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I’ve recently had an exchange on my Twitter account with a couple academic economists who believe MMT (Modern Money Theory) is the silver bullet answer to the growing instability of capitalist economy in the 21st century, it’s inability to generate sustained economic growth, and growing inequality (wealth, income, all forms) in the process of failure to provide sustained growth or stability (in employment, inflation, etc.). These economists too cleverly post their own views without acknowledging my points, so I’m here summarizing some of my views to date on MMT. (I reserve my final views pending my completion of my full analysis of the major advocates of MMT–Kelton, Wray, others). But for now, this is how I see it:

The 7 Propositions:

#MMT is a naive academic theory that thinks you can somehow get the capitalist Treasury & central bank (Fed) to abandon its primary mission to protect & preserve the capitalist banking system and somehow employ monetary policy to serve the country and economy as a whole.

#MMT Here’s more my view of MMT: a theory that stands ‘Keynesian Economics’ on its head & views monetary policy as solution to capitalist instability. But don’t confuse MMT or Keynesian economics with ‘Keynes’ Economics’. Keynes thought little of monetary solutions of any kind

#MMT: What’s the ‘achilles heel’ of MMT? the failure to understand the political system: neither Congress or parties will ever allow the Fed (or US Treasury) ever to become a bona fide national public bank that’s a prerequisite to implementing MMT. That is, it’s politically naive.

#MMT: In my discussions with academic MMTers I find that few have either read Keynes’ Ch. 12, 24 of his General Theory (or don’t understand it). In it, Keynes noted 2 ‘achilles heels’ of capitalist economy: inability to provide full employment + inherent drive toward inequality

#MMT Mainstream Keynesian Economics is a bastardized version of Keynes’ Economics. Keynesian reintroduces notions Keynes rejected. MMTers reject Keynesian but have more in common with it than they do with Keynes’ economics (most MMTers either haven’t read or don’t understand it)

#MMT is an offshoot variant of Keynesian economics, both of which are part of the school of post-Keynes econ analysis called Neoclassical Economics–which cherry picks select propositions of Keynes & merges them with pre-Keynes classical econ notions that Keynes himself rejected.

#MMT my prior 6 posts on MMT in no way suggests I believe that Keynes himself had all the answers. Neither does Minsky. Nor Marx. But I suspect the truth of 21st century capitalism lies somewhere in the intersection of the honest empirical work of all these three.

#MMT Now that I’ve turned the light on in the bathroom of Mainstream/MMT economics, let’s see what academic cockroaches will scurry out of the corners behind the bowl.

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Today the mainstream media made a big deal about new weekly unemployment claims hitting a record low of only 199,000 last week. But the truth, as always, is in the details and not the headlines.

There are three reasons why new claims are at record lows:

1. In September the Biden administration allowed unemployment benefits for independent contract workers (gig, freelancers, etc.) expire altogether. There are at least 10 million such workers in the US. If there’s no longer an unemployment benefits program with which to file for benefits, that fact will of course eliminate a large number of new claims. Independent contracts may be jobless but they won’t file a new claim because there’s no program any longer.

2. At least 4 million workers have dropped out of the labor force altogether since the start of Covid in Feb. 2020. At least three and a half million are still dropped out. Probably 1-2 million are early retirees. Ordinarily if they were in the labor force they’d file for unemployment benefits–i.e. new claims. However, if they’re drop outs they are no longer eligible for filing a claim for benefits.

3. Also ineligible to file a claim for benefits are workers who just quit their jobs. We know job quits are high and continue as workers refuse to go back to low paid dead end jobs. (see my post ‘The Great Strike of 2021).

These three trends have been continuing since last August, and steadily reducing the number of new unemployment claims. Of course, some people have been going back to work as the holiday season approaches. But don’t think that is the full explanation for this week’s new unemployment claim lows.

Along with the news about new claims, the media is also trumpeting the message the economy is recovering robustly. Consumer spending is up. Personal income is up. And 4q2021 US GDP will be up.

