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For the austerity class in Washington, yesterday was high theater. The Congressional supercommittee on deficit reduction heard hours of testimony from people who served on other deficit commissions about how best to cut the government’s budget. Both Alan Simpson and Erksine Bowles, of the Bowles-Simpson Commission, testified, as did Alice Rivlin and Pete Domenici, who have their own deficit reduction plan.
A morality play about the evils of national debt unfolded: the scene, as set by Domenici, was a fiscal house in disarray—“We have rats, holes in the roof and grass growing window high,” he said. Bowles—a board member at Wall Street megafirm Morgan Stanley—invoked his grandchildren and told the supercommittee not to “fail the country” by not agreeing on a major deficit reduction plan. Rivlin, who helped Representative Paul Ryan craft his Medicare privatization plan, proclaimed that “this committee can change the course of economic history for the better.”
The villains in this battle were Grover Norquist and the AARP, both of whom were repeatedly invoked as obstacles to a true deficit reduction package. Former Republican Senator Alan Simpson said Republicans should feel free to raise revenue, even if it caused Norquist to “have a stroke over in his shop.” He also blasted AARP for a television campaign to protect Medicare from supercommittee cuts. He called the advertisements “really ugly” and “the most disgusting ad I've ever seen.” (The ad can be seen here; it features a friendly senior citizen asking not to have his benefits reduced.)
No actual specifics were hashed out by supercommittee members—that’s being done behind closed doors, and as we noted last week, the left side of the supercommittee has already proposed a package that’s well to the right of the Bowles-Simpson proposal. Needless to say, the Republican proposal is even worse.
But other developments outside the hearing room yesterday have serious import—and should cause serious concern among progressives.
Reuters reported on the existence of a super-supercommittee—six members of the twelve-member supercommittee are negotiating a compromise amongst themselves. The Democratic members are Representative Chris van Hollen, and Senators Max Baucus and John Kerry.
That means Representatives Xavier Becerra and James Clyburn—the only true progressives on the committee—have been excluded from the negotiations. Becerra is a member of the Congressional Progressive Caucus, and Clyburn has already reportedly opposed the Medicare cuts being discussed and spent most of his time at the hearing yesterday addressing income inequality, using charts that showed explosive growth in post-tax income for the top 1 percent.
But they apparently no longer have a seat at the table with their fellow Democrats. The only other Democrat to be excluded was Senator Patty Murray—and that’s logical because, as a co-chair of the committee, she can’t really be part of the subgroup. (The Republican co-chair, Representative Jeb Hensarling, was left out of the Republican side as well).
Last week, Democrats proposed a package that features deep cuts to both Medicare and Social Security, and now they have sidelined progressive members who might oppose it. I’m not sure there will be a deal—Republicans are still not budging on raising taxes—but Democrats are trying awful hard to make a bad one.
As we’ve been reporting, Democrats on the supercommittee—led by Senator Max Baucus—are pursuing a “grand bargain” on deficit reduction, which would include tax increases, spending cuts, a new round of economic stimulus and steep cuts to both Medicare and Social Security. Republicans have rejected the deal in favor of their own, which basically includes all of the cuts and does not include tax increases nor stimulus spending.
But several Democratic members of the House are increasingly upset with how supercommittee Democrats are carrying out the negotiations, and are threatening to vote against a package that includes deep cuts to the safety net. Some are even planning an attempt to get rid of the supercommittee altogether.
Representative Maxine Waters of California has introduced a bill to repeal the supercommittee, and the $1.2 trillion in cuts it’s mandated to make. She believes the committee is “illegitimate” and “borders on unconstitutional.”
At a breakfast meeting with progressive reporters and bloggers today, Waters said she knows her bill probably doesn’t have the support to pass right now, but she wants it on the table if the supercommittee deadlocks. “Of course its’s a long shot. But right now people are getting more and more agitated, frustrated and concerned about this supercommittee and not happy that there are those who are saying, including the president, they want even bigger cuts,” Waters said. “So it may fall apart. If it falls apart my bill is there to say ‘kill it.’ ” She added that she’s spoken to several Republicans who are equally unhappy with the supercommittee’s power.
