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Paul Krugman | Perspective on the Deal
Paul Krugman, The New York Times
Krugman writes: "If Obama stands his ground on the debt ceiling, this deal won't look bad in retrospect. If he doesn't, yesterday will be seen as the day he began throwing away his presidency and the hopes of everyone who supported him."
READ MORE
And from the Congress:
Harkin Blasts Fellow Democrats: ‘No Deal Is Better’ Than This ‘Very Bad Deal’
By Kay Steiger
Monday, December 31, 2012
As the deadline to stop automatic spending cuts and tax increases trigger nears, Sen. Tom Harkin (D-IA) took to the Senate floor on Monday to decry the current deal, saying “no deal is better” than the one currently on the table.
Harkin said he was “disturbed” to read a report in the Washington Post that Democrats were debating giving in on giving in on tax cuts up to $400,000 instead of the previously proposed $250,000 and that they were considering keeping estates of $5 million or more at the tax rate of 35 percent.
“Well, I can tell you Mr. President, this is one Democrat who doesn’t agree with that,” Harkin said, saying that the deal meant that the tax cuts would remain permanent, but “all of the other things that the middle class in America really depends [sic] on is extended for one year, maybe two years.”
“Well I just think that’s grossly unfair. Grossly unfair,” Harkin continued. He pointed out that those who make $250,000 or more a year are the top 2 percent of income earners in America. By moving the tax cuts to $400,000, Harkin said, it sends a message that earners who make that much are “middle class.”
“Have we forgotten that average income earners in America are making $25, $30, $40, $50, or $60,000 a year? That’s the real middle class in America,” Harkin pointed out. “And they’re the ones that are getting hammered right now. They’re getting hammered with housing costs, rental, heating bills, kids going to school. They have no retirement. Now we’re talking about raising the retirement age on people who work hard every day?”
“As I see this thing developing, quite frankly, as I’ve said before, no deal is better than a bad deal, and this looks like a very bad deal the way this is shaping up,” Harkin said.
He said that when the deadline is reached tax rates will go back to what they were during Clinton’s presidency. “What’s so bad about that?”
“What’s happened is in the last ten years a lot of people have gotten very rich in this country. Very rich. And now they want to protect their wealth. And that’s what they want to do,” Harkin said. “I think it’s time they started paying their fair share.”
Harkin isn’t the only left-of-center critic on this reported deal. The New Republic‘s Timothy Noah’s asked House and Senate Democrats in an open letter to kill the proposed deal, saying, “Your president has sold you out.”
Robert Reich also has a few choice words for this incredibly fine "choice" by the Dims.
Lousy Deal on the Edge of the Cliff
01 January 13
he deal emerging from the Senate is a lousy one. Let me count the ways:
1. Republicans haven’t conceded anything on the debt ceiling, so over the next two months - as the Treasury runs out of tricks to avoid a default - Republicans are likely to do exactly what they did before, which is to hold their votes on raising the ceiling hostage to major cuts in programs for the poor and in Medicare and Social Security.
2. The deal makes tax cuts for the rich permanent (extending the Bush tax cuts for incomes up to $400,000 if filing singly and $450,000 if jointly) while extending refundable tax credits for the poor (child tax credit, enlarged EITC, and tuition tax credit) for only five years. There’s absolutely no justification for this asymmetry.
3. It doesn’t get nearly enough revenue from the wealthiest 2 percent - only $600 billion over the next decade, which is half of what the President called for, and a small fraction of the White House’s goal of more than $4 trillion in deficit reduction. That means more of the burden of tax hikes and spending cuts in future years will fall on the middle class and the poor.
4. It continues to exempt the first $5 million of inherited wealth from the estate tax (the exemption used to be $1 million). This is a huge gift to the heirs of the wealthy, perpetuating family dynasties of the idle rich.
Yes, the deal finally gets Republicans to accept a tax increase on the wealthy, but this is an inside-the-Beltway symbolic victory. If anyone believes this will make the GOP more amenable to future tax increases, they don’t know how rabidly extremist the GOP has become.
