Happy New Year!

First, to my family and friends; also,

The new 112^th Congress of the United States convening in January,

John Boehner, the new Speaker of the House of Representatives,

Nancy Pelosi, former Speaker of the House, now House Minority Leader,

John Lewis, Congressman from the Fifth Georgia District in Atlanta,

Harry Reid, Majority Leader of the Senate,

President Barack Obama,

Vice President Joseph Biden, and

Hillary Clinton, Secretary of State.

The 111^th Congress successfully addressed and passed, over obstinate opposition, more desperately needed, controversial legislation than any other Congress since the 89th when voter rights legislation passed in the 1960s!

I hope the 112^th is inspired by the 111^th example to do as well or better, and that new members, including Republicans and their Speaker, John Boehner, will help the nation weather its worst economic crisis since the Great Depression of the 1930s.

My Cousin Kathleen, focused on other issues, didn’t like the emphasis in my “Taming the Borrowing Beast” blog on the fact that, "The last time the United States operated on balanced budgets. . .was during the Democratic Administration of President Clinton." In reply, my “Nation Becoming A Dysfunctional Family” blog described election feuding over divisive issues that avoid government “addiction to irresponsible credit expansion during the last forty years...

“We are a marvelously diverse and contentious country of many shapes, sizes, colors, races, religions and sexual orientations. We're a nation of immigrants from every corner of the earth; a miniature United Nations of people live on every city block and small town. Our family mirrors our country, every bit as diverse and very contentious. . . . We have married people from many distant lands. These differences make life exciting and interesting; but there are times when we have to put them aside; now is such a time.

“The answer is not to avoid discussing our differences—as if this were possible— — but in remembering the law of love that holds our disputatious family together.

“Your Father, Kathleen, as you know so well, was talented in keeping . . . rhetoric in bounds with humor. Other members of our clan share this gift. That's why no one, whatever their cultural roots, wants to miss one of our family parties.

I have but one concrete suggestion to Republicans in the 112^th Congress:

Prove that I am wrong in claiming that little if any job stimulus will flow from the billions in tax breaks you recently won in the 111^th Congress for your wealthiest patrons and the corporations they own and control. It’s not hard:

A. Persuade your patrons to stop hoarding their enormous cash reserves such as I describe in my “Hatching a Brand New Beast” blog;

B. Persuade your patrons to spend or invest their cash reserves and tax breaks like Warren Buffet, in new enterprises that will create jobs, instead of “safe” aging enterprises approaching the down side of their secular trend curve;

C. Persuade your patrons and the state governments they dominate to stop firing, start hiring and begin serving their constituents’ needs;

D. Persuade your patrons and the media they control to stop trashing on efforts to accomplish these things and those who advocate them, like George Soros;

E. If your patrons do these things they’ll make a lot of money, avoid a class war, and like themselves better.

photo credit: flickr, rkramer62

Democrats Pay Scrooge Ransom

A New Republican Borrowing Beast is Born!

I have been waiting since the November election to see how Republican Borrowing Beast scams play out. That fearsome beast has now, despite campaign deficit reduction talk, once again been unleashed. We will continue to borrow money to reward our richest billionaires with new billions in tax breaks. Scrooge’s clerk, Bob Cratchit, and his impoverished family will continue to suffer; Tiny Tim may lose his health insurance; and the miserable Scrooge will continue to speculate, hoard money and foreclose.

Thursday, December 16, 2010 Congress finally approved, and the next day the President signed, an $858 billion extension of all Bush 2001 and 2003 tax cuts for two years and created additional new tax breaks as well. One fourth of all income tax reductions go to the richest one percent of taxpayers. They are also rewarded with a $5 million inheritance tax exemption and reduced rates. Democrats were coerced into voting this monstrous giveaway to the rich as ransom for extending middle-class tax reductions and unemployment benefits for thirteen months. See a graphic illustration of the cost of this plan here.