Waters’s frustration is shared by many Democrats in the House, who feel not only shut out from the process by colleagues in the Senate—Baucus is reportedly acting with guidance from Senate majority leader Harry Reid, leaving House minority leader Nancy Pelosi on the sidelines—but are also shocked at the level of cuts to Medicare and Social Security being proposed.
Representative Henry Waxman told Politico today that he has “no stake” in the committee and called it an “outrageous process” that is “not open and transparent.” He said the “things put forward by Democrats…I would never vote for.”
Much of the Democratic caucus could bolt from a supercommittee deal that looks like what Baucus has proposed, according to Representative Gerry Connolly in his remarks to Politico. “It’s a mistake to not bring [minority] leader Pelosi into meetings,” said Connolly .“If she’s not a stakeholder in a final product, neither is the Democratic caucus.”
With Republicans refusing to budge on revenues, a deadlock seems likely—meaning steep, across-the-board cuts to defense spending and domestic programs would be triggered. “I’ve always thought it will deadlock. I’ve never been one who believed anything meaningful would come out of it, if you assign six Republicans to it and they’ve all signed a pledge there can be no revenues,” Representative Peter DeFazio told me this morning at the breakfast.
Some Republicans have already publicly pledged to undo the defense cuts if the triggers are activated—and Waters said today some Democrats would likely try to protect domestic spending cuts.
It’s far from clear what the end result will be, but it’s pretty clear that nobody will like it—and many will try to change it.
Today at a meeting with progressive journalists and bloggers, Representative Gwen Moore of Wisconsin—the only person to have beaten Governor Scott Walker in an election—read her original poem called “Job Creators.” It’s a challenge to that vaunted group, which Republicans eagerly claim to promote and protect at all costs. It was really too amazing not to post right away:
Yesterday, supercommittee Democrats proposed a massive deficit reduction plan consisting of $300 billion in economic stimulus, discretionary spending cuts and increased tax revenue, and an alarming $575 billion in cuts to Medicare and Medicaid, at least $200 billion of which would come directly from benefits. (See my story here). After I published, reports came out that not only were Democrats proposing draconian Medicare cuts, but also floated the idea of adjusting the Consumer Price Index used to calculate Social Security benefits—in other words, they were willing to cut that program, too.
Republicans on the supercommittee rejected the deal immediately, due to the tax hikes, and proposed their own: it, too, included deep cuts to Medicare and Medicaid, deeper (but not by much) than what Democrats proposed, along with deep discretionary spending cuts and some limited “revenue raisers.” The revenue Republicans propose raising isn’t really in the form of taxes but increased government fees and higher co-pays for Medicare recipients.
Democrats have rejected this, rightly, because it makes deep cuts without changing the tax code nor really raising substantial new revenue. So we have a situation very similar to the summer standoffs over the debt limit: Democrats offer a “grand bargain” including tax increases along with many things that really anger their base, Republicans reject it in favor of an even more extreme package with no tax increases, and there’s a standoff. Everyone kicked this can down the road, to use the parlance of Washington pundits everywhere, by creating the supercommittee, but the fundamental dynamics haven’t changed.
The difference now, as I noted yesterday, is that the Republicans have no particular leverage. They possess the same amount of votes on the supercommittee as Democrats, and are if anything more scared of the triggers that get pulled in the event of a deadlock—Republicans don’t want to see the massive defense cuts that would then occur. Hopefully this means that Democrats won’t sell the farm in order to achieve a deal, but that remains to be seen. If I had to guess, I would say the committee deadlocks.
Meanwhile, the media coverage is the same as it ever was—that is, awful. Today in the Washington Post, Dana Milbank wrote a column on the supercommittee that turns on the following analyses:
Reasonable people on all sides know that tackling the nation’s long-term debt problems will require both an increase in taxes and cuts to entitlement programs. But just weeks from the committee’s deadline, Republicans continue to resist new tax revenues, and Democrats dance around the need for entitlement cuts [emphasis added].
Putting aside his insistence that entitlements must be slashed—Social Security does not contribute to the deficit—how did Milbank follow the supercommittee all day yesterday and come away thinking Democrats are dancing around entitlement cuts?
