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The Unraveling of Obamacare–A Progressive Critique

November 14, 2013 by jackrasmus

Listen to the update on Obamacare and the progressive critique on my radio show, ALTERNATIVE VISIONS, at:

http://prn.fm/category/archives/alternative-visions/

or also at:

http://www.alternativevisions.podbean.com

SHOW DESCRIPTION:
Dr. Jack Rasmus and guest, Dr. Margaret Flowers, provide a progressive critique of Obamacare and its growing problems of implementation and coverage. Dr. Rasmus explains how, and why, Obamacare will continue to unravel in 2014-15 and potentially implode, in whole or part, by 2016. Rasmus explains in detail how Obamacare has delayed and exempted businesses from participation in the program; why business penalties for failure to participate are in sufficient; why subsidies for individuals to participate are inadequate and won’t work; why enrollment will continue to seriously lag projections by wide margins in 2014; why the Act is the death-knell for union negotiation health plans; how businesses and health insurance corporations area increasingly ‘gameing’ the system. Rasmus explains how the Act is really a scheme for ‘moving the money around’, from those who now have coverage to those who don’t—where the money is moved first through the health insurance companies that skim off excess profits in the process—and how Obamacare should be understood as the extension of prior attempts to privatize health care via George W. Bush’s Health Savings Accounts (HSAs) in the past decade and Bill Clinton’s ‘Managed Health Care’ before that.

Rasmus and Margaret Flowers explain how ‘Medicare for All’ is the only real alternative that will work, showing how its initial enrollment process, benefit coverage, and costs have been, and continue to be, far superior to the Obamacare-Bushcare-Clintoncare market privatization approaches. Rasmus forewarns that as Obamacare continues to unravel the real fight will begin over ‘Medicare for All’ vs. total privatization of health care via ‘Vouchers for Some’ that conservatives are now preparing in the wings once again.

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False Positives: Analyzing Recent US GDP & Jobs Reports

November 11, 2013 by jackrasmus

A first look at US third quarter 2013 GDP and October Jobs Reports gives the impression that the US economy is mending and might soon begin to recover. But a closer inspection shows that the reports indicate an economy still mired in a ‘stop-go’ trajectory at best and a jobs market able to produce low pay, often contingent service jobs. Moreover, trends within the reports suggest even the already tepid results in the reports will likely wane, once again, in the coming quarter and months. Here’s why.

US 3rd Quarter GDP Report

The official, preliminary GDP numbers for July-September indicate a 2.8% US growth rate. The truth is always in the details, however. And a closer look at the composition and trends within GDP are nowhere near so rosy.

First and most important, no less than 0.71 of that 2.8% is due to what is called inventory accumulation by nonfarm businesses, which rose more than twice as fast as the 0.30 in the second quarter 2013 following a mere 0.06% in the first quarter. In other words, businesses have been accelerating their stocking up of goods in anticipation of a subsequent rise in consumer household spending in the U.S. However, as indicated below, that spending is decelerating rapidly—not rising—and along several fronts.

It would not be the first time in the past few years that businesses falsely anticipated the take off of consumer spending and ramped up prematurely, only to have to contract just as dramatically when spending did not materialize.

In early 2012 a similar scenario occurred. Business inventory accumulation surged, adding significantly to GDP, then collapsed. After gains in inventory spending contributing 0.91 to GDP in the 3rd quarter 2012, last year, the same inventory spending collapsed in the final quarter of 2012, subtracting a full -2.09 from GDP. Fourth quarter 2012 US GDP in turn collapsed to a mere 0.1% growth rate. Thereafter, businesses began once again this past spring in building inventories in anticipation, yet again, a surge in consumer spending to occur this current 4th quarter 2013—once again a ‘surge’ that does not appear will take place.

Another problem with the recent 2.8% GDP 3rd quarter 2013 number is that it reflects a major redefinition of what constitutes GDP that was introduced this past July 2013 by the Bureau of Economic Analysis, the US agency responsible for GDP reporting. In that change and redefinition, the BEA added for the first time business Research & Development costs to the business investment contribution to GDP. In other words, ‘costs’ not ‘output’, as previously has always been the case, now contribute to GDP. This was clearly one way to artificially raise what has been a declining trend in US business investment in the US for the past decade. Applying the redefinition retroactively, this GDP redefinition added no less than $550 billion to 2012 GDP last year. And for the most recent quarter, it added further to US GDP’s 2.8% rate. R&D contribution to US GDP is currently running at more than $280 billion for the year. That ‘redefinition and cost’ compares to an estimate of $292 billion for all software contribution to US GDP this year; and more than the investment contribution for all transport equipment or all industrial equipment to US GDP this year. It is not an insignificant sum, in other words. But it is ‘adding’ artificially to the 2.8% US GDP recent numbers.