What they don’t explain when they report consumer spending (2/3 of US GDP) is that the numbers reflect spending on goods and services, the prices of which are a big part of the increase. It’s mostly inflation in other words. And we know inflation is surging. Officially the CPI rose around 6% last month. But that’s a low ball estimate–with gasoline prices up 35%, food prices up 10%-20% for many items and just about everything rising, with rent prices double digit (but lowered by assuming homeowners are paying themselves rent at 2% inflation). Inflation is at least 10% year on year, and more for median income families where the weights assigned to food, lodging, gas, etc. are greater than for all the income groups. So take consumer spending numbers with a grain of salt, as they say.

That’s not to say there hasn’t been some consumer spending increase recently–as typically occurs as holidays near. But even that is distorted by end of year ‘seasonality adjustments’ to the numbers that always boost the real actual spending greater due to the statistical operation called ‘seasonality adjustment’.

The slowing of the US economy in third quarter was quite clear. After a 6.5% GDP annualized growth rate in the 2nd quarter, GDP rose only 2.1% in July-September. And now we have supply chain problems in the current 4th quarter, probably not as much business inventory accumulation (that mostly drove the 2nd quarter), and the lack of government fiscal stimulus as the spring’s $1.9T American Rescue Plan has mostly been spent, the Build Back Better plan hasn’t been passed, and the Infrastructure Plan means no actual spending into well into next year..

The US economy is now moving sideways, at best, just as Covid appears about to surge again this winter. And just as the Fed is going to raise interest rates earlier and faster. And just as consumer inflation is obviously not a ‘temporary’ phenomenon and will likely cut into real consumer spending right after the holidays.

The not so temporary inflation appears increasingly as business across the board taking advantage of global supply chain–and domestic supply problems–to raise prices everywhere. In other words, it’s a supply problem, but one that is overlaid by rising inflationary expectations by business resulting in business price gouging almost everywhere. Inflationary expectations may also be beginning on the consumer side as well, which will lead to even more entrenched price inflation driven now by rising demand pressures as well.

For all these reasons, the 1st quarter of 2022 will be a critical juncture in the already weak economic recovery. And I am not as sanguine as the mainstream media about the condition of the US economy beyond just occasional weekly or even monthly headlines for this or that economic indicator,

So that’s my ‘not so short’ short note on the current state of unemployment, inflation, and the much hyped by media US recovery.

Dr. Jack Rasmus
November 24, 2021

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Don’t want to listen to my hour long Alternative Visions radio show on Inflation? Here’s two short radio interviews on same, about 15-20m each.
TO LISTEN GO TO:

https://drive.google.com/file/d/1VF8lnnVGoSaTqKguRUNHGE8ejgiQ3CBl/view

https://www.spreaker.com/user/radiosputnik/by-any-means-1309-seg1a1-jack-spreaker

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I don’t often reproduce replies and commentaries on my postings but I’m doing so here. David Baker has just commented on my INFLATION radio show audio of Nov. 12, succinctly summarizing the show’s key messages and how surging Inflation today fits in the broader economic evolution underway. I couldn’t have said it better, so here it is:

David Baker’s Commentary on ‘INFLATION’ posting of Nov. 12 here:

David Baker

My take away from this post is that we are watching a series of negative feedback systems push the economy further down. The response to the broken supply chain precipitated by covid has created the cover for businesses to price gouge and allowed commodity speculators to gain traction by gaming critical components of the economy such as energy. This in turn produces inflation which diminishes demand which means a further push downward of the economy since the economy is driven primarily by consumer demand. The only way to break this downward spiral is major intervention by the government such as fiscal spending on the level of current monetary spending, say $5 Trillion but Biden clearly has capitulated on his many campaign promises which means he will be a one term President. So the job crisis and climate crisis deepen which in turn means we should start thinking of Biden not simply as a rerun of that has been Jimmy Carter but the end game role of Brezhnev.

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The latest raging public topic in economics in recent weeks is accelerating inflation. CPI report this past week indicated fastest rise last month in past 31 years. It’s actually even higher. In my latest Alternative Visions radio show I take on the subject as topic for the entire show. How much inflation is Supply driven( global supply chains & domestic US supply problems) How much Demand? What about global financial commodities speculators driving up oil prices, metals, and grains? How much is just US price gouging to make up for 2020 revenue losses by raising 2021 prices faster? How long will it go? What’s the implications for Fed rate increase policies? And for Democrats in 2022 midterm elections (they’ve already lost).