Very distressing news broke during this morning’s meeting of the supercommittee: aides told Reuters that Democratic members of the committee have proposed $2.5 to $3 trillion in deficit reduction measures, including $400 billion in cuts to Medicare—a half of which would come from benefits.
The Democratic proposal consists of an even split between tax increases and spending cuts, and also $200 to $300 billion in new stimulus spending that would be paid for because interest payments on the debt would be lowered if the plan passed. The $400 billion in Medicare cuts would be split evenly between beneficiaries and providers. It was reportedly a formal proposal advanced by Senator Max Baucus, though Clyburn is said to object to the Medicare cuts.
The supercommittee has largely been deliberating behind closed doors, but as far as anyone knows the Republicans have not proposed anything this concrete. This begs serious questions, once again, about Democrats’ negotiating techniques in the ongoing budget and debt ceiling dramas.
The additional stimulus is a terrific idea, and fulfills the calls for the supercommittee to address the jobs crisis as it forms a deficit reduction plan. And raising additional revenue is a must for any serious deficit package.
But this magnitude of Medicare cuts, presumably meant to entice Republicans, is astounding and out of line with previous Democratic proposals. President Obama’s own deficit plan calls for $320 billion in healthcare savings, only seven percent of which—not 50—would affect beneficiaries. I thought at the time perhaps Obama’s proposal would push the supercommittee left; instead, it’s gone far to the right, thanks to Baucus and the Democrats who support his plan.
Right now, approval ratings for Congressional Republicans are in the toilet, with just 20 percent of Americans saying they believe the party has a “clear plan” for job creation. Meanwhile, almost half of Americans (and counting) support the Occupy Wall Street movement and its demands for greater income equality and protections for the 99 percent.
So Republicans’ pull with the public is low, and on the supercommittee, it’s even lower. Unlike during the prolonged debt ceiling debate, the party has no real leverage. Then, Republicans seemed willing—even eager—to let the federal government default on its obligations, whereas Democrats and President Obama were not. But Republicans have the same number of votes as Democrats on the supercommittee, and control only the House of Representatives. Moreover, many Republicans have voiced serious fears about the triggers that would cut defense spending if the supercommittee cannot reach a deal. (Medicare, by the way, is entirely protected from the trigger process).
So why would the Democrats pre-negotiate cuts to Medicare—and if so, why go so far beyond what Obama already proposed? They either really want to cut the program, or are hoping to entice Republican votes to their side—a mission that’s proven fruitless in the Obama era, ever since the president went hunting for Republican votes on the stimulus in 2009 and didn't find a single one in the House and three in the Senate, one of which came from a senator, Arlen Specter, who soon became a Democrat.
And when Republicans on the supercommittee reject the stimulus and tax measures, they will surely be more than happy to keep talking about Medicare cuts, which are now officially on the supercommittee’s table.
This morning, I wondered whether income inequality would come up during the hearing, since the only witness, Congressional Budget Office Director Doug Elmendorf, just produced a dramatic report on the growing wealth divide. To their credit, Representatives Xavier Becerra and James Clyburn mentioned the report and urged the committee to address income inequality as it produces a deficit plan. If that’s what they want, they ought to push back hard against their party’s attempts to slash the social safety net.
UPDATE: In a not-so-shocking development, Republicans on the super-committee have already rejected Baucus' attempt to go big on deficit reduction. They don't like the stimulus and tax measures, and the committee is now deadlocked. Now that the GOP has pushed those items off the table, it will be very interesting to see if the Democrats pull the deep Medicare cuts right off the table as well.
A dramatic study released today shows income inequality in the United States is on a furious upward trajectory: since the late 1970s, the top one percent of earners more than doubled their share of the nation’s income. From 1979 to 2007, average inflation-adjusted after-tax income grew by 275 percent—and the top one-fifth now receives more income than the other four-fifths of the population. Meanwhile, people in the middle three-fifths of the population saw their shares of after-tax income decline by two or three percentage points.
The study’s results are dramatic, though certainly have been studied and noted before. But what adds juice is who conducted the study—it was released today in the heat of the Occupy Wall Street movement by the non-partisan Congressional Budget Office, after years of work. The study was requested by Senators Max Baucus and Charles Grassley in 2006.