Eliminate the excessive .71 contribution of inventories that will almost certainly contract this fourth quarter, and the artificial addition to GDP from R&D ‘costs’, the actual longer term trend in GDP in the 3rd quarter is about 1.8%–not 2.8%. That’s about the longer term average of US GDP growth annually for the past two years. In other words, the economy is growing no faster than it has in the past, a rate that is about half what it should be at this point nearly five years after the end of the recession in 2009.

But the 3rd Quarter GDP numbers are notable as well for other weak trends within the general number. First, it appears that spending on services has nearly come to a halt. After contributing 0.69 and 0.53 to GDP rates in the first and second quarters of 2013, respectively, services spending collapsed to only 0.05% in the 3rd quarter. Other warning signs of questionable consumer spending going forward are also now beginning to appear as well. Consumer confidence has plunged. The largest segment of consumer spending, retail sales, fell 0.1% in September, following one of the worst ‘back to school’ shopping seasons that “ended on a sour note, raising concerns about the holidays”, according to the Wall St. Journal. Imminent cuts of billions of dollars in food stamps recently approved by Congress will take a further toll on consumer spending essentials in the near future, as will the 6-day shorter holiday shopping season for this year. Both wholesale and consumer prices continue to decelerate to 1% or less, also an indicator of soft sales and demand by consumers. In short, it is not likely consumer spending will rebound significantly this fourth quarter, prompting in turn the sharp reduction in business inventory spending noted above.

Added to this will be a continued decline in government spending at the federal level, as the sequestered spending cuts take an even deeper ‘bite’ out of the US economy. Both Defense and Non-defense spending has been reducing GDP every quarter since the beginning of 2013. This will not only continue, but will now accelerate in the 2013-14 fiscal budget year.

Finally, on the manufacturing and construction side of the economy, which represents about 20% of total GDP, recent growth in new residential housing construction will likely decline. The recent US ‘housing recovery’ is now over, with rising interest rates and prices. US homebuilders are beginning to recognize this and are now reducing their output, and thus future contribution to GDP from this sector.

The contribution of manufacturing and exports to US GDP growth longer term is also fading. In the 3rd quarter, net exports added to GDP despite slowing exports because imports declined faster than exports. What was a US brief export sales advantage for a while in 2013 is in decline, as the Eurozone economy takes action to lower its exchange rate and thus boost their exports and as China quickly moves back to an ‘export-driven’ GDP in recent months after having tested the waters, and retreated, from a shift to more internal consumption driven growth. The imminent shift by the US federal reserve bank toward a ‘taper’ monetary policy in coming months will also result in higher US interest rates (further slowing housing and auto sales) and a related rising dollar (further slowing export sales).

The recent 2.8% US GDP for the third quarter is therefore a ‘false positive’ in terms of where the US economy, and economic growth, may be headed this coming 4th quarter and longer term.

US October Jobs Report

Last month’s Jobs report is a reflection of US third quarter GDP. The reported increase of 204,000 jobs in October at first glance appears a positive development. At least that number is needed to start reducing the unemployment rate. However, that rate actually rose last month. The reason is a whopping 700,000 more workers left the labor force. That huge number leaving the labor force is a strong indicator of severe weakness in the US labor markets, not strength. It means hundreds of thousands more in just one month have given up finding work because they can’t.

The composition of the hiring is also disturbing. 44,000 new hires in the retail sector. 53,000 in leisure & hospitality. And 52,000 in business services. The first two are typically overwhelmingly part time employment, as is a good part of the third as well. No doubt concerned with the weak August-September retail sales results, retail has begun hiring part timers even earlier than in previous years. Leisure and hospitality (restaurants, hotels, etc.) have also continued to hire, again typically part time. The hiring of part time, or ‘contingent’, labor is a major trend of this past year—when in the first half of 2013 more than 600,000 of the 900,000 newly hired were in fact ‘contingent’ (part time and temp jobs). That means low paid and service jobs, without benefits as a rule. That also means slow to stagnant income growth from job creation—the most important source of disposable income growth necessary for sustained consumer spending.

While wage increases for the past year are reported as 1.8%, it is important to note that this rate is for full time workers only. It does not reflect the lower pay received by part time workers, which have been the bulk of jobs created over the past year. When adjusted, wages are stagnant at best or falling for production and supervisory workers as a whole, full and part time and temp. It is not surprising, therefore, that median family (aka working class) disposable incomes continue to fall this year, as they have in four preceding consecutive years. That is not a foundation for future consumption increases. To date, consumption spending has risen even tepidly due to the growing use of consumer credit—cards, student loans, and auto and mortgage refinancing loans. Recently, credit card usage has slowed, however. Consumer spending has also been boosted by the wealthiest 10% households, who spend largely on performance of stock and bond markets that have been surging to record levels. Stocks and credit cards are not a basis for true household spending recovery; jobs and real income growth are the key but neither appear will contribute much in coming months.