TO LISTEN GO TO:

https://alternativevisions.podbean.com/e/alternative-visions-inflation%e2%80%94causes-future-prospects/

SHOW ANNOUNCEMENT.

Dr. Rasmus addresses the big topic of the week: accelerating inflation now rising 6.2% according to the latest CPI report and fastest in 30 yrs. Rasmus explains why the 6.2% is actually a low estimate. The multiple causes driving it today are explained: global supply chains breakdown, US domestic supply problems, price gouging by US companies with excessive market power, consumer demand, and the role of global financial commodities speculators. Why the latter is driving global crude oil prices to 2008 levels once again and spilling over to US economy as major factor in US domestic inflation. Rasmus explains why the mostly supply side and commodities speculator driven forces will continue for some time well into 2022. How inflation will slow the US economic recovery as it surges. And why a new causal element driving inflation is now appearing: inflationary expectations. Inflation + slowing economy + no government further stimulus = political wipe-out of Democrats in 2022 midterm elections.

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Listen to two short (15 min.) radio interviews I gave on Friday, November 5 and Monday, November 8, commenting on the US House vote on the Infrastructure bill and Democrats’ ‘orphaning’ of the Reconciliation/Build Back Better bill. (Note: these interviews supplement the recent blog posting of the 2 print pieces, ‘How Democrat Progressives Got Out-Maneuvered by Their Corporate Wing’ and ‘President Joe (Manchin) Moves the Goalposts Again’)

To Listen GO TO:
https://drive.google.com/file/d/1PGSfEnx5mMF2qNYKb0SsezvgM681yIVA/view
https://drive.google.com/file/d/1HdZuwq4KnoWWHtPIpOHLl773aI1BokIj/view

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By Dr. Jack Rasmus
copyright, November 6, 2021

This past week, November 1 to 6, this writer wrote a daily running commentary on the developments in Congress, as the corporate wing of the Democrat Party maneuvered US House progressives into a corner over voting on the Infrastructure and Reconciliation (Build Back Better) spending bills.

Ever since the two the bills—Infrastructure and Reconciliation— were first raised together last March 2021, progressives in the Democrat Party have been steadily driven into making concession after concession, reducing their proposals in a vain attempt to get the party’s corporate wing (represented in Senate by Manchin & Sinema and in the House by Cuellar and friends) to agree to some reduced cost Reconciliation bill. From an original bill with $3.5 trillion in social safety net and climate investments in the Reconciliation bill, progressives pared down their proposals to $1.75 trillion.

At each step the corporate wing of the party—represented by its point persons Manchin and Sinema—refused to counter the progressives’ offers. In fact, each time the progressives cut their proposals it only hardened the corporate wing’s opposition, encouraging them to refuse to make any counter proposals.
The media has referred to this process as ‘negotiations’ but it could hardly be called that. Normally negotiations refer to a two way street with both sides making proposals and counter offers. This was totally one way, the progressives making all the offers and Manchin-Sinema on behalf of the party’s corporate wing refusing to make any and all offers in return. It’s better described as one-way political concessions bargaining.

The coup d’grace and end to the charade was delivered up to the progressives last Friday, November 5, when the party leadership—Pelosi, Biden, Manchin—forced progressives to abandon their long-held position insisting both bills be voted up in the House together. With the help of 13 Republicans in the House, on Friday, November 5, speaker Pelosi broke out the two bills—thus breaking as well her months long pledge not to—and passed the Infrastructure bill separately by a vote of 228 to 206 with the help of the 13 Republicans.

That last point is worth repeating: Pelosi solicited 13 Republicans to vote for the breakout vote on Infrastructure and used their vote to defeat the progressive wing in her own party. Corporate ‘birds of a feather, flock together’ whether of the Democrat species or the Republican!

Pelosi had signaled a couple weeks ago she was planning to break out the votes on the two bills, but then backed off. Her fall-back position at that time was to vote both bills up and then send them both over to the Senate and let the Senate approve the Infrastructure bill and reject the Reconciliation bill. The Senate action would take the heat off her. But her less than clever maneuver was not to be.

