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Rolling Back the New Deal, Trashing the United States, Roiling International Financial Waters

Comment: The “deficit reduction” proposals now being presented by the “bipartisan” commission on the budget are, simply put, a frontal assault on the New Deal, the American people and the country itself.

Former GOP senator (Wyoming) Alan Simpson has sounded a battle cry to gut social security, raise taxes for the bottom 80% of the population, while lowering them for the top 20%, the top 5% in particular. The unabashed hubris manifested by  the GOP right is embodied in the tactic Simpson proposes–threatening to have the U.S. default on its debt, if Congress won’t go along with their agenda! Such a default w0uld have a catastrophic effect on the U.S. and global economies!

In this context, it is also worth noting that, as Nobel-Prize Winning economist Paul Krugman has noted, ” . . . the Bush tax cuts for the wealthy permanent is a huge budget issue — over the next 75 years it would cost as much as the entire Social Security shortfall.”

In this regard, one should not forget that the available evidence suggests that this gambit was pre-planned.

By the same token, one should never lose sight of the profound Nazi involvement with the Repblican Party.

“Alan Simpson: Deficit Plan Can Pass After Debt Limit ‘Blood Bath'” by Brian Beutler; TPMDC; 11/19/2010″

Excerpt: The Republican co-chair of the White House’s fiscal commission predicted this morning that his controversial recommendations for reducing long-term deficits will have a real opportunity to become enacted next year, when the nation brushes up against its debt ceiling, and newly elected Republicans threaten to send the country into default.

“I can’t wait for the blood bath in April,” said Alan Simpson at a Christian Science Monitor breakfast roundtable with reporters this morning. “It won’t matter whether two of us have signed this or 14 or 18. When debt limit time comes, they’re going to look around and say, ‘What in the hell do we do now? We’ve got guys who will not approve the debt limit extension unless we give ’em a piece of meat, real meat, off of this package.’ And boy the bloodbath will be extraordinary.”. . .

Discussion

One comment for “Rolling Back the New Deal, Trashing the United States, Roiling International Financial Waters”

  1. Here’s a reminder that the GOP is still intent on right-wing “populist” reforms for the Federal Reserve like eliminating its “dual mandate” so that high unemployment is no longer something the Fed is expected to care about. And that’s just one of their proposals. There are plenty of others:

    The New York Times
    In Republican Attacks on the Fed, Experts See a Shift

    By BINYAMIN APPELBAUM
    APRIL 7, 2015

    WASHINGTON — At a hearing in February, Representative Scott Garrett, a New Jersey Republican, complained that Congress and the Federal Reserve had traded places.

    During previous periods of high unemployment, members of Congress pressed the Fed to print more money even as the Fed remained wary of the inflationary consequences of such efforts.

    After the Great Recession, by contrast, the loudest criticism has come from politicians demanding that the Fed shut down its printing press and raise interest rates.

    Republicans like Mr. Garrett argue the central bank needs to be reined in because they say it has abandoned caution in its continuing effort to stimulate faster economic growth. They say the Fed was granted considerable autonomy so it could keep inflation under control, and it is now abusing that independence.

    “The people pushing back on your decisions are those arguing for a tougher monetary policy, not a looser one,” Mr. Garrett told Janet L. Yellen, the Federal Reserve chairwoman, during the hearing in late February. “This flies in the face of the original stated rationale for political independence in monetary policy.”

    The Fed has long been a popular target for politicians during periods of economic distress. Sarah Binder, a political scientist at George Washington University, has shown that congressional prodding of the Fed rises and falls with the unemployment rate.

    But she also found a striking shift: Democrats once proposed most bills to change the Federal Reserve but in recent years Republicans have taken their place, offering about two-thirds of such measures since 2010.

    The Fed’s chairman for most of that period, Ben S. Bernanke, was a Republican initially appointed by a Republican president. Under his leadership, the Fed reduced interest rates nearly to zero and embarked on several rounds of highly unusual “quantitative easing,” amassing more than $4 trillion in Treasury and mortgage-backed securities in a bid to further reduce borrowing costs for business and consumers.

    Easy-money policies like those pursued by Mr. Bernanke and continued by Ms. Yellen historically have drawn support from populist politicians in both parties. But Ms. Binder suggested that Republicans were attacking those policies in part because Democrats had supported the Fed’s efforts to fight unemployment, and the polarization of national politics encouraged the parties to accentuate their differences.

    “You now have these hard-money populists from the right who are concerned that monetary policy has been too lax and that the Fed needs to tighten,” Ms. Binder said. “It’s an inversion of what we might more typically see.”

    One proposal, which the House has passed twice in recent years, is known as “Audit the Fed.” Backed by Senator Rand Paul, a Kentucky Republican who is considering a presidential campaign, it would authorize the Government Accountability Office to review monetary policy decisions.

    A stronger measure, backed by the Republican leadership of the House Financial Services Committee, would require the Fed to publish a mathematical formula that it planned to follow in raising and lowering interest rates. The Fed would then be required to explain deviations from the path prescribed by the formula.

    There are also proposals to change the selection process for members of the Fed’s policy-making committee, including a plan to strengthen the role of the banking industry in picking the presidents of the Fed’s 12 regional reserve banks.

    So far, however, none of the measures have gained traction in the Senate, where Democrats still have considerable power to stall legislation. And the White House has expressed general opposition to restrictions on the Fed’s autonomy.

    The Fed is charged by Congress with minimizing inflation and maximizing employment, a mandate formalized in 1978 by the Humphrey-Hawkins Act. Since the Great Recession, inflation has been unusually slow while jobs have been unusually scarce. Ms. Yellen and other Fed officials have described the Fed’s actions as a necessary response to those circumstances.

