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Tag: debt ceiling negotiations
Why Would Any Voter Trust Republicans To Make A 'Better' Economy?

Why Would Any Voter Trust Republicans To Make A 'Better' Economy?

No delusion misleads American voters more than their certainty that Republicans are "better" and more worthy of "trust" on the economy than Democrats. Neither facts nor history support this durable fallacy, discredited by reams of studies over the years proving that Democratic administrations are consistently more successful in fostering economic growth, employment, family incomes, and nearly every other measure of prosperity — including reductions in the national debt.

That axiom has held true even when a Democratic president inherited the most miserable economic conditions from a Republican predecessor. It is certainly true of President Joe Biden, whose efforts to revive the United States from its pandemic slump have smashed records in the number of jobs created and sustained high employment. Inflation is beginning to abate, as are gas prices, and even so the latest quarterly data show renewed growth.

Yet because Americans are aggrieved over rising prices — and frightened by a potential recession — the mythology of Republican economic superiority now looms over the midterm elections. Evidently some voters aim to punish Biden for inflation by empowering his right-wing adversaries.

Before they do, perhaps they should ask how Republicans will exploit that enduring "trust" — and whether the result will be a "better" economy for them and their families. Based on past performance, and what Republican politicians themselves tell us, the only constituency that will see a better economy is the superrich.

In 2016, Donald Trump said he would close loopholes that allowed the very wealthy (including him) to avoid taxation. He also promised to erase the national debt and deficits in his first term. Instead, Trump and the Republicans in Congress passed an enormous tax cut that favored the wealthiest and inevitably exploded the deficit. Then the economy crashed.

Whatever their differences, that dismal Trump record is pretty much what George W. Bush achieved as president too. It is what Republicans always do.

Slashing taxes on the wealthy is what they yearn to do again — except that Sen. Rick Scott, who chairs the National Republican Senatorial Committee, has added an even "better" idea: He wants to raise income taxes on poor and working families, who make too little money to pay that levy under current law.

If you're a middle-class or working-class voter, in fact, there is a familiar agenda of economic policies that you can "trust" the Republicans to promote, because they are the same policies that the reactionary party has endeavored to enact since forever. They have vowed yet again, for instance, to ruin Social Security, Medicare and Medicaid, which serve as economic bulwarks for most Americans. And once more they are threatening to weaponize negotiations over the national debt ceiling to ram through those destructive cuts.

Will that be "better" for the older and disabled Americans who depend on those programs, and their families? Probably not, but what could be even worse is the recklessness of Republicans who would abrogate the credit of the United States Treasury to complete that cruel mission. So determined are they to cancel the benefits that Americans spend a lifetime earning that they would jeopardize the entire nation's economic stability.

You can "trust" their commitment to such financial insanity, which they continue to proclaim in this campaign, because they have pursued the same catastrophic scheme dating back to the bad old days of Speaker Newt Gingrich.

You can also trust the Republicans to seek total repeal of Biden's student-loan forgiveness plan, because they attempted to zero out all the federal student loan programs (the opposite of what Trump promised). Would that work "better" for middle-class students and their families? Presumably not, but it's what they insist on — with no proposal to improve college affordability.

For them it is now a matter of principle to have no principles, no platform, no constructive program. Remember when Trump promised a beautiful new health plan to replace the Affordable Care Act with something better that would insure everyone at low cost? Of course you do, just as you remember "Infrastructure Week," which came and went and came and went like Groundhog Day (until Biden finally passed the landmark Infrastructure Act).

In power, the Republicans will take that same pernicious approach to every aspect of economic policy that might improve life for working families. Not only would they refuse to increase minimum wages — highly popular across party lines — but nearly every one of them rejects the very idea of a minimum wage. They would obstruct any effort to reduce the cost of prescription drugs — also very popular — and repeal the provisions of the Inflation Reduction Act that are driving down those prices. They may still be too incompetent to repeal Obamacare, but that won't stop them from trying — and they will propose no "better" insurance plan to replace the health coverage they're so eager to strip away.

What you can assuredly trust the Republicans to do is what they always do. What you must never expect from them is anything better.

To find out more about Joe Conason and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.


Bond Markets Brace for Panic As Congress Bickers Over Debt Ceiling

Hold on for just a New York minute now and consider the powerfully serious message the bond market sent last week about the political dithering in Washington and in Europe’s capitals. “Pay attention folks,” as the investor Gifford Combs e-mailed me on Friday. “This is not a drill.”

Here are the facts: The yield on Greek sovereign debt is now at record highs for the euro era. Last week’s state-managed bond auction in Italy almost failed. And, while few seem to have noticed, the overnight repurchase market — for short-term, secured, corporate debt obligations — nearly seized up amid what Combs described as “an almost panicky scramble” for less- risky paper.

Indeed, investors’ manic desire for safety last week reached levels not seen since the most acute days of the financial crisis in September and October 2008. Ironically, though, given the pathetic display in Washington and the country’s ongoing fiscal troubles, people turned in droves to the perceived security of the U.S. Treasury market, even though it has never looked shakier.

Remember the days of negative yields on short-term U.S. paper — when effectively investors paid the government to keep their money safe? Warren Buffett considered that happenstance so rare that two years ago at the Berkshire Hathaway Inc. annual meeting he flashed a slide of a Treasury sale transaction ticket to his legion of followers.

Negative Yields Return

Well, it seems those days are back. U.S. Treasury bills shorter than three months in duration traded at negative yields last week. Three-month bills were trading a yield of 1 basis point. Six-month bills traded to yield 4 basis points and one- year U.S. Treasuries were trading to yield 13 basis points.