Finally, contingent job growth—and especially in retail and hospitality both highly dependent on holiday spending—can ‘disappear’ quickly from the economy, and may in fact do so by December should consumer spending come in well below expectations. Meanwhile, the federal government continues to reduce spending and shed jobs, and may even do so at a faster rate early next year should the ‘sequester’ spending cuts not be reversed and Congress take an even deeper bite out of social security and medicare spending in 2014.

To summarize, the 2.8% GDP for the 3rd quarter, and the October 2013 jobs report, are nothing to get excited about. They represent temporary adjustments to an otherwise stagnant at best US economy performance and a jobs creation record barely absorbing new entrants into the labor force and doing so at a sub-standard pay rate.

Jack Rasmus
November 11,2 013

Jack is the author of the 2012 book, ‘Obama’s Economy: Recovery for the Few’, Pluto Press, and host of the weekly radio show, ‘Alternative Visions’ on the Progressive Radio Network. His website is http://www.kyklosproductions.com, his blog jackrasmus.com, and his twitter handle, @drjackrasmus.

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The Great Corporate Tax Shift

November 6, 2013 by jackrasmus

Listen to my 11-06-13 Radio Show, ‘The Great Corporate Tax Shift’, on Alternative Visions at:

http://prn.fm/category/archives/alternative-visions/

or at:
alternativevisions.podbean.com

“Jack Rasmus discusses the ‘Great American Tax Shift’, shows how the Corporate Tax has been steadily declining for decades as a percent of federal revenues, percent of national income, and percent of corporate profits; why the Corporate Tax ‘effective rate’ is now 12%, not the official 35%; why corporations today pay state taxes of barely 2%, instead of official 5-10% rates, and only 2% on foreign earnings instead of 15-28%—for a total global real tax payment of 16%–not the 45%-50% corporate apologists claim. Jack explains how all this results in Corporate America now sitting on more than $10 trillion in cash and how that translates into income inequality trends and a global economy that is unable to fully recover from recession. Various myths about corporate taxes are also refuted (i.e. tax cuts create jobs, US corps have highest taxes in the world, corporations pay double taxes, etc.). And new corporate tax cut measures pending now in Congress in the Tax Code overhaul bill are explained.

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Contradictions of Global Fiscal-Monetary Policies

November 2, 2013 by jackrasmus

The following is an excerpt from this writer’s just published, ‘The Slowing Global Economy’, explaining why QE, austerity, fiscal stimulus packages, and record low central bank interest rates, are failing to generate a sustained global economic recovery after 4 years–and why the same policies are now beginning to have the opposite effect on global recovery.

“QEs, massive liquidity injections by central banks, token fiscal stimulus policies followed soon by austerity fiscal stimulus withdrawals represent the recovery policy ‘mix’ for the US since 2008. In similar form, albeit with different emphases, the same monetary and fiscal policies have been adopted by other main capitalist sectors of the global economy. Those economies, from the Eurozone, UK, to Japan and elsewhere are also experiencing a ‘stop-go’ economic recovery trajectory. The outcome has been more or less the same everywhere: a bailing out of the banks, an acceleration of investors income and corporate profits, a shift toward speculative financial investment, growing income inequality, declining relative real investment, inability to generate full time employment and wages, declining real disposable incomes for median family households, stalling consumption, and a sub-par historical, ‘stop-go’ economic recovery.

The US driven policy package of QE-unlimited liquidity, plus token fiscal stimulus followed by austerity and initial stimulus withdrawal, has been converging across all the capitalist economic sectors globally. All sectors, with perhaps the exception of China, have been following the US fiscal-monetary policy lead. This has been especially so with regard to QE and monetary policy which has been the main policy level of choice for capitalist economies and governments worldwide since 2008.

But fiscal-monetary policies globally are not only failing to generate a normal, sustained economic recovery; they are now also beginning to have a contradictory, counter-productive economic impact.
The growing contradictions in monetary policy are several.

First, it is clear that after five years of QE, investors are becoming addicted to QE and virtually interest free money from the Fed and central banks. When the Fed attempted to signal a future withdrawal from QE this past June, financial markets reacted severely. In a matter of weeks, stocks, bonds and financial asset prices plummeted and interest rates rose quickly. The Fed then backed off, re-signaled again in August, with the same response. It may prove significantly difficult for the Fed, and other central banks, to begin suspending QE and withdrawing liquidity without interest rates rising rapidly and provoking a serious real economic contraction. At the same time, continuing liquidity and low rates has a decreasing positive effect on the real economy.

