« The Sprawl Needle | Main | Book it: 2012 hottest on record »

December 28, 2012

TrackBack

TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a00e54fdb30b98834017ee6b90a2d970d

Listed below are links to weblogs that reference The continuing crisis:

Comments

Feed You can follow this conversation by subscribing to the comment feed for this post.

My money is on Obama selling out the middle class. Hope I'm proven wrong.

LBJ would have heads on pikes, metaphorically speaking of course.
It's a damned shame that these things need to be qualified like that these days, isn't it? Hell, in Johnson's case it may even damage its accuracy. :)
So I say, go over the cliff, loudly blame the Republicans, and make sure the most severe austerity hits every red state and red county. Let these people who decry government while taking its "gifts," as Willard would say, see how much they are the dependent class.
Right the ef' on.

Shouldn't even be extracting quotes from this post - the whole thing is the Best. Polemic. Ever.

Jon - How about addressing the issue of a constricting economy? Even Paul Krugman is questioning the overhyped emphasis on "growth." The real question is, "What do we do if the economy cannot grow?" No one, besides a few of peak oil "whackos" even consider it.

Nice commentary. Debt held by the public (the only kind of real debt the nation has), as a percentage of GDP, was higher in 1944 through 1950, according to the Office of Management and Budget's Historical Tables.

Debt to the public as a percentage of GDP is projected to remain roughly the same through middle 2020s. After that, it is projected to skyrocket, because of demographic factors (retirement of the baby boom generation) driving medical (Medicare) and Social Security costs; healthcare cost increases are by far the lion's share of this.

Either a single-payer system or tax increases will be necessary; else benefit cuts; or some combinations of revenue increase and benefit cuts.

I'm very short on time and regretfully cannot spend more on this interesting topic today. Much of tomorrow and Sunday will be devoted to other tasks, also, I fear.

Note also that debt as a percentage of GDP actually doubled since 2007.

See Table 7.1:

http://www.whitehouse.gov/omb/budget/Historicals

I'm always lurking here and the impulse to comment overwhelmed me. So here goes:

Obama's negotiating style appears to be a compound of anxious solicitude and preemptive capitulation. The problem, however, is that we're at an impasse not seen since the Civil War. The American right no longer has a central nervous system. Rather, it's guided by inchoate rage stemming from their toxic nostalgia for a nation that no longer exists. The Republican Party that unleashed this energy can no longer contain it. Its own power center has been eroded and taken over by its media, partiularly cable TV and talk radio. In this vacuum leaders quake before the peasants. That's why their political style is more about gaining power than governance itself. The radical right is not interested in policy.

Obama is forced to pretend that his opponents are not nihilists and sociopaths. His power derives from the perception that he is calm and reasonable. But this also means that he can't tell the truth to the nation about this situation. When one of the nation's two major political parties is fully willing to sabotage the nation's economy for the sake of harebrained "principles", there is no longer a vital center in our politics. Nor is there a functional process that can transform political differences into compromises. We've been whistling past this graveyard for over a decade now and the situation is getting worse, not better. Love them or hate them, the GOP is now more a jihad than a political party.

Obama cannot be LBJ and threaten recalcitrant legislators. This has less to do with his nature and more to do with our cold civil war. Even during his first two years, when he "enjoyed" super majorities, Obama's army was ragtag and mutinous. Imagine having to count on people like Joe Lieberman and Ben Nelson. Imagine having to court the few moderate Republicans remaining and who lived in fear of being primaried from the right. Imagine a national media wedded to a fantasy explanation about politics where both sides were equally to blame and thus further empowering Republican radicals.

Obama's thin reed of authority may be, to mix the metaphor, a fig leaf. That is, he's the only national figure willing to embody an overarching consensus despite the obvious lack of one. If Obama fails in this role, the crisis then becomes a catastrophe. We finally become a nation that is no longer governable since nihilism has reduced our options to just two: cave into the hostage takers or face the grave consequences.

We can fantasize about a solution where an angry public finally gets sick of Republican extremism and empowers liberals with electoral landslides. This is unlikely. Another one involves a slow demographic evolution where liberals and realists slowly gain the upper hand. This is more likely but the question remains whether our republic can survive this long and arduous trek back to sanity.

