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The Crisis That Wasn’t.

“It’s hard to escape the sense that debt panic was promoted because it served a political purpose — that many people were pushing the notion of a debt crisis as a way to attack Social Security and Medicare. And they did immense damage along the way, diverting the nation’s attention from its real problems — crippling unemployment, deteriorating infrastructure and more — for years on end.”

In the NYT, Paul Krugman reviews the waning of the deficit witchhunt. “I’m not sure whether most readers realize just how thoroughly the great fiscal panic has fizzled — and the deficit scolds are, of course, still scolding.” Of course they are. Now would be the time for embarrassment, if the Simpson-Bowles types out there were capable of it.

Geithner: Wrong on Everything

“At every turn on housing — on mass refinancing, on principal reduction, on leverage for homeowners in the bankruptcy process, on forcing banks to write down mortgages, on a modern-day HOLC–the evidence points to Tim Geithner preferring whatever option put the least pressure on banks, rather than actually helping ordinary people. He made far more excuses to do nothing than any effort to make a difference…In fact, the programs were never meant to help homeowners, designed only to ‘foam the runway’ for the banks, to spread out foreclosures and allow banks to absorb them.”

In the wake of Tim Geithner’s new rehab book tour — currently being aided and abetted by Wall Street’s usual court stenographer, Andrew Ross Sorkin — Dave Dayen says not so fast. “I don’t have to just focus on housing; this is indicative of Geithner’s worldview, which sees protecting the financial system at all costs as the only thing that matters.”

Yves Smith has also ably eviscerated Geithner’s game of “Three Card Monte”: “The entire edifice of the piece is a sleight of hand…The focus on TARP (and to a lesser degree, Lehman) allows Sorkin to omit mention of actions that were clearly Geithner’s doing…The bigger point, which is not lost on the public, was there were plenty of other options for saving the system. The one chosen, that left the banks largely unreformed and no one of any consequence punished, was clearly just about the worst of the available options, unless, of course, you are, like Geithner, a banker.”

And here’re economics and finance professors Atif Mian and Amir Sufi: “Whatever reasons he had for opposing assistance to underwater homeowners, a careful evaluation of the policy effects was not among them. The evidence is pretty clear: an aggressive bold attack on household debt would have significantly reduced the horrible impact of the Great Recession on Americans. The fact that Secretary Geithner and the Obama administration did not push for debt write-downs more aggressively remains the biggest policy mistake of the Great Recession.”

Noam Scheiber has his say in TNR: “[The article] inadvertently highlights something deeper about Geithner, which is the shocking extent to which he’s accepted financialization of the economy as a benign, even admirable, development. The people who spend their days shuffling trillions of dollars around the globe are really just like you and me, except with nicer offices. They deserve the same sympathy and respect, notwithstanding their abysmal track record. That blinkered view colors pretty much every one of Geithner’s utterances as he makes the rounds hawking books.”

Also of note: Geithner doesn’t seem to understand how Social Security works, and, in classic #ThisTown fashion, he — the Secretary of the Treasury! — just parrots the same ignorant Beltway line about zomg out-of-control entitlements as all Very Serious People™ do. To wit, from Geithner’s book:

“I remember during one Roosevelt Room prep session before I appeared on the Sunday shows, I objected when Dan Pfeiffer [a senior advisor to the Obama White House] wanted me to say Social Security didn’t contribute to the deficit. It wasn’t a main driver of our future deficits, but it did contribute. Pfeiffer said the line was a ‘dog whistle’ to the left…code to the Democratic base, signaling that we intended to protect Social Security.”

And here’s the LA Times’ Michael Hiltzik: “But let’s get to the nub. Does Social Security ‘contribute to the deficit’? The answer is, bluntly, no. By law, it can’t contribute to the federal deficit, because Social Security isn’t allowed to spend more than it takes in. Those who claim — as Geithner has at one point or another — both that the program contributes to the deficit yet will be forced to reduce benefits to retirees once its trust fund is depleted are trying to have things both ways: The reasoning behind the threat of reduced benefits is that Social Security can’t engage in spending money it doesn’t have, i.e., deficit spending. Pick one, fellas. If it can contribute to the deficit, then there’s no reason to cut benefits.”

So is there’s anything positive about Geithner’s rewriting of history here? Well, the Sorkin piece does include this telling anecdote: “At another point, [Geithner] cheerfully relayed a story that also appears in his book about the time he sought advice from Bill Clinton on how to pursue a more populist strategy: ‘You could take Lloyd Blankfein into a dark alley,’ Clinton said, ‘and slit his throat, and it would satisfy them for about two days. Then the blood lust would rise again.'”

Could somebody please tell me again why I should be excited about Hillary 2016?

Update: Sheila Bair offers her take. “On his book tour, to explain the need for bailouts, Tim has used a clever analogy of a pilot trying to land a plane that is on fire and in the back, sit the terrorists who started it. He argues that the pilot can’t leave the cockpit to put them in handcuffs. He first has to land the plane. The problem with this analogy is that the plane landed at the end of 2008. And let’s face it, instead of handcuffing the terrorists, we escorted them to the executive lounge.”

Ryan: Still Clownshoes.

