And I End With A Musical Allusion


Even Donna Brazile is getting into the act, the almost ritualistic plea to House Republicans to grow a spine and challenge their party's leader.  The CNN contributor and Democratic strategist writes "First, though, Republicans must break Norquist's insane hold on their party. More Republicans must put their country before someone else's agenda, and their Pledge of Allegiance before 'The Pledge' to Norquist."

Grover Norquist is extraordinarily influential in the G.O.P.   Bruce Bartlett, policy advisor to Presidents Reagan and Bush 41 and to Representatives Jack Kemp and Ron Paul argues the founder and director of Americans for Tax Reform "basically controls the Republican Party’s fiscal policy."

Bartlett takes us through the modern history of Norquist's goal of shrinking government "down to the size where we can drown it in a bathtub."  The "starve the beast" doctrine began, he writes, with Alan Greenspan in October, 1978 appearing before the Senate Finance Committee and advocating "restraining the amount of revenues available and trust that there is a political limit to deficit spending."

In February, 1981 President Reagan claimed "But there were always those who told us that taxes couldn't be cut until spending was reduced. Well, you know, we can lecture our children about extravagance until we run out of voice and breath. Or we can cure their extravagance by simply reducing their allowance."   Twenty years later, Bartlett continues,

George W. Bush justified his tax cut on starve-the-beast grounds, saying it would constitute a “fiscal straitjacket for Congress.” According to the journalist Ron Suskind’s book, “The Price of Loyalty,” the Bush adviser Karl Rove often invoked the starve-the-beast approach as “conservative economic theology” in White House meetings. By 2003, using deficits strategically to slash the size of government was widely considered to beparty doctrine among Republicans.

Cutting taxes is merely the means to the end of eliminating government.  In his famous interview with Politico on November 28, Norquist, asked whether the debt ceiling should be increased month-by-month, responded

Monthly. Monthly. Monthly if he’s good, weekly if he’s not. I mean, look, it’s an accordion, it’s an accordion, because if you’re really – well, that’s what they did – remember the first few months of the Obama – when the Republicans took the House and the Senate – took the House, they said, “O.K., here’s two weeks of continuing resolutions because you have saved $4 billion. Oh, now you’ve agreed to $8 billion in savings, you may have four weeks.

But, Bartlett explains in another column

At the risk of stating the obvious, the debt limit is nuts. It serves no useful purpose to allow members of Congress to vote for vast cuts in taxation and increases in spending and then tell the Treasury it is not permitted to sell bonds to cover the deficits Congress created. To my knowledge, no other nation has such a screwy system.

Nevertheless, we have a debt limit that is denominated in dollar terms; it is breached when the debt subject to limit, which includes bonds the government itself holds in various trust funds, rises above that limit. Currently, it is $16.394 trillion. The Congressional Budget Office estimates that given current spending and revenue trends, that figure will be reached before the end of the year.

At that point, Treasury will have to take extraordinary and costly measures to avoid technically hitting the debt ceiling. But these measures provide only a month or so of breathing room. At some point, Treasury will lack the cash to pay the bills that are due and it will face nothing but unthinkable choices – don’t pay interest to bondholders and default on the debt, don’t pay Social Security benefits, don’t pay our soldiers in the field and so on.

Either way, social services provided by government would suffer dramatically, either immediately or more gradually.  Disenchantment would result and disillusionment of voters toward "the government" would increase as the needs of the individual and of the community are neglected.   With government unable to meet its objectives,  people would grow ever more angry and demand further cuts in an institution which would increasingly seem to be without purpose.   Perhaps it wouldn't be so small as to be drowned in a bathtub, but it would become a shell of its former self.

The GOP thus is pursuing a long-term, ambitious strategy.   President Obama, by contrast, is pursuing a strategy of gaining prompt assent from congressional Repubs for re-imposing Bush-era tax rates on upper incomes.  If that is done before the fiscal cliff/curb/slope is reached, the President will have played his cards for, relatively speaking, chump change and the GOP will be ready to play its debt ceiling card.