And this morning, there’s a perfect stage for these findings: Doug Elmendorf, the head of the CBO, is testifying again before the Congressional supercommittee on deficit reduction, which is trying to find $1.2 trillion in cuts while possibly tackling the increasingly lopsided tax code, which the CBO found was a key contributor to the upward shift in incomes.
The last time Elmendorf testified, he urged the supercommittee to focus on growing the economy now and cutting the deficit later. Many Democrats and union groups are urging the committee to focus on growing the economy and creating jobs now, as well. But Republicans on the panel weren’t receptive to Elmendorf’s message last time—“deficit reduction is a jobs plan,” Representative Jeb Hensarling claimed that day.
Now, Elmendorf’s office has released this thorough, nonpartisan debunking of the idea that income inequality isn’t a real problem. Will Elmendorf trumpet its findings, and will Democrats bring it up? How will Republicans get around it? And ultimately, will these sobering facts push the supercommittee to minimize cuts harmful to middle-class Americans, ignore the calls from Wall Street for deep cuts and also make the tax code more equitable?
I am heading over to the hearing room now, and will report on twitter (@gzornick) and in this space later today. I’m not convinced at all that Hensarling and Club for Growth’s favorite Senator, Pat Toomey, will suddenly see the light, but they will likely at least face some uncomfortable truths.
Last week in The Nation, Ari Berman penned an excellent examination of the “austerity class”—the network of wealthy donors, pro-corporate front groups, and right-leaning pundits that have successfully convinced Washington that debt and deficits are a more pressing concern than stimulative action on jobs. As Berman noted, the basic goal of the Wall Street–driven movement is to see government funds directed to the private sector.
The Congressional supercommittee, tasked with finding at least $1.2 trillion in ten-year deficit reduction by November 23, is a natural target for the slashing austerity class. But there’s been a lot of talk in recent weeks that the supercommittee might not actually do much. Many legislators seem to think the committee will deadlock, thus triggering automatic cuts in both defense and domestic spending—but lawmakers could pretty easily undo the cuts resulting from that trigger. There are other ways for the committee to escape the burden of deep cuts painful to both sides: some senior Republicans, for example, are reportedly pressuring their colleagues to just count the money saved from already planned drawdowns in Iraq and Afghanistan, which would almost get to the supercommittee’s $1.2 trillion target.
Enter Wall Street. In a Hill story this morning titled “Fears of a US credit downgrade are growing on Wall Street,” we hear a lot of ominous talk from bankers that the credit rating agencies will downgrade the federal government's credit, again, if the deep cuts aren’t achieved:
Fitch Ratings, one of the three major credit raters, said in August that failure by the supercommittee to agree to a $1.2 trillion deficit-reduction package “would likely result in negative rating action.” […]
In its outlook for this week, Bank of America Merrill Lynch said it “expects” a downgrade by one of the three credit agencies “when the supercommittee crashes.”
It’s important to understand that the credit rating agencies get all of their fees from Wall Street, and have historically been more than willing to do the bidding of powerful financial firms—whether it was blessing toxic mortgage-backed securities or the issuing the unjustifiable downgrade of the federal government’s credit in August. (I wrote about that here, here, here and here). So this is just a tool which Wall Street is using to increase pressure on Washington to make cuts.
The story has more threats from Wall Street beyond action by the rating agencies, namely in the form of completely ridiculous rhetoric:
In its weekly analysis Friday, Deutsche Bank said the supercommittee report is “perhaps” the most important issue facing the markets. “The fiscal calendar is likely to be a source of considerable volatility,” the report warned.[…]
Michael Cembalest, chief investment officer for JP Morgan Chase, wrote that failure by the group could even herald the end of the dollar as a reserve currency.
So Wall Street really wants these cuts, without any shenanigans. The question now is whether Washington will listen—and of course, it usually does.
