Here We Go Again - the Debt Ceiling Follies

The Republicans are gearing up for another go at the social safety net as a bargaining chip in raising the debt ceiling.  Of all the phony crises generated by this gang, this one appears to have the broadest appeal outside the wing nut faction.  People's memories being short and the number of safe Republican House seats being what they are, there's plenty of time for them to shut down the government before the mid-term elections.  Whether they have the stomach for another shutdown is anyone's guess.  Obama has said he will not negotiate policies based on the debt ceiling and so the stage is set.  Here for your enjoyment is everything you really need to know about the national debt. 


The US has been in debt every year since its founding with the one exception of 1835.  Public debt has been the norm, not only in the US but in nearly all countries, for the past 200 years.  The sad fact is that much of the public debt has been undertaken to finance wars. 


US public debt as a percentage of GDP (72.5%) is about in the middle of the pack - the world average is 64%.  Of the 10 largest economies, the developing BRIC nations (Brazil, Russia, India, and China) have a lower ratio.  The remaining nations in the top 10 - i.e., the large advanced industrial economies of Japan, Germany, Italy, France, and the UK- have a higher percentage of debt to GDP than does the US. 


The national debt, currently in the range of $17 trillion is not the same as the budget deficit.  The budget deficit is the difference between annual expenditures and revenues.  The national debt is the accumulation of the annual deficits plus bonds issued in support of wars.  The deficit for 2014, $514 billion, will be the smallest since 2007 - i.e., since before the economic collapse of the Great Recession. 


Basically, if Congress does not raise the debt ceiling, the US will either default on its debt (shorting its creditors) or not spend money on previously budgeted programs (stiffing its citizens). 


Until recently, raising the debt ceiling was a routine procedure.  It's been done about 90 times since 1917, when the debt ceiling was first defined.  From 1979 until Republicans gained control of House of Representatives in the 1994 elections, the ceiling was automatically raised by a parliamentary rule (the "Gephardt rule") whenever a budget was passed.


The most notorious debt ceiling debacle was in 2011, after Republicans took control of the House of Representatives.  The Dow Jones Industrial Average fell 2000 points over the July-August time frame after US credit rating was downgraded for the first time in its history.  (Hmm, are we seeing a trend here?)


The debt ceiling "crisis" exists because Republicans have chosen to make it so.  It can be solved immediately by the single step of going back to the Gephardt rule - automatically raising the debt ceiling when a budget is passed. 


If Congress can't bring itself to pass this common sense solution and must look other places to get our deficit and debt under control, here are a few suggestions.

• Increase the maximum earned income limit on Social Security. 
• Introduce another surcharge on household incomes over one million dollars but make it applicable to dividends and capital gains as well as earned income.
• Reduce wasteful and exorbitant military spending to pre-Cold War levels. In 2013 dollars this would be about 100 billion dollars - a savings of 500 billion dollars annually.  This step alone would just about wipe out our current deficit.

Useful links


America's Staggering Defense Budget [Washington Post, January 7, 2013 blog]


List of Countries by Public Debt [Wikipedia]

Sunday Round-Up: December 15, 2013

This is the weekly selection of news and opinion from outside the US mainstream media.  Today we look at the compromise budget, Syria, and the Israeli-Palestinian peace process.

Mother Jones assesses the defense portion of the new compromise budget passed by the House in a Dec. 13 post: "The passage of the Ryan-Murray budget plan in the House sends a strong signal that the Pentagon's budget is basically untouchable.  Under the deal, the military's base budget (which doesn't include supplemental funding for overseas operations and combat) will be restored to around $520 billion next year—more than it got in 2006 and 2007, when the United States was fighting in both Iraq and Afghanistan."  The post cites as Exhibit A in Pentagon excess and lack of project control the F-35, which is called "the pricey plane with a reputation as the biggest defense boondoggle in history".  Originally estimated to cost $233 billion, the program to acquire the new jets now will cost nearly $400 billion. 

