The Conspiracy to Kill the New Deal; Yes it's Real

by: Bruce Webb

Sun Nov 22, 2009 at 15:30

(Let's not get blindsided by this, okay? - promoted by Paul Rosenberg)

As they say, even paranoids have real enemies. In the last couple of weeks there has been a renewed effort to push the parallel bills Conrad-Gregg and Cooper-Wolf each of which would establish a Bi-Partisan Commission to tackle the 'Entitlements Crisis' by sending a set of proposals to Congress that could only be voted up or down on a model set by BRAC (the Base Realignment and Closure Commission of the 1990s. The current push is to attach this to whatever legislation is used to raise the Public Debt Ceiling, something that has to be done in the next few weeks to avoid defaulting on some interest payments.

The problem is that Conrad-Gregg and Cooper-Wolf did not come out of nowhere and 'bi-partisan' does not mean what it would normally mean. Instead these bills exist to realize the vision of one man, a man who has founded and lavishly funded a series of 'Bi-Partisan' Institutions and Working Groups whose goals are, at times perhaps unknown to many of the participants in them, explicitly to destroy the crown jewel of the New Deal, that is Social Security, while also doing as much collateral damage to Medicare and Medicaid as possible in the process. Much more below the fold.

Bruce Webb :: The Conspiracy to Kill the New Deal; Yes it's Real
The man and his goal were revealed to the wider world in this important piece by William Grieder in the Nation last March Looting Social Security and was in fact the cover piece which had the result of having Peter G Peterson's face staring at you from the cover. Who is PGP? Well the Grieder article gives you a start, but suffice it to say that you couldn't make him or his career up, it reads more like an over the top conspiracy thriller than anything (though with less special effects and explosions).

For today's purposes let us just start with his role as founder and funder of the Concord Coalition. Like most of PGPs efforts it is cast as a bi-partisan group devoted to fiscal responsibility and typically has titular leaders drawn from both parties. For example if we go to  About the Concord Coalition

The Concord Coalition is a nationwide, non-partisan, grassroots organization advocating generationally responsible fiscal policy. The Concord Coalition was founded in 1992 by the late former Senator Paul Tsongas (D-Mass.), former Senator Warren Rudman (R-N.H.), and former U.S. Secretary of Commerce Peter Peterson. Former Senator Bob Kerrey (D-Ne.) was named a co-chair of the Concord Coalition in January 2002.

The Concord Coalition is dedicated to educating the public about the causes and consequences of federal budget deficits, the long-term challenges facing America's unsustainable entitlement programs, and how to build a sound economy for future generations.

Bolding mine. For PGP and his like-minded colleagues, followers and employees the problem mostly start and stop with 'entitlements', a word whose existence largely owes itself to Peterson to begin with.

The current head of Concord is Robert Bixby and its current main instrument is its Fiscal Wake Up Tour in which Bixby and former Comptroller General David Walker go around the country essentially selling 'Entitlements Crisis'. Now while Walker is invariably described by his former title and so an a more or less neutral observer, he actually has a day job with a somewhat more revealing title: President and CEO of the Peter G Peterson Foundation, itself endowed by PGP with a cool billion (with a 'b') dollars to promote its mission. About the PGPF On this page you will see the smiling faces of PGP himself and Walker and among other things a link to  I.O.U.S.A.: the Movie itself a documentary of the Fiscal Wake Up Tour, which the About page proudly reports:

The Foundation awarded the Concord Coalition $1.5 million to expand its highly acclaimed Fiscal Wake-Up Tour, an urgent, bipartisan call for changes to America's fiscal policies in the tradition of Paul Revere.
. So lesson one. Anytime you see the names Robert Bixby or David Walker know that you are talking full time employees of the PGP founded Concord Coalition or the Peter G Peterson Foundation. Lesson two. Almost every time you see the buzzwords 'fiscal responsibility', 'bi-partisan' anything, 'intergenerational equity' odds are you are only one or two degrees of separation from a PGP entity or employee.

But what does this have to do with Cooper-Wolf SAFE Commission. Well if we follow the link on the PGPF About page announcing the grant we find the following:

Partners in the Fiscal Wake-Up Tour include The Concord Coalition, the Peter G. Peterson Foundation, the Brookings Institution and the Heritage Foundation. The Concord Coalition is a 501(c)3 organization focused on promoting federal fiscal responsibility.
What the hell is 'left-leaning' Brookings doing in this mix? Well there is a tale. Back in 2008 Brookings and Heritage announced the formation of their 'Fiscal Seminar' which in time produced the following report Facing Our Fiscal Future (PDF) itself signed by sixteen authors, seven from Brookings, three from similarly 'left leaning' the Urban Institute, and one from the Progressive Policy Institute. Certainly seems bi-partisan. Until you realize that PPI is the creation of signatory Will Marshall and was the prime vehicle for sending Clintonism down the DLC/New Democrat/Third Way which mostly adds up to 'Renouncing FDR and All His Works'. And that a bunch of the Brookings people are similarly Clinton-Rubinista Deficit Hawks like Alice Rivlin and that the Urban Institute people include similarly hawkish former CBO Director Robert Reischauer. Plus among the remaining signatories from the center to right we have Robert Bixby (again), Maya MacGuineas (an author of a draconian Social Security 'reform' plan known as Liebman-MacGuineas-Samwick or LMS), and Stuart Butler the author of a detailed plan from 1983 to undermine and kill Social Security under the charming name Social Security Reform: Achieving a "Leninist" Strategy (PDF) which has to be read to be believed.

