DISPATCHES

CREDIT DOWNGRADE REVEALS RATING FAILURE

Dean Baker called the Standard & Poor’s downgrade of US government debt “another colossal failure by a major credit agency” that might be related to its attempt to curry favor with politicians that are writing rules affecting the credit rating agencies after their roles in rating hundreds of billions of dollars of subprime mortgage-backed securities as investment grade.

Baker noted (8/6) that “S&P made a big point of citing the fact that the debt deal did almost nothing to slow the growth of Medicare and other entitlements, obviously alluding to Social Security. S&P surely knows that Medicare’s cost growth is driven by projections of explosive growth in private sector health care costs. ... If S&P were being honest, it would have written about the need to fix the US health care system. Instead it talked about the need to cut Medicare. ...

“The reference to Social Security also cannot be supported. The program is financed by its own designated tax. Under the law, if benefits exceed the money raised by the tax, then they are not paid. If S&P assumes that Social Security will add to the deficit in future years, then they are assuming that Congress will change the law in a way that no one is now proposing.

“It is also worth noting that the projected increase in Social Security as a share of GDP over the next 30 years is 1.6%. This is roughly the same as the increase in the annual military budget since the days before Sept. 11th. An unbiased credit rating agency would not be highlighting one increase while ignoring the other.”

Baker also noted that US government debt and derivatives such as the $5 tln of mortgage-backed securities issued by Fannie Mae and Freddie Mac are the backbone of the US and world financial system. “If US debt is in fact less creditworthy, then all the banks and financial companies that rely on its value should also be less creditworthy. Yet, we didn’t hear of JP Morgan, Goldman Sachs and the rest being put on the watch list for a downgrade. Why not? Perhaps this is because S&P doesn’t take its own rating seriously.”

He noted that the US debt is issued in dollars and is payable in dollars. “This means that if some reasons the government was unable to tax or borrow to raise the money to pay its debt then it could always print it. This may carry a risk of inflation, but S&P is not in the business of making inflation predictions, they are in the business of assessing the likelihood that debt will be repaid. (Of course if they are worried that inflation will erode the value of US debt, S&P would also have to downgrade all debt denominated in dollars everywhere in the world.)”

He concluded, “In short, there is no coherent explanation that can be given for S&P’s downgrade. This downgrade was not made based on the economics. We can only speculate about the true motive.”

FUND MANAGERS STILL LIKE T-BILLS. Warren Buffett said the US merits a “quadruple A” rating. “I don’t get it,” Buffett told Fox Business News (8/5) of S&P’s downgrade. In fact, Buffett reaffirmed his belief in the quality of the United States’ credit: “In Omaha, the US is still triple A. In fact, if there were a quadruple-A rating, I’d give the US that.”

Legg Mason Inc.’s Bill Miller agreed in an interview with Bloomberg TV, saying S&P was “precipitous, wrong and dangerous” in lowering the ratings after the previous week’s market selloff, Bloomberg News reported (8/8).

Buffett, chairman and CEO of Berkshire Hathaway Inc. (which has a financial interest in S&P rival Moody’s), told Bloomberg TV he does not think the US faces a double-dip recession. “Clearly what stock markets do have is an effect on confidence, and this selloff can create a lack of confidence,” he said.

Bill Gross, the manager of Pimco, who has been critical of Treasury notes for months, told Bloomberg TV T bills are unattractive because yields don’t offer enough compensation for the risk of inflation. He recently suggested investors should should buy assets of countries that offer higher interest rates, such as Canada, Mexico and Germany. Bloomberg News noted that Pimco Total Return Fund, the world’s biggest mutual fund at $245 bln in assets, is lagging 56% of rivals this year as US government debt rallied amid the European sovereign crisis and concern that the global economy is slowing.

STOCK MARKET REFUGEES FLEE TO T-BILLS. Paul Krugman noted in his New York Times blog (8/8) that “S&P declared that US debt is no longer a safe investment; yet investors are piling into US debt, not out of it, driving the 10-year interest rate below 2.4% This amounts to a massive market rejection of S&P’s concerns.”

