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Paul Krugman writes about the politicizing of federal budget deficits in today’s column:

To me — and I’m not alone in this — the sudden outbreak of deficit hysteria brings back memories of the groupthink that took hold during the run-up to the Iraq war.  Now, as then, dubious allegations, not backed by hard evidence, are being reported as if they have been established beyond a shadow of a doubt.  Now, as then, much of the political and media establishments have bought into the notion that we must take drastic action quickly, even though there hasn’t been any new information to justify this sudden urgency.  Now, as then, those who challenge the prevailing narrative, no matter how strong their case and no matter how solid their background, are being marginalized.

And fear-mongering on the deficit may end up doing as much harm as the fear-mongering on weapons of mass destruction.

This is the year that the Bush tax cuts expire, so the Republicans will use their scare tactics to convince people that raising taxes on the rich is the wrong thing to do, and they’ll probably even argue that we should lower the tax rates to stimulate economic growth, because everybody knows that more money in the pockets of billionaires creates jobs, right?  WRONG!

Obama has been making a point of placing blame for the deficit spending where it belongs – with the Republicans – and he has been pretty vocal about how their tax-cutting schemes have not worked in the past.  He has pointed out that they are the party that reduced federal revenue by trillions of dollars by cutting taxes for the super rich, and they are the party that handed a blank check to Bush for the funding two very long wars.  Obama should keep hammering on the Republicans about the deficit they created and he should be very firm with Reid and Pelosi about not extending the Bush tax cuts for the rich.

The Democrats in Congress should not be pressured by the deficit hysteria Krugman writes about.  Now is not the time to cut funding for government programs that are essential to stimulating the economy and getting us out of this recession.

President Obama must have read Paul Krugman’s January 18th column in which he wrote about how “Reagan spent his first few years in office continuing to run against Jimmy Carter,” which led into:

Mr. Obama could have done the same — with, I’d argue, considerably more justice. He could have pointed out, repeatedly, that the continuing troubles of America’s economy are the result of a financial crisis that developed under the Bush administration, and was at least in part the result of the Bush administration’s refusal to regulate the banks.

But he didn’t. Maybe he still dreams of bridging the partisan divide; maybe he fears the ire of pundits who consider blaming your predecessor for current problems uncouth — if you’re a Democrat. (It’s O.K. if you’re a Republican.) Whatever the reason, Mr. Obama has allowed the public to forget, with remarkable speed, that the economy’s troubles didn’t start on his watch.

Obama got the message:

Now, even as health care reform would reduce our deficit, it’s not enough to dig us out of a massive fiscal hole in which we find ourselves. It’s a challenge that makes all others that much harder to solve, and one that’s been subject to a lot of political posturing. So let me start the discussion of government spending by setting the record straight.

At the beginning of the last decade, the year 2000, America had a budget surplus of over $200 billion. By the time I took office, we had a one-year deficit of over $1 trillion and projected deficits of $8 trillion over the next decade. Most of this was the result of not paying for two wars, two tax cuts and an expensive prescription drug program. On top of that, the effects of the recession put a $3 trillion hole in our budget. All this was before I walked in the door.

Now — just stating the facts. Now, if we had taken office in ordinary times, I would have liked nothing more than to start bringing down the deficit. But we took office amid a crisis. And our efforts to prevent a second depression have added another $1 trillion to our national debt. That, too, is a fact.

That’s a fact he needs to wield as a hammer far more often than he did during his first year in office.

Seriously, that’s what it says in the new GOP pamphlet released last week.

I scanned through it today and found the same tired old theories about how they are the party of low taxes and controlled spending.  It was really quite hilarious.  On page two I found how their plan:

CURBS SPENDING

•  
  • Limits the Federal Budget from Growing Faster than Family Budgets Instead of spending money on wasteful programs under the guise of “stimulus” and investments,” Republicans seek to ensure that the federal budget cannot grow faster than families’ ability to pay the bill.

And on page nine I found that the government would be collecting way less revenue because, you guessed it – they want more huge tax cuts for the rich!

