We don't have a budget crisis. We have a jobs and growth crisis.

 

Debt ceiling debate distortion - this is a jobs crisis, not a budget crisis

Robert Reich

Friday, July 29, 2011

A friend who's been watching the absurd machinations in Congress asked me "What happens if we don't solve the budget crisis and we run out of money to pay the nation's bills?"
It was only then I realized how effective Republican lies have been. That we're calling it a "budget crisis," and worrying that if we don't "solve" it we can't pay our nation's bills, is testament to how successful Republicans have been distorting the truth.
The federal budget deficit has no economic relationship to the debt limit. Republicans have linked the two, and the Obama administration has played along, but they are entirely separate. Republicans are using what would otherwise be a routine, legally technical vote to raise the debt limit as a means of holding the nation hostage to their own political goal of shrinking the size of the federal government.
In economic terms, we will not "run out of money" next week. We're still the richest nation in the world, and the Federal Reserve has unlimited capacity to print money.
Nor is there any economic imperative to reach an agreement on how to fix the budget deficit by Tuesday. It's not even clear the federal budget needs that much fixing anyway.
Yes, the ratio of the national debt to the total economy is 71 percent - high relative to what it's been. But it's not nearly as high as it was after World War II - when it reached 120 percent of the economy's total output.
If and when the economy begins to grow faster - if more Americans get jobs, and we move toward a full recovery - the debt/GDP ratio will fall, as it did in the 1950s, and as it does in every solid recovery. Revenues will pour into the Treasury, and much of the current "budget crisis" will be evaporate.
We're in a "jobs and growth" crisis - not a budget crisis.
And the best way to get jobs and growth back is for the federal government to spend more right now, not less - for example, by exempting the first $20,000 of income from payroll taxes this year and next, recreating a Works Progress Administration and Civilian Conservation Corps, creating an infrastructure bank, providing tax incentives for small businesses to hire, expanding the earned income tax credit, and so on.
But what happens next week if Congress can't or won't deliver the president a bill to raise the debt ceiling? Remember: This is all politics, mixed in with legal technicalities. Economics has nothing to do with it.
One possibility, therefore, is for the Treasury to keep paying the nation's bills regardless. It would continue to issue Treasury bills, which are our nation's IOUs. When those IOUs are cashed at the Federal Reserve Board, the Fed would do what it has always done: Honor them.
How long could this go on without the debt ceiling being lifted? That's a legal question.
Republicans in Congress could mount a legal challenge, but no court in its right mind would stop the Fed from honoring the full faith and credit of the United States.
The wild card is what the three big credit-rating agencies will do. As long as the Fed keeps honoring the nation's IOUs, America's credit should be deemed sound. We're not Greece or Portugal, after all. We'll still be the richest nation in the world, whose currency is the basis for most business transactions in the world.
Standard & Poor's has warned it will downgrade the nation's debt from a triple-A to a double-A rating, if we don't tend to the long-term deficit. But, as I've noted, S&P has no business meddling in American politics - especially because its own non-feasance was partly responsible for the size of the federal debt (had it done its job, the debt and housing bubbles wouldn't have precipitated the terrible recession, and the federal outlays it required).
As long as we pay our debts on time, our global creditors should be satisfied. And if they're satisfied, S&P, Moody's, and Fitch should be, too.
Repeat after me: The federal deficit is not the nation's biggest problem. The anemic recovery, huge unemployment, falling wages and declining home prices are bigger problems. We don't have a budget crisis. We have a jobs and growth crisis.
The GOP has manufactured a budget crisis out of the Republicans' extortionate demands over raising the debt limit. They have succeeded in hoodwinking the public, including my friend.
© 2011 Robert Reich

The United States spends close to half the world's total in military spending

Missing in action: debate on military spending

Daniel Wirls

Monday, July 25, 2011

As the president and Congress grind their way to a budgetary compromise that will do far more to further alienate the American public than solve our fiscal crisis, one thing - military spending - is all but overlooked. For all the strife over taxes and entitlements, the president and majorities in both parties agree on the following: Military spending is essentially off the table, even though it is far and away the most distorted part of the national budget, the most egregious mismatch between the country's rational needs and the commitment of national resources.

Let's remind ourselves of a few basic facts. Since 2001, the nation has spent more than $1.2 trillion on the wars in Iraq and Afghanistan. During the same period, military spending has increased more than 80 percent. That 80-plus percent increase is separate from, in addition to, the $1.2 trillion for the wars. U.S. military spending is higher than at any point since World War II, without counting the hundreds of billions for the wars. The United States spends close to half the world's total in military spending and our closest allies bring the total to more than 70 percent. At about $80 billion, the Pentagon's budget for research and development, alone, exceeds the entire military budget of any nation except China.

Moreover, the fastest growing entitlement program is not Medicaid, Medicare or Social Security - it's veterans' benefits, a separate category of spending, independent of the Pentagon budget or war spending. Over the last decade, the Veterans Affairs budget increased from $47 billion to $124.7 billion per year, or 162 percent (compared to Medicare's 109 percent, Medicaid's 119 percent, and Social Security's 61 percent).

These facts and others depict a decadelong, record-setting spending spree. And yet earlier this month, as the budget negotiations reached crisis level, the House of Representatives, run by Republicans for whom the budget crisis is so serious that they are gambling with the debt ceiling, voted 336-87 to increase the Pentagon's base budget (separate from the spending on the two wars) by $17 billion or just over 3 percent to $530 billion.

Several factors will continue to distort any attempt to bring military spending down to reasonable levels. First, it continues to be the silent (and bipartisan) economic stimulus. Second, Congress and the president will use decreases in war spending as an easy way to save money on defense, to make it appear that defense spending is taking a hit without making hard choices. Third, insofar as the $530 billion non-war Pentagon budget is negotiable, the peak of the Bush-Obama buildup, separate from the war spending, will be taken as the baseline against which all such reductions will be measured. Hawks are already portraying any cuts off the mountain top as a slippery slope to the dreaded "hollow force."

And if there is one thing worse than being accused of producing a "hollow force," it is being dubbed an isolationist. As a small number of Republicans have begun to express utterly sensible doubts about the costs of America fighting several wars at once, their critics - with the help of some rather unsophisticated media coverage - have raised the red flag of "isolationism." How removed from rationality about our national security needs are we when cautious and belated second thoughts about the sustainability of the vast and endless imperial project can be successfully disparaged as isolationist?

The conservative critics are correct that across-the-board cuts in defense would not be the best way to proceed, but given how much we are spending, such an approach could not hurt either. What should structure significant reductions is a fundamental review of national security priorities, one that recognizes the limited utility of and reduced need for military force, one that recognizes that national security is more about rebuilding education and infrastructure in this country than in others. This will not happen - for many politicians the politics of national security, which nearly always favor the hawks, are more important than national security itself.

Most Americans realize that no Churchill, reflecting on the United States at war during the last decade, would intone that "this was their finest hour." What we refuse to acknowledge, however, and at our peril, is that he might well observe instead that "Never in the field of human conflict has so much been spent for so long to accomplish so little."

Daniel Wirls is a professor of politics at UC Santa Cruz.

Need to give a friend a crescent wrench?

3D printing is a form of additive manufacturing technology where a three dimensional object is created by laying down successive layers of material. 3D printers are generally faster, more affordable and easier to use than other additive manufacturing technologies. 3D printers offer product developers the ability to print parts and assemblies made of several materials with different mechanical and physical properties in a single build process. Advanced 3D printing technologies yield models that can serve as product prototypes.

Category:

http://www.youtube.com/watch?v=ZboxMsSz5Aw&feature=youtube_gdata_player