When stocks are falling and bond prices are rising, he noted, “that’s normally the signature of concerns about a weak economy and deflation risk (see Japan, decline of).

“What triggered economy fears? To some extent I think this is a Wile E. Coyote moment, with investors suddenly noticing just how weak the fundamentals are. Also, the mess in Europe.”

If anything, the S&P downgrade “will bully policy makers into even more deflationary, contradictory policies than they would have undertaken otherwise, which has the perverse effect of making US debt more attractive, since the alternatives are worse.”

TREASURY DOWNGRADE SQUEEZES STATES, CITIES. Suzy Khimm of WashingtonPost.com noted (8/8) that the real victim of S&P’s downgrade of US credit may be cash-strapped states, towns and cities that are tied to Treasury notes or rely on federal support. Similarly, Fannie Mae, Freddie Mac and the Home Loan Bank Board are unlikely to lose investor confidence due to S&P’s downgrading of their credit, similar to the Treasury downgrading, but state or local housing agencies may find it harder to finance low- or moderate-income housing backed by Fannie or Freddie or FHLB. Unlike Treasuries, said Matt Fabian, managing director of Municipal Market Advisers, “munis are not cash, they have credit risk.” And local governments could pay the price of newfound uncertainty.

OBAMA’S BAD DEAL. The debt deal makes clear that President Obama is not a progressive, or what Americans still call a “liberal,” James K. Galbraith, an economist and professor at the Lyndon B. Johnson School of Public Affairs at the University of Texas, wrote in a column in Deutsche Welle (dw-world.de, 8/4). “He is a willful player in an epic drama of faux-politics, an operative for the money power, whose job is to neutralize the left with fear and distraction and then to pivot rightward and deliver a conservative result.

“What Barack Obama got from the debt deal was exactly what his sponsors have wanted: a long-term lock-in of domestic spending cuts, and a path toward severe cuts in the core New Deal and Great Society insurance programs – Social Security, Medicare and Medicaid. And, of course, no tax increases at all.”

From the beginning, Galbraith noted, Obama handed economic policy to retainers of Robert Rubin and touted “fiscal responsibility” and the (economically non-existent) problem of the budget deficit. He named a federal commission to focus on deficits, supported by Peter G. Peterson, a billionaire who has campaigned against Social Security and Medicare.

The debt ceiling was a pseudo-crisis, Galbraith said, which created the necessary panic to pass the domestic budget cuts and make them stick. “Even as “crisis” loomed, the President had powerful options. The Constitution of the United States flatly forbids default on debt or any other public obligation. The President could have simply asserted his duty and refused to negotiate.

“Even more cleverly, he could – under a quirk of existing law – have turned drama to farce by minting a large platinum coin – say for $1 trillion – and using that to buy back public debt held by the Federal Reserve, so that the debt ceiling would never have been breached. (There would have been an uproar but no other economic effect.)

“These options were rejected or not considered at all. From which, one has to conclude that the President really did want a big budget-cutting deal. He just wanted – like any politician – the appearance of being bullied into it.

“So now the die is cast. Practically nothing to address any real economic problem can now get done. Actual austerity will come slowly – the cuts are not abrupt and some may yet be blocked – but unless there is a radical change of events or mood it will come. Meanwhile as the economy stalls and despair deepens, the deficits and debt will continue to climb.”

MEDIA IGNORE GOP INTRANSIGENCE IN CREDIT DOWNGRADE. While most corporate news reports suggested that both parties shared blame for S&P’s downgrade of US debt, and Republicans and Fox News blamed President Obama, Thom Hartmann noted at CommonDreams.org (8/6) that very few in the mainstream media reported that S&P singled out the Republican resistance to tax increases that are needed to control the rise in debt. S&P said it now believes Republicans will prevent the Bush tax cuts from expiring as scheduled in 2012. “We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues, a position we believe Congress reinforced by passing the act,” S&P explained on page 4.

“Perhaps it’s just lazy – the bullet points at the beginning of the report don’t mention the Republicans or taxes, but instead just say, for example (part of one of six quick bullet-points): ‘[T]he downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges…’” Hartmann wrote.