The deal also extends unemployment insurance for more than 2 million long-term unemployed. That’s important.
But I can’t help believe the President could have done better than this. After all, public opinion is overwhelmingly on his side. Republicans would have been blamed had no deal been achieved.
More importantly, the fiscal cliff is on the President’s side as well. If we go over it, he and the Democrats in the next Congress that starts later this week can quickly offer legislation that grants a middle-class tax cut and restores most military spending. Even rabid Republicans would be hard-pressed not to sign on.
(Robert B. Reich, Chancellor's Professor of Public Policy at the University of California at Berkeley, was Secretary of Labor in the Clinton administration. Time Magazine named him one of the ten most effective cabinet secretaries of the last century. He has written thirteen books, including the best sellers Aftershock and The Work of Nations. His latest is an e-book, " Beyond Outrage. He is also a founding editor of the American Prospect magazine and chairman of Common Cause.)
But, Obama has publicly said he doesn't want to disappoint Republicans (and the wealthy). After all, he was elected by all the people.
Not.
These "salesmen" of self-serving national policy have historically enabled criminals (other criminals) to profit by this bought-and-paid-for system of certain power (and the powerless to pay the piper), and when caught with their hands in the till, never pay for their wrongdoing as they own the game and cannot be held accountable for their (venal/illegal) actions.
If you were to draw out a simple three stage pyramid of incarcerated people in this country the vast base of nearly 1 million people would be comprised of those committed non-violent acts which means by definition that nobody got hurt. The vast majority of those were given sentences of “pension” for minimum mandatory periods for possession of controlled substances, mostly, marijuana.
Hence, these people committed acts that posed no threat to anyone in society, or to put it simply, posed no threat to society. We spend $40 billion per year, which with inflation and other factors will cost nearly a Trillion dollars over the next ten years on these people.
The next level comprising just half the size of the foundation of the pyramid consist of people who committed violent crimes. And the last level is composed of a tiny fraction of people who committed “economic” crimes that are presumed to be non-violent.
The fact that these economic criminals altered the landscape of the finance and economies all over the world in whole or in part, resulting in inevitable suicides, mass shootings, riots, wars and billions of dollars in mental health costs which leads to tens of billions of dollars in physical ailments brought on stress does not get any consideration as to whether their crimes hurt society more than say, a murderer, who shoots his partner for stealing.
Up until thirty years ago the pyramid didn’t look anything like the pyramid today. Costs for incarcerated “pensioners” and other people held in prisons and jails were far less than 1/3 of what they are today. The reason that the cost of and size of the prison system has quadrupled in 3 decades is MONEY. The prison system was privatized and this is what happens when you privatize a societal function like police, fire, and prisons. After years of lobbying big business managed to support or convince legislators that privatizing the prison system was a good idea.
This was a great idea for business — but only if they kept the jails full, using the same business model as the hotels. If you have no guests staying there you lose money. The more you can count on a full prison or jail the more you can spend on new jails and prisons, using the Wall Street markets to bankroll you.
The trick is to make sure that people are convicted of something and sent to prison. And if the prison industry had their way they would make breathing a criminal event because that would give them an unlimited number of people to choose from in filling their ever growing prison system.
The closest thing they could come to criminalized breathing is taking a puff of a cigarette and since there were many types of cigarettes — tobacco and other substances, they supported anyone who was “afraid” of marijuana and managed to pass a new era of prohibition where we all know is where organized crime got its start.
To make certain they were reaching the huge population of people who used marijuana they even made it a crime just to possess it. This coup enabled the prison industry to grow into one of the largest industries in our economy (over $60 Billion per year) and create one of the largest lobbying systems to make certain that as many thing could be criminalized as possible, so long as it was directed to large numbers of potential “guests.”
Violent crimes were not as much fun as non-violent crimes because costs of insurance and other measures goes up exponentially as the risk goes up, guards demand more pay for assuming the risk of dealing with violent individuals and the list goes on. Hence the lower sentences on violent crimes than possession of pot.
