James K. Galbraith noted that the debt ceiling was first enacted in 1917 as cover when the government issued Liberty Bonds to pay for World War I, “to reassure the rubes that Congress would be ‘responsible” even when the country went to war. It was, from the beginning, an exercise in bad faith and has remained so every single second to the present day.”

Galbraith, who teaches economics at the University of Texas at Austin and is author of The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too, notes, in “Hawk Nation: A Guide to the Catastrophic Debt Ceiling Debate” at New Deal20.org (7/11), that the effort to force default on the public obligations of the US is plainly unconstitutional. “Section 4 of the 14th Amendment states, in simple language, that public debts, once duly authorized by law and including pensions, by the way, ‘shall not be questioned.’ The purpose of this language was to foreclose, to put beyond politics, any possibility that the Union would renege on debts and pensions and bounties incurred to win the Civil War. But the application is very general and the courts have ruled that the principle extends to the present day.” So the so-called “deficit hawks” who are using the debt ceiling to take budget hostages are enemies of the US Constitution.

Galbraith went on, “The great unasked question in this summer of sound-and-fury is ‘why?’ The United States has many problems at the moment: a high-and-stubborn unemployment rate, a foreclosure catastrophe, a slowing economy that has not recovered and will not recover from the Great Crisis, and the ongoing challenges of infrastructure, energy and climate change. Fiscal crisis? The entire thing is a figment, made up of wise-men’s warnings repeated endlessly and linked to the projections of technicians at the Congressional Budget Office and elsewhere.

“The projections ... are made up of two economically impossible arguments. One is that there will be a big economic rebound, restoring near-full employment by 2013 or so. We’re already off that track, as some of us warned from the beginning. Of course, a recovery would reduce the deficit even if nothing were done. But CBO then recreates the exploding debt by assumptions, which include steady growth and low inflation, but sharply higher health-care costs and much higher short-term interest rates. These lead the projected debt to compound skyward, soon surpassing all previous records in relation to GDP.

“Is this possible? No it is not. The Federal Reserve would never raise the short-term interest rate as CBO projects, without a prior increase of inflation, which CBO assumes will not occur. If they did, the economy would collapse! And if they don’t, the debt does not compound out of control. ... For what it’s worth, if you believe the capital markets signal anything, they signal their disbelief in doomsday forecasts, in the long-term interest rate on US government bonds, every single day.

Galbraith noted that government does 4 major things:

• It provides for the national defense.

• It purchases goods and services from the private economy for a wide range of public purposes, most of them individually quite small-scale in relation to GDP.

• It regulates a wide range of private-sector activity, for safety, health, environmental and other purposes, including financial stability – or so one should hope.

• It administers Social Security, Medicare and Medicaid, as well as other pension and health benefit programs.

Galbraith would end the wars in Iraq and Afghanistan quickly and dispense with the costs of many foreign bases, aircraft carrier groups, fighter aircraft and submarines and nuclear weapons left over from the Cold War, but “not cut a single dime of Pentagon spending that was actually necessary to defend the United States, in order supposedly to lower the interest rate on federal debt.

“By the same reasoning, why should we cut transportation, or public health, or environmental protection, or scientific research, or bank inspectors or funds that support the public schools? One can argue these matters program by program — and one should. (I would happily cut ethanol subsidies and oil company tax breaks, for starters.) But there is no economic case for placing an overall limit, and it is obvious that the 500,000 public sector workers – including many teachers, police, fire and park rangers and librarians – who have lost their jobs since 2009 were doing good and useful things that are now missed. If sacking them had been good for the economy, we would be having a stronger recovery than we are.

“Finally there are Social Security, Medicare and Medicaid. Unlike the military or the transportation program, Social Security is not a government purchasing program. It therefore takes nothing directly from the private sector. What it does, is provide insurance: it protects workers from poverty in old age, whether or not their families would otherwise be willing and able to support them. And it taxes all workers, whether or not they would otherwise be burdened with elderly parents, or survivors, or the disabled, to support. Along with Medicare and Medicaid, Social Security is a powerful protector of the entire working population – young and old. It redistributes purchasing power, in loose relation to past earnings, in a way that meets the basic needs of a large number of Americans who would otherwise, in many millions of cases, be destitute or medically bankrupt.