What do we find if we delve into Facing our Fiscal Future? Unsurprisingly we find a reprise of the central message of the Fiscal Wakeup Tour

The authors of this paper are longtime federal budget and policy experts who have been drawn together by a deep concern about the nation's long-term fiscal outlook. Our group covers the ideological spectrum. We are affiliated with a diverse set of organizations. We have been
meeting informally for over a year, under the auspices of The Brookings Institution and The Heritage Foundation, to define the dimensions and consequences of the looming federal budget
problem, examine alternative solutions, and reach agreement on what should be done. Despite our diverse philosophies and political leanings, we have found solid common ground. We agree that:
• Unsustainable deficits in the federal budget threaten the health and vigor of the American economy.  
• The first step toward establishing budget responsibility is to reform the budget decision process so that the major drivers of escalating deficits-Social Security, Medicare, and Medicaid-are no longer on autopilot.
Once again the "ideological spectrum" means from barely center-left to right, and the only problem that matters is not military spending or regressive taxation, nope everything is the fault of Social Security and Medicare. And what is there solution? One establish a system of triggers that would automatically slash Social Security and Medicare benefits (and so keep Congress's hands clean when and if) or
Alternatively, the trigger process could require that a commission make recommendations for closing the gap to the president and Congress on which an up or down vote must be held.
. I.e. some version of Cooper-Wolf.

Pete G Peterson and associates want to kill Social Security under the guise of 'fiscal responsibility'. And PGP has spent decades founding organizations largely or wholly devoted to that end and committed a billion dollars of his own money to do so. In the days and weeks to come look for the key words, starting not least with 'bi-partisan', and names like Bixby and Walker. These people are paid professional agents of the open conspiracy to roll back the New Deal.

And that ain't paranoia talking. Follow the links.

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PGP: the Biography (4.00 / 4)
From the Peter G Peterson Institute for International Economics

Hedge fund billionaire: founder of the Blackstone Group 1985
CEO of Lehman Brothers: 1973-1984
Secretary of Commerce under Nixon
Chairman of the Council on Foreign Relations, succeeding David Rockefeller
Founder of the Concord Coalition
Founder of the Peter G Peterson Foundation with its $1 billion dollar endowment
Chairman of the Federal Reserve Bank of New York 2000-2004.

Semi-secretive billionaire who served in all these roles? Are you kidding me? There are Bond super-villains who have more plausible resumes than this, somewhere Aureus Goldfinger is whimpering with envy.

great post (0.00 / 0)
Bruce, are you on Twitter? Because if you are, I need to be following you.

Join the Iowa progressive community at Bleeding Heartland.

[ Parent ]
Look up verbose in the dictionary (0.00 / 0)
And there is my not so smiling face.

I post regularly to Angry Bear and less often to the BruceWeb both on blogspot, and then some to dKos, MyDD and OpenLeft, but mostly even my subordinate clauses wouldn't fit into a 140 character limit. It must be the influence of my maternal grandmother whose ancestors were German on both sides. All hail my Beisel and Lutz distant cousins!

Brevity is not a virtue in Haus Webb.

[ Parent ]
Facing our Fiscal Future signatory C. Eugene Steurle (0.00 / 0)
listed as being from the Urban Institute and recently just returned to the Urban Institute. But what was in doing from May 2008 to now?

NEW YORK, May 19, 2008 - The Peter G. Peterson Foundation today announced the appointment of Dr. Eugene Steuerle as Vice President. A noted expert on the interplay of the federal budget, taxes, retirement security, health, philanthropy, and other areas of public finance, Dr. Steuerle will lead the Foundation's research and analysis on key fiscal and other selected challenges the Foundation will address.

Dr. Steuerle joins the Foundation from the Urban Institute, where he was a senior fellow and co-director of the Tax Policy Center, a joint effort of the Urban Institute and Brookings Institution.

You just can't make this stuff up, this kind of thing just doesn't happen outside the covers of paperback thrillers.

Jane at Firedoglake weighs in (4.00 / 2)
Hedge Fund Billionaire Pete Peterson Key Speaker At Obama "Fiscal Responsibility Summit," Will Tell Us All Why Little Old Ladies Must Eat Cat Food
After a report in the Wall Street Journal appeared indicating that Obama "met with 44 fiscally conservative 'Blue Dog' Democrats this week and gave a nod to legislation that would set up commissions to deal with long-term deficit strains," noting that "the commissions would then present plans to Congress for an up-or-down vote," it appears things moved rather swiftly.
Yep, Obama gave the nod to Cooper-Wolf in February. And further gave the nod to a Fiscal Responsibility (yep that word) Summit. Who was originally slated to lead up the discussion?
These Blue Dog dreams of circumventing Congressional procedure were evidently crushed when "Reid and Pelosi sent back word that Congress doesn't get bypassed just because Peter Orszag says it does," said a source familiar with the communications.  But Peterson can't be too disappointed - after Obama and Biden speak at the Monday conference, it will be Peterson himself presenting to the group, and then Laura Tyson of the Obama economic advisory team.  Then the guests, which include members of Congress and others, will split up into six groups.  But for now, the plan for a specially empowered "panel" coming out of the summit has been scrapped.

Tyson has been a proponent of the "Diamond-Orszag" plan, which calls for the retirement age to be raised and for Social Security benefits to be cut for those 55 and under as a way to be "fiscally responsible."  So anyone waiting to hear the voice of a progressive like Jamie Galbraith, say, who thinks that Social Security should be increased, or even someone who doesn't assume that Social Security is in the midst of a "crisis" and needs to be "fixed" -  don't hold your breath.

Social Security is one of the only things standing between a significant portion of the retired female population and poverty, so it takes some real nerve to argue that their benefits should be cut.  It'll be really interesting to see egomaniac billionaire Pete Peterson, who owes his fortune to favorable taxation rates on hedge funds and private equity, lecture everyone about why old women should be eating cat food so the nation can be "fiscally responsible."

As it turns out we dodged a bullet, Peterson's plan to hijack the Summit and stack it with his own presenters in hopes of selling Cooper-Wolf were headed off by Nancy Pelosi and Reid, in the end he didn't give the keynote. But it was a near thing and pretty indicative of the kind of economic advice Obama is getting from his own team. Given that the top two people at OMB, Orszag and Jeff Liebman, are both authors of prominent Social Security Reform Plans (Diamond-Orszag or D-O being much better than Liebman-MacGuineas-Samwick or LMS, not that that is saying much) and Summers known to be an 'entitlements crisis' person this is not much of a surprise.