In the context of modern American politics, the debt limit is not "nuts"- not, at least, for a Party determined to use it to bring support for government to a diminuendo and with it, its own fortunes to a crescendo.



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Alan Greenspan, Really?

In a recent meeting with the Editorial Board of the Philadelphia Daily News, Hillary Clinton recommended a "high-level emergency group" to address the issue of high-risk mortgages. She suggested that the members might include Robert Rubin (a supporter of hers), Paul Volcker (a supporter of Barack Obama), and Alan Greenspan (a supporter of John McCain). When Greenspan spoke before the Credit Union National Association 2004 Governmental Affairs Conference, Washington, D.C. on February 23, 2004, he stated:

American consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed-rate mortgage. To the degree that households are driven by fears of payment shocks but are willing to manage their own interest rate risks, the traditional fixed-rate mortgage may be an expensive method of financing a home.


He also has been a champion of deregulation. When he gave the Federal Reserve Board's semiannual monetary policy report to the Congress (before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate on March 7, 2002), Greenspan declared:

Both deregulation and innovation in the financial sector have been especially important in enhancing overall economic resilience. New financial products—including derivatives, asset-backed securities, collateralized loan obligations, and collateralized mortgage obligations, among others—have enabled risk to be dispersed more effectively to those willing to, and presumably capable of, bearing it.

So Senator Clinton was asked by the Editorial Board about her recommendation of the nation's most important economist, who promoted adjustable rate mortgages and deregulation of the financial industry and failed to recognize the housing bubble. She replied:

Not only that, but the Fed didn't act while he was there. But he has a calming influence still to this day on Wall Street -- don't ask me why because I never understand what he's saying -- but nevertheless people respond to that Delphic oracle approach. I think it would be wise to include him. And recently he's come out, and very smartly so, that we have to deal with housing and maybe we need to have some kind of buyout mechanism for mortgages. So he's moved on his understanding and depth of the problem -- but you know you could pick three others. You just have to have some demonstrable involvement of presidential leadership...

We've gone through seven years of an Administration which, with the help of the Congressional Medal of Honor, rewards incompetence at every turn. Calling on a guy who helped bring on the mortgage debacle is no way to address the nation's housing crisis.

Greenspan: Open The Borders!

On a recent episode of "Democracy Now," whose website bills itself as "a daily radio and TV news program on over 500 stations," host Amy Goodman and, primarily, investigative journalist Naomi Klein, recently interviewed former Federal Reserve Board Chairman Alan Greenspan, continuing his tour to promote his memoir "The Age of
Turbulence: Adventures in a New World." Although the questions covered a fairly wide range of economic issues (even the war in Iraq was viewed in part in this context), a portion of one of Greenspan's responses caught my eye- or ear, when I heard it:

And I also argue in the book that we ought to be opening up our borders to skilled labor from all sorts of -- from all parts of the world, because if we were to do that, we would increase the supply of skilled workers, which our schools have been unable to create, and as a consequence of that, we would lower the average wage of skills and reduce the degree of income inequality in this country.

There are several interesting arguments made here, each disturbing:

1) "Our schools have been unable to create" an adequate "supply of skilled workers," a claim refuted by evidence, and offensive to the hordes of men and women highly trained in technology upon graduating colleges and universities each year;

2) "Lower(ing) the average wage of skills" would "reduce the degree of income inequality in this country, an implication which suggests that reducing income of workers somehow decreases income inequality, a bizarre idea;

3) "We ought to be opening up our borders to skilled labor... from all parts of the world," although clearly the United States has done so.

All in all, a worthwhile interview, for which Naomi Klein deserves credit- as does Alan Greenspan, whose argument here is seriously wrongheaded. He stuck with the interview even though he wasn't treated with the same reverence that he had come to expect from the American media.