As for the economic crimes, the pickings are slim. The prison business model views it as a loser. There are just not enough people committing them as those who commit drug offenses and violent crimes. So prosecutions are sparse and the number of guests is very limited — really of no consequence in the business model of the prison industry.
Besides it was the kingpins of Wall Street that financed the privatization of prison systems with new bonds, stock offerings and hedge products like credit default swaps. The last thing the prison lobby wants are prosecutions of Wall Street titans who are supporting the prison industry.
And the last thing a politician wants is to to decriminalize non-violent drug crimes if he or she is dependent upon Wall Street or direct donations to their campaigns from the prison industry. The two lobbies combined probably exceed the total of all other lobbying.
I submit that the pyramid is inverted and that any politician who lacks the nerve to do what is best for society should be removed from office and replaced with someone who will vote with an eye towards what will most benefit his or her constituents and the country as a whole, as is stated in their oath of office. I submit that the reason why Wall Street criminals were not prosecuted is that they are indirectly in charge of criminal prosecution system and the departments of corrections in each state and federal prison or jail.
If you analyze the pyramid in terms of damage to society, the base would be economic crimes costing some 1/3 of the world’s wealth — $17 trillion — through an obvious PONZI scheme that was named “securitization.” The principal flag for recognizing a PONZI scheme is that it collapses when people stop buying in because the venture is using incoming investments to pay the old investors. That is exactly what happened.
Compounding the crime, the Wall Street Bankers took money from investors under false pretenses, intentionally diverted a large part of that money into their own pockets, and then funded mortgages from remote thinly capitalized entities of dubious or impossibility viability by manipulating property values, rating systems, mortgage brokers and nominees that became called “originators, as if that term means anything.
The Wall Street Banks diverted investor money into their own pockets, then compounded that with making themselves (instead of the investors they were required to protect) beneficiaries of insurance, federal bailouts and proceeds from “hedge” products like credit default swaps.
Instead of protecting the investors by having them named as payee on the funded loans, they created plainly defective notes and mortgages that were patently wrong as potential liens on the homeowner’s property.
Instead of having the money that funded the loans come from REMIC trusts that issued the bogus mortgage backed bond, they funded the loans from other entities leaving the REMIC and the investor with nothing.
They had simply diverted the paperwork from the investors for whom they were supposedly acting as agents, and created the illusion that the Wall Street Banks owned the mortgage backed bonds that contained no mortgages, no notes, were not backed and therefore bogus bonds with no capacity to pay the expected interest and principal back to the investor.
So the foundation of pyramid based upon societal damage would be $17 trillion, with a continuing cost of trillions of dollars per year caused by squeezing values of currency on which the banks made even more money, minimum, whereas the cost to society of even the most violent crimes would be under $10 billion using the most liberal formulas. The cost to society of non-violent drug crimes could be computed as high as $3 Billion per year depending upon whose analysis you look at.
Thus under the current scenario each one ($1) dollar spent on criminalizing certain acts, prosecuting them and punishing them is met by a comparative figure of seventeen thousand ($17,000) dollars in damages caused solely by the Wall Street mortgage meltdown alone. It’s impossible to graph on a single piece of paper.
If the current societal cost of all crimes including nonviolent drug related offenses was plotted at 1/4 inches, the next line down for economic crimes would be 68,000 inches long or 6,181 pages.
The outcome is clear — the bigger the economic crime the less likely the punishment regardless of the damage to society. And, as we all know, criminals who are successful tend to escalate their criminality rather than say “‘enough.”
Unless the State and Federal and Local governments understand and act on these self-evident truths, it is virtually certain that whatever is left in world wealth will be taken on the next round of Wall Street exotic securities that only robotic supercomputers can properly value — on chips containing programs created on Wall Street and never reviewed by any regulatory agency.
I submit that like the FDA, an agency I have no love for, the labeling of products from Wall Street should await approval from a newly created division of the SEC that can review —- and understand — the tricks and tools of the new “securities” being offered and that the U.S. attorneys and Attorneys General get together a task force and claw back what they can to cure or assist their deficits.
Until that happens Wall Street will continue its four-decades-long pursuit of selling crap instead of investments.
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