In short, demand for the perceived security of the debt obligations of the U.S. government was so intense that “it was virtually impossible to find ANY amount of certain maturities of short duration Treasury bills,” Combs informed me. He ended up buying what he could of the one-year notes and paying big time for the privilege (resulting in that minuscule 13 basis-point yield).

Not everyone, however, seems to have so much faith in the U.S. The Saudis appear to be so concerned that Congress and President Barack Obama will not be able to reach a resolution on increasing the debt-ceiling by Aug. 2 — pushing the Treasury to possible default on the nation’s obligations for the first time — that, according to market insiders, last week they Hoovered up euros as a possible hedge. This helps to explain why the European currency has managed to more than hold its own against the dollar despite the continent’s economic woes.

Money-Market Worries

At the same time, it’s an open secret on Wall Street that the Federal Reserve Bank of New York has become increasingly concerned about the state of U.S. money-market funds. With as little fanfare as possible — understandably, so as not to cause a panic — the New York Fed has been urging domestic money- market funds to reduce their exposure to European banks, where the funds have turned to increase yields not available in the U.S. because of rock-bottom interest rates.

The Fed is said to be terribly worried that — because of provisions in the Dodd-Frank law — it will no longer be able to rescue a money-market fund if it “breaks the buck,” as the Fed did famously the day after Lehman Brothers Holdings Inc. filed for bankruptcy.

Threat of Downgrades

As if all this were not enough, last week both Moody’s and Standard & Poor’s put the U.S. itself on credit watch, with negative implications about a possible downgrade. S&P said that while it expected an agreement regarding the debt ceiling, it was worried that the country’s fiscal house will remain in disarray.

“Despite months of negotiations, the two sides remain at odds on fundamental fiscal policy issues,” it stated in its Bastille Day note. “Consequently, we believe there is an increasing risk of a substantial policy stalemate enduring beyond any near-term agreement to raise the debt ceiling.”

Additionally, on Friday, S&P put the six AAA-rated insurers — including New York Life Insurance Co. and Northwestern Mutual Life Insurance Co. — on the watch list for a possible downgrade because of their significant holdings of U.S. Treasury and agency securities. None of this is even remotely good news.

Charade in Washington

What is the bond market telling us? Combs, a founder of Dalton Investments LLC in Los Angeles, likens the panic in the bond market to the unambiguous message the stock market sent on Sept. 29, 2008 — when the Dow Jones Industrial Average dropped 780 points, the largest one-day point drop ever — after Congress voted down the first version of the TARP bill. That’s how concerned the bond market is now about the charade going on in Washington.

Combs worries, though, because of how inherently more difficult it is for people to understand the machinations of the bond market than those of the stock market, that the message this time is not getting through to the politicians in Washington, who seem intent on taking a nonchalant approach to the potential Aug. 2 deadline for raising the debt ceiling. (Some politicians — hello, Michele Bachmann — have actually claimed that defaulting on our obligations would be good for the country.)

Politicians Don’t Understand

His concern is that politicians don’t understand how intimately tied transactions are on a worldwide basis to U.S. Treasury securities, and that if Treasuries were no longer accepted as collateral, the resulting market turmoil would make the “collapse of Lehman Brothers look like a walk in the park.”

Combs said he believes a default on U.S. Treasuries would set off “an unholy scramble” for what constitutes “good and valid” collateral, creating a huge problem in the worldwide payments system: “It’s a situation no one has ever faced before — that people stop accepting Treasury bills as collateral.”

Even though, incredibly, the politicians in Washington took the weekend off from their negotiations, a bunch of them still found the time to appear on the Sunday morning political talk shows to make the case that a compromise will be found before Aug. 2. We’ll see if they are correct — but bond traders are going to be increasingly less likely to bet on it.

William D. Cohan, a former investment banker and the author of “Money and Power: How Goldman Sachs Came to Rule the World,” is a Bloomberg View columnist. The opinions expressed are his own.

Copyright 2011 Bloomberg.

Obama Considers Raising Medicare Age to Appease Republicans

First it was Social Security on the chopping block. Now, it’s Medicare.

The Huffington Post reports that, according to five sources from inside the debt ceiling negotiations, President Obama may consider raising the age of Medicare eligibility from 65 to 67 in the hope of gaining Republican support for tax revenue increases. The pitch drew parallels with Sens. Joe Lieberman and Tom Coburn’s proposed cuts to Medicare that would allegedly save $600 billion over the next 10 years.

At a press conference today, the president renewed his commitment to attaining the largest deficit reduction deal possible, which may involve reducing the federal government’s commitment to senior citizens, under the auspices of “both parties taking on their sacred cows.” Uncertainty about the future of key pillars of American social policy seems to be the new norm; last week, the President seemed to be open to Republican demands for Social Security cuts.

In regard to Medicare changes, the Congressional Budget Office estimates that the two-year increase would save $124.8 billion between 2014 and 2021 — a relatively small amount given the massive influx of baby boomers currently entering the system.

The Washington Post‘s Ezra Klein points out that even if the proposal goes through, the Affordable Care Act would theoretically provide subsidies to those seniors who are unable to obtain health insurance. (Of course, that’s if the program totally goes in effect — and works as well as Medicare.)

Bailing on such an important, popular, and central plank of the Democratic Party platform and philosophy might be justified if Republicans were willing to budge on major issues in the negotiations, but such cooperation seems totally absent from the talks. This past weekend, Republicans rejected a $4 trillion deal proposed by Obama because it involved repealing the Bush tax cuts for the wealthy and, a few weeks ago, they walked away from a similar but smaller $2 trillion deal. It seems that the give-and-take of the budget negotiations now involve Obama giving to Republicans, and Congress taking away from seniors.