“In order to figure out that one of the reasons why is that ‘Republicans in the Congress continue to resist any measure that would raise revenues,’ a hard-working reporter would have to read to page four of the eight-page report. It’s just too much effort for most reporters?”

But Hartmann noted S&P mentioned this in the first sentence of its report: “We lowered our long-term rating on the US because we believe that the prolonged controversy over raising the statutory debt ceiling and the related fiscal policy debate indicate that further near-term progress containing the growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed and will remain a contentious and fitful process.” (Emphasis added.)

IF IT THREATENS LIKE A TERRORIST ... After it was reported that Vice President Biden agreed with a Democratic congressman in a closed-door meeting that Tea Party Republicans were acting like “terrorists,” Tea Party Republicans demanded an apology. Biden denied that he described Republicans that way and White House spokesman Jay Carney said neither President Obama nor Vice President Biden think calling political rivals “terrorists” is appropriate.

But some Republicans seem to accept the terrorist comparisons. Senate Republican Leader Mitch McConnell told the Washington Post after the bill passed the Senate: “I think some of our members may have thought the default issue was a hostage you might take a chance at shooting.” He added, “Most of us didn’t think that. What we did learn is this — it’s a hostage that’s worth ransoming. And it focuses the Congress on something that must be done.”

Not all Republicans were happy with the hostage-taking. Paul O’Neill, former Treasury secretary under George W. Bush, warned in April, “The people who are threatening not to pass the debt ceiling are our version of al Qaeda terrorists. Really. They’re really putting our whole society at risk by threatening to round up 50% of the members of the Congress, who are loony, who would put our credit at risk.” O’Neill has not been heard from since then.

Former Reagan and Bush economist Bruce Bartlett called for abolition of the debt ceiling in New York Times blog (8/1). “It is nothing but grandstanding for members of both parties to vote routinely for legislation they know create deficits and then profess shock and horror that the debt limit must be increased as a consequence.” Bartlett writes that there is “not one iota of evidence” to show the limit acts as a constraint on government debt, concluding that abolition of the limit, while unlikely, is necessary. “The only way to avoid disaster in this sort of game,” Bartlett writes, “is not to play.”

GOP BLAMES DEMS FOR BEING HOSTAGES. Clearly, it’s the Democratic Party’s fault, according to the House GOP’s campaign committee. The National Republican Congressional Committee ran ads attacking 10 potentially vulnerable Dems for opposing a balanced budget amendment and blaming the “addiction on government spending” for a downgrade of America’s credit rating, Politico.com reported (8/9).

Jed Lewison wrote at DailyKos.com (8/9) of the Republican logic: “We’re going to destroy the economy if you don’t give us what we want. And when you do capitulate, and things go to s**t, we’re going to blame you for the consequences of your capitulation. Just because we held you hostage doesn’t mean you shouldn’t get blamed.”

DEMS GO ALONG WITH DEBT DEAL. A CNN/Opinion Research poll conducted 8/1 found 52% disapproval of the debt deal, but Democrats were most satisfied, approving 63%-32%. Independents were opposed, 35-62 and Republicans 35-58. But 77% of Democrats disapproved of the lack of revenue increases in the debt ceiling deal and a majority of both Democrats and liberals felt the Democrats and the president “gave up too much” in order to make the deal happen. Only 34% of conservatives felt the GOP “gave up too much.”

30-YEAR WAR ON WORKERS. Thirty years ago, the Professional Air Traffic Controllers Organization went on strike after negotiations with Ronald Reagan’s administration broke down. Ironically, PATCO had endorsed Reagan in his presidential campaign. But on 8/2/80 Reagan fired all the striking workers and barred them from working for the federal government.

Joseph McCartin noted in the New York Times (8/2/11), “Workers in the private sector had used the strike as a tool of leverage in labor-management conflicts between World War II and 1981, repeatedly withholding their work to win fairer treatment from recalcitrant employers. But after PATCO, that weapon was largely lost. Reagan’s unprecedented dismissal of skilled strikers encouraged private employers to do likewise. Phelps Dodge and International Paper were among the companies that imitated Reagan by replacing strikers rather than negotiating with them. Many other employers followed suit.

