The election is over. Obama won. No need to be nice anymore. Time to push back against fiscal insanity and propaganda.
Yves Smith has a good piece up over at Naked Capitalism - Obama calls on Citizens to Ask Congress to Slit Their Throats.
In fact, NOT getting a deal done is far better for everyone except the uber rich. As Paul Krugman has stressed, going into 2013 with no deal in place is not a dramatic event, and would substantially weaken the Republican’s bargaining position as far as preserving tax breaks for the wealthy are concerned. And if the Administration wanted to preserve middle cut tax relief, like lower payroll taxes, it can make that retroactive to the start of 2013.
...the options that Obama is allowing to be considered range from utterly dreadful to merely awful.More below ....
Yves is of course correct.
The best way (except maybe for market confidence ... which although important is still overplayed by the media/talking heads) is to go over the fiscal cliff. Let all the tax cuts expire. Once they have expired they can be re instituted, if necessary, for everyone on their first $250,000 of income. This is far easier than selling out to the Rethugs in order to get a deal, any deal.
It is important to note that any tax changes can be made retroactive to Jan 1, so even if a deal is not made until February for example the impacts can be reversed.
Unfortunately the Obama approach continues to be run by the representatives of the 1%. Whether it is Geithner, Bowles, Lew, etc. they all see the world through a similar prism, one that distorts reality to fit the Wall Street view of the world.
Steps to sanity:
1. Let the tax cuts expire. Then if necessary bring some back as part of a new deal.
2. Social Security is OFF the table. Any reforms to SS should be separate and based on the solvency of that program, independent of the rest of the budget. SS is NOT an entitlement program. It is shared insurance and should be treated as such.
3. Stop trying for a Big Deal. The number crunchers just bend the projections out into the future without actually changing much. They can get any result they want by playing with assumptions. Just take a look at how good CBO or other projections have been for even a three year period into the future, let alone 10 years. It is just an exercise in BULL SHIT.
4. Defense has to be cut, and cut hard. Spending 50% of world military expenditures (and borrowing all the money to do it) is NOT sustainable.
5. Tax reforms, tax increases, and spending cuts should be aimed at those with the lowest propensity to spend ( in other words if I take $1 away for someone on unemployment insurance, they will cut spending by $1 - not good-, but I take $1 from someone in the 1%, it likely will not impact their spending one bit), because for now it is important to try to maintain demand in the economy.
Is the deficit important?
Yes, because if deficits really did not matter, then why do we bother collecting any taxes at all.
What else is important?:
What markets and businesses and individuals really want is some certainty and some consistency, an end to brinkmanship, and a new era of over performing on expectations. The continual focus on short term solutions and deadlines is, as we have seen in Europe, and in the US, a recipe for disaster.
Now if this sounds like the Grand Bargain idea, it is not. Any Grand Bargain will fall apart within a year or two, because expectations will not fit reality. Stick to one, two and three year plans, with consequences for targets not hit (cuts to Congress critters pay/benefits being an example).
What else else is important?
We are still in a balance sheet recession. These types of recessions can take many years to recover from (see Japan) and require very different solutions than normal recessions. The economy has basically stabilized .. but unfortunately the time since the recession began has been wasted as almost no structural reforms have been implemented. Much of the fiscal discussion seems predicated on getting back to how things were in the good times ... Well that AIN'T gonna happen. Those past time good times were fueled by debt and now the debt tank is empty so going forward new models, new approaches, and new systems will be required ... which unfortunately we have seen very little evidence of so far. And this is not just an American problem. It is a developed world problem.
Note #1: If you agree take a trip over to Twitter #My2k and throw a spanner or two into the propaganda machine.
Note #2: For anyone worried about how the markets will react to going over the fiscal cliff .. don't. The markets as we used to know them are gone, broken, dead and gone. What we have now are algorithmically run casinos designed to fleece any investor that walks in. They are the parasite devouring the host ... at almost light speed. I say FUCK THEM for a few weeks.