Second, it appears the capitalist economies are becoming increasingly interest rate increase sensitive as they have become interest rate decrease insensitive.

Third, the continuation of massive liquidity injections via QE and other means has begun to exacerbate currency wars. One sector engages in QE, driving down its currency’s value, lowering in turn the cost of its exports at the expense of competitors. Others then respond similarly. Currency volatility results across the board, which creates uncertainty for real investment. Economies subsequently slow. What was competitive devaluations during the great depression of the 1930s via declaration, now occurs via currency exchange rate movements via QE and liquidity.

Efforts by the Fed and other central banks to withdraw from QE result in massive capital flight from emerging markets, as hot money that was pushed into those markets when QE was growing now sloshes back to the US and Europe when liquidity is reversed. Capital flight from emerging markets forces those economies to raise interest rates to lure back the capital, but doing so slows their real economies that causes even more capital to flow out of emerging markets. The process destabilizes the global financial system in turn.

QE and excess liquidity spills out in global financial markets. Far more money capital is available that can be profitably invested in real production. Investors turn to short-term financial asset investments.

Speculative investing and financial asset prices and profits rise, drawing capital from real asset investment into financial assets. Capital flows increase in magnitude and frequency across countries, destabilizing the global financial system still further.

Not least, as already noted, the accelerating financialization of the global economy provoked by QE and unlimited liquidity injections by central banks leads to accelerating financial profits, income, and wealth by investor households that in turn results in growing income inequality and problems sustaining non-investor household consumption.

To summarize, monetary policies since 2008 are breeding dependency on free money from central banks, super-sensitivity to interest rate hikes, currency wars, competitive devaluations by means of exchange rate volatility, capital flight from emerging markets, excessive speculative investing and declining real investment that slows the real economy making it difficult to create jobs, reduce unemployment and sustain household consumption, and in general exacerbate hot money flows globally that destabilize the global financial system.

Contradictions in Fiscal Policy are no less significant.

Fiscal policies are also becoming less effective in generating real economic growth. Contrary to what liberal economists argue, deficit spending per se does not stimulate economic growth. The composition of that spending is key, not just its magnitude (business tax cuts vs. direct spending by government). Business tax cuts don’t create many jobs any longer since, in a global economy, they are easily diverted offshore or into financial investments by corporations today; or used to buy back stocks, pay dividends, retire debt; or just hoarded as retained earnings in offshore tax havens or in companies’ foreign subsidiaries. What economists refer to as tax multipliers have thus declined significantly in the 21st century global capitalist world, rendering fiscal stimulus policies less effective.

Not just tax multipliers, but government spending on subsidies to states, rather than on direct federal job creation, results in a smaller multiplier effect than in the past, producing fewer jobs as state and local governments, like corporations, don’t hire but pay down debt or hoard cash. Conversely, government deficit spending cuts and austerity fiscal policies have a larger negative multiplier effect, as government entities prefer to lay off workers and reduce spending on programs in lieu of committing cash to spending.

A further reason why multiplier effects have declined is household consumers have become more ‘fragile’—that is, they have accumulated excessive debt loads and face stagnating or declining income gains. Government spending and tax cuts targeting consumer households thus get diverted to retiring debt or paying for inflationary increases for essential goods and services that was once covered by rising wage incomes.

To summarize with regard to fiscal and austerity policy, government spending and tax cuts no longer have the same positive effect on economic recovery they once had. Greater household debt and stagnating incomes reduces the effect of fiscal stimulus. That same debt and income stagnation makes austerity fiscal policies in turn more effective in terms of reducing consumption. Austerity multipliers are greater, while fiscal stimulus multipliers are smaller. Austerity serves to contract the economy, but does so more effectively than tax cuts and spending stimulate the economy. In order for fiscal stimulus policies to return to past effective levels, major structural changes will have to occur in the economy: incomes will have to be redistributed from the wealthiest households and toward the middle and working classes by means of a number of measures, while debt levels will have to be reduced or debt expunged.

(NOTE: The complete article on the Slowing Global Economy is available on the website, http://www.kyklosproductions.com, accessible from the sidebar of this blog. The article with accompanying graphs and charts is available at ‘Z’ magazine’s November 2013 issue).

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The Slowing Global Economy

November 2, 2013 by jackrasmus

Contrary to month to month economic data, the US and Global Economies reflect a longer run slowing of economic growth since the short, shallow recovery of 2009-10 following the financial crash and ‘epic’ contraction of economies worldwide in 2008-09.