Reagan/Greenspan eclipse Madoff (4.00 / 7)
The Reagan/Greenspan created Social Security Trust Fund will soon become the greatest fraud ever perpetrated on the American working class. Multi-billions of dollars have been taken from working wages with a Full Faith and Credit promise from the Federal government that they will be repaid with interest at retirement. These 'borrowed' funds were largely transferred to the wealthy in the form of tax cuts/breaks. Now, millionaire elected officials with large public pensions are seeing to it that the fraud is completed by ensuring the Trust Fund is never repaid.

Completing the Ronald Reagan fraud -- that's how this should be framed. Either the Social Security Trust Fund is repaid or Ronald Reagan will have perpetrated the greatest fraud ever on the American people.

Self-refuting Christine O'Donnell is proof monkeys are still evolving into humans

Well the Great Reagan Raid (4.00 / 3)
was mostly a myth. The actual surpluses in the years 1983 to 1992 were very small and by the latter year the accumulated Trust Fund was only a hair below its mandated level of 100 (a year of reserves). At the end of Reagan's last year the total TF balance was $110 billion of which more than half was built up in his last two years. The idea that Reagans tax cuts and Cold War spending were financed out of these tiny pre 1987 SS surpluses doesn't pass the math test.
Given that the law at that time required that those reserves be held in Treasuries, it is impossible to say that either Reagan or Bush I did anything wrong to Social Security.

The really big cash surpluses didn't start rolling in until around 1995 and Clinton did the responsible thing and used them to start paying down Public Debt, to the point that by 1999 Greenspan was warning about the possible disappearance of the long bond. Since paying down Public Debt was the only real world response to the problem of negative cash flows after 2017 or so (by freeing up borrowing capability on world markets) Clinton did the right thing as well. It might have made sense to take some of that cash surplus and invest it in other asset categories but that would have opened the door to the privatizers, all things being equal it was best to appeal to Save Social Security First and Lock Box.

Things didn't really go to shit until Bush decided that all money was fungeable and that moreover you could pay for $1.5 trillion in tax cuts, $1.5 trillion in war spending, and $1.5 trillion in debt reduction all out of the same $1.5 trillion.

Reagan, Bush 1 and Clinton were all reasonable stewards of Social Security, nothing was diverted or spent in a way that was against the interest of future retirees. W on the other hand was a pure disaster. If he had spent his first term paying down debt and regulating the financial markets we wouldn't even be thinking about Social Security 'crisis'.

[ Parent ]
Full Faith and Credit assets (0.00 / 0)
Independent of what the surplus sizes were in different periods the fundamental scheme was constant: Surplus funds were to be placed in securities backed by "Full Faith and Credit" of the U.S. Government. What the government did with this borrowed money is irrelevant to the basic 'contract.' All other fiscal policy is irrelevant to the 'contract.'

To be sure, initial surpluses were modest, but continued to grow as the maturing baby boom generation became more productive and, of course, waxed and waned with overall economic growth. This is all as the scheme anticipated. Furthermore, it was fully anticipated that all of the 'borrowed' surplus was going to be spent for government purposes (what were they going to do, put it a giant mattress?) and with the Full Faith provision wouldn't be invested privately.

The fundamental flaw or 'tell' is this: The scheme was allegedly devised because future SSI needs were going to outpace revenue. If nothing was done, when that happened taxes would have to be raised or benefits cut. So they raised taxes in advance, placed the funds in a so-called Trust Fund, which hold government obligations.  The government would borrow and spend the money, and pay it back later. Here's the tell: What happens when they need to be redeemed? You still have the exact same problem the scheme was supposed to solve -- either raise taxes or cut benefits.

In short, how is having to raise revenue to pay off bond obligations any different from having to raise taxes to fund SSI benefits? The scheme itself solved nothing -- unless the anticipation was to not fully pay it back. Can you think of any other reason to create this scheme that does not solve the actual problem?

It was Reagan and Greenspan's 'contract.' The debt coming due was fully anticipated as part of the plan. It's their fraud if it doesn't get paid back.

Self-refuting Christine O'Donnell is proof monkeys are still evolving into humans

[ Parent ]
Steve it is Pay-Go (0.00 / 0)
The phased in FICA increases after 2003 allowed Social Security to continue to pay scheduled benefits while slowly building up the Trust Fund Ratio to its mandated level of one year of Treasuries in reserve.

Between 1971 and 1982 Social Security outlays exceeded SS revenues and four Presidents honored the TF obligations dollar for dollar. In doing so presumedly they calmly borrowed dollars in the public markets to do so. The sky did not fall. Now Carter put in a reform plan in 1977 that ended up not being effective enough, and Ball and Darman negotiated an agreement under the cover of the Greenspan Commission that put SS back on pay-go for two plus decades. But in 2006 the DI Trust Fund ran short of revenue and started cashing in it's own Soecial Treasuries. Nobody noticed, no body freaked and said we needed to hike taxes or default, just as in the seventies the Treasury has been fulfilling it's obligations. Why people think this will be different when the nominal OASDI TF makes a theoretical transition to revenue negative status in 2017 (because OAS itself will not do so for five or six years after that) when DI will have been in that status for more than a decade baffles me.

Treasury will honor Full Faith because it HAS been honoring Full Faith for two plus years in respect to DI. Combined TF shortfall in 2017 is not a crisis point, it is a totally meaningless transition from a theoretical state to another. Legally we need to do something about DI, it failed the test for Short Term Actuarial Balance as defined by SSA last year. That doesn't make anything a crisis. A 0.2% increase in FICA in 2010 and another 0.1% in 2011 would fix DI until 2041 and combined OASDI until 2026.

Google 'Northwest Plan for. Real Social Security Fix' and our spreadsheets should pop right up.

[ Parent ]
Crap. Substitute 1983 for 2003 (0.00 / 0)
In first sentence.

[ Parent ]
A $2.4 trillion surplus over 25 years is Pay-Go? (0.00 / 0)
A 25-year accumulated surplus of $2.4 trillion from 1983-2008 doesn't sound like Pay-Go to me. Finding a way to never repay most of this surplus is no small part of the motivation to create these commissions.

Reagan and Greenspan set this scheme up. Perhaps it can be argued that successor Presidents and Congresses should've reduced payroll taxes when the TF assets significantly expanded (really starting with H.W. Bush), but the fundamental point remains. These funds were taken from working wages with the promise of repayment later with interest. The commissions are looking to renege on the promise and effectively defraud the working taxpayers.