Soleri????
best post in months!!!!
welcome back

Soleri, you made my day, my month, my year. Thanks.

The Sociopathic white men fantasize of hanging every black man to the nearest tree starting at the white house.

Soleri - I've not read such claptrap in my life - and I'm as old as Cal Lash.

""thin reed of authority, etc.", my foot.

Yes, I lurk also.

Well teres dudas bring your words and we can duel over coffee. Make mine an Americano with room.

Wow, soleri... that was humbling. So glad you de-lurked!!

Republicans are hoping for impeachment proceedings against Obama in the event he takes unorthodox executive action against the GOP's obstructionism.

soleri, I've slept on your compelling word-painting. I think you've got your finger on something there, but I'm left with some questions, and I'm hopeful that you'll resurface to address one of them.

As I wrote rather venomously elsewhere:

I think he sees himself as a "serious and practical" man who wants to be a member of the "Serious and Practical Men's Club"...

Now, I'll readily admit that I'm on shakier ground in trying to psychoanalyze-from-a-distance this administration, than you are with your more objective political observations. And I certainly can't argue with your characterizations of the sorry (and dangerous) state of the GOP!

But there is this nagging fact that Obama seems to be wedded to the very neoliberal (or "centrist," if you prefer) concerns on the "long-term viability" of SS & Medicare. Jane Hamsher, from a recent essay:

Everywhere you look, the media narrative is that President Obama is “capitulating” to Republicans by agreeing to cuts in Social Security benefits.

And I have to ask, where is this collective political amnesia coming from?

Can We Please Stop Pretending Obama is “Capitulating” on Social Security?

She goes on to list very specific moves by the administration that don't look particularly defensive, but appear proactive in dismantling one of the key platforms of true liberalism (she also ends up speculating on Obama's "serious person" insecurities.)

Are you inclined to dismiss Hamsher's observations on Obama & entitlements? (As the Grande dame of the liberal site FDL the woman does, after all, have her own echo-chamber issues, so I could see that.) If not, how would you fold this aspect of the President's posture towards the safety net into the world-view you articulated in your excellent rant?

On the other hand, are you in agreement with the neoliberal idea that keeping "entitlements," and the safety net in general, "on the table" in the service of a "healthy economy" is a practical position to which reasonable progressives should acquiesce? (I cop to holding the extreme view that taking care of the least of us is priority one, progress and growth be damned - the anti-thesis of "the business party," and of the reduced set that is neoliberalism.)

Not to take away from the valid criticisms you make of his opposition and the damaging effectiveness of its Clown Posse obstructionism, I am trying to avoid reading what you've said as a sort of historical interpretation, transmitted back to us from scholars 100 years hence, reminiscent of the plaintive "multi-dimensional chess" theory of that faction of progressives who strain to remain true-blue to their man.

I admit that I tend to be a bit, say, "shamanistic" in my analysis of politics and human behavior (and Pulsifer regularly beats the hell out of me because of it,) but I do consciously depend on empirical observers like yourself to help refine my opinions and keep them reasonably down to earth, so I welcome anything you might have to say about this.

Petro, I took out a sentence in my rant that dealt with Obama's neo-liberal positioning. I did so because there are only so many ambiguities the mind can ponder before the little bit of clarity we're capable of vanishes in the murk. Obama is offering up SS cuts because that's what elite opinion expects of him. That's because he's a creature of the meritocracy that rewards painful cuts for people other than themselves. But I decided that the Obama-as-betrayer meme still ignores the primary issue here. In short, Obama has to reconcile a nation where liberalism is battered and reactive. He does so by making the ritualistic sacrifices the citizens seemingly demand. The nation wants austerity conceptually because that is what passes for high-mindedness today. It's only when the particulars are listed that citizens become much more liberal.

Obama would have to play this role even if he weren't already predisposed to play it. The problem, once more, is that approximately half this nation is insane with Culture War wedge issues and its misdirected rage. If Obama doesn't meet it at least part way, political consensus will fail since there is a dangerously asymmetric split now between passion and political will.