“By 2010, the number of workers participating in walkouts was less than 2% of what it had been when Reagan led the actors’ strike in 1952. Lacking the leverage that strikes once provided, unions have been unable to pressure employers to increase wages as productivity rises. Inequality has ballooned to a level not seen since Reagan’s boyhood in the 1920s.”

This past January, McCartin noted, Gov. Scott Walker (R-Wis.) invoked Reagan’s handling of PATCO as he prepared to “change history” by stripping public employees of collective bargaining rights in a party-line vote. “I’m not negotiating,” Walker said.

McCartin added, “By then the world had seemingly forgotten that unlike Mr. Walker, Reagan had not challenged public employees’ right to bargain — only their right to strike.”

This year, Laura Clawson noted at DailyKos.com (8/7), “Reagan’s party has become a party that would shut down the FAA — save, ironically, for air traffic controllers — in order to make it all but impossible for private sector workers to unionize. ... Thirty years later, Reagan’s breaking of PATCO continues to shape not just how employers treat unions but how they treat all employees: with the expectation that any worker can be broken and that that is the natural response to any challenge to the employer’s total power and domination.”

Clawson also noted that 45,000 Verizon workers are on strike, “fighting a host of concessions demanded by management and fighting for their middle-class jobs to stay middle-class jobs.” The company reported net income of $1.44 bln in April as earnings more than tripled, but management was still demanding nearly 100 concessions worth $1 bln per year — $20,000 for every worker — and management refused to show up for contract talks.

Spokesmen for the Communications Workers of America and the International Brotherhood of Electrical Workers told the Boston Globe (8/8) they went into negotiations a month ago willing to make concessions related to health care benefits, but Verizon’s proposals to limit sick days, eliminate holidays, such as Martin Luther King Jr. Day and Veteran’s Day, freeze pensions and remove a clause that limits the company’s ability to lay off workers went too far.

Verizon has slashed the percentage of union jobs from 69% in 1999 to 35% in 2010, leaving little question of its intentions toward the union now, Clawson noted.

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MORE AMERICANS USE FOOD STAMPS. A record 45.8 mln Americans were using food stamps in May, the USDA reported (8/1). Meteor Blades noted at DailyKos.com (8/3) that only about 67% of the eligible people actually apply for the Supplemental Nutrition Assistance Program, as the program is now called. The House GOP budget would fund SNAP at only 80% of the current level, a cut of $127 bln between now and 2021. It would cut benefits and impose a time limit on how long a recipient would be eligible for food stamps. Children were 48% of food stamp participants in 2009. Seniors make up 8% of recipients and 93% of recipients have incomes below the poverty line.

DEUNIONIZATION INCREASES INCOME INEQUALITY. The decline of unions is a leading factor behind the income inequality gap, research shows. “From 1973 to 2007, wage inequality in the private sector increased by more than 40% among men, and by about 50% among women,” Bruce Western of Harvard University reported, while “deunionization — the decline in the percentage of the labor force that is unionized — and educational stratification each explain about 33% of the rise in within-group wage inequality among men. Among women, deunionization explains about 20% of the increase in wage inequality, whereas education explains more than 40%.

“Part of the reason for this gender discrepancy is that men have experienced a much larger decline in private sector union membership — from 34% in 1973 to 8% in 2007 — than women (who went from 16% to 6% during the same period).”

Even nonunion workers benefit from stronger unions as employers raise wages and increase employee benefits. The study also attributes the changing normative perception of pay equity to the decline of unions, arguing that “unions helped institutionalize norms of equity.”

Tellingly, the decreasing rate of unionization clearly parallels the squeeze on middle-class incomes. Since the union movement began to stumble in the 1970s, the link between worker productivity and wages has been severed, leading employees to work harder for less money. Between 1980 and 2008, “nationwide worker productivity grew by 75%, while workers’ inflation-adjusted average wages increased by only 22.6%.” (Sarah Bufkin, ThinkProgress.org, 8/1.)