For my just published, November 2013 article, reviewing the current state and trends within the global economy, as of late summer 2013, go to my website at http://.www.kyklosproductions.com/articles.html. Or access the website from the sidebar on this blog.

Included are assessments of the US, Eurozone, UK, Japan and China economies. While recoveries appear in the short run, in this or that global region, the recoveries are short and shallow and thus unsustainable. The article explains why traditional fiscal-monetary policies, including a primary focus on QE and liquidity injections by central banks and reluctant and insufficient fiscal stimulus packages, have been unable to propel the global economy and its various regions onto a sustained growth path. Weak multiplier effects for fiscal policy due to excess debt and stagnant incomes and inverse elasticities and return to financial speculation in lieu of real asset investment, are offered as explanations for the growing failure, and contradictions, increasingly evident by traditional fiscal-monetary policies being employed worldwide.

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Myth Busting the Smear Campaign Against Social Security

October 24, 2013 by jackrasmus

STATEMENT ISSUED BY THE GREEN SHADOW CABINET USA
October 24, 2013
By Dr. Jack Rasmus, ‘Shadow’ Federal Reserve Chair

“With the interim ‘debt ceiling/government shutdown’ agreement reached last week between the Obama administration and the Teaparty-driven U.S. House of Representatives, the real negotiations on deficit cutting—aka Austerity American Style—are about to begin again.

A long campaign peddling falsehoods around social security and medicare has created a myth that they are facing a budget and fiscal crisis. This claim will be rolled out by Democrats and Republicans alike, to justify cutting programs for the poorest Americans, while handing tax breaks to the richest corporation.

Both Obama and the Republicans in the House were agreed last summer, before the Teaparty faction upset the negotiations agenda by injecting the Obamacare issue, to proceed toward cutting ‘entitlements’ and seeking Tax Code Overhaul. With the Teapartyers in temporary retreat, Boehner and the Republicans have now returned to their initial strategy of of demanding entitlement cuts for a budget deal, and Obama has indicated that he is prepared to meet them halfway.

At the center of coming negotiations will be hundreds of billions of dollars in proposed cuts to social security and medicare, in exchange for a longer term debt ceiling extension beyond the November 2014 midterm congressional elections. In the ‘ mix’ for an agreement will also be big corporate tax cuts in exchange for token, ‘smoke and mirror’ tax loophole closings, as Tax Code legislation moving through Congress comes to a concurrent vote.

Obama recent record on social security and medicare cuts includes his 2014 budget – where he cut $630 billion. On the flip side of this austerity for the poor is Obama’s largess for business, and his support for dropping the top corporate tax rate from 35% to 28%.

It is important to make clear that neither social security or medicare are facing a long term financial crisis.

A closer look at the 2014 budget and at reports by social security-medicare trustees shows that problems exist for financials of Social Security Disability Insurance (SSDI) within the social security program, however, the retirement benefits program in social security does not suffer these issues. Nevertheless, Obama is proposing to cut future social security retirement benefits. The ‘fix’ goes beyond the problem.

Similarly, problems exist with funding for Part D prescription drugs program within Medicare, which has never been funded by a tax since its inception in 2005. Under the program drug companies are allowed to price gouge everyone on drug costs – so there is need for reform. However, Medicare’s basic hospital and physicians programs – Part A and Part B, are fully funded for the next decade, and these programs should not be painted with the same brush.

It is time to get the facts straight, before the hype and lies start to flow once again in the run up to the next deficit cutting-tax cuts for the rich deal that is now on the agenda once again.

For more analysis of Obama’s 2014 Budget follow link to this June 2013 interview, on the Progressive Radio Network.

~ Jack Rasmus serves as the Chairman of the Federal Reserve System in the Economy Branch of the Green Shadow Cabinet of the United States

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What’s Happening to the $1.2 Trillion ‘Sequester Cuts’?

October 24, 2013 by jackrasmus

What’s Happening to the $1.2 Trillion “Sequester Cuts”?