You have to go back to the pre-Reagan days to find a nation that was still reasonably content with government. What happened since then was the fruit of a propaganda campaign that still colors our debate about reality. If government is incompetent, corrupt, and tyrannical, then there's nothing it can do that can improve our lives. Only the private sector (in reality, crony capitalism) can do that. And the result here is as painfully obvious as the shrinking middle class and falling median incomes. It's actually more comforting to believe we're the problem. That is, "we the people".

Obama's left-wing critics are both correct in their truth-telling and oblivious about the underlying collapse of consensus. We lefties assume that if we manifested a FDR then all would be well. But we have Obama for a reason and it's telling that we couldn't find anyone on the political bench that comes close to a FDR or a LBJ. For a people wounded by a collapse of national consensus, the only balm remaining consists of measured speech and the offer to compromise even more middle-class security. Obama occupies the sweet spot in our political constellation for this reason. Anyone else would be a fantasy messiah in a forgotten testament.

I want to respect Soleri's ability to re-cloak like a Romulan Warbird (and am glad he's still lurking). So I don't expect his response (although his erudition is always welcome and has been missed).

A few thoughts and questions without answers, and I welcome anyone's thoughts:

So what is to be done?, as Lenin would put it. Just hope that Obama can manage the decline in our civilization better than a Romney? Or that the demographics save us — but that only works if liberals are engaged in the kind of enterprise that Bill Buckley/Barry Goldwater, etc. undertook for the right in the 1950s and 1960s, when, for their cause, all seemed hopeless.

I know, different times.

Sometimes I think we over-estimate the power of the right. Their "ideas" manifestly failed in the last election. Only the 2010 Tea Party re-districting saved the House for them. I know that Mr. Obama underestimates his own power. Liberalism can think itself too weak. But it wins urban areas and this presidential election was not close.

We are indeed in a cold civil war. But it is also a phony war, inasmuch as the right wants its goodies, grows government and wouldn't actually secede (damn!).

Things get dicey if Mr. Obama allows the extremists, against whom his office is not powerless, to create a full-blown economic crisis. E.g., refusing to raise the debt ceiling and causing a panic from Treasuries.

But no inexorable force of history is keeping Mr. Obama from telling the truth. Failure to do so undermines his legitimacy. It's like every workplace in which I've ever labored: Nobody respects a lying boss. Nor did such a force make him accept the right's proposition that the deficit is our biggest problem.

Just some thoughts. I don't know that they have "answers." The parallels with the late Roman Republic do grow, however.

Welcome back, Soleri.

I made a special trip today to post this, first because I opened up a can of worms yesterday, and second because the topic is sufficiently important to warrant interest.

Debt held by the public (i.e., Treasury borrowing) doubled since the start of the recession, from 36.3% of GDP in fiscal year 2007 (which ended two months before the recession started) to 73% today (the 2012 estimate shown is slightly higher than actual). See Table 7.1:

http://www.whitehouse.gov/omb/budget/Historicals

That's colossal. Compare that to the increase from 2000 (34.7%) to 2007 (36.3%).

Graphs and analyses that attempt to blame the doubling of the debt since 2007 on the war in Afghanistan (began October 2001) or the war in Iraq (began March 2003) or on the Bush tax cuts (passed in 2001 and 2003) are obviously misleading. So are claims that delayed net interest payments carried over from the Bush years are to blame. Since the recession, the Fed has pushed interest rates down to near zero. Net interest as a percentage of GDP has actually declined, from 2.3% in 2000 to 1.7% in 2007 to 1.4% currently. See Table 8.4.

If liberals want a credible explanation, they are going to have to look elsewhere. Table 1.3 tells the real story.

From FY 2007 just before the recession, to FY 2009 (which included the official end of the recession), the deficit rose from $161 billion to $1.41 trillion. The deficit has not dropped below $1.1 trillion (FY 2012) since then. So, the only remaining question is to sort out to what degree revenue losses or spending increases are responsible.

In 2007 federal revenues were 18.5% of GDP. By 2009 they had dropped to 15.1 percent. As of 2012 they had only increased to 15.8%. In 2007 federal spending ("outlays") was 19.7% of GDP. By 2009 it had risen to 25.2% of GDP. As of 2012 it had decreased to 22.9% (considerably lower than the 2012 estimate shown). Since both revenues and spending are expressed as percentages of GDP they are directly comparable.