We can quibble about whether Reagan is responsible for the fraud (as I noted above, the scheme was suspect from the beginning), however as a matter of effective rhetoric and politics, framing this as "either the TF is good or Reagan and Greenspan defrauded us" is a powerful, strong push-back for the Democratic allies who may be with us in the fight and puts the GOP proponents on their heels.

Self-refuting Christine O'Donnell is proof monkeys are still evolving into humans

[ Parent ]
"Powerful, strong push back" (0.00 / 0)
"Hell yeah, if lies work why bother with the truth!

Screw the Enlightenment. Herr Goebbels showed us the way forward!"

Sorry homey don't play that game.

[ Parent ]
Godwin, nice... (0.00 / 0)
Somehow I expected more. Oh well...

...Adding, you might want to consider playing the game that's actually being played. When the usual suspects trot out their 'SS is broke, the TF is just worthless IOUs' (heh, like truth matters in the game) it's worth pointing out whose IOUs they are. Are they going to break St. Ronnie's promise or uphold it? That's a truthful formulation of the question before us w/r/t the SSTF.

Self-refuting Christine O'Donnell is proof monkeys are still evolving into humans

[ Parent ]
I have spent the last twelve years (0.00 / 0)
Educating people about Social Security. I set up a website in Nov 2004 devoted to that. I have a fairly widely cited Social Security Series on Angry Bear devoted to telling the truth about Social Security. My work has been noticed by some of the biggest names on our side of the Social Security debate. A plan designed by me and some collaborators has been run by the Chief Actuary of Social Security by some policy people in DC.

I have no interest in scrapping a decade and more of slowly building up credibility on this topic by adopting the tactics of the Reich Ministry of Propaganda. No matter how tactically convenient.

If pointing out that progressive propoganda and disregard for truth is just as objectionable as Fox/RNC efforts is a violation of Godwin's Law then so be it. I believe that "The Truth Will Set You Free" and not "All is Fair in Love and War". Ends don't justify all means.

[ Parent ]
Respectfully (0.00 / 0)
Bruce, it was not my intention to have acrimony here, however I'm not the one falsely alleging Reichian tactics or following "Herr Goebbels." I find that offensive and unnecessary -- let alone that it's wrong on the merits.

I respect your long time interest and expertise on the subject. I understand that the thrust of your work is to create thoughtful solutions to the problems that confront us and that for someone in that capacity/role, engaging or creating political rhetoric could undermine the respectability required for your proposals to be seriously considered. I get all that.

However, matters of public policy and politics play out on many levels, with various actors filling roles to impact public opinion and bring pressure to bear on public officials. All of this is important to driving an acceptable outcome.

Now, what I honestly don't understand is why you think my rhetorical formulation is wrong (let alone, so wrong as to accuse me of Reichian tactics). The basic scheme was to set up a TF that would accumulate surpluses to ensure benefits could be adequately covered for the next 75 years. The TF has accumulated over $2 trillion in Full Faith assets (which incidentally are still not enough to get through the full 75 year period, so it's hard to make an overcollection argument). In the simplest, most easy to understand terms, the basic promise of Reagan and Greenspan, who created/enable/approved the scheme, was 'pay this in over your working lifetime and it will be paid back when you retire' (aggregately speaking). It was a deliberate departure from Pay-Go.

I don't think it's at all unreasonable to frame the politics and rhetoric on this as a question of whether we're going to keep faith or break faith on St. Ronnie's promise. That is not dishonest. It's not false propaganda or Fox News lite or Reichian or whatever new, unsavory retort comes to your mind.

Finally, whether you agree or not, I think an argument can be made that the whole scheme was a fraud from the beginning. The structure of a deliberate, large surplus doesn't solve the problem it was created to allegedly solve. At the end of the day, when SS revenue turns negative, contemporary taxpayers will still face the same choices they would've faced -- raise taxes or cut benefits. Perhaps you can explain how having to find new revenue to pay off bonds is any different than having to do the same to cover benefits.

In the end, even if you respectfully (or disrespectfully) disagree with this formulation, there can be no disagreement that, whether malignant or benign, if the TF is never paid off (or at least significantly drawn down and utilized) the net effect is that working class taxpayers will have been defrauded. As a matter of rhetoric and politics there's nothing dishonest or Reichian etc. about framing this outcome that way.

If you would like to explain why I am wrong or why those frames are factually wrong, I'd be glad to read what you have to say. If you want to continue your current line or argumentation that I'm just some Karl Rove clone who lusts for Eva Braun, then just move on and stay classy...

Self-refuting Christine O'Donnell is proof monkeys are still evolving into humans

[ Parent ]
Medicare Commission (0.00 / 0)
What is the relationship of this to the plan Obama and Orszag have been promoting of forming a Medicare Commission to set Medicare reimbursements to doctors and hospital?  I believe the two are unrelated, but 1) I want to be sure and 2) I don't want progressives to confuse the two, as I think the Medicare Commission is a pretty good idea.

the Medicare commission is totally different (0.00 / 0)
As I understand it, that is meant to address the problem of some states, like Iowa, having extremely low Medicare reimbursement rates, even though we have relatively high quality of care.

Join the Iowa progressive community at Bleeding Heartland.

[ Parent ]
Different yes. But attempts are afoot (4.00 / 1)
to get people to confuse the two and so allow progressives who oppose this Peterson power move to be blamed for not facing Medicare reality. Cooper-Wolf is essentially designed to empower the 'bi-partisan' Brookings-Heritage-Urban Institute group as members of the Commission along with the limit of four members of Congress who I would bet big are intended to be filled by four guys named Conrad, Gregg, Cooper and Wolf.

I am not a big fan of the Medicare Commission idea, but there is less chance of it getting outright hijacked by Blue Dogs and Conservadems in the way that Conrad-Gregg and Cooper-Wolf do.

And it is beyond interesting that some of the same people who are pushing this bills to address 'Entitlements' are the same people loudly defending Medicare from cuts under HCR. Making me think they are just trying to thread the needle and get a whack at the real target, which is Social Security. Unless these people really are just cognitively dissonant and don't hear their dueling messages on this collide.