What happened Friday was the Infrastructure bill was separated out from the Reconciliation bill in the House and voted up with the help of Republicans. No delay sending it to the Senate to reject. Or thereafter to a House-Senate Conference committee to further consider.So why the abrupt change of strategy last Friday to waste no time separating the bills and just vote up the Infrastructure bill? What changed was Biden intervened on Thursday, November 4, contacted Pelosi and demanded she immediate break out and vote on the Infrastructure bill. Biden reportedly also called some of the progressives and convinced some of them to break rank as well. Why his action? The Democrat loss of governor in Virginia and in local races in New Jersey and Texas clearly panicked Biden, leading him to ask Pelosi to vote up the Infrastructure bill first. Biden’s hand is thus all over the decision for Pelosi to block with 13 Republicans against her own progressive wing and push through the Infrastructure bill.

After having Manchin and Sinema carry the water for the corporate wing of the party, Biden injected himself and undermined the progressives resolve and Pelosi’s prevarications on holding a direct up front breakout and vote on Infrastructure. All the pieces came together on Friday: Manchin-Sinema, Biden, and then Pelosi. Progressives caved. And with them collapsed the Reconciliation bill and its $1.75 trillion in safety net and climate spending.

The sop thrown to the progressives was the commitment by Pelosi to hold a vote on the now ‘orphan’ Reconciliation bill by November 15. But that vote will be meaningless. So-called moderates in the House, already emboldened, have publicly said they’ll vote for the Reconciliation bill if it is totally paid for. That means it will have to include tax hikes on corporations and wealthy investors. But if it does include taxes, when it’s sent over to the Senate it will almost certainly be rejected by that body. Of course, Pelosi and others know full well that’s the coming fate of the Reconciliation bill. Instead of immediately DOA, the bill’s death will be delayed a couple more weeks. But dead is dead, now or then.

The outcomes of the perfidy delivered by Biden, Manchin, and Pelosi to their party’s own progressive wing—now in total disarray–are predictable:

First, the corporate friendly (no tax hikes) $550 billion Infrastructure bill has passed, leaving the $1.75T corporate unfriendly (requires tax hikes) Reconciliation bill DOA. It is highly unlikely any measures in the Reconciliation bill (including climate change investments) will now pass Congress any time soon. In fact, voices are growing within the Democrat party leadership saying the party should forget any new stimulus and start talking about other issues—like schools, immigration, etc.—in the run up to next year’s 2022 midterm Congressional elections.

Second, Biden and corporate Dems may think the $550B Infrastructure bill will make the difference in next year’s 2022 midterm elections. They are mistaken. Infrastructure spending will not even begin impacting the US economy until late next year. Meanwhile, no further safety net or household friendly program spending means little or no stimulus for the economy over the next year.

Third, what last week’s events in Congress further represent is the end of the fiscal social spending era by Congress. The coming months will be a transition period until the midterm elections. After the midterms, it will be an eventual return to austerity in social spending programs–i.e. the same scenario of insufficient stimulus followed by ‘take backs’ that occurred under Obama, 2009-2011. Expect the same string of events to occur once again under Biden.

The following are my daily commentary on Twitter during the past week, November 1 to 6, reporting on the maneuvers by Pelosi, Biden and the corporate wing to force the party progressives in the House to reverse their position and agree to a separate vote on Infrastructure. Billionaire Lloyd Blankfein, Chairman of Goldman Sachs, publicly described the events of the past week and the reversal as “the progressives blinked”. More accurately, they capitulated and collapsed in the face of a united front of their party’s leaders and the corporate interests behind it all. (Posts are in reverse chronological order, with first posted Nov. 5 and last Nov. 1)

#Democrats: Now that House progressives’ have capitulated & their will to fight broken, corp voices in Dem party growing louder to drop all Reconcilation proposals and ‘move on’ to focus on other issues in 2022 midterms. 2022 = deja vu 2010 midterms for Dems. Massive losses coming

#Pelosi: I was wrong: I predicted Pelosi would vote up both bills and pass it on to the Senate. knowing it would shit can Reconciliation. Instead, she voted up just Infrastructure-per Biden’s request who panicked after Virginia loss for Dems. Infrastructure won’t buy votes in 2022

#InfrastructureBill: Vote tonight was 228 to 206, with 13 Republicans voting for. That is, without Republicans it would have failed. So Pelosi blocked with Republicans to defeat her own progressive wing! Corporate birds of a feather flock together, whether Dems or Republicans.