Bill Moyers delivered a stirring keynote on the capture of our political system by the ultra-rich last night in Washington, at a gala honoring the fortieth anniversary of Ralph Nader’s advocacy group Public Citizen. Moyers urged people to have clarity about what has happened to American politics, and to engage in dedicated citizen action to combat it. His remarks are worth quoting at length:
During the great prairie revolt that swept the plains a century after the Constitution was ratified, the populist orator Mary Elizabeth Lease explained “Wall Street owns the country. Our laws are the output of a system which clothes rascals in robes and honesty in rags. The parties lie to us, and the political speakers mislead us,” because, she said, “money rules.”
That was 1890. And those agrarian populists were boiling over with anger that the corporations, banks and government were conniving to deprive everyday people of their livelihood. They should see us now.
John Boehner calls on the bankers, holds out his cup, and offers them total obeisance from the House majority if only they will fill it. That’s now the norm, and they get away with it.
Barack Obama criticizes bankers as fat cats, then invites them to dine at a pricy New York restaurant where the tasting menu runs to $195 a person. And that’s the norm. And they get away with it.
As we speak, the president has raised more money from banks, hedge funds, and private equity managers than any Republican candidate, including Mitt Romney. Let’s name it for what it is: democratic decency defined downward. Politics today—and there are honorable men and women in it—but politics today is little more than money laundering and the trafficking of power and policy, fewer than six degrees of separation from the spirit and tactics of Tony Soprano.
Why New York’s Zuccotti Park is occupied is no mystery—reporters keep scratching their heads and asking, “Why are you here?” But it’s as clear as the crash of 2008: they are occupying Wall Street because Wall Street has occupied America.
So it’s no wonder to me as a journalist or a citizen that so many Americans have felt that sense of political impotence that Lawrence Goodwyn described as the mass resignation of people who believe in the dogma of democracy at the superficial level, but whose hearts no longer burn with the conviction that they are part of the deal.
And I will tell you that against such odds, discouragement comes easily. But if the generations before us had given up, slaves would still be waiting on these tables, women would still be turned away from the voting booths on election days, and workers would still be committing a crime if they organize.
So, don’t ever, as Ralph said, don’t ever count the people out.
Moyers appeared along with Nader and other key advocates from Public Citizen, like Joan Claybrook, Alan Morrison and Dr. Sidney Alan Wolfe. The group has rather stunning record of success combatting corporate power in Washington, from the famous battles over auto safety to later fights against nuclear power, dangerous pharmaceutical products and other excesses.
How often does the Pentagon award contracts to defense companies that have already been proven to be defrauding taxpayers? A report the Department of Defense did at the request of Senator Bernie Sanders (I-VT) reveals an answer that should make Washington very uncomfortable.
The report, released today, showed that hundreds of defense contractors found guilty of civil fraud received more than $1.1 trillion in defense contracts since 2001. The study took into account only companies that were found to have defrauded taxpayers of more than $1 million dollars.
More than $573 billion went directly to companies that were guilty of defrauding taxpayers, and when you factor in the awards that went to the parent companies of those contractors, the total is $1.1 trillion. Of that $573 billion, more than two-thirds—$398 billion—went to companies after they had been found guilty of fraud.
Companies convicted of “hard-core criminal fraud” received $255 million in contracts, $33 million of it after conviction.
Some of the country’s biggest defense contractors were implicated. “The ugly truth is that virtually all of the major defense contractors in this country for years have been engaged in systemic fraudulent behavior, while receiving hundreds of billions of dollars of taxpayer money,” said Sanders. According to the report:
Lockheed Martin in 2008 paid $10.5 million to settle charges that it defrauded the government by submitting false invoices on a multi-billion dollar contract connected to the Titan IV space launch vehicle program. That didn’t seem to sour the relationship between Lockheed and the Defense Department, which gave Lockheed $30.2 billion in contracts in fiscal year 2009, more than ever before.
In another case, Northrop Grumman paid $62 million in 2005 to settle charges that it “engaged in a fraud scheme by routinely submitting false contract proposals,” and “concealed basic problems in its handling of inventory, scrap and attrition.” Despite the serious charges of pervasive and repeated fraud, Northrop Grumman received $12.9 billion in contracts the next year, 16 percent more than the year before.
The report comes at a crucial time, as the Congressional supercommittee debating $1.2 trillion in deficit reduction is at least theoretically going to be looking at cuts to the Defense Department—and if they cannot agree, which seems increasingly likely, triggers will take half of that amount from defense spending.