Alternative Visions Radio Show, Oct 23, 2013 on Progressive Radio Network

“Dr. Jack Rasmus provides an update on last week’s interim ‘Government Shutdown-Debt Ceiling Extension’ deal in Washington and explains the real role and strategy of the Teaparty faction in recent months and going forward to the 2014 elections. With the Teaparty no longer the driving force, now the real negotiations begin (again) between Obama/Congressional Democrats and Congressional Republicans, returning to the ‘well orchestrated dance 2.0’ laid out this past summer before the Teaparty’s intervention. Rasmus predicts there will be a government funding deal by the next January 2014 budget deadline, and there will be no repeated debt ceiling crisis on February 7, 2014. The coming Obama-Republican deal will now include major cuts to social security and medicare, and possibly more tax cuts for corporate America as well. In addition, the $500 billion in proposed sequester defense spending cuts will be further restored in the coming deal, and that restoration has in fact already begun. ”

(For a 35 min. video presentation on “Why Social Security and Medicare Are Not in Crisis”, download Jack’s presentation at: http://www.kyklosproductions.com/videos.html

Also available at http://alternativevisions.podbean.com

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Social Security & Medicare in the Cross-Hairs Again

October 21, 2013 by jackrasmus

With the interim ‘debt ceiling/government shutdown’ agreement reached last week between the Obama administration and the Teaparty-driven US House of Representatives, the real negotiations on deficit cutting—aka Austerity American Style—are about to begin again, now that the Teaparty has retreated on its demand to defund Obamacare.

A committee will now recommend further spending cuts by December 13, with a deadline in January 2014. The next debt ceiling deadline has been pushed even further out, to February 7, 2014. That means the parties will clearly now focus specifically in the coming months just on deficit cutting.

At the center of coming negotiations will be hundreds of billions of dollars in proposed cuts to social security and medicare, in exchange for a longer term debt ceiling extension beyond the November 2014 midterm congressional elections.

In the ‘ mix’ for an agreement may also be big corporate tax cuts in exchange for token, ‘smoke and mirror’ tax loophole closings, as Tax Code legislation moving through Congress comes to a concurrent vote.

Both Obama and the Republicans in the House were agreed last summer, before the Teaparty faction upset the negotiations agenda in September by injecting the Obamacare issue, to proceed toward cutting ‘entitlements’ and seeking Tax Code Overhaul.

With the Teapartyers in temporary retreat, Boehner and the Republicans have now returned to their initial strategy of this past summer of demanding entitlement cuts for a budget deal. And Obama is prepared to meet them half way, already on record to date to cut social security and medicare in his 2014 budget by $630 billion, as well as on record to cut the top corporate tax rate from 35% to 28%.

For my analysis of Obama’s 2014 Budget—which includes hundreds of billions in social security-medicare cuts—listen to my June 5, 2013 radio show, Alternative Visions, commentary at the following url:

http://prn.fm/?p=5807

See also my June 2013 blog entry and analysis of Obama’s Budget, plus the longer historical piece on US deficit cutting entitled, ‘Austerity American Style’.

It is important for readers to know that neither social security nor medicare are facing a long term financial crisis. A closer look at the 2014 budget and at reports by social security-medicare trustees shows that problems exist for financial of Social Security Disability Insurance (SSDI) within the social security program, but do not the retirement benefits program in social security. Nevertheless, Obama is proposing to cut future social security retirement benefits. Similarly, problems exist with funding for Part D prescription drugs program within medicare, which has never been funded by a tax since its inception in 2005 and under which drug companies are allowed to price gouge everyone on drug costs. But Medicare’s basic hospital and physicians, Part A and Part B, programs are fully funded for the next decade.

For a clarification of the real status of social security and medicare, watch my 35 minute video presentation earlier this year to the Progressive Democrats of America in San Francisco, on this topic. That video is available on my website at:

http://www.kyklosproductions.com/videos.html (note: click on the TV icon that is second from the top, for the PDA presentation).

It is time to get the facts straight, before the hype and lies start to flow once again in the run up to the next deficit cutting-tax cuts for the rich deal that is now on the agenda once again.

Dr. Jack Rasmus
October 21, 2013

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My Radio Show Commentary on ‘Debt Ceiling Deal 2.0’

October 17, 2013 by jackrasmus

Readers interested in a more detailed, in depth analysis of the debt ceiling deal reached October 16, 2013, can listen to my 10-16-13 radio commentary by accessing the url:

http://www.kyklosproductions.com/audiocds.html

(or at alternativevisions.podbean.com)

The following is the summary introduction to the content of the show, the duration of which is 55 min.