The first thing to note is that over the recessionary period, decreased revenue accounted for about 2/5 of the increase in deficits, with the other 3/5 resulting from spending increases.

Over the post recessionary period, revenue losses begin to account for a larger portion of increased deficits. In 2012 revenues were still 2.7 percentage points below the pre-recession reference year 2007; in 2012 spending was 3.2% above the reference year; so revenue losses now account for nearly half (45%) of the increased deficits. (FYI: the actual FY 2012 deficit was 7.0% of GDP, considerably lower than the estimate for 2012 shown in the table.)

However, this is still misleading, because we are using pre-recessionary 2007 as a reference year for revenues whereas revenues have yet to recover to the 2007 level even in nominal dollars (not adjusted for inflation); whereas in a normal economic period we would expect to see revenues grow larger than 2007 over the subsequent five years.

If instead of a recession and slow recovery the economy had grown at its historical average rate of 3.25% annually and revenues had grown at the same rate, the $2.57 trillion in 2007 revenues would have grown to slightly over $3 trillion by 2012. Actual FY 2012 outlays were $3.5 trillion.

So even if spending in our hypothetical normal period had grown the same as actual, the deficit would be only 500 billion not $1.1 trillion. But spending would not have grown the same during a normal economic period because the increased emergency spending would not have been necessary and a large portion of the increased social spending would not have been triggered. We might well have been looking at a modest budget surplus.

For actual instead of estimated FY 2012 figures see:

http://www.cbo.gov/publication/43656

Now to break down those spending increases.

Obviously during the recessionary period, emergency spending measures (e.g., TARP to handle the near-collapse of the financial system, and the stimulus package to prevent the economy from continuing down the toilet) predominated.

Unemployment actually peaked after the official end of the recession and has remained high since: federal spending on unemployment compensation was about 3.5 times higher in 2012 than in 2007. Spending on food stamps has doubled. Medicaid spending has increased as poverty levels rose consequent to the recession and slow recovery. All of these spending increases are mandatory and result from formulas contained in pre-existing law and were triggered by economic conditions, not profligacy by the president or liberal Democrats. See Table 3.2.

But the really big increases in spending came from the usual suspects: national defense; Medicare; Social Security. Not net interest, which was actually less in dollars in 2012 than in 2007. (FYI: the big projected increases in net interest are yet to come, as interest rates rise over the 2014-2017 period. See Table 3.2.)

Another, seldom commented aspect of increase in debt to the public (but not in deficits, since it was created directly) was the Federal Reserve program called "quantitative easement" in which the Fed bought huge quantities of securities directly from the Treasury in order to increase bank reserves. Debt to the public held by the Fed increased from 5.6% of GDP in 2007 to 11.1% in 2011. See Table 7.1 (FY 2012 data not available).

The Fed's holdings of Treasury debt aren't real debt, insofar as the Fed is the U.S. Government's lapdog and isn't going to hold the Treasury Department over a barrel. On the other hand, if the Fed has to "unwind" its position as a result of inflationary pressures, some of those securities will be sold to foreign and domestic investors, who are not nearly as tame. So it probably should be included when considering debt to the public, but with a caveat.

Maybe this isn't as politically sexy as "blame Bush" but it's far more accurate.

Great stuff, Emil. To what extent, if at all, did the Obama administration's decision to move war spending onto the books affect things?

soleri, thanks. I can now see that the two views on Obama's "expectations fulfillment" tendencies - the internal, psychological view & the external, reaction to the facts-on-the-ground one - are not necessarily, after all, in conflict.

Thanks for firing my synapses.

P.S. Federal spending on unemployment insurance rose from $35 billion in 2007 to $120 billion in 2011. It's true that long-term unemployment benefits were passed post-recession, so part of this wasn't triggered by pre-existing law. However, Republicans generally supported the extended coverage until recently, and they've controlled the House since the 2010 elections.

See Table 3.2, subfunction 603 "unemployment compensation".

http://www.whitehouse.gov/omb/budget/Historicals

Sequestration: to sequester, then to castrate.