#InfrastructureBill: Why hasn’t CBO ‘scored’ (i.e. costed out) the bill before it was passed tonight? Now will cost AFTER passage. Ass-backwards. Why? B/c ‘smoke & mirrors’ (i.e. no tax hikes) used to ‘pay for’ infrastructure. Was vote rushed before CBO reveals smoke & mirrors?

#ClimateEmergency: Don’t look now but Biden & Dems just gave up on climate. Infrastructure bill passed tonight has only $15B such investment. Reconciliation bill had >$500B, but is now DOA. Infrastructure passed first today by Pelosi & House=No Reconciliation bill passes Senate

#Pelosi: The proviso given progressives in house that Pelosi & House corp Dems will hold a vote on BuildBackBetter by Nov. 15–i.e. that it be paid for–means must include tax hikes. Senate will reject it if tax hikes. So $1.85T is DOA!! Corp Dems outmaneuver progressives again!

#Pelosi: with help of Republicans in House, Pelosi reneges on past promises & pushes the Infrastructure bill to passage. What did progressives get? A mere promise from Pelosi & corporate Dems in House they’ll vote on 2nd social bill by Nov. 15 (with proviso the $1.85T is paid for)

#InfrastructureBill: Mainstream media finally stops saying the Infrastructure bill is worth $1.1 trillion, and admits now it’s $550 billion (as it has always been). Why? CBO is about to provide official estimate and media knows it can’t continue the misrepresentation.

#Manchin: complains BuildBackBetter contains smoke & mirrors financing. He’s right. But so does Infrastructure bill which he supports. + BuildBackBetter also has some real corp & wealth tax hikes. That’s what Manchin & corp lobbyists running around DC in thousands really oppose.

#Manchin: Dem progressives kept cutting, cutting, proposals thinking Manchin might agree at some point, when Manchin’s goal from beginning has been to prevent all of BuildBackBetter bill. Progressives never seemed to get wise to that all along. Still don’t.

#Democrats: Pelosi’s transparent maneuver add some token measures back to BuildBackBetter, approve both bills & send to Senate that will strip them out again. Pelosi agrees to Senate version in House-Senate conference that follows. Infrastructure bill passes; BuildBackBetter not.

#Manchin: says he won’t support bill until he knows its effect on the economy first. But he won’t pass it so it won’t happen, so he’ll never know its effect on the economy. You gotta follow Qanon for that kind of dumb-ass circular logic. Of course, he knows better but it sells

#Democrats: got skunked tonight in VA & other races. Think it has something to do with a President who has lost control of party? VP who’s disappeared from public view? Their Senator from WV on TV telling us we can’t have this, can’t have that, etc. Beltway dumbos have no idea

#ReconciliationBill: Surprise surprise! Progressives in House just now concede to Manchin, per CNN latest report. Will vote on Infrastructure bill first. Leave BuildBackBetter in the lurch. Guess ‘triple teaming’ of Manchin-Sinema-Biden worked. With end of BBB, austerity begins

#ReconciliationBill: In his press conference today Senator Joe Manchin suggests he’ll not vote for any compromise (including Biden’s framework) for some time to come. Read my just written blog piece ‘President Joe (Manchin) Moves the Goal Posts Again’

#BuildBackBetter: President Joe–Manchin that is–just held press conference and ‘moved the goalposts’ again. After Biden (former president) last week got House to agree to $1.75T compromise, Manchin refuses again. Wants to see long term econ. effect first–i.e. wont agree soon.

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This past week the federal reserve bank chair, Jerome Powell, declared the monthly ‘free money’ to bankers and investors would continue, reduced from the $120 billion/mo. since the Covid recession began in March 2020 to now ‘only’ $105 billion a month. How and why the Fed pre-bailed out the banks when they didn’t need it, and continues to do so. Listen to Dr. Rasmus’ Alternative Visions radio show of friday November 5 for the Federal Reserve decision. Dr. Rasmus also discusses the jobs numbers released today by the US labor dept. and the ‘endgame’ approaching in the Democrats attempts to pass the Infrastructure & Reconciliation bills in Congress. How the ‘progressives’ keep getting outmaneuvered.