[ Parent ]
And just a reminder and heads up for those not aware. (0.00 / 0)
Medicare is part of Social Security (thanks to the Social Security Act of 1965), so if these guys manage to take down Social Security, that's likely going to kill the whole enchilada, including Medicare.

Health insurance is not health care.
If you don't fight, you can't win.
Never give up. Never Surrender.
Watch out for flying kabuki.

[ Parent ]
I have long thought (2.00 / 2)
I certainly and sincerely believe that strong entities want to get rid of social security and medicare.  This health care is a start.  By centralizing our system, obviously to make it more efficient, it becomes vulnerable to pressure from these "background groups."

Conservative......CNN news:Nopenhagen: US PRES 2 WKS LATE ATTEND 1 DAY, GORE JOURNEY BY TRAIN.

Good Point (4.00 / 5)
By nationalizing our services it makes it easier to fight the nationalization of services.

Oh, wait.  No, that is a stupid point.

[ Parent ]
Rate this Up (0.00 / 0)
The guy who troll rated this seems to have missed the point.

[ Parent ]
You can not have a race to the bottom if there is no absolute bottom (0.00 / 0)

Sure you can (0.00 / 0)
You just can't win.

Or lose.

[ Parent ]
what I mean is that (4.00 / 1)
If you compare why Europeans are less bothered by the business cycle, it is because they have a better social safety net. I often fantasize about a world that combines the European sense of safety net with the American sense of entrepreneurial small business growth. Really, it would be the better world.

[ Parent ]
I was there (0.00 / 0)
While stationed in Germany,  I saw this safety net in operation.  It seemed to work fairly well.  You are correct in that the entrepreneurial enthusiam was severely dampened with very high tax rates; especially on employers.  Many people work longer than we do and endure very long periods of unemployment.  The consequences of these periods aren't as consequential as ours.  On the other hand the probable overall standard of living is lower.

Conservative......CNN news:Nopenhagen: US PRES 2 WKS LATE ATTEND 1 DAY, GORE JOURNEY BY TRAIN.

[ Parent ]
We do not need to raise taxes as high as there (0.00 / 0)
we a) need to re-prioritize from being a military super power (hence the waste of 800 bil a year on defense and in many cases unnecessarily so) b) prioritize the right investment in funding domestically to promote a diversify economy that makes something rather than a finance based paper economy and c) refocus any tax advantages etc into the small and midsized domestica businesses. These three solutions would reshape this country,including allowing for the money to create a real safety net. By the way, they have a higher standard of living than we do. Their Quality of life  and social mobility is higher than ours. What they lack in ability to start businesses, they make up for in other ways. There are other choices than those that the right here creates as the only choices- for example cost of healthcare and education should not be a factor in turns of success

[ Parent ]
Thanks for promoting this Paul (4.00 / 5)
I am on a mailing list from some really heavy DC policy people on this and they are working hard putting inside pressure on Congress, but apart from some people at TAP the members of the list don't have a lot of presence in the blogosphere so anything people can do to raise awareness on this outside the Beltway is important.

One you get attuned to this particular set of names and phrases it is shocking to see how often they jump off the page.

And of all of them David Walker is the most dangerous. Because he is just so darn sensible looking, plus he had a really cool title in Comptroller of the U.S. Hardly anybody knows what that could possibly mean but it just oozes responsibility. It's like hating on Marcus Welby.

The sleaze (4.00 / 1)
Peterson made a bunch of money from the Carlyle Group which took off while W. was president.  You remember Carlyle from Farenheit 9/11.  That was the private company which was holding its annual meeting on 9/11 in the US.  Two of the prominent attendees were former President George H. W. Bush and Osama Bin Laden's brother.

The payoff from wrecking Social Security is direct.  With 45% of Carlyle's $85 billion in assets consisting of government pension funds (37%) and corporate pension funds (8%).  This will give them trillions more to play with.

Oh yes, the largest chunk of Carlyle investments is in "energy."

Peterson's father owned a diner and changed the family name from Petropolous to Peterson.  Concord Coalition and the Bushes and Peterson sounds like old money.  Nope.  Oil money.  The Democrat involved at the start-up was Tsongas.  Wanna bet that ethnic ties and similar friends played a part in dragging a Democrat with respectability on board?

His pedigree is Richard Nixon the Republican connected Bell and Howell (Chuck Percy was his predecewssor) and the University of Chicago.

The added data is from Carlyle's Annual Report, btw.  Except for the 9/11 meeting.

Tsongas always had a rightwing view of deficits and cutting Social Security/Medicare. (4.00 / 1)

[ Parent ]
One of the keys to fighting this sort of nonsense (4.00 / 2)
is to demand that Democratic representatives defend Social Security and Medicare not in bland interest group terms, but in terms of progressive values and fundamental ideas (i.e. social insurance.)  

The other, of course, is to attack anyone who makes any noise about these sorts of schemes.

Politics is the art of the possible, but that means you have to think about changing what is possible, not that you have to accept it in perpetuity.

Yes it drove me crazy (4.00 / 4)
When we allowed HCR to be constrained by artificial dollar figures and demands that all savings be found within the current system when instead we could have simply established a goal of universal coverage and then found what it would cost to reach it.

Per CBO 17% of non-elderly U.S. residents are uninsured, it stands and stood to reason that driving that percentage to 2% was going to cost the government some money, It also stood to reason that saving 40,000 lives a year, and productivity gains from having less untreated disease and disability in itself have  social and economic value, and for people of faith deep religious value as well.

The original House Bill covered 97% of all legal U.S. residents, 94% of all residents including illegals. Which was pretty good given economic and political realities (personally if you are good enough to pick my lettuce, you are good enough to see a doctor, but that logic wasn't going to fly). Every percentage point compromised away from that is more than 3 million people. By the time we got to where we are some 3-8 million people's health care had simply been bargained away. And we may not be done.

I believe that most of that was unavoidable, but compared to how we reacted during the enactment of Medicare and Medicaid, a pretty piss poor performance. How we went from the New Frontier and the Great Society vision to the 'Wouldn't be Prudent to ask for So Much' Society over the course of my life is kind of discouraging.

