Fix the Debt, Destroy the Recovery

David Walker announced his endorsement of Mitt Romney this week. The name might not ring a bell, but Walker was head of the Peter G. Peterson Foundation, the number one funder of deficit-hawkery in the United States. Walker, a former Comptroller General, has described himself and his crusade as bipartisan, and it is actually helpful that he has come out of the closet as a Republican.

Lately, Walker has been deeply involved with the efforts to levitate the late Bowles-Simpson Commission as a template for deficit-reduction, and has been working closely with the corporate-funded “Fix the Debt” campaign of more than 100 CEOs lobbying for an austerity grand bargain. 

It’s worth unpacking the economics and the politics of the austerity lobby.

The Fix the Debt campaign, much like the Bowles-Simpson Commission and the propaganda of the Peterson Foundation generally, contends that the projected national debt is depressing business willingness to invest now. Presumably, businesses are worried about inflation and uncertainty. But the government can fund ten-year bonds at less than 2 percent interest and thirty-year bonds at less than 3 percent. So investors don’t seem worried about inflation. It’s not lack of confidence in deficit reduction that’s depressing business investment but lack of confidence in consumer purchasing power.

If anything, the economy needs more public spending to get us out of a deep slump brought to you by the very people behind this campaign. Cutting the deficit prematurely will only depress purchasing power and deepen the slump. That’s the real lesson of Greece, Spain, Portugal, et al.

The only difference between the “Fix the Debt” campaign and a dozen kindred efforts such as the Committee for a Responsible Federal Budget, the Pew-Peterson Commission, the Concord Coalition, and Bowles-Simpson Redux is that this one is funded and led by corporate CEOs. The campaign is on track to raise $100 billion in corporate money.

Last week, the campaign even did a major event at the New York Stock Exchange, a sign of the tin ear that operates in the corporate boardroom echo-chamber. It was Wall Street excesses that crashed the economy. And now, corporate CEOs are hectoring the 99 percent to tighten their belts.

Another splendid case of chutzpah, defined in the classic joke as the man who murders his parents and then asks the judge for mercy on grounds that he’s an orphan: Several of the CEOs that lead the Fix the Debt campaign are heads of highly profitable corporations that pay no federal taxes.

According to a very helpful analysis by Americans for Tax Fairness, 13 of the corporations whose CEOs are behind this lobby paid zero taxes in recent years. Here is their chart drawn from an analysis of IRS data by Citizens for Tax Justice:

Corporation

Federal Income Taxes 2008-2011

Profit
 2008-2011
$ Billions

Tax Subsidies 2008-2011
$ Billions

Boeing

$0

$14.8

$6.0

Corning

$0

$2.9

$1.0

General Electric

$0

$19.6

$10.6

Honeywell International

*$0

*$4.9

$1.7

Verizon Communications

$0

$19.8

$7.7

TOTAL

$0

$62 billion

$27 billion

David Cote, the CEO of Honeywell, and a member of the steering committee of the Fix the Debt lobby, is paid $55.2 million a year, and personally saved an estimated $2.5 million last year thanks to the Bush tax cuts. Americans for Tax Fairness calculates that 57 of the sponsoring CEOs save at least $1 million a year courtesy of the Bush tax breaks.

Another member of the steering committee is James B. Lee, Jr., co-chairman of JP Morgan. With Wall Street’s other investment bankers, Morgan is relentlessly lobbying the government to water down the regulations carrying out the Dodd-Frank Act. It was the recklessness of Wall Street that pushed the economy into a deep hole, and these people want the license to do it again.

Others in this financial rogues gallery lending their names to Fix the Debt are Larry Fink, CEO of Black Rock, and Lloyd Blankfein, chairman of Goldman Sachs.

So if these guys were not utter hypocrites, they’d be lobbying to repeal cuts on their personal incomes and the loopholes that allow highly profitable companies to avoid taxation entirely, as well as for adequate financial regulation.

Even worse is the fact that prominent Democratic elected officials, now cozy with the business elite, have lent their names to this effort. In that hall of shame: former Pennsylvania Governor Ed Rendell and former Califorina Congressman Vic Fazio, as well as former Senator Sam Nunn, a longtime deficit hawk associated with the Peterson-funded Concord Coalition.

The other cute deception practiced by the Fix the Debt campaign is to portray their own efforts as a way to spare the economy from the harmful effects of the impending “fiscal cliff.” That is the set of automatic “triggers” set to go off January 1, cutting spending by $1.2 trillion dollars, unless Congress acts to cut the deficit on its own. The Congressional Budget Office projects that deficit cuts of that magnitude will push the economy back into negative GDP growth in 2013.