    Democrats, rallying to the Fed’s defense, say the central bank is doing its best to fulfill its twin objectives, which can sometimes pull in opposite direction. Republicans, they say, are seeking to change its job description.

    “The root of the issue at this point, I can sum it up in two words, Humphrey and Hawkins,” said Barney Frank, the former Massachusetts congressman. “What you have is a vehement objection to the dual mandate. Many Republicans do understand that the atmospherics of repealing the unemployment part of the dual mandate would be very bad, but they are opposed to it philosophically.”

    Some Republicans are in favor of directing the Fed to focus solely on price stability, in line with the operating instructions for most central banks in developed nations, including the European Central Bank and the Bank of Japan. The Republican senators Bob Corker of Tennessee and David Vitter of Louisiana introduced legislation in 2013 that directed the Fed to focus on keeping inflation low.

    Bills being put forward now, however, do not attack the dual mandate directly. The proposal to make the Fed adopt a policy rule, for example, includes a baseline rule that incorporates both inflation and a measure of economic output. But that rule, known as the Taylor Rule, suggests that the Fed has kept interest rates near zero for too long, and the bill would require the Fed to justify that choice.

    John Taylor, a professor of economics at Stanford University and the intellectual force behind the legislation, said that requiring the Fed to establish a policy rule would serve the same purpose as the checklists that some hospitals use to help doctors avoid errors.

    “Practical experience and empirical studies show that checklist-free medical care is wrought with dangers just as rules-free monetary policy is,” Mr. Taylor wrote in a recent defense of his proposal.

    The current debate also has revived a struggle that dates to the Fed’s creation in 1913. Republicans want to strengthen the independence of the Fed’s regional reserve banks, whose presidents participate in monetary policy decisions, while Democrats want to strengthen the federal government’s control.

    Legislation introduced by Mr. Garrett would let the regional banks select their own boards and increase the banking industry’s representation on those boards. It would also let the banks pick presidents without Washington’s approval.

    A countervailing bill introduced by Senator Jack Reed, a Rhode Island Democrat, would make the president of the New York Fed a presidential nominee, subject to confirmation by the Senate. A coalition of community groups is pressuring the Fed to allow public input in the selection process for all regional Fed presidents.

    Most of these proposals are revivals of earlier legislation, from earlier periods of frustration, and Mr. Conti-Brown said it was quite likely nothing would change.

    “I think chances are strong that if the recovery holds, then even though the Fed after the crisis is a much bigger and more powerful institution, the Fed will slink back into the shadows,” he said. “People like me are just going to be talking to other academics and central bankers and won’t be talking to the public anymore.”

    “You now have these hard-money populists from the right who are concerned that monetary policy has been too lax and that the Fed needs to tighten”
    As we can see, hard-money populist are overflowing with ideas for how to reform the Fed. Ideas like:

    Legislation introduced by Mr. Garrett would let the regional banks select their own boards and increase the banking industry’s representation on those boards. It would also let the banks pick presidents without Washington’s approval.

    Yes, in addition to eliminating the dual mandate, the GOP’s plans for the Fed include giving the finance industry even more representation on the regional Federal Reserve boards and then giving that board even more power to choose its own regional bank president. How populist!

    And here’s a reminder that one of the objectives the right-wing hopes to achieve by eliminating the Fed’s dual mandate and/or putting in place things like the proposed “Taylor rule” is so the next time there’s a significant financial crisis the Fed can’t prevent the US from descending into a Great Depression/eurozone-style mega crisis. That’s presumably also supposed to be populist. Presumably:

    The New York Times
    The Conscience of a Liberal
    John Galt Hates Ben Bernanke

    Paul Krugman
    April 3, 2015 5:53 pm

    Ah: I see that there was a Twitter exchange among Brad DeLong, James Pethokoukis, and others over why Republicans don’t acknowledge that Ben Bernanke helped the economy, and claim credit. Pethokoukis — who presumably gets to talk to quite a few Republicans from his perch at AEI — offers a fairly amazing explanation:

    B/c many view BB as enabling Obama’s spending and artificially propping up debt-heavy economy in need of Mellon-esque liquidation

    Yep: that dastardly Bernanke was preventing us from having a financial crisis, curse him.

    Actually, there’s a lot of evidence that this was an important part of the story. As I pointed out a couple of months ago, Paul Ryan and John Taylor went all-out conspiracy theory on the Bernanke Fed, claiming that its efforts were not about trying to fulfill its mandate, but rather that

    This looks an awful lot like an attempt to bail out fiscal policy, and such attempts call the Fed’s independence into question.

    Basically, leading Republicans didn’t just expect a disaster, they wanted one — and they were furious at Bernanke for, as they saw it, heading off the crisis they hoped to see. It’s a pretty awesome position to take. But it makes a lot of sense when you consider where these people were coming from.

    After all, what is Atlas Shrugged really about? Leave aside the endless speeches and bad sex scenes. What you’re left with is the tale of how a group of plutocrats overthrow a democratically elected government with a campaign of economic sabotage.

    “B/c many view BB as enabling Obama’s spending and artificially propping up debt-heavy economy in need of Mellon-esque liquidation
    Yes, Mellon-esque liquidation is what the right-wing really wants and would have gotten it already if it wasn’t for that pesky Fed with its pesky dual mandate that requires the Fed to actually care about mass unemployment instead of just assuming that “Mellon-esque liquidation” will take care of it. Let the populism flow.

    Posted by Pterrafractyl | April 7, 2015, 1:35 pm

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