“What economic purpose would cutting such programs serve? To do so would again redistribute incomes. Many of the future elderly would be much worse off, and of course many would die younger than they otherwise would. Survivors and the disabled would suffer as well. In return, what would the federal government and the country gain? A release of real resources to the private sector? Social Security does not take real resources from the private sector! Lower interest rates? The idea is absurd, and not just because interest rates are low today. The notion that cutting Social Security would help keep interest rates down is absurd because interest rates are set in a way that has no relationship at all to the scale of Social Security, Medicare or Medicaid.”

Galbraith added, “This argument has nothing to do with the trope, oft-repeated and perfectly true, that the Social Security system does not contribute to the deficit. It would not matter if it did. The important question is: are benefits too high? Obviously not. How about payroll taxes — are they too low? There is no case for that either. One of the very few bright spots in recent policy was the decision to reduce payroll taxes on employees, temporarily, while leaving Social Security benefits alone.

“If you wanted to build on that, the right steps would be to lower — not raise —the Social Security early retirement age, permitting for a few years older workers to exit the labor force permanently on better terms than are available to them today. This together with a lower age of access to Medicare would work quickly to rebalance the labor force, reducing unemployment and futile job search among older workers while increasing job openings for the young. It is the application of plain common sense. And unlike all the pressures to enact long-term cuts in these programs, it would help solve one of today’s important problems right away.

“Instead of this, what do we have, from a President who claims to be a member of the Democratic Party? First, there is the claim that we face a fiscal crisis, which is a big untruth. Second, a concession in principle that we should deal with that crisis by enacting massive cuts in public services on one hand and in vital social insurance programs on the other. This is an arbitrary cruelty. Third, a refusal to stand on the strong ground of the Constitution, against those whose open and declared purpose is tear that document and the public credit to shreds. ...”

Galbraith concluded by noting the false fear that the US might end up like Greece — “a small and overmatched member of a currency zone it cannot control.” But the feared catastrophe — a default on US government obligations — “was entirely the product of treacherous politics, abetted by an irresolute President who seems not to grasp the danger of allowing the Constitution to fail.”

The deal that deficit hawks would applaud, “with cuts to Social Security, Medicare, Medicaid and all the legitimate and necessary functions of government — would be for millions of Americans the catastrophe itself.” See the entire essay at (http://bit.ly/oWn6pI).

SANDERS: WEALTHY MUST SHARE DEFICIT REDUCTION. Sen. Bernie Sanders (I-Vt.) has led the fight to protect Social Security and Medicare from cuts proposed by President Obama. He sent a letter to Obama noting that “the wealthiest people in our country and the largest corporations are doing phenomenally well while the middle class is collapsing and poverty is increasing. ...

“Everyone understands that over the long term we have got to reduce the deficit — a deficit that was caused mainly by Wall Street greed, tax breaks for the rich, two wars and a prescription drug program written by the drug and insurance companies. It is absolutely imperative, however, that as we go forward with deficit reduction, we completely reject the Republican approach that demands savage cuts in desperately-needed programs for working families, the elderly, the sick, our children and the poor, while not asking the wealthiest among us to contribute one penny. ...”

“At least 50% of any deficit reduction package must come from revenue raised by ending tax breaks for the wealthy and eliminating tax loopholes that benefit large, profitable corporations and Wall Street financial institutions,” Sanders wrote. “A sensible deficit reduction package must also include significant cuts to unnecessary and wasteful spending.”

He urged Obama to “stand with the tens of millions of Americans who are struggling to survive economically, not with the millionaires and billionaires who have never had it so good.”

The letter, which is available to be co-signed at sanders.senate.gov, had more than 134,000 co-signers (7/12).

Sanders, chairman of the Senate subcommittee on Primary Health and Aging, warned that a change the White House is considering in figuring cost of living adjustments to Social Security benefits could drive 245,000 people into poverty and reduce widows’ benefits $1,200 a year by 2050, according to Social Security Administration calculations.

Sanders emphasized that Social Security has not contributed a dime to the deficit or the national debt. Funded by the payroll tax on workers and employers, Social Security has a $2.6 tln surplus and is able to provide full benefits for every eligible American for at least the next 25 years.

