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My advice to President Obama

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  • Strongly Liberal Democrat
    Democrat
    Dallas, TX
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    Mr. President,
    Do you understand how the checks clear in the US banking system? Do you understand that the federal government is the issuer of the currency? Do you understand that the government's deficit is directly equal to the non-government surplus? Do you understand that the government's deficit floats per the savings demands of the non-government? Do you understand that US Treasury interest rate payments are a policy variable? Do you understand that federal taxes regulate demand, and they don't give the federal government the funds it needs to spend? Do you realize that the federal government must spend the dollar first for us to pay our taxes or buy government securities? Do you understand that the limits are on the real side of the economy, not the financial side? Do you understand that a spending cut is like raising taxes? Do you understand that we have a jobs crisis, not a deficit crisis? Do you understand that we are the real net-beneficiaries of current trade "imbalances"? Do you understand that banks create deposits with loans, and government debt is the equity that supports the private credit structure? Do you understand that oil prices are the main driver of inflation? And that deregulation of oil commodities markets is the main driver of rising costs at the pump? Do you understand that Medicare and SSI are completely sustainable? And that we should increase and add to those programs? Do you understand that involuntary unemployment is the product of government not spending enough for us to pay our taxes and save what we try to save? Do you understand that President Reagan was the greatest Keynesian president of all time? Do you understand that in 1981 his economic adviser, ex-Cato chairman, and leading libertarian, William A. Niskanen said a.) "The simple relationship between deficits and inflation is as close to being empty as can be perceived”; b.) “There are no necessary relationships between the deficit and money growth”; and c.) “Evidence doesn’t support” the assertion that deficits crowd out private borrowers.? Do you understand that Reagan closed down and arrested more fraudsters than you have? Do you understand that attempting to cut the deficit now will likely guarantee another recession and larger budget deficits?

    Mr. President, if you go through with your Grand Bargain, you will destroy this economy. You will destroy your party's chances in 2014 and 2016, and your legacy will be our ruin. Mr. President, WE DEMAND AGGREGATE DEMAND! Now's the time to outflank your Republican adversaries by calling for the largest tax cut in American history, by demanding an end to the REGRESSIVE FICA payroll tax. Right now, even to many of your supporters, you look like the captive prisoner or errand boy of neoliberal special interests. Either way, that's not what the American people want or need. Right now, they want and need jobs, and for that to happen, we need more net-spending by government. For a given sized government and credit expansion, there's a rate of taxation that corresponds with full employment. That means, depending on your politics, we need more government spending or a demand side tax cut. Deficit reduction measures take us in the wrong direction.

    Mr. President, THE DEFICIT IS NOT HIGH ENOUGH! Break out of the box that precludes our government from doing the right thing. Fight for full FICA payroll tax relief and increasing SSI benefits.

    "Too Late, All Gone"-How To Destroy Angels.
  • Liberal Democrat
    Democrat
    Colorado Springs, CO
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    CBB --

    Do the Tea Party Republicans and their perceptions of "debt is awful" matter at all in this dialogue? Does the President have the persuasive power to change the minds of John Boehner and the House Republicans that hate him more than they love our country? Are there enough Senate Republicans to overcome Mitch McConnell's "everyday filibuster" intended to make Obama fail so that Republicans can point blame for the 2014 election...and the 2016 election? It will be a rough four years for President Obama, but is it his fault for not being able to negotiate any kind of deals with Republicans who are intent on making him fail?

    Just asking. President Obama is now having to play their game...but are there enough players in Congress to play the game that you want to play? I agree with your philosophies. However, the tactics to accomplish your recommendations are a hell of a lot more difficult in this political environment.
  • Strongly Liberal Democrat
    Democrat
    Dallas, TX
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    All very good questions. I see it like this, when Republicans are up their lying through their teeth (e.g. Saddam Hussein was involved w/ 9/11), the proper response is not to agree with them. You get out there and tell the truth. It may have political costs, but so does going along with their craziness. So what I'm getting at is what the hell does Obama have to lose? Deficit Reduction is a loser. It's both bad politics and bad policy. There's nothing to be gained, and there's a lot we could lose if the economy doesn't turn around and the Republicans move in a more moderate modern direction. There's a lot to be gained from MMT. Mainly, it refutes every Republican economic talking point for the last 30 years, and it gives Democrats the understanding needed to win those arguments, and not fall in the "tax and spend" type thinking that Republicans can successfully rail against. If Republicans want to go on record as against tax cuts that the Democrats are for, by all means, please let them do so. The irony here is that FICA tax cuts are closer to what the Tea Party is supposed to be about: remember it's Taxed Enough Already. By fighting for FICA tax cuts, President Obama could effectively out-Tea Party the Tea Party. What the hell are they gonna do? Start calling for tax increases? Please, let them do that.

    If Republicans are opposed to measures to restore aggregate demand, sales, output, and employment, that means they are opposed to market-capitalism, and we might as well start calling them Marxists, or some other type of subversive swear word.

    Moreover, Obama wants to be the Democrat's Reagan. Well, look at what Reagan did. He exploded the national debt. Hamiltonian-Republicans figured out the basics of MMT, before there was MMT, as I alluded to in my Niskanen quote. Their radicals wanted to run against Reagan in 1984 for reneging on deficit reduction, and it was then that the Democrats sensed an opening to attack Republican's "fiscal irresponsibility," and since then the debt has been a political football from hell used by the out-party to criticize the in-party.

    So if Obama fails to persuade McConnell or the Republicans in the Senate hiding behind the filibuster. Then it's on them. They would be on record opposing tax cuts. To me, this should be a no-brainer.

    I think the hard part might be explaining to Democrats how we are going to pay for SSI, which is why it's gotta be a tandem cut FICA/raise SSI benefits thing.
  • Liberal Democrat
    Democrat
    Colorado Springs, CO
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    There's some progress in that direction. George Stephanopoulos on ABC yesterday noted that Paul Ryan has unveiled the House Republican budget plan and has challenged Obama to present a plan that eliminates the deficit entirely.

    Maddow Blog: Obama rejects GOP premise on balanced budgets

    "The ABC host asked, "Are you going to do that?" The president, "No."

    "My goal is not to chase a balanced budget just for the sake of balance. My goal is, how do we grow the economy, put people back to work, and if we do that, we're going to be bringing in more revenue, if we control spending and we've got a smart entitlement package, then potentially what you have is balance. But it's not balance on the backs of the poor, the elderly, students who need student loans, families who've got disabled kids -- that's not the right way to balance our budget."

    "We're not going to balance the budget in 10 years. If you look at what Paul Ryan does to balance the budget, it means that you have to voucherize Medicare, you have to slash deeply into programs like Medicaid, you've essentially got to either tax middle class families a lot higher than you currently are, or you can't lower rates the way he's promised."


    Obama needs to do more of this...continually emphasize jobs and growing the economy, and move away from the Republican fear mongering about deficits and debt and balanced budgets.
  • Strongly Liberal Democrat
    Democrat
    Dallas, TX
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    I agree that is progress from a terrible starting point. Problem is the deficit he wants to target is far too low to support the current account deficits and domestic private sector savings. In that environment, the only way for the economy to grow is on the backs of domestic private sector deficits, and we know how that turns out. You cannot increase private sector debt-service payments forever.