In my August 15, 2010 blog, “Paper Money Makes Voters Happy,” I quoted Canby Balderston, then a governor of the Federal Reserve Board, summing up a speech at a Wharton School Alumni luncheon during the Nixon Administration:

“We will soon run out of that nothing with which to make no down payment.”

I then explained: “Despite the warnings of true conservatives like Canby Balderston and Paul Volker, former Chairman of the Federal Reserve Board, Republican politicians, beginning with President Nixon, could not resist the temptation to buy elections with ever-expanding extensions of credit.”

After some details about how this works, I quoted a moving description in the Atlanta Journal-Constitution by a long unemployed, decorated war veteran of how it feels trying to live on the “nothing” of which Dean Balderston spoke.

August 30 I wrote a sequel, “Taming the Borrowing Beast,” in which I pointed out: “The last time the United States operated on balanced budgets, that is, spending no more money than collectable in taxes, was during the Democratic Administration of President Clinton. In its final annual quarters, that administration’s budgets yielded a surplus; that is, the federal government collected more in taxes than it spent.

“According to the still dominant business cycle theory of British economist Lord John Maynard Keynes (1883-1946), governments should take in more money than they spend during good times so that in hard times they may ease the pain by spending more than they take in. . . .

“Continuing in the Nixon tradition, President George W. Bush, at the first sign of declining economic prospects in 2001, applied a big dose of Nixon voter happiness balm with risky inflationary tax cuts to the wealthy, and, as if that was not enough, began a war in Afghanistan. In 2003, came more tax cuts to the wealthy and the Iraq war.

“Tax cuts plus war spending are wildly inflationary. They induce voter euphoria for a while—a seemingly endless feast of dollars garnished with patriotic fervor are delicious—but eventually the happiness bubble breaks, and we are at the mercy of a grouchy Borrowing Beast.

“That beast leaves us, in the words of Alan Greenspan, with choices that are no longer between “the good and the better,” but between “the bad and worse.”

How do we, an electorate addicted to an illusory prosperity from a political financing fix, tame our Borrowing Beast?

“First, as in the ‘twelve steps’ method, we have to face the fact of our addiction.

For more on this topic: “Hatching a Brand New Beast.”

cartoon credit: HikingArtist.com

Are You Rich Enough to Vote Republican?

Being rich is not enough; only the very rich count with Republican politicians. In addition to their wealthy human base, a recent 5-4 Supreme Court majority handed them a vast new source of campaign funds. News reports are beginning to discover the infusion of enormous corporate contributions into an already well-endowed Republican effort to buy themselves a Congressional majority this November.

During the last forty years (since President Nixon), Republican politicians have been making ordinary voters happy with an illusory prosperity by recklessly inflating the amount of money in circulation. They eased bank regulation, manipulated interest rates, and, finally, W applied the most powerful inflationary “stimulus” of all, financing two wars and tax breaks with borrowed money.

The only people that benefited from Republican financial manipulations, however, were the very rich. According to James Surowieki writing in the New Yorker, “People who earn a few hundred thousand a year have done much worse than people at the top of the ladder.

“Between 2002 and 2007, for instance, the bottom 99% of incomes grew 1.3% a year in real terms—while the incomes in the top one percent grew ten per cent a year. That one percent accounted for all income growth in those years.”

But us 99% are bearing the brunt of the catastrophic economic consequences of W’s reckless tax avoidance borrowing since it came home to roost in 2007.

Most professional Republican advisors have publicly regretted going along with such risky financing. Alan Greenspan, former chairman of the Federal Reserve Board on whose watch W’s wartime borrowing boom occurred, now wants all $3.7 trillion of 2001 and 2003 tax breaks repealed and applied to reducing the national debt.

Now repentant deregulators read like a former celebrity list. Richard Posner, “The crisis is primarily, perhaps almost entirely, the consequence of decisions taken by private [banking] firms in an environment of minimal regulation.” David Stockman, former director of the Office of Management and Budget under President Ronald Reagan, is writing a book on “How my G.O.P. destroyed the U.S. Economy.”

President Obama has been forgiving—many say too forgiving—of Republican financial advisors. Timothy Geithner, who managed the Bush bailouts in 2008, is now Obama’s Treasury Secretary.