Sanders noted that repealing the Bush-era tax breaks for the top 2% of Americans would raise at least $700 bln over the next decade. When Bill Clinton raised taxes on the top 2%, more than 22 mln jobs were created and Clinton left office with a huge budget surplus.

Among Sanders’ proposals:

• Levy a 5.4% surtax on millionaires that would raise more than $383 bln. The millionaire surtax enjoyed 81% approval in a recent NBC/Wall Street Journal poll.

• Stop giving tax breaks to companies that move US manufacturing job overseas. That would save $582 bln over 10 years.

• End tax breaks and subsidies for big oil and gas companies, at a savings of more than $40 bln.

• End abusive and illegal tax shelters overseas, bringing in $1 tln.

• Establish a Wall Street speculation fee of less than 1% on the sale and purchase of credit default swaps, derivatives, stock options and futures, which could reduce the deficit by more than $100 bln.

• Tax capital gains and dividends the same way we tax ordinary work, raising $730 bln. Today the effective tax rate on the wealthiest 400 Americans is just 18%, the lowest on record.

• A progressive estate tax on inherited wealth of more than $3.5 mln would raise more than $70 bln over 10 years and not effect 99.7% of those who lose a loved one.

• Reduce $900 bln in unnecessary and wasteful spending at the Pentagon.

• Require Medicare to negotiate for lower prescription drug prices with the pharmaceutical industry, at a savings of over $157 bln. (Sen. Al Franken, D-Minn., who is sponsoring a bill to that effect, says it would save $240 bln; see below.)

• Enact a robust public option or Medicare-for-all health insurance program, saving more than $68 bln over the next decade and providing affordable health coverage for millions of Americans.

• Impose a currency manipulation fee on China and other low-wage countries that use their currencies to gain an unfair trade advantage over the US. The Economic Policy Institute estimates the manipulation fee could raise $500 bln over 10 years and create 1 mln jobs in the process.

Sanders also estimates that the federal government could root out $200 bln in waste, fraud and abuse.

Sen. Al Franken (D-Minn.) noted that there are ways to cut Medicare that would not harm benefits. For example, if Congress simply authorized Medicare to negotiate with pharmaceutical companies for lower drug prices, that could save more than $240 bln over 10 years. Medicare Part D cost $68 bln in 2010 and Franken has introduced a bill to give the Department of Health and Human Services the same authority to deal with Big Pharma as other federal agencies, such as Veterans Affairs, already have. VA receives 10 of the most common prescription drugs at approximately 50% of what Medicare pays, Franken said.

Franken also noted that that the Defense Department could save $300 bln by cutting programs the military says it doesn’t need or want, such as the F-22, the C-17 and the F-35 alternate engine.

Congress also could stop the subsidies and tax breaks for the enormously profitable oil industry, at a savings of $64 bln over 10 years. Franken noted that the Treasury Department estimated that repealing subsidies would reduce domestic oil production by less than 0.5%.

MEDICARE IS NOT ‘BANKRUPT.’ Claims by fiscal alarmists that Medicare faces “bankruptcy” are at best misleading as the Affordable Care Act has substantially improved the program’s financial outlook, the Center on Budget and Policy Priorities (cbpp.org) reported (7/12). The 2011 report of Medicare’s trustees finds that Medicare’s Hospital Insurance trust fund will be able to pay 100% of the costs of the hospital insurance coverage through 2024; at that point, payroll taxes and other revenue in the trust fund will be sufficient to pay 90% of Medicare hospital costs.

Medicare’s coverage for physician and outpatient costs or to the prescription drug benefit do not face insolvency as they are financed through the Supplementary Medical Insurance trust fund, which consists of accounts for Part B, which pays for physician and other outpatient services, and Part D, which pays for outpatient prescription drugs. Premiums for those programs are set each year to cover 25% of costs, with general revenues accoring to the remaining 75%.

Nonetheless, Medicare faces financing challenges to make the Hospital Insurance trust fund solvent over the long term. Major reforms in health care payment and delivery will be essential throughout the US health care system, but CBPP said teh “first step” is to “do not harm” — that is, not make Medicare’s financing challenges even greater by repealing the Affordable Care Act.

