This from Robert Reich

Here are Robert Reich's last TWO blog posts. This is important stuff. This might even be LIFE OE DEATH for the American Experiment, for The American Republic (what's left of it). Please follow link to original. Read. Go to Prof Brad DeLong's site. Read. Go to Prof Paul Krugman's site. Read. Repeat until the fever breaks. Support Occupy Wall Street!
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The Austerity Death-Trap

Wednesday, October 19, 2011

Ron Paul’s newly-unveiled economic plan – promising to cut $1 trillion from the federal budget in year one (presumably that means 2013) – is only slightly more ambitious than what we’re hearing from other Republican candidates. They’re all calling for major spending cuts starting as soon as possible.

What are they smoking?

Can we just put ideology aside for a moment and be clear about the facts? Consumer spending (70 percent of the economy) is flat or dropping because consumers are losing their jobs and wages, and don’t have the dough. And businesses aren’t hiring because they don’t have enough customers.

The only way out of this vicious cycle is for the government – the spender of last resort – to boost the economy. The regressives are all calling for the opposite.

But even without these hare-brained Republican plans, we’re heading in their direction anyway. Unless Republicans agree to a budget deal before the end of the year (don’t hold your breath), the temporary payroll tax cuts and extended unemployment benefits we have now will end.

The result will be the most stringent fiscal tightening of any large economy in the world.

Together with ongoing cuts at the state and local government level, the scale of this fiscal contraction would be almost unprecedented.

It will come at a time when 25 million are Americans looking for full-time work, median incomes are dropping, home foreclosures rising, and a record 37 percent of American families with young children are in poverty.

To call this economic lunacy is to understate the point.

And if you think 2011 is bad, you ain’t seen nothin’ yet.

Even if you’re a deficit hawk this is nuts. Instead of reducing the ratio of debt to the size of the overall economy, this strategy increases the ratio because it causes the economy to shrink.

Call it the austerity death trap.

Under these circumstances, the harder a country works to cut its debt, the worse the ratio becomes — because the economy shrinks even faster.

Greece is already in the trap. Spain and Italy are perilously close. Even Britain, France, and Germany are tip-toeing up to it. And now us.

Deficit hawks have to understand: The first step must be to revive growth and jobs. That way, revenues increase and the debt/GDP ratio drops. Only then – when the economy is back on track – do you start cutting.

At the start of the Clinton administration the annual budget deficit was almost $300 billion. But rather than take a meat-axe to spending, we pushed for growth, as did the Fed. The expansion of the 1990s made it easy to get the budget under control. By 2000 we had a $226 billion surplus.

The austerity trap will even hurt Mitch-McConnell Republicans whose top priority is to “make sure Obama is a one-term president.”

While it increases the likelihood of this Republican goal, it doesn’t stop there. Because the austerity trap will last for many years, any Republican successor will also be a one-termer.
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The Meagerness of the Republican Debates, the Smallness of the President’s Solutions, and the Need for a Progressive Alternative

Monday, October 17, 2011

Republicans are debating again tomorrow night. And once again, Americans will hear the standard regressive litany: government is bad, Medicare and Medicaid should be cut, “Obamacare” is killing the economy, undocumented immigrants are taking our jobs, the military should get more money, taxes should be lowered on corporations and the rich, and regulations should be gutted.

Four years ago the most widely-watched TV debate among Republican aspirants attracted 3.2 million viewers. This year it’s almost twice that number. And for every viewer assume a multiplier effect as he or she shares what’s heard with friends and family.

Americans are listening more intently this time around because they’re hurting and they want answers. But the answers they’re getting from Republican candidates – tripping over themselves trying to appeal to hard-core regressives – are the wrong ones.

The correct ones aren’t being aired.

That’s partly because there’s no primary contest in the Democratic party. So Republicans automatically get loads of free broadcast time to air their regressive nonsense while the Democrats get none.

But even if the President had equal time, the debate about what to do about the crisis would still be frighteningly narrow.

That’s because the President’s answers don’t nearly match up to the magnitude of the crisis.

Without bold alternatives, Americans desperate for big solutions are attracted to bold crackpot ideas like Herman Cain’s “9-9-9” proposal, which would raise taxes on the poor and cut them for the rich.