HEALTH REFORM SAVES SENIORS $460M. The donut hole-closing provision of the Affordable Care Act is working, the Department of Health and Human Services reports, and has saved seniors more than $460 mln so far. The pharmaceutical industry agreed to offer a 50% discount for brand-name prescription drugs in the Medicare “donut hole” — the coverage gap in which seniors pay for their drugs out of pocket. Nearly 900,000 seniors have taken advantage of that discount, at a total savings of $461 mln, The Hill reported (8/4).

TAX RATES FOR M’AIRES FALL 25% SINCE ‘95. Millionaires are paying about one-quarter less of their income to federal taxes than they did in the mid-1990s, Seth Hanlon of the Center for American Progress noted (8/4). According to data released by the IRS, millionaires paid an average tax rate of 22.4% in 2009, down from 30.4% in 1995.

The Bush tax cuts 0f 2001 and 2003 lowered the top marginal rate from the Clinton-era 39.6% to 35%, but they also dropped the rates on capital gains and dividend income to a historically low 15%. That was a boon to millionaires because they receive more than 60% of all income from long-term capital gains and nearly 40 of all income from tax-favored dividends. Mega-millionaires and billionaires did even better, paying 18.1% in 2008, largely because that group derives two-thirds of its income from capital gains.

If millionaires paid the same level of federal income taxes as they were in the mid-1990s, the federal government would have collected an additional $65 bln in 2009. That amount of revenue over 10 years, $650 bln, exceeds the $600 bln in cuts to domestic discretionary programs in the budget deal.

Hanlon also noted that lower taxes on top earners did not boost the economy in the Bush years, as supply-side advocates predicted. The US experienced 3.2% economic growth in the 10 years before the Bush tax cuts but only 1.7% since then.

GAS TAX COULD BE NEXT HOSTAGE. The next hostage for the Tea Party Republicans could be the federal gasoline tax (18.4 cents per gallon), which expires 9/30, Politico.com noted (8/1).

Conservative groups are eyeing the expiration as the next potential front in the spending and tax fight — including Grover Norquist’s influential Americans for Tax Reform group — but are mum about any potential legislative strategy. “In general, ATR has always supported the idea of ending the federal tax on gas and having states pay for their own roads,” Norquist told Politico, but he declined to say whether he or his group plans to pressure congressional Republicans to let the excise tax expire.

The federal Highway Trust Fund — the largest source of cash for mass transit and road improvements — is funded by the tax on fuel. In 2008, when high gas prices kept consumers away from the pump, the fund temporarily ran out of money, forcing Congress to appropriate an additional $8 bln to keep road projects on track.

Experts say that an expiration of the gas tax would throw the nation’s transportation system into chaos. “It’s the most important transportation funding source we have,” said Carl Davis, an analyst with the group Citizens for Tax Justice. “It would be absolutely devastating to that trust fund.” (ThinkProgress.org)

BACK-TO-SCHOOL RALLY DWARVES PRAYER RALLY. Houston’s biggest gathering on Saturday (8/6) was not Gov. Rick Perry’s Response prayer rally, which attracted 30,000 Christians to Reliant Stadium. An estimated 100,000 people were drawn to the George R. Brown Convention Center, seven miles away, for a citywide back-to-school event where free backpacks, school supplies, uniforms, haircut vouchers, immunizations and fresh produce were made provided. The City of Houston donated 20,000 boxed lunches and the local food bank gave 25,000 three-pound bags of food.

Event planners expected around 25,000 children to attend along with their parents, but found themselves overwhelmed with nearly four times that number, forcing police to close the doors around 10 a.m., two hours earlier than expected, with many Houstonians left empty-handed. “They were supposed to have school supplies, but all we got was sweating and paid parking,” Houston mother Beatrice Jones told the Houston Chronicle (8/7).

Down the road, Jones’s governor prayed for all those “who have lost hope,” but Sarah Bufkin of ThinkProgress.org noted, “He did not see fit to mention either the thousands of his constituents who lined up for free back-to-school items or the [$4 billion in cuts] his budget will inflict upon the Texas education system.”