“Dr. Jack Rasmus focuses on the latest debt ceiling-government shutdown negotiations in Washington, and his prediction of the past weeks that a deal would be reached. That deal appears will occur today, October 16, 2013—at least the first phase. The real negotiations now begin, Rasmus predicts, involving trading off major spending cuts targeting social security and medicare—plus more corporate tax cuts in the pending “Tax Code Overhaul” bill moving through the US House—for a still longer term debt ceiling and government budget agreement that will all occur early next year. Dr. Rasmus explains how Obamacare was never a real issue in the negotiations, and how the real strategy was deficit cuts for debt ceiling. Also explained is how the current settlement is a repeat of the August 2011 debt ceiling 1.0 agreement, cutting spending by $1 trillion, and the 2012 fiscal cliff settlement cutting spending by another $1.2 trillion (the sequester) along with $4 trillion in permanent extension of the Bush tax cuts. It represents what Dr. Rasmus calls the “Well Orchestrated Dance” (2.0) between the two wings of the ruling capitalist party. (see Dr. Rasmus’s blog, jackrasmus.com, for prior articles on the fiscal cliff of December 2012 and debt ceiling 1.0 deal of August 2011).

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The Coming Debt Ceiling Settlement 2.0

October 14, 2013 by jackrasmus

History repeats itself, but always in combinations of past events.

What today’s debt-ceiling/government shutdown dual crisis represents is a telescoping, within a time period of two months, of similar events that rolled out over an extended two year period in 2011-2012. What took two years to conclude previously, between 2011-2012, in a prior debt ceiling + deficit cutting settlement is now happening in the course of two months, September-October 2013, in today’s repeat of debt ceiling + government budget fight.

Today’s debt-ceiling 2.0 + refusal to approve a government budget October 2013 is similar to events of 2011-2012—i.e. the debt ceiling fiasco of August 2011 and the Fiscal Cliff ‘crisis’ of December 2012, consisting of trillions of dollars of sequestered spending cuts and Bush tax cut extensions.

The prediction here is that, in the settlement to the current crisis coming in the next few days, or week or so at the most, the final terms and details will likely prove remarkably similar to that concluded in August 2011 and December 2012: Massive social spending cuts combined with tax cuts for the few, in exchange for an extension of the debt ceiling and a political ‘armistice’ for Obama and Democrats until after the next Congressional elections.

The differences between the 2011-2012 and today’s 2013 settlement will be the particular focus of tax cuts and spending cuts in exchange for extending the debt ceiling.

In August 2011 the settlement was debt ceiling extension in exchange for an immediate $1 trillion in social program only spending cuts, plus another $1.2 trillion in the so-called ‘sequestered’ spending taking effect January 1, 2013. That was more than $2.2 trillion—or more than twice Obama’s original 2009 stimulus spending of $787 billion. Overlaid upon the August 2011 deal was the permanent extension of $4 trillion of the $4.6 trillion Bush tax cuts that also took effect January 1, 2013. Together the two—sequestered cuts and Bush tax cuts extension—were referred to as the ‘fiscal cliff’.

What the Republicans and its House Teaparty faction together got out of the 2011-2012 debt ceiling plus fiscal cliff settlements was a total of $6.2 trillion in spending cuts and Bush tax cuts (80% of which benefited wealthy households and investors)—$2.2 trillion in spending and another $4 trillion in tax cuts.

What Obama and the Democrats got out of the 2011-2012 deal was a politically convenient agreement in August 2011 from the Republicans not to raise the debt ceiling issue again until after the November 2012 national elections. What Obama and Democrats didn’t get was any tax hikes on the rich in August 2011 they had said was a deal breaker.

What Obama got from the December 2012 fiscal cliff part of the settlement was mere $60 billion a year in tax hikes on wealthy investors. (Actually, it was not even $60 billion, as the fiscal cliff deal included a generous liberalization of the inheritance tax for multimillionaire households, a liberalization of the Alternative Minimum Tax for them, and the ‘super-sweetener’ of the remaining $4 trillion in tax cuts now made permanent forever). Obama and democrats also failed to achieve any reduction in the $1.2 trillion sequestered spending cuts that they had expected, not believing the Republicans would allow those cuts, involving defense spending as well as social programs, to take effect. But those sequestered cuts began taking effect in March 2013. Now, post-October 2013, they are beginning to have their full negative impact on the economy.

No wonder the Teapublican faction in the Republican party eventually went along with both the 2011 debt ceiling and 2012 fiscal cliff deals. They got a big bite of the apple, and a chance for another down the road today. The Obama-Democrat ‘cave-ins’ on both the August 2011 debt ceiling agreement and subsequent fiscal cliff no doubt emboldened the faction to take the even more aggressive stance they have recently assumed in today’s crisis.

Notice in the foregoing remarks there is no reference to cutting Obamacare as key to the settlement deal today. It never was part of any deal. Last August 2013 the Republican strategy was to use the debt ceiling extension as a hammer to further pound out social spending, especially entitlements like social security and medicare, cuts that were left out of the 2011-2012 spending reductions deal of $2.2 trillion. Another difference in today’s repeat of the debt-ceiling debacle will be that the corresponding tax cuts eventually agreed to probably will focus on corporate taxes instead of individual wealthy taxes—the latter now being set up in the tax code overhaul bill moving rapidly through Congress. That tax cut part of today’s deal may also not be made public in an eventual deal, but will be agreed to in principle by the parties for when the legislation on corporate tax cuts (keyword: Tax Code Overhaul) reaches the House and Senate for a vote.