[ Parent ]
Kill the "fiscal responsibility" meme (4.00 / 4)
The "fiscal responsibility" meme is based on the erroneous analogy that government finance is the same as household and firm finance, both of which are revenue-constrained. Government finance is not revenue-constrained when the government is a sovereign provider of a non-convertible currency of issue within a flexible rate regime.

The government issues currency. Non-government uses it. The government issues currency through the device of national accounting, which simply involves crediting and debiting bank reserve accounts. Physical currency is supplied on demand to banks and the amount deducted from reserves. There is no government savings account. The government does not need to save, tax, or borrow to spend.

Government deficits add to the net financial assets of the non-government economy. Taxes reduce the net financial assets of the non-government economy. This is not theory. It is the way that national accounting is done. The government borrows for two reasons. First, it borrows to drain excess bank reserves so that the Fed can set its target overnight rate. Secondly, borrowing creates securities that have essentially the same value as the currency of issue but provide interest. This is government spending that increases net financial assets.

The government's only constraint is not to spend more than the private sector wants to save or this will create inflation (increasing notional value faster than output). This means that the government as the provider of the currency of issue as a public service must balance notional value and real value, so that there is full employment at full capacity.

When there is an output gap, the non-government sector is saving more that spending, leaving a gap between goods and services offered and goods and services purchased. Therefore, the government needs to spend more or reduce taxes, or both, in order to make up for the income gap resulting from an increased propensity to save (and in the case of the US, a current account deficit, meaning that imports exceed exports. Otherwise the gap between present production level and full capacity will cause unemployment to rise. This is the case at present.

The error in the thinking of "fiscal responsibility" is that government surpluses result in deficits for the non-governmental sector, forcing either contraction or increased private borrowing. Private borrowing beyond income capacity is unsustainable.

So with a properly designed monetary and fiscal policy it is possible to permanently have the economy running at full capacity and maintain full employment (including about 2% frictional unemployment as people transfer between jobs) along with price stability.

See L. Randall Wray, Understanding Modern Money: The Key to Full Employment with Price Stability (1998), available here at Google Books.

Yes, But... (0.00 / 0)
I'm not at all sure that "fiscal responsibility" is a bad frame.  It's certainly better than "fiscal conservative," and all that's needed is to define it properly--which is a different matter for a sovereign entity than it is for a household or a firm.

I wrote a diary about this awhile back, "What Does Fiscal Responsibility Look Like?".  Here's part of what I wrote, by way of leading folks to a progressively more sensible notion of fiscal responsibility:

 Mark said that he used to think it was good policy to balance budgets over the business cycle, but he'd come to realize it was fine to run a deficit over the business cycle, so long as the debt service ratio didn't increase.

Here's a little run-down of the "fiscal responsibility" concept that I think summarizes Mark's point, and sets us up for extending it further:

Fiscal Responsibility Concept 1.0

Concept: Don't spend more than you take in in any one budget.
Flaw:  Costs and revenues fluctuate with the business cycle.
Corrective: Project your budget planning, projections and guidelines over a full business cycle, so that you balance your budgets across the business cycle.

Fiscal Responsibility Concept 2.0

Concept: Don't spend more than you take in in any one business cycle.
Flaw:  Governments don't have to pay off all their debts. It's more important that they meet their citizen's needs.  After all, that's why they exist in the first place.
Corrective:  Project your budget planning, projections and guidelines over a full business cycle, so that you maintain a constant debt service ratio.

Fiscal Responsibility Concept 3.0

Concept: Don't increase your debt service ratio over the course of a business cycle.
Flaw:  Emergencies can arise beyond the scale of a normal business cycle, requiring capital investments for long-term well-being of the commonwealth.
Corrective:  Open to debate.

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3

[ Parent ]
This is still only a modification of the conservative meme (4.00 / 2)
This supposed progressive meme is not based on the modern monetary theory (MMT of Neo-Chartalists, but rather traditional economics (neoliberal and New Keynesian and some Post Keynesian).  As long as progressives engage conservative and even liberal economists on their field, the result will be a disaster, because it is giving up the game at the beginning.

Traditional economics has is wrong, because it does not take financial economics into account based on the established principles of national accounting, which show traditional model to be erroneous in modeling reality.

I suggest that progressives read Wray's Understanding Modern Money, and follow the blogs of Bill Mitchell, Warren Mosler, and Winterspeak, as well as read Economic Perspectives from Kansas City, to which Randy Wray, William Black, and Scott Fulwiler, and others contribute. Scott has an excellent post up today, What If The Government Just Prints Money?

Let's not get suckered into Peterson's game with half measures. See how good that working for Obama. We need to replace erroneous ideas with ideas that accord with reality. These guys are going for the throat. Parry, and they'll just be right back at you. You need to counter with a lethal blow when an opponent is trying to terminate you.

The economists above and others publishing at the Levy Economics Institute. like Wynne Godley and Marc Lavoie, have done the work. Now we need to get it out there.

This is not about maintaining a constant debt service ratio throughout the business cycle. It's about using the government's ability to issue money as a public good in order to achieve the public purpose, which, according to the Preamble to the Constitution, includes "the general welfare." There is no difficulty funding public goods like education, healthcare, while deploying policy that will maintain full capacity of the economy and full employment along with price stability. This is what progressives should be talking up.

[ Parent ]
I'm Afraid You've Misunderstood Me (0.00 / 0)
The progression above was not completed.  The point was it was a progression, taking people gradually from what passes as "common sense" step-by-step towards a broader view.  It's been my experience--and it's supported by cognitive development theorists such a Robert Keegan--that most folks don't transition readily from more simplistic to more complex models of understanding the world.

So one must distinguish between inherently conservative concepts, which need to be rejected, and those that have simply been used conservatively, which can be gradually rehabilitated in an educational process.

It's not just the MMT perspective that's missing from the conventional thinking.  Pigou's externalities--conceptually a century old now--are equally absent from the picture, for example.

