US Politics & Economy: Explaining Washington's Dangerous Game of Chicken on the Debt (First, Look at the Tax Cuts)

Photo: Jewel Samad (AFP)Right now the American conversation is being driven by fear, creating a further crisis in the attempt to solve the initial one.  That fear is embodied in the idea that Obama is driving a far-left social agenda and a tax-and-spend socialism, and in the belief that taxes cannot be raised without killing the American economy. But President Reagan raised taxes 11 times, including during a recession, and Obama has cut taxes. Reagan raised the debt ceiling 18 times, and Obama is trying to pass a plan that will only require him to do it once. President Eisenhower stimulated the economy by subsidizing higher education and by building infrastructure, but today he would be considered a socialist for his initiatives. Fifty years later, taxes are at an unrealistic historic level, far lower than they were under all Republican administrations.

The fear is unfounded. The taxes are too low, the debate has gone on too long, and it is time that the Republicans compromise on revenue so that the nation is brought into line with what all of the facts are telling us.

Click to read more ...

US Politics Analysis: The Republicans' Damaging Myth of Lower Taxes = More Employment

Last week, President Obama finally showed some of the leadership over the issue that his critics have demanded. But his new engagement with the debt limit talks, and his desire for a long-term deal, have run headlong into the brick wall of the Republican insistence that spending cuts are the only acceptable means for cutting America's deficits. Even though virtually every moderate media observer is demanding some revenue increases as part of any meaningful deal and even though there is reason to doubt tax increases would be as harmful to the economy as conservatives maintain, Republicans seem prepared to hold this position to the point of breakdown.

Click to read more ...

US Politics Analysis: Republicans Find the Strategy of a Balanced Budget Amendment

Back in early April, EA noted how “Republicans --- and that means all Republican senators in this case --- are threatening that they will only agree to raising the limit if this long-term solution to the debt problem is also passed". GOP Congressman saw a ”once-in-a-lifetime opportunity” to enact the amendment, and “win a major victory for the American people and begin the process of stopping the massive spending, takeovers and debt that are destroying our country.”

The rhetoric used now to support the Amendment has not changed since then, and not one Republican senator has defected from the cause.

Click to read more ...

US Politics Special: Fiddling While America Defaults?

With four weeks to go before the US faces a possible default on its debt, there is still little sense of how President Obama will lead the country out of the public finances mess the nation faces. It defies belief that the Administration does not have some kind of long-term strategy to ensure that America pays its bills come 2 August, but quite what that plan is nobody outside the Administration could claim to know for sure.

One disturbing possibility to begin considering is that Obama is privy to information that the crisis in America's finances is worse than thought --- his seeming reluctance to get fully involved in the debate is, in fact, a masterful attempt to avoid spooking the markets before a Band-aid can be slapped on the problem. That is pure speculation, but it says something about the ineffectiveness of the President that the only way to take some cold comfort from his performance is to imagine an even worse scenario.

Click to read more ...

US Politics and Economy Analysis: Obama Talks Corporate Jets But Fails to Lead

Obama's demeanour does little to suggest he takes the problem as seriously as the authors of the Congressional Budget Office report. He is flunking his responsibility to take the initiative in explaining to the public the magnitude of the issues at stake. When he talks corporate jets not entitlement spending reform, he only makes it harder for those voices in Congress who are struggling to lead responsibly to be heard. If the president does not appear to be taking them seriously --- to my knowledge, President Obama has not once publicly acknowledged or encouraged the efforts of Sen. Conrad to build some sort of bipartisan consensus on the deficit, why should anyone else?

Click to read more ...

US Politics Special: Will the Democrats Fight Back over Jobs?

The Democratic response to the twin problems of the stagnant economy and the successful Republican onslaught on "irresponsible" government spending has been to play defense. Little has emerged from Congress, and nothing from the Obama Administration, to suggest that the Democrats have vision of how to stimulate not only the economy, but also a liberal base feeling battered by the conservative resurgence.

But there were signs last week that Democrats are beginning to emerge from the bunker mentality re-engaging Republicans with the case that more should be done to invigorate the labor market through government investment.

Click to read more ...

US Feature: 5 Top Facts About Defense Spending --- and What It Costs America (Holland)

Head Start provides education, health, nutrition, and parenting services to low-income children and their families. It's an incredibly successful, effective and popular program, but there are only 900,000 places in the program for more than 2.5 million eligible kids. According to the National Priorities Project, what we've spent on the Afghanistan war so far could fund Head Start for all eligible children for the next 15.6 years.

Click to read more ...

US Politics Analysis: Setting Out the Medicare Crisis

An ideological clash looms over the reality that health care costs are on an unsustainable upward curve. Both parties have different and deeply divergent opinions on how those costs should be controlled, but the Medicare Trustees Report unequivocally sets outs:

The sizable differences in projected Medicare cost levels between current law and the illustrative alternative scenario highlight the critical importance of finding ways to bring Medicare costs --- and health care costs in the U.S. generally --- more in line with society's ability to afford them.

Quite how that "critically important'"solution can be found in the existing political climate remains a mystery.

Click to read more ...

US Politics: Compromising on the Federal Government's Debt

A few weeks ago it appeared that Republicans were prepared to use the need for increasing the debt limit to push through some of the controversial measures included in their 2012 Budget Resolution, notably the plan proposed by Rep. Paul Ryan (R-Wisc) to change the Medicare programme for future beneficiaries and/or a Balanced Budget Amendment that would require sharp and immediate reductions in government spending.

These options are not totally off the table, especially with the pressures being exerted within Republican ranks by new members of Congress keen to assuage their Tea Party constituencies, but the overwhelming message that emerged from participants after the Biden talks is the urgent need for compromise before the debt limit vote.

Click to read more ...

US Politics Analysis: "The Game's Afoot" --- The Budget Battle and Obama's Historic Speech

This was a speech that will be in the history textbooks in 50 years' time. Their verdict on its importance may be uncertain as yet, but Obama showed on Wednesday the essential role of the Chief Executive in framing the context of debate in the United States. Now the budget battles over the future of the entitlement programs in America can begin in earnest.

Click to read more ...