However, automatic triggers have been a favorite device of the austerity lobby going back decades. So Fix the Debt is promoting deep cuts to spare the country deep cuts resulting from the earlier handiwork of the same crowd. The only difference between the fiscal cliff that the Fix the Debt campaign is invoking in its hysteria campaign and the one that the campaign itself wants to lead the economy off a cliff is a matter of degree. The CEOs would push us off a slightly lower cliff.

This stuff would be comical if it weren’t so influential. And if President Obama is re-elected, the corporate CEOs add up to one more pressure group pushing him to agree to a budget-cutting deal that will be suicidal for the economy and for his legacy in a second term.

Deficit reduction in a deep slump is not a path to recovery but to a deeper slump.

The fact that corporate CEOs are behind this latest push should not give the campaign greater credibility, but rather should signal “buyer beware.”

Despite the bipartisan camouflage, this campaign was always deeply conservative—hostile to social outlay, activist government, and a decent income distribution. Shame on any Democrat who doesn’t see through it.

Comments

That chart that shows large corporations receiving tax subsidies and paying no federal income taxes is obscene. How anyone can vote for the mysterious teapublican tax plan is baffling. Also, cutting the Department of Education, FEMA, Planned Parenthood funding, Public Broadcasting, Medicare, Medicaid, employee unions, etc. etc. IS NOT ACCEPTABLE. If we all vote, the teapublicans will have to practice their bigotry, exclusion, and obstruction elsewhere. Please do not miss this election. Our families cannot afford Mitt Romney's slash and burn/ trickle-down economics. Thank you!

http://www.youtube.com/watch?v=FvTIphPnDM8

I don't think many Americans quite grasp the austerity agenda. Under Bill Clinton, this agenda was adopted for our poor. Results were predictable in terms of increased infant mortality rates, a life expectancy among US poor that has fallen below that of some Third World nations, return of some diseases we thought had been eradicated, etc. These policies kill, and what we learned is that we finally have a generation of Americans who couldn't care less. The media (including progressive) has largely chosen to un-write the poor from the American story. The thing is, very, very little of what once went into welfare for the poorest still exists, having been redistributed upward. Today, two things alone consume over 50% of the fed. budget: annual handouts/tax cuts for the rich/corps. and the military, neither of which will be substantially cut. We no longer have the jobs that pay enough to bring in the taxes necessary to maintain the military and the country. Since there's virtually nothing left to take from the poor, it is necessary now to focus on austerity for the middle class. That's the only available money left. Upward wealth redistribution will continue; what the middle class did to the poor, the rich are now doing to the middle class.

This goes back to the founding of the country. Our "Founding Fathers" were all wealthy men (by the standards of the time). The Constitution was written to "protect wealth and property". (this was in the Federalist Papers). We are a "republic", not a democracy. As a matter of fact the Founding Fathers were quite clear that they did not want to create a democratic society. Republics are not "representative" of the people, but of the wealthy, property owning class. Who makes up the majority of Congress? Not ordinary working people. But the "licensed professions". The legal profession is vastly over-represented in Congress. These are generally men of wealth and property. Not true representatives of the "people" as such. To find "democracy", you have to look outside the USA for it as you will not find it here. In true democracies, all their citizens have the right to health care regardless of income. Not so here in the USA, which is further proof if any is needed of the true nature of our "plutocratic republic" as represented by Mitt Romney, a proud example of the sort of person held up as an ideal by the Republican Party, otherwise known as the party of the rich and the big corporations. And how did Mitt Romney become rich? Did he do it through hard work? Did he create something "useful"? The answer is that he engaged in "legal theft". Bain Capital did "leveraged buyouts", bought up companies with borrowed money. Then Bain would put the assets of the business as backing for a loan to pay off the loan that Bain made to buy the company. Bain would raid the company's pension fund, any other assets it could seize. Then the remainer would be liquidated, the machinery sold, the workers fired as they were no longer needed. Bain did this with a company making automotive sensors called "Sensa". Bain sold the company to the Chinese. Had the American workers as their last act train their Chinese replacements with the threat to without severance pay if they refused to do it. This is the sort of a man that is now running for President. In a proper society Mitt Romney would be serving time in a federal prison somewhere, instead of running for President!

Still true today:
"We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle."

Winston Churchill (1903)

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