Another Mother Jones post, "Can't Touch This", examines the Pentagon budget in more detail.  Among other topics, it discusses the size of the military budget (the US spends more on its military than the next 10 countries combined), the Pentagon's "inauditable" financial statements (the Pentagon insists that they will "achieve audit readiness" by 2017, 20 years after it was required to do so), and ideas from various think tanks that could save billions in the defense budget. 

An Al Jazeera post on Friday reminds us of the harsh conditions facing refugees from the Syrian civil war.  Describing the scene at the refugee tent camp in the Bekaa Valley in Lebanon, Josh Wood writes: "...snow dumped by Lebanon’s first storm of the season melts when the temperature rises a few degrees above freezing during the day, turning the narrow paths between tents into shin-deep patches of mud. Thursday found children standing shivering by a puddle, their rubber sandals sinking into the mud and their pajama pants rolled up in a futile attempt to keep them clean....At least 80,000 Syrian refugees in Lebanon are living at winter’s mercy in tent settlements like this one, according to Dana Sleiman, a public-information officer with the Office of the United Nations High Commissioner for Refugees (UNHCR).  Hundreds of thousands more are living in unfinished buildings, garages and other structures offering insufficient protection against winter’s bite." 

BBC News noted the increasing concern in the West of "the violence perpetrated [across Syria] by the Nusra Front and the Islamic State of Iraq and the Levant (ISIS), hardline Islamic radicals linked to al-Qaeda."  Although the position of the West publically is that Assad must go, privately some are beginning to question that position.  "As the year draws to a close, and the West's chosen allies in Syria suffer one setback after another, have policymakers started to ponder the unthinkable - that there's more to be gained from working with Mr Assad than against him?"  

Ahead of John Kerry's trip to the Middle East to try to breathe some life into the Israeli-Palestinian peace talks, Al Jazeera reported on the pessimistic assessment published on Wednesday by the European Council on Foreign Relations: the two-state solution for Israel and Palestine has become increasingly unlikely.  The two-state solution has been the "default negotiating position of the United States and the international community" since the 1993 Oslo Accords.  "According to researchers, the two factors found to place the most strain on a two-state solution were the 'territorial issue' and 'the dynamics of the Israeli political and public debate.' Researchers noted strain added by the decreasing physical space available to establish a territorially contiguous Palestinian state, as a result of ongoing Israeli settlement growth. They noted that as of July 2013, there were 367,000 Israeli settlers in the Israeli occupied West Bank, whereas the total had been a little over 100,000 at the beginning of the Oslo process 20 years ago.  Israeli discourse also strained the likelihood of realizing two states. Levy said the “indifference of the Israeli public” to the Palestinian issue and “a government that includes – something that is relatively new – a significant cohort opposed to two states, and who say that there are other options” has weakened the appeal of the two-state paradigm in Israel."

Meanwhile, the Israeli newspaper Haaretz opined on November 27 that, with the EU intent on preventing funds from flowing to Israeli companies operating on Palestinian land, "Israel is now beginning to pay the price of its deeds in the occupied territories.  Four years after Prime Minister Benjamin Netanyahu’s speech at Bar-Ilan University, in which he recognized the principle of two states but nevertheless refused to stop construction in the settlements - following the government’s extremist statements and decisions to build thousands of housing units in the settlements; and following Israel’s ongoing harassment of Palestinian residents of the territories - the international community is beginning to take practical measures against Israel’s tactics of deception and the apartheid it practices toward the Palestinians."  In an article published December 13,  Haaretz reported that "The European Union is expected to announce on Monday that it will offer an unprecedented assistance package to Israel and the Palestinians, if the two parties sign a final-status agreement.   The organization also promised to upgrade relations with both parties to the highest level possible for nonmember nations in the event of a peace treaty."


