1/5th of all US personal income last year came from government spending. Simply, 20 percent of the economy is sustained by government spending. One could possibly argue that government spending shouldn’t constitute this much of the economy, but it does, and to try to make a sudden change in this would be awful for the economy. To actually balance the budget, government spending would have to be cut in half. Excuse me if my math is wrong, but balancing the budget (on purely cuts) would take 10% of income out of economy, as comparison, the Great Depression caused GDP to fall 30%. Cutting spending will only take money out of the economy. President Obama’s plan that he has put on the table, would impoverish 250,000 Americans. Obama still wants 4 trillion dollars in debt reduction, at a ratio of $3 of spending cuts for every $1 of tax revenue. Speaker Boehner is now actually calling for a smaller 2 trillion dollars in cuts. Mitch McConnell came up with the strange and potentially dangerous idea of giving the president the power to raise the debt ceiling whenever he needs to, as if the Executive Branch didn’t already have enough power. The Wall Street Journal continues to call for deficit reduction by cutting things from the middle class. The Debt Ceiling will be raised, because Wall Street wants it to be raised. Republicans are just going to play hardball until the Democrats cave and give them everything they want with no revenue increases. As I was putting the final touches on this article, I listened to Lawerence O’Donnell insist that Obama is a political genius in these debt talks. He may be right, just not in the way he thinks he is. Obama is going to do something that the previous president tried to do, and failed. He is going to make significant cuts in Social Security. Meanwhile, there are still 5 unemployed people for every available job. 13% of veterans are unemployed (support the troops?). Jeff Immelt (the CEO of GE, and Obama’s “jobs guy”) is saying that it is not businesses fault that they have so many tax loopholes. This is an absolute lie, as big businesses lobby for these tax breaks, and I think this shows you how serious Obama is on closing these tax loopholes. Caterpillar demoted an executive who discovered and told about the company’s 2 billion dollar tax evasion. Cisco systems is cutting 10,000 jobs and simultaneously arguing they need a tax break. They also expect to bring in 43 billion dollars more of revenues. Currently, food lobbyists are lobbying against voluntary(!) rules. Even suggestions are too strong for these guys. A bill in the House would make it harder for economists to know important economic statistics and numbers. This is a terrible idea of course, and is about as anti-transparent as government can be. We don’t even know what is being said in these secret debt meetings, and now we may not know economic statistics.
The Atlantic had an absurd piece claiming that Washington and Wall Street are at a disconnect. I continue to marvel at how people, who get paid to cover politics for a living, do not understand the basic fundamentals of campaign financing and how it affects policy. Banks rule the economy and the government. Despite 61% of people approving of Dodd-Frank, Newsweek ran a big story (if you look past the Sarah Palin cover and feature) on how it continues to not be implemented. Wall Street doesn’t want it implemented, so they use their power to make sure it doesn’t. The lead foreclosure fraud investigator in Florida’s attorney general’s office was fired. For what? Discovering bank fraud on foreclosures.
Barry Ritholtz (who I have been quoting a lot lately) asks whether the “Ags (Attorney General)will turn the US into a banktocracy”
The answer is yes Barry, if they haven’t already.