TO LISTEN TO THE RADIO SHOW

GO TO:

https://alternativevisions.podbean.com/e/that-other-bailout-the-fed-s-5t-pre-bailout-of-banks-investors-continues/

SHOW ANNOUNCEMENT:

Dr. Rasmus explains how the Federal Reserve has provided $5T in free money to banks and private investors during the Covid recession, when they didn’t need it. That’s $120B every month. The Fed this past week reduced that to…$105B a month. How the monetary system works to subsidize financial markets, bankers, and investors. Why mainstream media avoids explaining this. Meanwhile, progressive democrats reaching their ‘endgame’ in passing the Infrastructure and Reconciliation bills in the US House. How Pelosi is maneuvering them to a final passage of the Infrastructure bill only is explained. Last month’s Employment and Jobs report out today is also dissected to show it reflects a weakening economic rebound—and not the hype presented by the media

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Mainstream media is now reporting, following Manchin’s press conference, that the House Progressives have in effect thrown in the towel and will agree to vote on the Infrastructure bill first. That leaves the $1.75T ‘build back better’ bill in the lurch. Appears the ‘triple teaming’ of Manchin-Sinema-Biden collapsed their resistance.

Some consequences: with the US economy now slowing, no further stimulus will add to the slowdown $Q 21 and after (Infrastructure bill spending won’t take effect until late 2022). Biden’s falling poll numbers (mostly Democrat supporters) will now continue. He’s finished. So is the Democrat House in Nov. 2022; What’s the future of progressive wing in the party? Bleak; What’s the future of the Democrat party itself???

Reportedly, McConnell, McConnell, McCarthy seen line dancing together off camera!

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by Dr. Jack Rasmus
copyright 2021

Today Joe Manchin, Senator from West Virginia, and the de facto President now, today held a press conference. In it he announced he couldn’t support the compromise framework proposal that former President, Joe Biden, got US House progressives to agree to last week.

As part of that Biden framework compromise, both sides in negotiations (progressives in the US House and Manchin-Senate in the Senate) would vote on the $1.75 Trillion ‘Reconciliation Bill’—formerly known as the ‘Build Back Better’ bill—and the $1.1T Infrastructure bill.

Over the weekend House progressives had conceded to Biden’s ‘compromise’ that would further reduce spending on human infrastructure and climate change in their Reconciliation bill. That compromise was reduced to $1.75T, dramatically cut from the progressives’ July $3.5 trillion original position.

From ‘Double’ to ‘Triple Teaming’ Progressives

Manchin and his counterpart, Senator Krysten Sinema, remained silent while Biden last week pushed, and got, House progressives to accept the $1.75T ‘compromise’. But today, November 1, in his press conference Manchin ‘sand-bagged’ progressives (again) by coming out against the compromise Biden ‘Framework’ proposal of $1.75T.

What we have here now is a triple-teaming of Democrat progressives: Manchin takes the lead, gives the appearance he’ll maybe accept a lower total spending. Sinema then jumps in and adds more demands. Both of them suggest maybe a deal to Biden. Biden now jumps in and pressures progressives to cut further. Manchin-Sinema balk again after progressives concede still further to Biden’s compromise ‘framework’. What was formerly a double team by Manchin-Sinema has now become a ‘triple-team’. There appears no end in sight to this kind of ‘bad faith’ bargaining to elicit concession and after concession from progressives and then refuse to accept.

The latest iteration of this strategy raises an interesting question. Was Biden just manipulated by Manchin? Or is this all a cleverly choreographed maneuver by all three—Manchin, Sinema, Biden—to keep progressives making concessions until there’s nothing at all left of the Reconciliation bill? Or until progressives walk away in disgust? Both of which would be just fine for Manchin, Sinema, the corporate wing of the Democrat party—not to mention McConnell and his Republican minions.

Manchin’s Counter-Attack

In his press conference this morning, Manchin in effect ‘moved the goalposts’ once again, as the saying goes. In fact, he took the goalposts off the field altogether just as progressives thought they might at least score a little extra point.

