Mitch McConnell's spending hypocrisy

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Forums > All Posts > Mitch McConnell's spending hypocrisy

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2011-07-02 04:04 PM

Schmidt
Colorado Springs, CO
Posts: 1058

Barack Obama has targeted removing tax subsidies for oil and gas companies and private jet owners, and tax deductions for the wealthiest people to gain some $400 billion in revenue over the next 10 years to help reduce the deficit. None of Obama's proposed revenue increases specifically target the poor or middle class (those earning less then $250,000).

Those revenue increases would be paired with some $1 trillion in proposed spending cuts hitting cherished Democratic programs.

Senator Mitch McConnell on the Senate floor stated:

“Those who are calling for tax hikes as a part of these debt discussions either have amnesia about the fate of similar votes just six months ago — when Democrats controlled both chambers of Congress as well as the White House — or they’re acting in bad faith, since we all know that including massive, job-killing tax hikes would be a poison pill.”

Mitch McConnell is using the deficit as a justification to cut spending for social programs including Medicare. Yet when he was in the Senate under George Bush he voted for both the 2001 and 2003 tax cuts that enormously added to the deficit. He voted for the unfunded prescription drug benefit, which was largely a gift to the pharmaceutical companies. He voted for two wars that were not funded by revenue increases. All of these Republican measures were largely responsible for the $1.2 trillion deficit that was handed by Bush to Barack Obama when he took office. Oh and what about all those job generated by the Bush tax cuts...how many? Just 1.08 million net jobs added in eight years. Wow.

And now Senator Mitch McConnell sees defict reduction as more important than anything else (except to make Obama a one term President). Republican hypocrisy. And he calls Obama's revenue increases "job-killing tax hikes." I suppose he is pandering to his Fox News audience because anyone with a memory or has done his/her homework will know the McConnell is full of BS.

2011-07-02 10:19 PM

Schmidt
Colorado Springs, CO
Posts: 1058

Just to expand and claify my comment about the number of jobs added during the Bush administration, Politifact conducted an in-depth review and here are the FACTS:

FACT 1: Net job growth for the two terms of the Bush Administration: 1.1 million.

FACT 2: Net job growth for Bill Clinton's two terms: 22.7 million

FACT 3: Bureau of Labor Statistics data, adjusted for inflation, show that average weekly wages grew by 21 percent from the start of Clinton’s first term to the end of his second term. They grew by only 2 percent under Bush’s two terms.

Bush lowered taxes twice. Clinton raised taxes.

I think these numbers speak for themselves.

2011-07-03 03:04 AM

CARLITOS BAM-BAM
Dallas, TX
Posts: 897

Clinton did sign tax relief in 1997 with the bipartisan lovefest known as the Tax Payer Relief Act, which had the primary effect of lowering taxes on capital gains, and raising the child tax credit.

A financial 'deepening' occured under Clinton, which helped liquefy upper-income wealth. CEOs and corporate hiearchies stopped recieving salaries. Instead they were compensated with financial portfolios. Thus, they avoided paying the higher income tax rate, and revenue from capital gains taxes actualy rose depite cuts in the top rate from 28% to 20%, and the lower from 15% to 10%. The Heritage Foundation incessantly ignores this when citing the accompanying revenue increases.

1993's income tax increases had a built in mechanism for annual nominal cuts, with marginal tax rate income limits rising year after year. With inflation this still amounted to a real tax increase on income.

Basically, in the early 90s the Federal Reserve started defining full employment at a lower level from 6-7% to 4-5%. Thus, the Fed stimulated lower interest rates.

This financial 'deepening' was enveloped inside a technological revolution which expanded service industries and self perpetuated globalization.

Credit access widened. Consumer spending power expanded.

Free Trade and Globalization promoted modest trade deficits that accelerated quickly towards the end of the Clinton administration and onward and upward under Bush.

Finally, the Graham-Leech-Biley Act of 1999 deregulated the financial services industry.

As you can see from this chart here, from the 70s on, we have had a trade deficit, and und Clinton-Bush this dramatically expanded.
Now much of the trade deficit is reinvested in American markets. Another thing is that the US dollar circulates as currency outside of the American economy. It's the official currency of Panama, Ecuador, El Salvador, and is used throughout South East Asia.
And the dollar is also one of the world's main reserve currencies.

We also have a 14 trillion dollar GDP. Even with a 1 trillion dollar trade deficit (which has not been hit) this represents only 7% in absolute leakage, and we know that is not the case.