Republican politicians, however, are neither repentant nor forgiving. They’re in denial. The only song they sing, in the midst of the money meltdown their excessive borrowing spawned, is more tax breaks for their very wealthy supporters, paid for, again of course, with borrowed money. Every other kind of “government spending”—except for their endless nine-year old wars—must be sacrificed to “decrease the deficit” those wars and tax breaks created.

Obama, ever the conciliator, would cancel only $700 billion of the expiring $3.7 trillion in Republican tax breaks; that is, only tax reductions benefiting taxpayers with net joint income above a quarter of a million dollars annually would expire.

As revealed in Mr. Surowieki’s statistics, Republican politicians have, in effect, if not deliberately, been waging class warfare on behalf of the very rich against their poorer fellow citizens.

Republican are spending tons of money firing up a lot of angry people brimming with vituperation, including some armed and dangerous. I hope we survive such madness long enough for Republicans to repent cheating their poorer relations.

artwork: flickr, Patrick Hoesly

Hatching a Brand New Beast

Nine years of tax breaks authorized by President Bush and a Republican Congress in 2001 and 2003, expressed in terms of the cost of proposals to extend them beyond their present December 31, 2010 expiration date, total $3.7 trillion (Washington Post).

These were the first wartime tax cuts the United States has ever enacted.

Borrowing money to cover both war expenditures and tax breaks is the kind of reckless financing that leaves us “nothing with which to make no down payment.” See my earlier blog.

Alan Greenspan, Chairman of the Federal Reserve Board on whose watch this dangerous borrowing occurred has since acknowledged his mistake and its terrible consequences. Another earlier blog.

Greenspan now calls for a complete repeal of the 2001 and 2003 tax cuts. But beneficiaries of these tax cuts and the politicians that speak for them continue to insist on extending $3.7 trillion in risky tax breaks at a time when the nation is up to its ears in debt, in a deep recession and still at war. They spend tons of money and spread truckloads of lies to buy a Congress in this fall’s mid term elections that will extend $3.7 trillion risky tax breaks that expire December 31, 2010.

Legions of very expensive professional lobbyists orchestrate grass roots agitation, support Congressional obstructionism (approaching 200 filibusters since 2008) and reinforce it all with big business money hoarding. Cash reserves of Georgia’s largest Fortune 500 firms have roughly doubled since 2007 (Atlanta Journal-Constitution).

These tactics paralyze efforts to tame the marauding monster that has devastated our country since 2007. Long term unemployment. Reduced public services in education, road and bridge maintenance, libraries, street lighting, etc. pave “a long unlit road to nowhere” (Paul Krugman) “toward third world status” (Arianna Huffington).

President Obama, like President Roosevelt 87 years ago, is far more forgiving of Republicans than they are of him. Obama currently proposes to leave in place $3 trillion of Bush era tax cuts, canceling only $700 billion of the $3.7 trillion total.

$3 trillion paid for with borrowed money duplicates almost exactly the risky financing that unleashed the present monster, hatching a brand new beast only slightly smaller (81%) than the original.

The Justification is “stimulus,” but that’s a heap of stimulus! $3 trillion to people, who, unlike the poor, have no incentive to spend it. But neither “stimulus” nor “lower taxes” address “where the money is.”

According to James Surowieki writing in the New Yorker, “People who earn a few hundred thousand a year have done much worse than people at the top of the ladder.

“Between 2002 and 2007, for instance, the bottom 99% of incomes grew 1.3% a year in real terms—while the incomes in the top one percent grew ten per cent a year. That one percent accounted for all income growth in those years.”

Instead of tax brackets that obscure the difference between someone earning two hundred thousand a year and someone earning two hundred million, we should refine tax brackets into smaller, fairer and less controversial subclasses. Such revisions could turn the ugliness of the present effort to extend risky 2001-2003 tax breaks into a healing, useful reform.

photo credit, flickr, Limbic, Jonathon Davis

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rtwork: CBS, The Family of Music