The answer to all your worries is very simple.

Put congress in a barn and cut their worthless nuts off.

Mr. Talton wrote:

"To what extent, if at all, did the Obama administration's decision to move war spending onto the books affect things?"

Great question. The answer is that it didn't affect deficit and debt levels at all, because the Bush-era practice of using emergency and supplemental spending bills (rather than the primary defense budget bill) was simply an accounting shift: this made it easier to conceal the costs of the war, but those costs still showed up in spending totals.

...there are only so many ambiguities the mind can ponder before the little bit of clarity we're capable of vanishes in the murk.
BTW, this made me smile. I completely appreciate that! The opaqueness of many of my essays is the direct result of my conscious struggle to defy this, and wrestle such ambiguities into prose - what seems to me so crystal is so often ill-served by the linearity, and inherent duality, of language/thought.

Blog running on all intellectual cylinders today. Traffic way up.

Exactly right. The misrepresentation and exploitation of bogus issues (e.g., deficit crisis) by the oligarchy, and consumption by a low (and descending) information electorate is stunning.

The oligarchs are greedy in simply trying to preserve what they've already absconded with, but of course being able to hang onto what they have and pass it on to progeny is what it's all about, nothing more. Shortsighted and proves, again, that having capital demonstrates nothing about intelligence or special wisdom about anything. It appears to act more like inbreeding and just makes things worse for all.

Incidentally, it's worth taking a look at the Obama administration's long-run budget projections, and in particular its projections of federal debt held by the public (i.e., total Treasury borrowing outstanding).

The projections assume that Obama's FY 2013 budget passed as written (it didn't, of course, and the fiscal cliff impass is one result).

Chart 5-1 shows an easy to read graph of debt to the public as a percentage of GDP. After 2022 "the fiscal position gradually deteriorates mainly because of the aging of the population and the high continuing cost of the Government’s health programs". Look at the ominous, gigantic climb in the graph from roughly 2030 onward.

Table 5-1 gives the graph in numbers and breaks out the data by general spending category. Social Security spending is essentially unchanging as a percentage of GDP from 2030 through 2085. Medicaid increases slightly. Medicare spending grows by nearly a whole percentage point of GDP.

But -- and here is the kicker -- the master villain is not "the government's health programs" it is net interest on the debt: the latter grows from 3.8% of GDP in 2030 to to 8.6% in 2085; nearly five percentage points of GDP and five times as fast as Medicare growth.

See pages 58-59 (internal document page numbers; PDF reader page numbers are 52-53):

http://www.whitehouse.gov/sites/default/files/omb/budget/fy2013/assets/econ_analyses.pdf

Net interest is going to crowd out nearly everything else in the budget if debt levels are allowed to climb as projected from FY 2022 onward.

A few days ago I began reading What Hath God Wrought by D. Howe where I came upon these words, “Old Republicans remained such stubborn adherents of their little-government, lowtax, state-rights philosophy that no national emergency could budge them”. The time was 1814 and the president was Madison. Then as now, a few congressmen held political sway by bitterly objecting to levies and more spending even while they were congregating in the only viable government building, a post office.

Mr. Talton wrote “Whatever the causes, we're setting ourselves up for a Julius Caesar moment. Sooner than you think.” This is an intriguing end, Mr. Talton - but I can’t say that I understand what you mean.?
For me, solari’s last paragraph sums it up well.
And finally,
Perfect and bulletproof are seductive, but they don’t exist in the human experience. Dr. Brene` Brown

Well, maybe sooner than 2022 if Obama doesn't get the additional revenue from allowing the Bush tax cuts for the top 2 percent to lapse.

OT, but this is an example of what's missing in Phoenix:

http://www.nytimes.com/2012/12/29/arts/design/museum-of-history-industry-reopens-in-seattle.html?ref=todayspaper&_r=0

And note it has moved downtown, on the streetcar line.

Suzanne,
Hope you enjoy the Howe book. I am thinking of the late Roman republic, which became corrupt and ungovernable. In stepped Caesar.

And no Count of Monte Christo!

"...the GOP is now more a jihad than a political party."

A ray of sunshine! Welcome back.

The comments to this entry are closed.