That 2011-2012 Republican-Teapublican strategy resurrected again by the Republican leadership this past August 2013 was essentially the same as its prior 2011-2012 strategy. What happened was the Teapublican faction of the party intervened in September 2013 and injected its pet provision of defunding Obamacare into the mix, thereby upsetting the timetable and the process for another second debt-ceiling/spending reduction deal this second time around. Negotiations since September may therefore be viewed as attempts by the Republican, Obama and Democrat leadership—with massive corporate lobbying and pressure in the background—trying to get the negotiations back on track with the original process and objective of debt ceiling extension for entitlement cuts plus corporate tax reduction.

The recent Teaparty grandstanding on Obamacare has been for the media and public, with the goal of enhancing their 2014 midterm election results within the Republican party as well as in general. They have now accomplished this. The Obamacare issue was never a serious possibility. They will now retreat.

In the past week a shift back to the original strategy and process—of trading off debt ceiling extension for spending (entitlement) cuts and taxes (cuts for corporate America) has begun to emerge. A weekend ago Boehner signaled such in his round of TV press show appearances. Teapublican presidential candidate, Paul Ryan, trying to keep a foot in both Teapublican and Republican leadership camps, followed Boehner with a similar focus of ‘lets focus more on general spending and entitlement cuts’ in a lengthy Wall St. Journal editorial. Even Corporate radicals like the billionaire Koch brothers, supporters and funders of various radical right causes, published a widespread commentary that Obamacare was not the real issue—that spending and tax cuts for corporations were the key issue.

And today, Senators of both parties are trotting out to give press interviews to the same effect. As conservative Republican Senator, Bob Corker of Tennessee, declared today to a Bloomberg interview: “for the past two months we’ve been focused on the wrong subject”. That correct focus “is spending cuts”.

On Monday, October 14, the real bargaining and ‘end-game’ to the current crisis began. Obama held closed door meetings with Boehner and Senate Republican leader, Mitch McConnell, and with Senate-House Democrat leaders, Harry Reid and Nancy Pelosi. Now the real deal details and terms will be hammered out. It will, this writer predicts, result in more spending cuts, especially social security, medicare and Medicaid, as well as an understanding and consensus to cut corporate taxes when the tax code overhaul bill comes to votes in Congress and for Obama’s signature.

One should not forget that Obama has been, and continues to be, a strong advocate of cutting the corporate tax rate from 35% to 28% and providing ‘relief’ for multinational corporations’ tax rates. Obama has also already indicated cuts of $630 billion in social security and medicare in his 2014 budget. This is the starting point for the ‘original process’ negotiations that have been temporarily derailed by Teapublican grandstanding, now coming to an end.

The deal may include some token concessions to Teapublicans in the House as well. Perhaps the already offered repeal of the medical device tax. Perhaps some further exemptions to Obamacare for business and wealthy individuals. A long list of such concessions to exempting and postponing parts of Obamacare have already been unilaterally made by Obama since the beginning of this year. Difficulties in the rollout of Obamacare may encourage him to agree to more. There may even be a short delay of a few months in the implementation deadline for the Obamacare act.

But the final deal to be struck in 2013 will appear more like the prior 2011-2012 deal of spending cuts and tax largesse for the wealthy. This time seniors and retirees will be the primary target of the spending cuts, while corporations get the tax cuts instead of wealthy individuals.

As this writer wrote in late 2012 when the fiscal cliff fears were being whipped up by both parties and the press, what was going on at the time was a ‘Well Orchestrated Dance’ between Obama and the Republicans. (see ‘Fiscal Cliff: A Well-Orchestrated Dance’, December 18, 2012, at the blog jackrasmus.com). A deal was inevitable by year end 2012, it was predicted.

Today the leadership of the two wings of the single corporate party have entered into final negotiations again, after a brief interruption by the Teapublicans ‘cutting into’ their cozy dance. The latter are about to leave the dance floor, however, and the well orchestrated dance now begins anew.

Dr. Jack Rasmus
Monday, October 14, 2013

Jack Rasmus is author of the 2012 book, ‘Obama’s Economy: Recovery for the Few’, Pluto Press, and host of the weekly online radio show, Alternative Visions, on the progressive radio network. His website is http://www.kyklosproductions.com, his blog, jackrasmus.com, and twitter handle @drjackrasmus.

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