Image of Syrian refugee camp is from the Al Jazeera article and by Ahmad Shalha/Reuters.

Sunday Round-Up - November 17, 2013

This is the weekly selection of news and opinion from outside the US mainstream media.  Today we look at the Republican stranglehold on Congress, the Euro-recession, war spending and the deficit, The Guardian editor's upcoming appearance before Parliament, and bee colony collapse.

In an article posted on its website on November 11, Rolling Stone magazine takes up the lock on Congress that Republicans have in spite of the growing gap between their policies and the wishes of the majority of the electorate.  Tom Dickinson explains how national Republicans have rigged the game by "waging an unrelenting campaign to exploit every weakness and anachronism in our electoral system.  Through a combination of hyperpartisan redistricting of the House, unprecedented obstructionism in the Senate and racist voter suppression in the states, today's GOP has locked in political power that it could never have secured on a level playing field."  The redistricting of Pennsylvania, Ohio, and Michigan is described in some detail.  The vast sum of money spent by Republicans in North Carolina to take over the state legislature in 2010, voter suppression laws, activist judges and the unprecedented use of the filibuster in the Senate are exposed.  And, as Dickinson notes, the Republicans are not done yet.  "In a project with the explicit blessing of Republican National Committee Chairman..., a half-dozen Republican-dominated legislatures in states that swing blue in presidential elections have advanced proposals to abandon the winner-take-all standard in the Electoral College. These states would instead apportion electoral votes by the favored candidate of each congressional district – a method currently practiced by only two, small, homogenous states, Maine and Nebraska. Thanks to the GOP's gerrymandering, such a change would all but guarantee that a Democratic presidential candidate in a big, diverse state like Michigan would lose the split of electoral votes even if he or she won in a popular landslide."

"The EU economy will remain flat in 2013, EU economic affairs commissioner Olli Rehn said on Tuesday (5 November), as he downgraded the bloc's growth forecasts for 2014 and 2015...There was little to cheer for Europe's jobless. Unemployment levels are likely to remain virtually unchanged, although they are forecast to fall from 12.2 percent to 11.8 percent across the eurozone by 2015."   The November 13 EU Observer article should be a reminder to us of how austerity programs implemented to reduce deficits slow recovery from a recession.  The "sequestration" cuts, our own version of misguided austerity, will begin having a greater impact in 2014.  Combine this with the fiscal cliff negotiations and the possibility of another government shutdown and we may be in for an interesting ride leading to the 2014 mid-term elections.

Speaking of the US deficit, a Harvard report out earlier this year put the eventual total monetary cost of the Iraq and Afghan wars as high as 6 trillion dollars - or 35% of the 17 trillion dollars total national debt.  The DNA India website noted that this corresponds to $75,000 for every household in the country.  "There's a sense that we are turning the corner, but unfortunately, the legacy of these wars, because of decision about the way we fought and funded these wars, means we will be paying the costs for a long time to come," [Harvard Professor Linda] Bilmes said in an interview with The Daily Telegraph. "We may be mentally turning the page, but we are certainly not from a budgetary and financial perspective."   As the Congressional budget discussions proceed, it should be helpful to keep in mind this graphic from the National Priorities Project.



 

In the UK, Guardian editor Alan Rusbridger has been asked to appear before Parliament to give evidence regarding the intelligence files leaked by American whistleblower Edward Snowden.  Rusbridger will appear at a meeting of the home affairs select committee amidst rising criticism from British intelligence agencies and Tories.  "Alan has been invited to give evidence to the home affairs select committee and looks forward to appearing next month," a Guardian spokeswoman said.  A New York Times editorial  warns that the freedom of the press so essential to democratic accountability, is being challenged by the Conservative-Liberal Democrat coalition government of Prime Minister David Cameron.