Republicans propose a simple and fair tax code with a marginal tax rate for income up to $100,000 of 10 percent and 25 percent for any income thereafter, with a generous standard deduction and personal exemption.  Republicans would allow any individual or family satisfied with their current tax structure to continue to pay those rates, while dropping the two lowest rates by 5 percent to provide every taxpayer with a tax cut.  Republicans would also permanently fix the Alternative Minimum Tax (AMT) so that millions would no longer have to fear the possible imposition of a huge, new tax each year.

Yes, they want to CUT the top tax rates that are currently set at 35%, 33%, and 28% down to 25%.  That would give the super rich who currently pay 35% a 10% reduction on their income-tax bill, unless they fell into the category of those who are “satisfied with their current tax structure” who will choose “to continue to pay those rates.”  I wonder how many millionaires and billionaires would willingly pay more taxes than their greedhead associates.  Not many I bet…  

And as if the income-tax reduction isn’t enough, I’ve read they would also like to completely do away with the capital gains tax.  If they had their way, the very richest CEO’s among them would save an average of $1,500,000 every year, while the working class would see little to no reductions in their taxes. 

How much tax revenue would be lost under the Republican plan?  Citizens for Tax Justice says: 

The income tax proposals in the House GOP plan, which is presented as a fiscally responsible alternative to the President’s plan, would cost over $300 billion more than the Obama income tax cuts in 2011 alone.

So the Republican tax plan would reduce federal revenues by hundreds of billions of dollars a year that would be funneled into the pockets of their super-rich base and, you guessed it, the government wouldn’t be able to spend money on “wasteful” programs like schools, bridges, roads, alternative energy development, and health care to stimulate the economy.

Obama shouldn’t waste a nanosecond trying to reach out to these greedy vulgarians and their pissed-on tax plan.  He should do what he was elected to do:   Start changing things.  If I were him I’d start by telling everybody that the right thing to do at this time is to take back the hundreds of billions of dollars that the super rich pretty much stole from everybody else by RAISING their tax rate to at least 50% and using the extra revenue to rebuild our country.

The Alternative Minimum Tax instituted in 1969 was put in affect to prevent a very small number of very rich Americans from using accounting tricks to avoid paying any income taxes.  How much were the “very rich” earning in 1969?  Well the alternative tax applied to those who earned $200,000 or more.
 
So what’s $200,000 adjusted for inflation from 1969 to date?  $915,000.  So you can see, the AMT was never intended to reach down into the ranks of the upper middle class, and since the compensation threshold was not indexed to inflation, it’s been a fought over in Congress more and more frequently as middle class incomes rise. 

Just before Congress adjourned a couple weeks ago, they passed a bill that provides some relief for those who would have to pay the AMT for 2007.  The Democrats wanted to pay for the loss of revenue the AMT would have generated by raising taxes on the super rich.  One plan was to make hedge-fund managers pay regular income tax rates on their billions in earnings instead of the lower 15% capital gains tax. 

Whoa!  What a crazy idea.  Why would anybody with a normal job who’s paying 20% to 30% in Federal Income Taxes want billionaires who earn their money by extracting dollars from the economy to pay the same or higher taxes than they do?  I don’t know… maybe because the hedge fund managers are taking so much money for themselves and not contributing anything tangible to the economy.  Maybe they should be stuck with paying a greater portion of total income taxes. 

Ask anyone you know who works for a living if he or she thinks it is acceptable for people that collect most of their income from investments – not from real jobs – to pay a lesser tax rate than they do.  I think you’ll find the idea of the super rich getting discounts on income tax rates makes them very angry.

Back to that AMT bill recently passed by Congress:  Here are two quotes from opposing sides:

“Let me be clear, there is no disagreement between Republicans and Democrats over protecting the middle class from the AMT,” House Majority Leader Steny Hoyer, D-Md., said. “The question is, will we do so responsibly or charge tens of billions of dollars to our grandchildren?”

Rep. Eric Cantor, R-Va., the Republicans’ chief deputy whip, said the Wednesday vote was “a huge victory for us.” The GOP position, he said, “has been consistent down the line. We don’t believe we ought to raise taxes to correct the mistake of AMT.”

I like that… “the mistake of the AMT.”  Remember, the original 1969 tax was targeted at those earning more than $915,000 dollars a year in today’s dollars.  The “mistake” of course is that the 1969 income level was not indexed to inflation.  If it was, it would have continued to affect only the very rich as originally intended.  So why are the Republicans so adamant about not raising taxes on the super rich to offset the loss of revenue?  Pretty simple really.  It’s all part of the Republican plan to shift a large portion of the tax burden from the ultra rich to the middle and lower classes.