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3

[ Parent ]
Agree, and (4.00 / 2)
Paul, I agree that MMT is not the only thing that needs to be added to current debate if the issue is to be reframed in a progressive light. The problem that progressives face is that the current economic and political universes of discourse, as well as where they overlap, has been captured by conservatives and progressive are marginalized unless they enter these universes in terms of the prevailing norms that shape them.

I believe that it is necessary to work at reframing by changing the universe of discourse. Economics and politics are not my field, but I've encountered the same problem in the field in which I work, so I am well aware that it is very difficult to gain a foothold once one's steps into the universe of discourse that is shaping the established narrative. Actually, George Lakoff has set this forth in terms of cognitive science, as many progressive know.

The problem that progressives face is not just influencing conservatives. Many progressives are still mouthing conservative memes because they themselves are trapped in the established narrative and are opposing it from within. This is shooting oneself in the foot. You have to change your own mind (way of thinking) before you can change other minds. Here, I am using"you" in the generalized plural to mean progressives in general. Lots of us are still unaware of the latest knowledge about reality  that supports our values and policies.

I doubt very much that many conservatives are reading this blog. But it is influential on the left. We need to change ourselves before we can change others, and that means presenting the latest knowledge as it relates to progressive value and issues so that all progressives can contribute to shaping a New Vision for America with a grand strategy for actualizing that will both appeal and work.

Keep up the good work.

[ Parent ]
This should be connected to the current health care reform debate (0.00 / 0)
I googled social security and medicare trust funds and found this report from March 2004.


[I added emphasis and some paragraph breaks in the quoted material to aid reading.]

p. 5-6 Until this year, SMI had one major account (referred to as Part B...[SMI=Supplemental Medical Insurance, Medicare Part B covers mostly outpatient and doctor visits, as opposed to Medicare Part A, HI, hospital insurance].

On December 8, 2003, the President signed into law the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) that, beginning in 2004, adds to the SMI Trust Fund a second major account, referred to as Part D. Part D is a voluntary prescription drug benefit program that is expected to have a major impact on the operations and finances of Medicare.2

For Part B of SMI as well as for Part D beginning in 2006, transfers from the general fund of the Treasury represent the largest source of income, covering about 75 percent of program costs in each account. Beneficiaries pay monthly premiums that currently finance about 25 percent of Part B costs.
p. 8-9 SMI is currently the only one of the four programs [SMI, HI and two Social Security Trust Funds: OASI=cash retirement benefits and DI=Disability Insurance] that receives large transfers from the general fund of the Treasury. ... As noted above, these funds make up roughly three-fourths of SMI program expenses.

The transfers are automatic; their size depends on how much the program spends, not on how much revenue comes into the Treasury. All the non-dedicated sources of revenue contribute to the transfer: personal and corporate income taxes, custom duties, excise taxes, etc. If non-dedicated revenues become insufficient to cover both the mandated transfer to SMI and expenditures on general government programs Treasury would have to borrow to make up the difference. In the longer run, if transfers to SMI are increasing -- and as shown in the Medicare Trustees Report and Figure 4 below, they are projected to increase significantly in coming years - then Congress must borrow, raise taxes, cut other government spending, or reduce SMI benefits.

Emphasis added: This might be why the money people are upset. They think their money-the corporate income taxes that they actually pay-is being used to fund the "entitlements."

In addition, some of the problem with alleged lack of solvency of the trust funds seems to be related to accounting methods.

The general fund, at times, borrows money from the trust funds. The paper reports numbers for 2003:

p.11 For OASDI [cash retirement benefits], the difference between revenues from the public ($546.7 billion) and total expenditures was $72.0 billion in 2003, indicating that OASDI had a positive effect on the overall budget in that year. In sum, from the budget perspective, HI [hospital insurance] and OASDI had surpluses and SMI [Medicare Part B] had a substantial draw on the budget in 2003 for a net negative effect of $18.5 billion ($6.8-$97.3+$72.0) on the 2003 unified budget deficit of $374.8 billion.

The whole paper, really, is about accounting methods (emphasis added):

p. 3 The trust fund and budget perspectives are both important and appropriate for their intended purposes yet the relationship between the two is often misunderstood.

Social Security and Medicare together rely on federal general fund revenues for some of their financing, and they currently are credited with large interest payments as well. In the past, these flows were relatively small. But they have increased in recent years, and the expected rapid growth of the two programs renders the trust fund-budget interchange an increasingly important feature of government finance.

A picture of the financial operations of Social Security and Medicare can be markedly different depending on which of the two perspectives it is viewed from. This paper attempts to elucidate the distinctions between the trust fund and budget perspectives.

So, I think my whole point is that we should not let this billionaire group hijack "entitlements," when the problem really comes back to spiraling health care costs. Social Security is intact, as are hospitals. It's the daily care - outpatient and doctor visits and the biggie pharmaceuticals. Does the proposed legislation adequately address cost control?

You know the answer to this, Mr. Webb. I read with interest your post on the most important and overlooked part of HR 3962.

In a stroke it guts the entire current business model of the insurance companies, based as it is on predation and selective coverage, and replaces it with a model where you can only make money by extending coverage to the widest range of customers and or delivering that coverage in a more efficient way.

Here is the "most important and most overlooked sentence" in HR 3962

``(a) IN GENERAL.--Each health insurance issuer that offers health insurance coverage in the small or large group market shall provide that for any plan year in which the coverage has a medical loss ratio below a level specified by the Secretary (but not less than 85 percent), the issuer shall provide in a manner specified by the Secretary for rebates to enrollees of the amount by which the issuer's medical loss ratio is less than the level so specified.

Seems to me, if we can reduce SMI expenditures, the billionaires don't have to raid the "entitlement" programs, and old ladies like me, when I get there, won't have to eat cat food.

Well there is a little confusion here. (0.00 / 0)
Reducing SMI expenditures means cutting payments to Physicians under Part B or cutting down on spending on covered medication under Part D meaning that old ladies might not be eating cat food, but equally might not have adequate access to doctors and prescriptions. The current bills actually move the needle the other way on Part B and D. And on balance this is a good thing.

The cost savings in the bill are largely coming from cutting down on fraud and a certain category of disproportionate hospital funding which will have the effect of extending the life of the HI Trust Fund that actually pays for Part A (and itself is replenished with Medicare payroll taxes).