Replacing traditional Medicare with private insurance, as the House-passed budget would do, would represent a big step in the wrong direction, as it would increase total health care spending attributable to Medicare beneficiaries by upwards of 40%, the Congressional Budget Office reported.

Medicare has been the leader in instituting various reforms in the health care payment system to improve efficiency and constrain costs. Between 1970 and 2009, Medicare spending per enrollee grew by an average of 1 percentage point less each year than comparable private health insurance premiums, the Centers for Medicare and Medicaid Services reported in January.

MEDICAID MATTERS. In 2002, 110,000 people were enrolled in Oregon’s Medicaid program. By 2008, budget cuts had reduced that number to 19,000. When the state realized it had the money to cover another 10,000 residents, officials set up a lottery. That lottery, with random choice of who gets health care and who doesn’t, allowed health policy researchers to compare the health of insured to the uninsured, Ezra Klein noted at WashingtonPost.com (7/8).

By September 2009, after the first year of coverage, the data showed those in the Medicaid sample got 30% more hospital care, 35% more outpatient care and 15% more prescription-drug care than those who were on their own. Mammograms were up 60% and cholesterol monitoring rose 20%. Medicaid recipients also had fewer unpaid bills sent to collection, were 25% more likely to report themselves in “good” or “excellent” health and 10% less likely to screen positive for depression. “Perhaps the one surprise was that there was no evidence of ‘crowd-out’: Medicaid coverage didn’t make someone more or less likely to purchase private insurance,” Klein wrote.

Klein noted that senior citizens form a powerful voting bloc, with long experience protecting Medicare, but “Medicaid — which serves the poor, the young and the disabled — isn’t guarded by a force anywhere near as fearsome. And so, as the Republicans back off Medicare, there’s broad concern that Medicaid is going to get the ax. For instance, Paul Ryan, the Wisconsin Republican who heads the House Budget Committee, wants to repeal the Affordable Care Act’s expansion of Medicaid to 16 mln Americans and ultimately cut $1.4 tln from the $4 tln program.”

BRIT PHONE HACKING SCANDAL PUTS HEAT ON MURDOCH. Charges that employees of Rupert Murdoch’s British newspaper, News of the World, hacked thousands of phones, from a kidnapped girl and slain British soldiers to Prince Charles, has resulted in the shutdown of the newspaper. The tabloid reportedly hacked into the voicemail of murdered teenager Milly Dowler, potentially impeding a police investigation and giving her family false home by deleting voicemails. Reports have also emerged of News of the World allegedly hacking the phones of fallen soldiers and the father of a victim of a 7/5/05 terrorist bombing in London. Reporters at two other of his British papers, including the formerly respected Sunday Times, engaged in hacking, deception and privacy violations that included accessing former Prime Minister Gordon Brown’s bank account and stealing medical records of his seriously ill baby son. Reporters also were accused of paying Queen Elizabeth II’s bodyguards for secret information about the monarch, which raised security concerns.

This is of special interest in the US because, MediaMatters.org noted, Murdoch’s News Corp. media empire includes Fox News, the Wall Street Journal and the New York Post. In fact, Murdoch’s choice to run the once-proud WSJ was longtime loyalist Les Hinton, who oversaw News Corp.’s British newspapers during the height of the News of the World’s alleged hacking activity. Hinton twice testified to the UK parliament that he had conducted a rigorous inquiry into the papers he oversaw and claimed hacking was limited to one reporter. Now Gordon Brown is saying the Sunday Times’ violations took place over a 10-year period.

Media Matters noted that it took a week before the WSJ newsroom finally got around to informing readers that the newspaper’s publisher plays a starring role in the phone-hacking scandal. And that report consisted of one paragraph in a larger story about the scandal.

Judd Legum of ThinkProgress.org noted (7/11) that Murdoch and News Corp. could run afoul of the Foreign Corrupt Practices Act, as the US Department of Justice has aggressively prosecuted US companies involved with corrupt practices abroad, collecting billions in fines and sending executives to jail.

The hacking scandal is getting little attention on Fox News, but Fairness & Accuracy In Reporting recalled (7/12) that Fox host Bill O’Reilly had a very different view when a Sarah Palin’s email account was hacked in September 2008. He called for criminal prosecution of the website that published the emails.