So trade deficits should be a matter of pride to our economy, but with unemployment staggeringly high and a large demand-output gap, it's clear that trade deficits are not being used to service expansionary aims, but carve up bigger peices of the pie for the global wealthy class.
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We are not growing because we are gutting demand through budget cuts (federal, state, & local) and despite an easy monetary policy, banks are not lending at levels to support housing market values, because the credit worthiness of the average consumer is weak.

The Federal Accounting Standards Board's suspension of market-to-market accounting has allowed banks to avoid recognizing some losses on assets. This, combined with the Central Bank's easy monetary policy, has made it possible for banks to make larger profits, while lending to a smaller number of credit worthy borrowers.

Before the crash in '08 bank reserves vibrated, that is banks made up for shortfalls in the interbank payment system by the second.
During the financial crisis, the interbank market nearly froze up. In a response, banks have chosen to put cushion in the payment system by holding larger reserves. This is somewhat desirable, and the FED has started paying interest on reserves for the first time ever, begining in Oct. 2008.
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About the payment system - should government dramatically cut spending (as will happen in event a debt deal is not reached), bank reserves will necessarilly drop. And without extraordinary action by the FED (which is already stretched pretty thin) the payment system will collapse.
It's no coincidence that bank reserves have dramatically risen with the onset of trillion dollar deficits on the federal government's books. That's what necessarilly happens. No matter how much new lending or demand stimulated, it all ends up as bank reserves. Why? Because with the introduction of high powered money (deficit spending) there is no corresponding liability created in the private system. Lending cannot create new net bank reserves. In the private system, money creation is zero-sum. Assets are balanced by corresponding liabilities. Therefore, there can be no net private savings without government deficit spending, and only contraction with government surpluses, or balanced budgets.
Circumstances vary with respect to the desirability of such outcomes, but operationally there can be no other way without a very large trade surplus.
If the federal government does not put-out more dollars than it destroys in the private system annually, the private economy cannot produce net-savings to facilitate the robust lines of credit that consumers and small businesses depend upon.
Business can't get credit -> Business fails = Business can't make tax payment = more spending cuts needed to balance the budget = less bank reserves = higher interest rates = (cycle stronger) -> bank failures -> interbank market freeze -> credit card and debt card freeze = run on banks = collapse....ballgame over.
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Dick Cheney was right. Republican Presidents from Nixon to Bush II have championed the "noble lies" of fiscal responsibility, while adopting modern economics to the advantage of the wealthy class.
The problem is now hideously ironic due to rightwing mutiny and voter amnesia.
The same Conservative voters who effectively installed oligarchical socialism are now, with projection, blaming liberal Democrats for a bill (that does not exist) on the heads of every American in the form of a so-called national debt.
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Only with Social Security Trust Fund reciepts did the federal government imagine a surplus during a few of Clinton's years in office. He left office with large projected surpluses.

I'm not against the practice of spending trust funds reciepts in the general fund. But it does not make any sense for the government to spend Social Security savings, while still taking more money out of the economy than it puts in; in such a scenario (of balance budget or surpluses) government can only meet future Social Security obligations by raising tax rates, because the capacity for the private system to produce net savings is non-existent without high-powered money, and thus economic growth cannot make up for future tax revenue shortfalls at existing rates. Attempts to raise taxes then to meet a balance or surplus budget will only compound the problem. Ultimately, when the federal government does not run a deficit, there is a net destruction of dollars in the private system. And pretty soon, there's not going to be enough dollars to go around, and the economy will necessarily cool and contract through higher interest rates. The velocity or turnover of dollars has natural limits, it simply cannot be sped up pass the point of income and credit limits. I can't spend more money than I earn without borrowing, and I cannot borrow unlimited sums of money, nor would I want to.
So at some point when government takes out more money than it puts in...or does not resupply leakage in the private system there will be a shortage of dollars in the private system and interest rates will necessarilly rise to cool demand, and our standard of living will decline.

The federal government must run an annual deficit if economic growth is desirable. The problem with the current deficit is the way it is accumulated....in support of short term nominal upper income wealth, instead of longer term investments in the future. New dollars (high powered money) are effectively being introduced in the wrong place.....in the hands of those who already have plenty, instead of for a broader public purpose that service systemic expansionary aims.

Nine Inch Nails -Now I'm nothing.

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