DO WINGERS READ THE BIBLE? Jim Rigby, a Presbyterian minister in Austin, wrote in the Austin American-Statesman (8/5), “The use of the governor’s office to promote one religion in a country with such rich religious diversity is obviously unhealthy politics, but, if one takes the Christian and Jewish scriptures seriously, it is also unhealthy religion.” He offered five scripture verses that you aren’t likely to hear at “The Response”:

• Don’t make a show of prayer: “And when you pray, do not be like the hypocrites, for they love to pray in public places to be seen by others ... But when you pray, go into your room, close the door and pray to your heavenly parent, who is unseen (Matthew 6:5-6)

• God doesn’t withhold rain because we’ve done something wrong: “God causes the sun to rise on the evil and the good, and sends rain on the righteous and the unrighteous.” (Matthew 5:45)

• God doesn’t have favorites: “Then Peter began to speak: ‘I now realize how true it is that God does not show favoritism.” (Acts 10:34)

• Worship by those who neglect the poor is offensive to God: “I hate, I despise your religious festivals; your assemblies are a stench to me ... Away with the noise of your songs! I will not listen to the music of your harps. But let justice roll on like a river, righteousness like a never-failing stream!” (Amos 5:21-24)

• The heart of Christian ethics is being a good neighbor: Rignby noted that when Jesus told the story of the Good Samaritan (Luke 10:30-37), it was to teach humility to a rich young zealot who thought he was approaching moral perfection. The Samaritans were the scapegoats of the day. The rich young ruler would consider Samaritans heretics and immoral people. Jesus used a merciful Samaritan as the example of ethical perfection. “It is a lesson that many Christians have yet to learn.”

For example, one sponsor of the event, the American Family Association, is listed by the Southern Poverty Law Center as a hate group. The group’s director of analysis for government and policy is quoted by the SPLC as saying that Hitler was “an active homosexual” who sought out gays “because he could not get straight soldiers to be savage and brutal and vicious enough.” He also said Muslims should not be allowed in the military or be allowed to build mosques in the US.

MORE AMERICANS USE FOOD STAMPS. A record 45.8 mln Americans were using food stamps in May, the USDA reported (8/1). Meteor Blades noted at DailyKos.com (8/3) that only about 67% of the eligible people actually apply for the Supplemental Nutrition Assistance Program, as the program is now called. The House Republican budget would fund SNAP at only 80% of the current level, a cut of $127 bln between now and 2021. It would cut benefits and impose a time limit on how long a recipient would be eligible for food stamps. Children were 48% of food stamp participants in 2009. Seniors make up 8% of recipients and 93% of recipients have incomes below the poverty line.

CANTOR BETS AGAINST US TREASURY. House Majority Leader Eric Cantor (R-Va.), who led the House GOP’s debt ceiling negotiations, is personally invested in a fund that “aggressively ‘shorts’ long-term US Treasury bonds, meaning that it performs well when US debt is undesirable,” Salon.com reported (6/27). Cantor owns up to $15,000 in the fund, which is called the ProShares Trust Ultrashort 20+ Year Treasury ETF.

ThinkProgress.org noted other conflicts of interest with Cantor, who defended mortgage companies and pushed back on efforts to mitigate foreclosures in 2009-10. He owns a stake in a Virginia mortgage company worth hundreds of thousands of dollars, many of his top contributors are financial companies and lobbyists for the mortgage banking industry and his wife was head of a New York Private Bank & Trust, whose mortgage business had one of the highest foreclosure rates in the country during that period (she has since left the company).

GOP SEEKS TO SLASH FOOD SAFETY BUDGETS. In the third-largest recall on record, food giant recall Cargill pulled 36 mln pounds of ground turkey out of stores after a salmonella outbreak linked to one of Cargill’s plants sicked nearly 80 people, killing one. The first illnesses related to the outbreak were reported in March, but The Hill reported that it took months for federal regulators to trace the cause back to Cargill’s turkey. Meanwhile, House Republicans in June voted to slash FDA funds to prevent the agency from implementing a tougher food safety law and have proposed slashing the budgets of USDA food inspectors, who are charged with ensuring the safety of poultry and other meat products.