VOUCHER ADVOCATES: ‘PUBLIC SCHOOLS SHOULD GO AWAY.’ Public school advocates have been mocked for suggesting that right-wing supporters of school vouchers are out to destroy public schools, but the leader of a Tea Party group in Pennsylvania has come clean with its goal: “We think public schools should go away,” Teri Adams, head of the Independence Hall Tea Party and a leading advocate of school voucher bills in New Jersey and Pennsylvania, said in an email, Bob Braun of the Newark Star-Ledger reported at nj.com (7/11). Public schools “are hurting our children,” Adams said in an email received by James Kovalcin, a retired public school teacher who asked Adams for clarification. She responded: “Our ultimate goal is to shut down public schools and have private schools only, eventually returning responsibility for payment to parents and private charities. It’s going to happen piecemeal and not overnight. It took us years to get into this mess and it’s going to take years to get out of it.”

“I was shocked she was so open about it, but her view didn’t surprise me,’’ Kovalcin told Braun.

In a phone interview, Adams acknowledged to Braun that she sent the e-mail and made the comment that public schools should “go away.” After the interview, she called back to say her position “now” was the elimination of failing urban schools with the decision of what to do with more successful suburban schools to come later.

GRAYSON IN COMEBACK BID. Former Rep. Alan Grayson (D-Fla.) will seek to regain the Orlando, Fla., congressional seat he lost in 2010. In his announcement at DailyKos.com (7/11) The progressive populist said he decided to run after he heard of a veteran who has had a bad liver since he was 30, when he contracted hepatitis, but he was ineligible for VA coverage and no private insurance company would go near him. “Every day Rick survived, his family owed several thousand dollars more to hospitals and doctors. And they had no way to pay for it.” Rick died 6/30 and Grayson said he was keeping his promise to Rick and his wife to run again. He said he was running “for the four mln people in Florida who can’t see a doctor when they are sick, and the 50 mln nationwide ... four the six mln Americans who haven’t worked in six months and are seeing their benefits run out, for the eight mln more who are unemployed, and for the eight mln on top of that who can only find part-time work ... for the millions of parents who have absolutely no idea how to pay for a college education for their children ... and for everyone who is appalled by the prospect that we may cut Social Security and Medicare benefits as we spend more than $150 bln a year on three unnecessary wars and almost $100 bln a year on the Bush tax cuts for the rich.”

Grayson was targeted in 2010 by Republicans and right-wing PACs who ran attack ads in a district that was historically Republican, and he lost to Dan Webster (R) 56.2% to 38.4%. Grayson told TalkingPointsMemo.com (7/12) he expects redistricting will make Orlando a Democratic-leaning district thanks to population growth, a 2010 ballot measure that restricts gerrymandering and reaction to the Republican House majority’s struggles with the responsibilities of governing. See graysonforcongress.com.

OLBERMANN PUTS CURRENT ON RADAR, SINKS SPITZER. Keith Olbermann’s first week back on cable TV after his 6/20 was judged a success, as his 245,000 viewers in the “target demo” aged 25-54 beat MSNBC’s 237,000 and CNN’s 89,000, Deadline.com reported (7/5). The first week after he surfaced on Current TV, his audience was about one-third of what he averaged on MSNBC before his abrupt departure in February. The second week, the target demo was down 29% to 93,000 and the total audience dropped 28.5% to 253,000. That’s still more than the 23,000 viewers Current had before Olbermann (including 15,000 in the target demo). Current’s CEO, Mark Rosenthal, told Adweek.com (7/7) he isn’t too worried about the ratings drop-off, and expects the show to build as people find Current or demand that their cable operators add the six-year-old channel, which is available to 60 mln homes, compared to 95 to 105 mln homes for the competition.

Meanwhile, MSNBC’s ratings were up 3% in the second quarter, averaging 945,000 viewers. Lawrence O’Donnell, who took over Olbermann’s time slot, drew 974,000 viewers, down from the 1.06 mln Olbermann drew on MSNBC. And CNN parted ways with Eliot Spitzer after Olbermann beat his show in the first week.