NOT TRUE! You say.  Oh really…

Take a look at these numbers that Paul Krugman derived from recent “Historical Effective Federal Tax Rates” reports put out by the Congressional Budget Office:

Here’s what the numbers say about percentage gains in after-tax income from 2003 to 2005:

Bottom quintile: 2%
Next quintile: 2.4%
Middle quintile: 3.9%
Fourth quintile: 3.7%
Top quintile: 16%
Top 10%: 20.9%
Top 5%: 27.7%
Top 1%: 43.5%

It was a boom, all right — but only for a few people.

Leave it to Bush and his congressional foot soldiers to protect “his base” by refusing to raise income taxes on the richest Americans who have seen their incomes increase by 43.5% over the last three years compared to the 2% to 3.7% for bottom 80%

They’d rather run higher deficits than offset the loss of revenue from a “mistake” tax that crept its way into the middle class than transfer the burden to the richest 1% that can easily afford to pay back a portion of what they’ve extracted from the rest of us.

Here is a part of a rant by David Michael Green posted on CommonDreams.org that you really should read:

Regressives like to call people like me Bush-haters, and so it is important to address that claim before proceeding, because the entire intent of hurling that label at the president’s critics is to undermine their credibility. If you simply hate the man, they imply, you’re not rational, and your critiques can be dismissed. But it isn’t that simple – not by a long shot. First, it should be noted that the regressive right is far wider a phenomenon than just one person. It currently includes an entire executive branch administration, almost (and, just a year ago, more than) half of Congress, a majority of the Supreme Court and probably a majority of the lower federal courts, a biased-to-the-point-of-being-a-joke mainstream media, and tons of lobbyists, think tanks and profitable industries.

But as to George W. Bush, himself, I suspect it’s quite fair to say that most Americans and even most progressives did not originally despise or loathe him. I didn’t. I certainly didn’t admire the guy, nor did I think he was remotely prepared to be president of the United States. (Nor, by the way, was I particularly impressed with Al Gore in 2000.) Bush campaigned as a center-right pragmatist (a “compassionate conservative”, in his words), much as his father had been, and I expected that’s how he would govern if elected. You know, more embarrassing most of the time than truly destructive.

I mention all this because it is important to note what has – and what has not – been responsible for my/our anger, and to make clear that attempts to dismiss that anger as some Bush-hating bias or predisposition are false, a ploy to destroy the messenger when one doesn’t care for the message he’s carrying. If Bush had governed like he campaigned I’m sure I would have disliked him, but neither hated him nor his policies, nor experienced the rage that I feel about what he’s done to the country and the world. Frankly, my feelings toward another center-right Bush presidency would have likely been largely the same as my feelings toward the center-right Clinton presidency which preceded it.

But he hasn’t governed anywhere near to how he campaigned, and he wasn’t even elected properly, and I do in fact feel huge anger at the damage done. Moreover, I cannot for the life of me imagine how anyone – even conservatives – could feel differently. Even the wealthy, to whose interests this presidency is so wholly devoted, have to sleep at night. Even they have children who will inherit a broken country existing in an environmentally and politically hostile world, though no doubt they figure that big enough fences, mean enough private armies, and loads of central air conditioning will insulate them from the damage.

Followed by a litany of nauseating offenses.  Read it all here.

Everything you need to know about Alan Greenspan’s economic policy in six panels of This Modern World.

Karl Rove is no idiot. When he promises an ‘October Surprise‘, he delivers.  So, if he promised an ‘October Surprise‘ back in September, he knew what he was delivering.  I have pondered this topic in a few other posts(here, here, and here), but never found his special gift to the world.

But what is it???

I think his ‘October Surprise’ is a gift that keeps on giving, for at least the next 18 months or so.

The Republicans took a dive in the midterms.

Before we look at the possibility of the Republicans taking a dive, I want to state that I wholeheartedly believe that voters overwhelmingly wanted Republicans out of office and a change of direction for the nation. But, perhaps Karl Rove did not use all the tricks (ex. electronic voting manipulation, caging lists, etc.) which are accessible to him, allowing the Democrats to take control.

