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An Ugly, Ugly, Ugly Deal

On New Year's Day, the Senate and House passed a "fiscal cliff" deal by respective votes of 89-8 and 257-167.  The deal has some good parts.  It lets the Bush tax cuts expire on the wealthy, raises the estate tax marginally and increases taxes on capital gains and dividends a bit.  Unemployment benefits are extended for a year.  Tax boosts for the low paid workers – the child tax credit, expanded earned income credit, refundable tuition tax credits – are extended, if only for five years.  Social Security, Medicare and Medicaid are not touched.

But no one should be fooled.  This is an ugly deal, with foul implications for the coming months.
[...]

President Obama sensibly told Republicans that he would not sign any bill or agree to any deal that extended the Bush tax cuts on those making over $250,000.   He had stumped on that across the country on this pledge and received a mandate from the voters.  Polls showed the majority of Americans were with him.  With all the Bush tax breaks due to expire, Republicans were faced with letting taxes go up on everyone just to defend tax breaks for the richest Americans.  The President began the negotiations saying this was not negotiable.  He could not have been in a stronger position.

But he chose to compromise.  The Bush tax cuts will be allowed to expire on couples making over $450,000.  This costs about $150-200 billion in revenue over 10 years.  The president argues he got the important extension of unemployment insurance and the working poor tax credits in return.  But these could have been folded into a package after going over the cliff.  And the cost to the president is significant.  Once more Republicans have learned that obstruction works, that the president will always blink.
[...]
But this entire debate is wrong-headed.  You can’t fix the debt without fixing the economy.  And deficit reduction won’t fix the economy.  The recovery is too slow and too skewed to put people back to work.  Deficit reduction can only slow it further.

A lot of important things in this article, hard to excerpt, so it's a good idea to go read, imho:
Michael Hudson: America’s Deceptive 2012 Fiscal Cliff, Part III– Why Today’s Fiscal Squeeze Imposes Needless Austerity

If taxes did fully cover government spending, there would be no budget deficit – or new public money creation. Government budget deficits pump money into the economy. Conversely, running a budget surplus retires the public debt or currency outstanding. This deflationary effect occurred in the late 19th-century, causing monetary deflation that plunged the U.S. economy into depression. Likewise when President Bill Clinton ran a budget surplus late in his administration, the economy relied on commercial banks to supply credit to use as the means of payment, charging interest for this service. As Stephanie Kelton summarizes this historical experience:

The federal government has achieved fiscal balance (even surpluses) in just seven periods since 1776, bringing in enough revenue to cover all of its spending during 1817-21, 1823-36, 1852-57, 1867-73, 1880-93, 1920-30 and 1998-2001. We have also experienced six depressions. They began in 1819, 1837, 1857, 1873, 1893 and 1929.

Do you see the correlation? The one exception to this pattern occurred in the late 1990s and early 2000s, when the dot-com and housing bubbles fueled a consumption binge that delayed the harmful effects of the Clinton surpluses until the Great Recession of 2007-09.

When taxpayers pay more to the government than the economy receives in public spending, the effect is like paying banks more than they provide in new credit. The debt volume is reduced (increasing the reported savings rate). The resulting austerity is favorable to the financial sector but harmful to the rest of the economy.
 
Pretty clear to me that not only is the progressive movement pretty well dead, we really have no progressive caucus left either.   The evidence is piled up pretty high now.  The progressive movement failed.  When it comes time to vote on cutting Social Security, this will be even more clear, imho.
Why a Handful of Progressive Lawmakers Opposed the Deal

Most progressives in the U.S. Senate and House voted in favor of the "Fiscal Cliff" deal worked out between Vice President Joe Biden and Senate Minority Leader Mitch McConnell, R-Kentucky.

[...]

That was enough for most congressional progressives, from Senators Bernie Sanders, I-Vermont, and Sherrod Brown, D-Ohio, to Congressional Progressive Caucus co-chairs Keith Ellison, D-Minnesota, and Raul Grijalva, D-Arizona, in the House. They voiced their concerns but ultimately voted "yes." Many, like Senator Jeff Merkley, D-Oregon, did so with considearble concern.  

[...]

In the Senate, where the vote for the measure was a lopsided 89-8, the one progressive "no" vote was that of Iowa Senator Tom Harkin, who echoed the view of grassroots groups such as the Progressive Change Campaign Committee, which argued that: "The president ran on and won on $250,000 twice. Voters across the country overwhelmingly agree with the $250,000 threshold (see here). And in real human costs, the billions lost by raising the threshold to $400,000 will come out of the pockets of grandparents and working families across the nation."





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Debate

Remember when progressive debate was about our values and not about a "progressive" candidate? Remember when progressive websites championed progressive values and didn't tell progressives to shut up about values so that "progressive" candidates can get elected?

Come to where the debate is not constrained by oaths of fealty to persons or parties.

Come to where the pie is served in a variety of flavors.

"The smart way to keep people passive and obedient is to strictly limit the spectrum of acceptable opinion, but allow very lively debate within that spectrum."  ~ Noam Chomsky

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