SENS. ASK FED PROBE OF VOTER RESTRICTIONS. Sixteen senators, led by Sen. Michael Bennett (D-Colo.) asked Att’y. Gen. Eric Holder to examine whether the Voting Rights Act prohibitions on laws preventing minorities from voting invalidate so-called “voter ID” laws, which effectively disenfranchise thousands of elderly, disabled and low-income voters. In the letter, the senators said studies show that as high as 11% of eligible voters nationwide do not have a government-issued ID. This percentage is higher for seniors, racial minorities, low-income voters and students.

Ian Milhiser noted at ThinkProgress.org (7/9) that there is reason to fear that the Supreme Court could simply strike down parts of the VRA if the Justice Department attempted to make Republican-controlled states follow the law. “Sadly, in the wake of Bush v. Gore and Citizens United v. FEC, there are no longer any guarantees that the Supreme Court will place democratic values ahead of corporate interest groups and other conservatives eager to seize control of our elections,” Milhiser wrote.

INHOFE SLAPS FAA FOR DISCIPLINING HIM. Sen. James Inhofe (R-Okla.) was punished by the Federal Aviation Agency for landing last year on a closed runway in South Texas despite the presence of vehicles and workers on the runway. On 10/21/10, despite an X mark on the runway, Inhofe touched down and then “sky hopped” over six vehicles and personnel working on the strip, and “scared the crap out of” the airport workeres before he landed for good, TalkingPointsMemo.com reported in April. The FAA reported that Inhofe did not check the Notices to Airmen indicating the runway was closed prior to flying. He told the Washington Post that an airport official, not identified, “hates me, I don’t know why.”

Inhofe agreed to a “program of remedial training” as a substitute for legal action. With that done, TalkingPointsMemo noted (7/6), Inhofe is pushing a bill that would protect pilots from “agency overreach” by the FAA. The “Pilot’s Bill of Rights” would allow a pilot to appeal to a federal court; would simplify the Notice to Airmen system for providing relevant information to pilots; and would require a review of the current medical certification process.

Inhofe repeated his assertion that the South Texas incident was not his fault. “I did nothing wrong, but at any time I could have suffered the revocation of a license,” he told the Tulsa World (7/6). Inhofe said earlier this year that he would pursue legislation to help general aviation pilots. “I was never fully appreciative of the feeling of desperation until it happened to me,” he said.

STATES LEAD ON SINGLE-PAYER. Single-payer coverage will only happen in the United States at the state level, Andrew McGuire, executive director of California OneCare, said at a Netroots Nation discussion on the next steps for health care reform. McGuire, director of the statewide campaign for single-payer health care, noted that the California Assembly has passed a single-payer bill twice only to get it vetoed by Gov. Arnold Schwarzennegger (R).

Reapportionment looks like it will give Democrats a two-thirds majority in the Assembly as well as two to five more Democats in Congress. “We’ll have to primary ‘business Democrats’ to scare the Hell out of them,” McGuire said, but single-payer has the support of the California Nurses Association, Physicians for a National Health Plan, the League of Women Voters, the Council of Churches, teachers’ and public employees’ unions and Latino organizations. He noted that three million undocumented residents of California will get no help from the Affordable Care Act, so Latino organizations are expected to help deliver Medicare for All to California. “Once we get some discipline in the California Democratic Party, California will change what is happening.”

Vermont has approved a single-payer health plan but it cannot be implemented until 2017 under the Affordable Care Act. President Obama in March said he supports a bill sponsored by Sens. Ron Wyden (R-Ore.) and Scott Brown (R-Mass.) that would move up the waiver date to 2014.

Dylan Matthews noted at WashingtonPost.com (7/7) that if Medicare was opened to buy-ins for people between 62 and 64, the Congressional Budget Office reported in 2008 that, to be self-financing, the premium would have to be $634 a month, or $7,600 a year. In 2009, when Congress was considering a buy-in for people aged 55-64, the CBO estimated the monthly premium would be $600, with the lower premium presumably due to lower health costs of people aged 55-61. In 2010, the CBO analyzed a proposal form Rep. Pete Stark that would set up a public option that essentially offered a universal Medicare buy-in. The CBO found that premiums wold be 5-7 percent lower than higher private health plans in health exchanges. The plan would reduce the deficit by $53 bln over 10 years.

From The Progressive Populist, August 1, 2011


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