He attacked the progressive caucus in the House in no uncertain terms, calling them ‘irresponsible’ by not voting up the $1.1T infrastructure bill first. That’s been the Manchin-McConnell-Corporate strategy all along: get a vote on the Infrastructure bill that will fund corporate spending and then, once passed, allow the $1.75T Reconciliation bill with social program and climate change spending fade and not pass. House progressives (and Sanders in the Senate) know this game. That’s why they’ve been insisting on the two votes for both bills be held at the same time.

Nonetheless, in a strange inversion of logic, Manchin declared progressives were holding the Infrastructure bill “hostage” when, in fact, it was he and Sinema holding the Reconcilation bill hostage. The hostage metaphor breaks down, however, when one compares the progressives’ hostage taking to Manchin’s: the former indicate publicly what it will take to ‘free the hostages’ (i.e. just vote up both bills simultaneously), while Manchin refuses to say how much it will cost for him to release hostages. And when progressives make an offer, he just keeps raising the ante.

Voting both bills up simultaneously is in fact now the last demand of the House progressives. They’ve already conceded to everything, cutting the $3.5T in half. All they wanted over the weekend was to have both bills passed and not get whipsawed by Manchin and friends.

It’s likely Manchin-Sinema signaled to Biden last week they might agree, if Biden pushed progressives to agree to his ‘framework’ proposal to cut out community college free tuition, to end paid leave of even 4 weeks, to drop Medicare dental, not allow the government to negotiate prescription drug prices for Medicare, not require power plants to convert to alternative fuels, no tax hikes on corporations, no hikes on wealthy individuals, etc. etc. All that was taken out of the Biden ‘framework’ proposal last week. The progressives then accepted all the cuts. They only wanted a simultaneous vote so Manchin-Sinema wouldn’t sandbag them again, and not agree and insist on Infrastructure vote first—after which both would almost certainly not vote on even the much reduced Reconciliation bill.

Manchin’s Neoliberal Arguments

In his press conferences Manchin raised the phony argument that he wanted to know how the $1.75T would affect the US economy first. As he put it: “I will not support the Build Back Better proposal until we know its economic effects”. That meant he would never know, since he could not know unless the bill was enacted first (which he won’t vote for), and then at least six months passed to see its effect on the economy. It was an absurdly illogic argument, and in reality a transparent excuse for not wanting to vote on the $1.75T at all.

We now know therefore his real position all along: Manchin & friends don’t want any bill except the corporate-friendly Infrastructure bill.

In his press conference remarks Manchin further raised several other phony economic arguments as his excuse for wanting to wait to see the effects of the $1.75T on the US economy.

He first argued that current inflation is due to household spending—i.e. excess Demand. Giving households more money via the Reconciliation bill programs would only raise more inflation. That point of course is rejected by nearly all economists. Inflation surge at present is not due to consumer demand; it’s clearly due to supply—i.e. broken global supply chains, domestic US supply problems as businesses refuse to ramp up until they see a clear recovery in the US, resurging Covid in areas of the country that is hampering workers from returning to work (and consumers shopping), problems with unavailable and unaffordable child care which is causing a slow return to work by workers, chronic low wages and unstable hours of work which is causing workers to refuse to return to their jobs, and a host of other ‘supply’ problems. Yet Manchin raises the ‘conservative-corporate’ fake argument that inflation is due to workers and middle class families having ‘too much income’ and therefore causing demand-driven price inflation.

Another fake argument Manchin raised was the $1.75T would only drive the US deficit and national debt further into the red. This is the same business argument that deficits and debt are due only to excess spending by the government. Absent conveniently from this argument is that chronic and rising deficits and debt since 2000 have been driven by tax cuts ($15 trillion) and war spending ($7 trillion) up to 2020. That’s $22 trillion and about the total of the national debt on the eve of Covid in 2020. So now Manchin doesn’t want to spend to rescue households, but was willing to spend to subsidize corporate-investor America for two decades with tax cuts and agreed to $7T in worthless war spending that produced defeats in the middle east.

