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Et tu, Sheila Bair?

photo: Leadership Conference on Civil and Human Rights (Flickr)

Sheila Bair, Chairwoman of the Federal Deposit Insurance Corporation, is supposedly one of the few at least halfway sensible federal regulators who actually warned about the banks’ risky behavior and maintains a healthy skepticism of the laissez faire ideology that shielded their predatory behavior both before and after it tanked the US and Western economies.

So it’s disheartening to see her provide cover for the Peterson-type deficit hysterics who would impose Irish-type austerity on the US as the price the already plundered public must pay to give unneeded “confidence” to banksters, already flush with cash, and their protected bond holders.

It’s bad enough Ms. Bair repeats hysterics’ propaganda about out of control “structural deficits,” without explaining our long-term deficits are almost entirely driven by escalating health care costs affecting the whole economy, not just the federal budgets for Medicare/Medicaid. The solutions lie in changing the health care delivery system and how we pay for it, not cutting benefits to meet some arbitrary federal spending limit.

It’s worse that she lumps together, as Petersonians always do, Social Security with Medicare and Medicaid. And for some unexplained reason, these folks can never remember that the 1983 reforms anticipated and planned for the baby boomers. As Dean Baker reminds us (for the umpteenth time) in debunking the same discredited arguments from CBS:

[CBS claims,] “. . . The system won’t be able to handle the strain without an overhaul.”

Well, no that is not true. The projections from the Congressional
Budget Office (CBO) show that the system can pay all benefits through
the year 2039 with no changes whatsoever. The Social Security trustees
are somewhat more pessimistic showing that full benefits can be paid
through the year 2037 with no changes at all. By 2039 the oldest baby
boomers will be age 93 and the youngest will be 74. By 2037, the oldest
boomers will be 91 and the youngest 73.

This means that by both the CBO and the trustees projections, most of
the retirement of the baby boomers can be supported with no change whatsoever.

Most disappointing is how Bair trots out a fear of us becoming Ireland or Greece. From her Washington Post op ed, Will the next fiscal crisis start in Washington D.C.?:

With more than 70 percent of U.S. Treasury obligations held by private investors scheduled to mature in the next five years, an erosion of investor confidence would lead to sharp increases in government and private borrowing costs. And while we enjoy a uniquely favored status today – investors still view U.S. Treasury securities as a haven during crises – events in Greece and Ireland should serve as a warning. The yields on their long-term government securities have risen from rough parity with U.S. Treasury obligations in early 2007 to levels that are hundreds of basis points higher. If investors were to similarly lose confidence in U.S. public debt, we could expect high and volatile interest rates to impose losses on financial institutions that hold Treasury instruments, and to raise the funding costs of depository institutions, which can be highly vulnerable to interest-rate shocks. All of us would pay more for consumer and business credit, and our economy would suffer.

For pity’s sake! How is it possible for a senior federal financial regulator to suggest that the US, with it’s own currency and ability to directly affect exchange rates, is like Ireland or Greece which lack either?

And how can someone with a history of acknowledging the risks to consumers manage to write an entire column about phantom risks that might materialize if, at some point in the future, the US insanely behaved as though it were Ireland and Greece, while dismissing the very real immediate crisis we have of 15 million people unemployed with record numbers in poverty, foreclosure and without health insurance and the worst income inequality since the Gilded Age?

From Krugman today:

But Ireland is now in its third year of austerity, and confidence just keeps draining away. And you have to wonder what it will take for serious people to realize that punishing the populace for the bankers’ sins is worse than a crime; it’s a mistake.

The nation has a redwood tree stuck in the middle of its forehead, and our supposedly most serious government officials are worried about tripping over some future branch that might fall on a road we shouldn’t even be taking. Gah!

CommunityMy FDL

Et tu, Sheila Bair?

Sheila Bair, Chairwoman of the Federal Deposit Insurance Corporation, is supposedly one of the few at least halfway sensible federal regulators who actually warned about the banks’ risky behavior and maintains a healthy skepticism of the laissez faire ideology that shielded their predatory behavior both before and after it tanked the US and Western economies.

So it’s disheartening to see her provide cover for the Peterson-type deficit hysterics who would impose Irish-type austerity on the US as the price the already plundered public must pay to give unneeded “confidence” to banksters, already flush with cash, and their protected bond holders.

It’s bad enough Ms. Bair repeats hysterics’ propaganda about out of control “structural deficits,” without explaining our long-term deficits are almost entirely driven by escalating health care costs affecting the whole economy, not just the federal budgets for Medicare/Medicaid. The solutions lie in changing the health care delivery system and how we pay for it, not cutting benefits to meet some arbitrary federal spending limit.

It’s worse that she lumps together, as Petersonians always do, Social Security with Medicare and Medicaid. And for some unexplained reason, these folks can never remember that the 1983 reforms anticipated and planned for the baby boomers. As Dean Baker reminds us (for the umpteenth time) in debunking the same discredited arguments from CBS:

[CBS claims,] “. . . The system won’t be able to handle the strain without an overhaul.”

Well, no that is not true. The projections from the Congressional
Budget Office (CBO) show that the system can pay all benefits through
the year 2039 with no changes whatsoever. The Social Security trustees
are somewhat more pessimistic showing that full benefits can be paid
through the year 2037 with no changes at all. By 2039 the oldest baby
boomers will be age 93 and the youngest will be 74. By 2037, the oldest
boomers will be 91 and the youngest 73.

This means that by both the CBO and the trustees projections, most of
the retirement of the baby boomers can be supported with no change whatsoever.

Most disappointing is how Bair trots out a fear of us becoming Ireland or Greece. From her Washington Post op ed, Will the next fiscal crisis start in Washington D.C.?:

With more than 70 percent of U.S. Treasury obligations held by private investors scheduled to mature in the next five years, an erosion of investor confidence would lead to sharp increases in government and private borrowing costs. And while we enjoy a uniquely favored status today – investors still view U.S. Treasury securities as a haven during crises – events in Greece and Ireland should serve as a warning. The yields on their long-term government securities have risen from rough parity with U.S. Treasury obligations in early 2007 to levels that are hundreds of basis points higher. If investors were to similarly lose confidence in U.S. public debt, we could expect high and volatile interest rates to impose losses on financial institutions that hold Treasury instruments, and to raise the funding costs of depository institutions, which can be highly vulnerable to interest-rate shocks. All of us would pay more for consumer and business credit, and our economy would suffer.

For pity’s sake! How is it possible for a senior federal financial regulator to suggest that the US, with it’s own currency and ability to directly affect exchange rates, is like Ireland or Greece which lack either?

And how can someone with a history of acknowledging the risks to consumers manage to write an entire column about phantom risks that might materialize if, at some point in the future, the US insanely behaved as though it were Ireland and Greece, while dismissing the very real immediate crisis we have of 15 million people unemployed with record numbers in poverty, foreclosure and without health insurance and the worst income inequality since the Gilded Age?

From Krugman today:

But Ireland is now in its third year of austerity, and confidence just keeps draining away. And you have to wonder what it will take for serious people to realize that punishing the populace for the bankers’ sins is worse than a crime; it’s a mistake.

The nation has a redwood tree stuck in the middle of its forehead, and our supposedly most serious government officials are worried about tripping over some future branch that might fall on a road we shouldn’t even be taking. Gah!

John Chandley

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John has been writing for Firedoglake since 2006 or so, on whatever interests him. He has a law degree, worked as legal counsel and energy policy adviser for a state energy agency for 20 years and then as a consultant on electricity systems and markets. He's now retired, living in Massachusetts.

You can follow John on twitter: @JohnChandley