Rep. Rosa DeLauro (D-Conn.) took the GOP to task for cutting food safety funds. “The House majority has slashed funding for the FDA and USDA, choosing to preserve tax cuts for the wealthy over investing in and improving our food safety system,” she said. “By cutting their funding, we have limited their effectiveness and asked FDA and USDA to do more with less, and the impact of these cuts is starkly clear with this most recent recall.”

One out of six Americans suffers from a foodborne illness every year, with 128,000 of those resulting in hospitalization. Ultimately, 3,000 people die from foodborne illness annually, according to the Department of Health and Human Services. Georgetown University’s Produce Safety Project has found that foodborne illness costs the US $152 bln each year.

Republicans have justified their cuts to food safety by insisting that the private sector “self polices,” Pat Garofalo noted at ThinkProgress.org (8/8). “But that clearly wasn’t the case here, and this isn’t the first time that Cargill has had problems and been forced into a recall. In fact, in 2007, the company recalled roughly 845,000 pounds of frozen ground beef patties linked to an outbreak of E. coli.

BRIEF HISTORY OF FISCAL RESPONSIBILITY. It cannot be said too many times that Ronald Reagan ran for president in 1980, promising a balanced budget, but Bill Clinton is the only president who actually has balanced the budget since then. Instead of balancing the budget, Reagan ran up enormous deficits, adding $2 tln to the debt. In 1993, Clinton passed a budget with modest tax increases, and got no votes from congressional Republicans. GOP leaders predicted the Democratic budget would plunge the nation into a recession. Instead, the economy boomed and the US ran a surplus for the first time in three decades in 1998.

In 2000, George W. Bush ran for president, promising to maintain a balanced budget, according to a timeline noted by Steve Benen at WashingtonMonthly.com (8/6). As Bush took office in 2001, the Congressional Budget Office showed the US was on track to pay off the national debt within a decade. But Bush ran up enormous deficits — Dick Cheney declared “Deficits don’t matter” — as Republicans approved tax cuts, two wars and Medicare expansion without even trying to pay for them — and added nearly $5 tln to the national debt.

In 2009, Barack Obama inherited a budget that was $1.3 tln in deficit. Republicans immediately condemned Obama’s fiscal irresponsibility. Congressional Democrats unveiled domestic policy initiatives, including health care reform, cap and trade to cut down on pollution and the DREAM Act to legalize the children of undocumented immigrants. The GOP opposed all of them, while continuing to push for deficit reduction. In September 2010, Obama’s first fiscal year shrank the deficit by $122 bln, but Republicans again condemned Obama’s fiscal irresponsibility. In October 2010, S&P endorsed the nation’s AAA rating with a stable outlook, saying the US looked to be in solid fiscal shape for the foreseeable future.

In November 2010 Republicans won a US House majority, citing the need for fiscal responsibility. In December 2010, Republicans demanded extension of the Bush tax cuts, relying entirely on deficit financing, all the while continuing to accuse Obama of fiscal irresponsibility. In March 2011 congressional Republicans declared their intention to hold the full faith and credit of the US hostage — a move without precedent in US history — until a massive debt-reduction plan was approved. In July 2011, Obama offered Republicans a $4 tln debt-reduction deal. The GOP refuses, pushing the debt-ceiling standoff until the last possible day, rattling international markets. August 2011, S&P downgraded US debt, citing GOP refusal to consider new revenues. Republicans rejoiced and blamed Obama for fiscal irresponsibility.

BRANSTAD VETOS TAX BREAK FOR POOR. Iowa Gov. Terry Branstad vetoed a tax break for 240,000 low-income Iowa families because the plan did not include a tax break he requested for corporations. Members of both parties in the House and Senate agreed to increase the state’s Earned Income Tax Credit, which would have saved families making less than $45,000 a year an estimated $28.5 mln in taxes over two years. Sen. Joe Bolkcom (D-Iowa City), chairman of the Senate Ways and Means Committee, said Branstad “has again shown that he will only consider tax cuts that benefit Iowa’s wealthiest citizens and corporations,” the Des Moines Register reported (7/28).

From The Progressive Populist, September 1, 2011