The most insidious of Manchin’s argument against the $1.75T Biden framework compromise, however, was his point about Medicare and Social Security. He argued that how could we spend more money to add dental to Medicare when the Medicare fund was about to go bankrupt in five years and social security retirement by the mid-2030s? Both those points are false, of course.

Medicare trust fund is not about to go bankrupt. Revenue inflows from the 1.45% medicare tax may fall below outflows. But that’ not bankrupt. Same applies to the social security payroll tax.

Manchin certainly knows that Medicare and Social Security Retirement funds have nothing to do with the national budget deficit and debt. They are funded totally separately. Moreover, Trust Fund managers have estimated that a mere 0.25% tax added to the 1.45% would resolve the Medicare shortfall for decades.
And by simply removing the ‘cap’ on the social security retirement tax (now no one earning more than $147,000 a year has to pay the tax after that’s paid) will end the shortfall in 2035 in the retirement fund for another 75 years!

So Manchin plays the Corporate-Republican excuse game—blaming social program spending (aka Reconciliation bill) for inflation, for the national debt, and for pushing social security & medicare into bankruptcy.

As Manchin left the press conference he added “I won’t negotiate in public”. What he really meant was he won’t negotiate at all. His apparent real position now (as it has been all along) is: vote the Infrastructure bill first and the rest be damned.

In the media commentary following the press conference, the talking heads on CNN succinctly clarified what’s going on.

Talking Heads Sum Up

According to CNN’s Wolf Blitzer: “They’re a long long way from a deal”…”Senator Manchin says No Deal”.

His colleague, Manu Raju added “This is going to require a lot more changes to get Manchin support”.

Gloria Berger then noted that Manchin’s remarks that he wanted to know the economic effect of the $1.75T first, raised the open-ended point: “How long will it take to know the effect?”

All agreed the press conference resulted in deep trouble for the other Joe, you know the former president called Biden. His framework of last week and compromise at $1.75T that the progressives then accepted, was all but DOA now. Other Democrats running for office, like McAuliffe for Virginia governor, may now get the deep six in tomorrow’s election in that state.

Democrat Party Permanent Decline?

What we are seeing in this Manchin-Sinema attack on the Reconciliation bill may be the beginning of the end of the Democrat party. That’s certainly so in next year’s 2022 Congressional elections. And very likely in 2024. Meanwhile, Biden’s polls continue to go south—losing widespread support from his party’s progressive wing, families who believed Biden’s promises in the 2020 election he would deliver for them, and independents as well.

The even more important question is not just whether the Democrats will be wounded badly in future elections, but whether the split in the party will deepen and lead to something organizationally more permanent.

It remains to be seen how long with the progressive wing in the party put up with what is now clearly the strategy and intent of the party’s corporate wing—led by Manchin & Sinema—to prevent any further expansion of much needed social and climate change spending. Of course, this has been going on since the corporate wing, under the leadership of the ‘DLC (democrat leadership conference)’ faction took total control of that party in the early 1990s when it pushed its boy Bill Clinton to the top. That faction has come to run the party ever since and thwart most reasonable social programs—while joining the Neoliberal policy trend originally launched by Reagan in 1981 subsidizing corporations and capital incomes ever since 1992.

Will the progressives in the House, and the Sanders-Warren minority wing in the Senate, continue to be manipulated and denied? Give it no more than one year and we will know. But 30 years of track record should not lead one to be optimistic.

POSTSCRIPT to ‘President Joe (Manchin)–added evening of November 1

Mainstream media is now reporting, following Manchin’s press conference, that the House Progressives have in effect thrown in the towel and will agree to vote on the Infrastructure bill first. That leaves the $1.75T ‘build back better’ bill in the lurch. Appears the ‘triple teaming’ of Manchin-Sinema-Biden collapsed their resistance.

Some consequences: with the US economy now slowing, no further stimulus will add to the slowdown 3Q21 and after (Infrastructure bill spending won’t take effect until late 2022). Biden’s falling poll numbers (mostly Democrat supporters) will now continue. He’s finished. So is the Democrat House in Nov. 2022; What’s the future of progressive wing in the party? Bleak; What’s the future of the Democrat party itself???

Reportedly, McConnell, Trump, McCarthy seen line dancing together off camera!

Dr. Jack Rasmus
November 1, 2021

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