This is where the inchoate Occupy Wall Street movement could come in. What’s needed isn’t just big ideas. It’s people fulminating for them – making enough of a ruckus that the ideas can’t be ignored. They become part of the debate because the public demands it.

The biggest thing the President has proposed is a plan to create 2 million jobs. But that’s not nearly big enough. Today, 14 million Americans are out of work, and 11 million more are working part-time who’d rather be working full time.

The nation needs a real jobs plan, one of sufficient size and scope to do the job – including a WPA and a Civilian Conservation Corps, to put the millions of long-term unemployed and young unemployed to work rebuilding America.

I’m not criticizing the President. Without energized, mobilized, and organized progressives, even the best people in Washington can’t overcome the monied interests.

For example, America’s long-term debt needs to be addressed, but not the way the President is doing it. He wants to lop $4 trillion off the budget over the next ten years. This almost certainly means sacrificing education, job training, food stamps, and everything else now listed in the so-called “non-defense discretionary” budget, as well as cuts in Medicare and Medicaid.

What about halving the military budget instead? It doubled after 9/11, and military contractors are intent on keeping it in the stratosphere. So is Secretary of Defense Leon Panetta. Result: Defense cuts this size won’t be on the table unless progressives vociferously demand it.

And what about really raising taxes on the rich to finance what the nation should be doing to create a world-class workforce with world-class wages?

Here again, the President’s proposal is paltry compared to what should be done. He wants to raise taxes on the rich by ending the Bush tax cut for incomes over $250,000 and limiting certain deductions.

Yet income and wealth are now more concentrated than they’ve been in 70 years. The top 1 percent gets over 20 percent of total income and holds over 35 percent of national wealth; the richest 400 Americans have more wealth than the bottom 150 million Americans put together.

Meanwhile, effective tax rates on the rich are lower than they’ve been in three decades.

We need to push for higher marginal taxes on the top, and more brackets. Incomes of more than $5 million should be subject to a 70 percent rate. (The top marginal rate was never below 70 percent between 1940 and 1980.) And these rates should apply to all income regardless of source, including capital gains.

This would allow for a bigger Earned Income Tax Credit (that is, a wage subsidy) for lower-income workers. And lower taxes on middle-income workers.

There should be a 2 percent annual surtax on all fortunes over $7 million. This would only hit the richest half a percent of Americans at the very top of the heap. And would yield $70 billion a year – enough to improve our schools and make college affordable to everyone.

And a tax on financial transactions. Even a tiny one of one-half of one percent would generate $200 billion a year. That’s enough to make a major contribution toward early childhood education for every American toddler.

The President’s healthcare law is a good start but it’s not the solution, either. We need Medicare for all. Medicare has lower administrative costs than private insurers. And it has the bargaining heft to reduce drug and hospital costs as well as shift the system from fee-for-services to payments for healthy outcomes.

The President’s financial reforms are also a beginning but they’re way too weak to stop Wall Street depredations. (At this moment, for example, no one even knows the exposure of Wall Street banks to European banks and, through them, Europe’s debt crisis.)

We need to resurrect the Glass-Steagall Act and break up the biggest banks.

The President has talked about fixing Social Security by raising the retirement age. But the best way to ensure the program’s long-term solvency is to lift the ceiling on income subject to Social Security payroll taxes (now $106,800.) Yet this, too, is off the table.

Workers also need more bargaining power. The ratio of corporate profits to wages is now higher than it’s been since before the Great Depression. Workers should be able to form unions through a simple up-or-down vote, without delay.

None of this is possible without strong and consistent pressure from the progressive side. Regressives are setting the agenda.

The President isn’t even talking about the environment any more. Yet climate change is a reality, and our survival depends on reducing carbon emissions.

We should tax carbon-based fuels, and divide the revenues equally among all Americans. It’s the best way to get us to switch to non-carbon fuels, and stimulate research and development of them. And by dividing the revenues, the typical American would come out ahead even though some prices would increase.

Finally, we need public financing of elections and strict limits on so-called “independent” expenditures. Corporations should have to get the approval of every shareholder before spending corporate funds – the shareholders’ money – on politics.

I have no idea whether the Occupiers will morph into the kind of progressive force necessary to put these ideas into play. But if Americans stand together and demand real reform, we can have a real national debate in 2012.

Tomorrow’s Republican debate may attract lots of viewers. It need not capture their minds.