The General Fund borrows money from the Trust Funds in any quarter that Social Security runs a cash surplus, which has up to know been every quarter, this is an automatic process not driven by any particular need of the General Fund, every time a person or institution or Trust Fund buys a bond it is making the GF a loan, it is just a flip side of the same transaction.

The 'Raids' on the Trust Funds are coming to an end because the cash surpluses are coming to an end, the question now for the Billionaires is how to avoid paying those loans back by redeeming the Special Tresuries in the Trust Fund. Which is why the main thrust of these various Commissions will be to change the benefit formula mostly for initial benefits for future retirees but perhaps the growth rate for current retirees (though that is politically explosive, try explaining why current retirees don't deserve a CPI increase for 2010 and then duck).

So I am more than happy to answer any questions you might have but am having some difficulty figuring them out. I am leaving the house and so will not be able to respond here, but comments posted to my own blog get sent to me by e-mail and I can follow up to them via my iPhone. So if you or anyone else wants to ask me something specifically maybe you could put it in comments to this same post over at: The title is changed but the text is the same as here.

[ Parent ]
The conspiracy to kill the New Deal is called 'The Republican Party' (0.00 / 0)
it sucks that the Democrats decided to help them round about 1994.  I'm at this point at sort of a loss at how to stop them before they accomplish it by overspending on war and giving a ton of money to people who are already rich.

Very illuminating (0.00 / 0)
The fundamental irrationality of our new brand of capitalism is its bizarre need/want/desire to suck up any and all available pools of capital there are.

For what purpose? To attain some kind of absolute power? For pity's sake, only 235 individuals own 3/4 of the world's total wealth. They want it all?

They are ridiculous. It's pointless to claim they have any reason other than the delusional dream of having it ALL.

Recall that Abram Vereide and Coe Christianity (now of C Street fame) also had this psychotic dream.

Bixby and Concord in NYT today (0.00 / 0)

Payback Time - Wave of Debt Payments Facing U.S. Government

"The government is on teaser rates," said Robert Bixby, executive director of the Concord Coalition, a nonpartisan group that advocates lower deficits. "We're taking out a huge mortgage right now, but we won't feel the pain until later."

Yet in typical fashion for planted and slanted NYT stories like this, other info in the same article directly contradicts the dire warnings of supposed "experts" like Bixby that the sky is falling:

So far, the demand for Treasury securities from investors and other governments around the world has remained strong enough to hold down the interest rates that the United States must offer to sell them. Indeed, the government paid less interest on its debt this year than in 2008, even though it added almost $2 trillion in debt.

"Entitlement" vs "Fiscal Responsibility" (4.00 / 2)
On the surface these seem like frames that both fit into the same conservative world view, but in reality we can apply both the "entitlement" and the "fiscal responsibility" frame onto many different aspects of our current financial situation.

Is it the greedy-lazy poor people who feel "entitled" to health care, education, a social safety net of Social Security and Unemployment benefits OR is it the greedy-power hunger bankers and CEO's and their profit driven corporations that feel "entitled" to pay way less than their fare share of the taxes?

What is more responsible: A)Taking grandma and grandpa's Medicare away to "balance the budget" OR B)raising taxes and leveraging fair prices from Insurance/Drug Companies to pay for that same Medicare?

After all, "responsibility" is at root a nurturing-parent frame key word, and so the logical question within that frame is, "to whom are we most responsible? CEO's, banks, and the Military-Industrial-(Congressional)-Complex OR the tax-payers and their mothers/fathers/daughters/sons?"

These are the questions we need to ask would-be budget hawks, pundits and think-tankers.  AND IN ADDITION we need to form a coherent plan of action that we can also frame effectively.  Give people something to vote for and not just against.

I for one would love to see a "Support The Troops" bill that requires a certain percentage of the Defense budget (larger than it currently stands) be spent directly on our soldiers and the remaining percentage be scrutinized for waste and "redeployed" toward education, transportation, and/or budget deficits.  Maybe we could even push for an amendment that would require any future military plans to be "deficit neutral!"  In Sicko Michael Moore interviews a former British politician. Their Nationalized Health Care was created immediately after WWII and the British politician said something to the effect of, "If we have money to fight a war then we must have money to care for our sick." Well currently I believe we seem to have the inverse problem, but we need to stick it to the budget hawks that if we can't afford Health Care for everyone in the United States then we sure as shit can't afford to send our troops across the seas to fight war after endless pointless war.

What are some other ideas that would have a positive and coherent progressive vision of "fiscal responsibility?"

"Fiscal responsibility" and MMT (4.00 / 2)
"Fiscal responsibility" in modern monetary theory aka Neo-Chartalism would mean essentially an economic policy that allows the government to promote the public purpose. This would include enabling the economy to run at full capacity and form capital adequately that also promotes full-employment with price stability, thought to be impossible under orthodox economic models. MMT shows how, this is doable on the basis of national accounting, which reveals how things actually work economically between government as currency issuer and non-government as currency user.

Economics is the infrastructure of politics. Get the economics right and politics follows. Don't, and politics is hobbled.

Right now the"fiscal responsibility" argument is that "we can't afford it," and "we are indenturing our children," when we can well fund the general welfare since the federal government is not revenue-constrained, except by inflation. The government can spend what it wants to accomplish the public purpose as long as this does not become inflationary. According to MMT, as long as government does not spend more than non-government wants to save, no problem.

See L. Randall Wray, Understanding Modern Money (1998).

[ Parent ]
Addendum (0.00 / 0)
In the first sentence above, I should have said  "a LONG-TERM SUSTAINABLE economic policy" instead of just "an economic policy."

[ Parent ]
I just met Mr Walker and his foundation (0.00 / 0)
at a conference last week, and as soon as I started listening to him I knew he was a dirtbag.

I guess what's scary to me is that it was a "progressive" organization that had him there, maybe in an attempt to be "non-partisan".

Oh and side note, there's a follow-up movie they're going to roll-out, should be terrible.

Where's the accountability, or how do folks go about, holding "progressives" like the institutions you mention above accountable for even entertaining these crazies without disclosing who/what they stand for.


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