Basically, the Republicans could benefit greatly from taking a dive, letting the shit hit the fan with Democrats in power, then in 2008 come in to clean up the mess. I know, the mess is the Republican’s mess, but remember, these guys operate at a 5th grade mentality.

If you don’t believe me about their mentality, check out this passage from an article in Rolling Stone that I mentioned previously:

According to the rules, conferences have to include at least one public, open meeting…amazingly, the Republicans sneak off to hold the real conference, forcing the Democrats to turn amateur detective and go searching the Capitol grounds for the meeting. “More often than not, we’re trying to figure out where the conference is,” says one House aide.

In one legendary incident, Rep. Charles Rangel went searching for a secret conference being held by Thomas. When he found the room where Republicans closeted themselves, he knocked and knocked on the door, but no one answered. A House aide compares the scene to the famous “Land Shark” skit from Saturday Night Live, with everyone hiding behind the door afraid to make a sound. “Rangel was the land shark, I guess,” the aide jokes. But the real punch line came when Thomas finally opened the door. “This meeting,” he informed Rangel, “is only open to the coalition of the willing.”

So, now that I’ve illustrated the maturity of the Republicans, let’s regress to childhood for a moment and role play…

You are a child in a room. There is one other person in the room. There is a table. On the table is a jar filled with your favorite candy. It isn’t your candy, but you love the candy. You eat a piece, yummmmmmm. You eat another and another. Pretty soon the jar is empty. You hear someone coming.

You have two options. One is to stick around and take responsibility for eating all of the candy. The other option is to go out the back door and avoid any confrontation as to who ate the candy. You know that if you leave, the other person will be held responsible for your actions.

So, what would you do as a child? Not just any child, but the type of child who holds ‘public’ meetings in secret?

Not the best analogy, but hopefully it makes the point. I think that Karl Rove had the Republicans take a dive so that in 2008 they could come back to ‘fix’ the results of the growing mess that the Republicans made in the past 6 years.

The list of the current mess is long and I am tired, but how about Iraq, corruption, a housing bubble about to burst, the growing deficit, and on and on…

The electorate has an amazingly short memory and I predict that the next 2 years will be a period of Republicans turning these into Democrat failures.

Hey everybody!  It’s Election Day, so get out there and vote. 

And remember, if you vote for an “R” you’re voting for five D’s.

1. Division
2. Deficits
3. Deception
4. Destruction
5. Death 

That’s right, a vote for any Republican is a vote to for the Bush agenda.  It’s an agenda that can be summed up very well with those five words.

1. Bush campaigned as a “uniter” but from day one he governed as a divider.
2. Bush cut taxes for his extremely wealthy base, and turned what was a budget surplus into the greatest deficit ever.
3. The Bush Administration deceived people about pretty much everything.  They concocted false reasons for invading Iraq and sold them as truths.  They don’t acknowledge the cost of the war in their budget projections.  They ignore science. 
4. The goal of Repbulicans is to destroy everything.  They want to unravel decades of laws to protect the environment.  They want to destroy social services.  They’ve already begun to successfully destroy The Constitution.  They enjoy destroying other countries with bombs and bullets.
5. Tens if not hundreds of thousands of Iraqis and U.S. troops have died in a brutal war that they claim is about spreading democracy.  They have deceived you.  The war is about oil, and they are willing to buy it with as many lives as it takes.

Bush isn’t running for office—that’s true, but his loyal congressmen are, and they blindly support him.

So when you cast your votes today, remember that voting for a Republican is like voting for Demons from Hell.

What strange days these last two have been. Yesterday Bush actually accepted responsibility for the Federal Government’s failures in responding to the destruction caused by Hurricane Katrina. And tonight, Bush gave a special address to the nation from Jackson Square in New Orleans in which he said the government would take on the huge costs of rebuilding the devastated areas of the Gulf Coast.

“The work that has begun in the Gulf Coast region will be one of the largest reconstruction efforts the world has ever seen,” Bush said. He praised Americans for giving generously for disaster relief, saying the fund led by former Presidents Bush and Clinton had received pledges of more than $100 million.