Finally, here's an update on the bee colony collapse that's been occurring around the world and threatening to impact fruit and vegetable production.  Ars Technica reported on October 21 that Italian researchers had cut through the complexity of causes that had surrounded the bee colony collapse.  Infections, insecticides and agricultural practices were all thought to be involved.  "Previous toxicology work in mammals indicated that a specific class of insecticides, the neonicotinoids, could influence the activity of genes involved in the innate immune system."  The researchers started by showing that the same is true in insects. Initially, they worked with everyone's favorite fruit fly, Drosophila, showing that the equivalent genes responded in the same ways in the flies. They then showed that the innate immune response isn't activated when these same flies are exposed to an infection.... Various infections may still be doing the ultimate job of killing the bees, but their virulence could be explained by compromised immune function, caused by a combination of insecticide use and agricultural practices. The results will also provide further support for the European Union's attempt to ban the use of neonicotinoid pesticides."  The relationship between insecticides and colony collapse had been legally challenged by Bayer and Syngenta earlier this year.  

The image of the European honey bee is from Wikipedia.

The Insane Military Budget

Fifty-one years ago,  Republican Dwight Eisenhower, the thirty-fourth President of the United States, warned against the increasing militarization of the United States in his famous speech on the "military-industrial complex."  John F. Kennedy, the thirty-fifth President of the United States, once wrote in a letter to a Navy friend that "War will exist until the distant day when the conscientious objector enjoys the same reputation and prestige as the warrior does today."

Neither Eisenhower's warning nor Kennedy's vision have gained much of a foothold in the last half-century - this despite the end of the Cold War, despite the disastrous wars in Vietnam, Iraq and Afghanistan, despite the misguided military incursions and interference in the internal affairs of Latin American countries, despite the trillions of dollars of expenditures, despite the tens of thousands of American lives and hundreds of thousands of foreign lives lost. 

Militarism has powerful and influential supporters in government.  Large swaths of the populace confuse it with patriotism.  The so-called defense industry has long provided a home for retiring politicians who can effectively act as lobbyists for the industry.  Republicans will cut just about every program imaginable except the bloated military budget.  Democrats, ever fearful of seeming not militaristic enough, have been ineffective at best and complicit at worst.  Neo-con dreams of an American Empire based on military intervention still gets a welcome hearing in many corners and the drumbeat for war with Iran is starting to be played by many of the same actors who misled us into Iraq. 

It's time for this to stop.  The money that is currently spent on paying for wars - past. present, and future - is totally out of control and totally unrelated to any real dangers that we now face.  This graphic from The Economist says it all:



The Economist notes that United States military spending in 2010 was more than the next seventeen nations combined. And this is using an official figure of $700 bn, which is not the whole story by a long shot. 

As Chris Hellman explained at TomDispatch.com, the Fiscal Year 2012 Pentagon budget starting at an official figure of $703 bn rises rapidly when we see the other military-related spending squirreled away in departments other than Defense or related to past wars and military expenditures.

Official Pentagon budget: 703 bn$
Counter-terrorism and homeland security: + 62 bn$
National Intelligence Program funding: + 53 bn$
Veteran programs:hospital,medical, disability, education: + 129 bn$
Other direct security spending (for example, military aid): + 18 bn$
Military and DOD pensions: +  69 bn$
Interest on debt for past Pentagon spending: +185 bn$

Total military-related spending = 1219 bn$ or 1.219 trillion dollars

The 1.2 trillion dollars is just under 1/3 of the total budget proposal for FY 2012 (~$3.75 trillion).  In other words, one of every three dollars in the 2012 budget is spent on the military.  Coincidentally (or maybe not), this 1.2 trillion dollars approximates the FY 2012 projected budget deficit ($1.1 - $1.3 trillion). 

Any rational and humane discussion aimed at reducing the deficit must start here.  Before we cut heating fuel subsidies, shred the food stamp program, slash Medicaid, underfund health care reform, increase student loan interest rates, privatize Social Security and end Medicare as we know it, we must address this out-of-control military spending.