Many Republicans are strongly opposed to any cuts—Senator Jon Kyl (R-AZ), a member of the panel, even threatened to quit if significant defense cuts were made. Senator John McCain (R-AZ) has already said he would try to undo any defense cuts if the trigger is hit.
Last week, Secretary of Defense Leon Panetta testified before Congress that if the trigger is hit and that amount is cut from military spending, “it’ll truly devastate our national defense.” As I noted, Panetta said President Obama agreed with him—a comment the White House has not yet corrected.
This stance is ludicrous giving the sheer amount of waste at the Pentagon. The military’s own auditors have admitted that it cannot track 25 percent of the money it spends—in 2010, that would amount to $165.95 billion. For perspective, the entire budget of the State Department last year was $27.4 billion.
The report commissioned by Sanders offers a grim accounting of how a lot of money can be wasted—by continuing to pay companies that have brazenly been ripping off the government for years. Battling that waste seems like a prime target for any legislators truly concerned with the country’s debt.
This post was written by The Nation’s DC intern, Cal Colgan.
Earlier this week, Congress passed trade deals with South Korea, Panama and Colombia, and the president will undoubtedly sign them into law. The Obama administration claims the agreements will increase exports by $13 billion and support tens of thousands of US jobs. The deals were stalled in Congress for five years over concerns they would hurt American jobs, but many centrist Dems lent their support when the House proposed a bill to protect workers hurt by foreign competition.
But for all rhetoric about protecting American workers, most mainstream media outlets only had passing mention of the Colombia deal’s actual effect on that country’s labor movement. A few paltry sentences in the New York Times, the Washington Post, and CNN were all the non-savvy news consumer got about the issue.
The truth is that despite the claims of Angelino Garzón, the former Communist Party leader-turned-vice president, there have not been many improvements in the Colombian government’s treatment of union activists.
True, if one were to measure the carnage by Colombian standards, the murders of union activists have dropped significantly, as the Miami Herald reports:
During the first nine months of the year, there were 22 union-member assassinations in Colombia. In 2010, there were 51 murders. While it’s still a global record, it’s down dramatically from 1996 and 2002, when there were 281 and 201 union-member homicides, respectively.
But twenty-two assassinations is still a large number for a country that—in the words of Garzón—claims to be making “tremendous progress in defending human rights and in protecting and working with unions.”
Historically, as the Herald also notes, Colombian officials investigate a pathetically small amount of union-related homicides that do occur:
Human Rights Watch recently pointed out that of the 2,886 union-member murders registered since 1986, the government’s conviction rate is less than 10 percent.
In 2007, a special unit was created in the prosecutors’ office to deal with crimes against union leaders. Since its inception, there have been 195 union-member homicides and only six convictions, Human Rights Watch said.
Garzón and President Juan Manuel Santos are being fairly naïve when they claim that the new trade agreement with the United States will allow American authorities to monitor their country’s labor and human rights policies. That ignores the fact that the United States has at times played an indirect role in the abuses—right along with the Colombian government itself.
In September, Columbia’s Supreme Court sentenced Jose Noguera, the former director of Administrative Department of Security (DAS) to twenty-five years in prison for colluding with right-wing militias. During Alvaro Uribe’s presidency, Noguera gave the death squads lists of left-wing activists and union leaders, many of whom were later killed.
Also, during Uribe’s presidency DAS-controlled groups received US government supplies and CIA training to monitor Uribe’s opponents, including union members:
Another unit that operated for eight months in 2005, the Group to Analyze Terrorist Organization Media, assembled dossiers on labor leaders, broke into their offices and videotaped union activists. The United States provided equipment and tens of thousands of dollars, according to an internal DAS report, and the unit’s members regularly met with an embassy official they remembered as “Chris Sullivan.”
Some strong opposition still remains in Congress, though it’s too late now. Democratic Representative Maxine Waters said that she found it “deeply disturbing that the United States Congress is even considering a free trade agreement with a country that holds the world record for assassinations of trade unionists.”
But when the US government provided $6 billion in aid during Uribe’s presidency and the Obama administration gave Santos’ government half a billion in combined aid this year, is it any surprise?