Rebuilding across the devastated region is expected to cost $200 billion or more in the near term. The final tab could approach the more than $300 billion spent thus far on U.S. wars in Iraq and Afghanistan. Congress has already approved $62 billion for the disaster, but that is expected to run out next month.

House Speaker Dennis Hastert, R-Ill., speaking after the president’s address, said the recovery programs would add to the nation’s debt. GOP leaders are open to suggestions from lawmakers to cut government spending elsewhere, he said.

Yes, the recovery programs will add to our nation’s debt. But just how bad is the debt? Take a look at this chart and see for yourself.

Chart via Bartcop. (Visit the site. It’s full of fun stuff.)

That chart shows the deficit before taking into account any spending on Gulf Coast recovery or the Iraq War in 2005. Obviously, our government needs to take in more money to carry out its agenda without going bankrupt. Will the majority party start pushing for tax increases to pay for these projects?

Bush likes to refer to himself as a “War President.” That he is, but he is also the “Deficit President.”

The previous post talks about the tremendous federal deficit that we have accumulated in the five years that Bush has been president and how he and Congress have no real plan to reduce it. Sure, Bush recently bragged about a reduction in the size of the deficit and claimed that it was proof his economic “stimulus” package that was passed by Congress in 2001 was working. Krugman commented on the new numbers in this column from July 11th.

The usual suspects on the right are already declaring victory over the deficit, and proclaiming vindication for the Laffer Curve – the claim that tax cuts pay for themselves, because they have such a miraculous effect on the economy that revenue actually goes up.

But the fact is that revenue remains far lower than anyone would have predicted before the tax cuts began. In January 2001 the budget office forecast revenues of $2.57 trillion in fiscal 2005. Even with the recent increase in receipts, the actual number will be at least $400 billion less.

(Snip)

It turns out that all of the upside surprise in tax receipts is coming from two sources. One is tax payments from corporations, up both because last year corporate profits grew much more rapidly than the rest of the economy and because the effective tax rate on corporations went up when a temporary tax break, introduced in 2002, expired. Both are one-time events.

(Snip)

In other words, we’re still deep in the fiscal quagmire, with federal revenues far below what’s needed to pay for federal programs. And we won’t get out of that quagmire until a future president admits that the Bush tax cuts were a mistake, and must be reversed.

Hmmm… that sounds familiar. Didn’t we have a Republican president many years ago that tried to spur the economy with tax cuts? How’d that turn out? Not good, but at least Reagan recognized that the rapidly increasing deficit would lead to future economic problems, so he backtracked and raised taxes. His successor, President “Read My Lips… No new taxes!” Bush also had to raise taxes.

Then along came Clinton, and he proved that you could increase taxes, turn the deficit into surplus, and have a thriving economy. Ahh… those were the days. All we had to worry about was how to define a sexual relationship and what the meaning of “is” is.

That brings me to a lengthy Atlantic Unbound interview (subscription required, but if you email me, I’d be happy to email the article to you from their website.) with John Harris, “author of The Survivor, on why Clinton and his legacy will be debated for decades to come.” Here’s an excerpt of Harris’s response to a question about Clinton’s deficit reduction plan:

…I’m wondering if Clinton’s action to reduce the deficit really did spur the economy, or if he was the beneficiary of lucky timing.

That’s an argument that you can never fully resolve because it rests on an imponderable. You can’t go back and try it the other way. That 1993 deficit-reduction package was passed with all Democratic votes… The predictions on the Republican side were that this would cause an economic catastrophe, that it would plunge the economy into recession-that’s what Newt Gingrich said, that’s what Dick Armey said, and that part’s not an imponderable. Those predictions were ostentatiously wrong. Certainly if the economy had not improved, Clinton would have borne the blame for that… To my mind, it is almost like the debate that echoes from the Reagan years. Democrats always say, “If we hadn’t had a military build-up, the Soviet Union would still have collapsed.” That might be true, but most sensible people would not want to go back and try it another way, given that the end result was a good one. I really do think it’s equivalent, and I think it’s churlish of conservatives not to accord Clinton some credit for the economy of the 1990s, since they almost certainly would blame him if it had gone the other way.

Bush is in the middle of an expensive war that is adding hundreds of billions of dollars to the deficit, and he won’t ask his ultra-rich donors to sacrifice a little of their “hard earned” billions to pay for his folly.