“[S]everal economists and social scientists contacted on Monday had reactions ranging from bemusement to anger at Ryan’s report, claiming that he either misunderstood or misrepresented their research…The Columbia researchers found that, using their model of the SPM, the poverty rate fell from 26 percent in 1967 to 15 percent in 2012. Ryan only cites data from 1969 onward, ignoring a full 36 percent of the decline.”

Still Clownshoes: Republican Serious Person™ Paul Ryan’s attempt to get super-serial about policy research turns out disastrously, as multiple authors he cites in his new anti-War on Poverty screed say that he’s misrepresented their work. “In my experience, usually you use all of the available data. There’s no justification given. It’s unfortunate because it really understates the progress we’ve made in reducing poverty.”

The above pic of the learned statesman in question via Mansplaining Paul Ryan dot tumblr dot com. Also, I see Jonathan Chait has already gone there, but this is the obvious movie reference here:

The Can Likes Kickbacks.

“In 2014, for the first time in three years, the vote to extend the nation’s debt ceiling did not bring the US to the brink of default in a high-stakes game of slash and burn…It was a striking turnaround for the forces of austerity. One of the biggest losers? The Campaign to Fix the Debt, the $40 million AstroTurf austerity group, financed by Pete Peterson and other Wall Street big wigs, and fronted by Maya MacGuineas, Erskine Bowles and Alan Simpson. Call it Alan Simpson’s last harrumph.”

In general, I think victory laps are a bad idea, especially since sequestration continues and it’s not like austerity is suddenly out of fashion in this godforsaken town. Nonetheless, The Nation‘s Mary Bottari looks at how citizen and netroots activism helped beat back (for now) the deficit witchhunt, and much of the corporate rapacity and profiteering attending it.

The pic above is my friend Alex Lawson crashing a Pete Peterson Astro-Turf event a few months ago. “‘Aaar!’ he said. ‘Fix the debt, but let me keep my corporate booty! Fix the Debt’s founders have more than $500 million in offshore corporate booty.'”

The Neverending Shutdown.

“[W]ith recovery still perilously weak in 2010, the obvious response would have been a second dose of stimulus spending. But the political world was already moving in the opposite direction…In the end, for reasons both political and ideological, Obama decided that he needed to demonstrate that he took the deficit seriously, and in his 2010 State of the Union address he did just that…The Beltway establishment may have applauded Obama’s pivot to the deficit, but much of the economic community saw it as nothing short of a debacle.”

It’s the Austerity, Stupid: In Mother Jones, Kevin Drum surveys the rise of deficit hysteria in the Beltway over the past several years, with particular attention paid to the Reinhart-Rogoff debacle. “It’s not as if we needed the skills of Nostradamus to predict the consequences of austerity. It’s pretty much textbook economics.” (Rhino via here.)

“It was an awful time. Federal employees had to take unpaid furlough days. Beneficiaries were thrown off of federal programs. Courthouses had to be sold. Federal agencies like the FBI, the Food and Drug Administration, and the National Institutes of Health strained to meet commitments, leading to more crime, more outbreaks of disease and less basic research, among other horrors. This may sound like a description of the recent government shutdown, which ended October 16. But this describes the fallout from sequestration, the across-the-board cuts to discretionary spending that took effect March 1—arbitrary reductions that closely parallel the effects of the shutdown.”

Meanwhile, as David Dayen recently noted in The New Republic, the deficit witchhunt is continuing to wreak havoc across America, in the form of the sequestration budget. “Sequestration and artificial spending caps have become the new normal, and it’s redefining the role of government, rolling back the ambitions of the past, and constraining needed investments in the future. So let’s call it what it is: a government shutdown that’s infinitely worse than the one that just ended.”

Nihilists, Dude.

“‘It’s imperative to act now, Cruz warns, before the full benefits of Obamacare kick in and Americans get “hooked on the sugar, hooked on the subsidies.’ His plan: Yoke the defunding of Obamacare to the must-pass budget bill the House will take up in September. The endgame? To force a government shutdown so painful and protracted that Barack Obama would have no choice but to surrender the crown jewel of his presidency. ‘As scary as a shutdown fight is,’ Cruz insists, ‘if we don’t stand and defund Obamacare now, we never will.'”

Another dispatch from the madhouse: In a fine piece of reporting, Rolling Stone‘s Tim Dickinson delves inside the Republican suicide machine. “Having backed the GOP into a shutdown fight that congressional leaders never wanted, the insurgents are winning, and establishment leaders are running scared. America is now careening toward a catastrophic voluntary default on our debt because no one in the Republican Party with the authority to put on the brakes has the guts to apply them, for fear of being toppled from power.”

An important point Dickinson makes here that cannot be emphasized enough: We didn’t just stumble into this crisis: Taking the government and the debt ceiling hostage was the strategy all long, and the right-wing insurgents have been planning for this for months. “They’d drawn a dangerous lesson from the previous battle: Brinksmanship works…In February, the House temporarily suspended the debt ceiling — intending to give the president’s poll numbers three months to come back to earth.”

Hey, speaking of polling numbers coming back to Earth

In any case, see also the NYT on this: “To many Americans, the shutdown came out of nowhere. But interviews with a wide array of conservatives show that the confrontation that precipitated the crisis was the outgrowth of a long-running effort to undo the law, the Affordable Care Act, since its passage in 2010 — waged by a galaxy of conservative groups with more money, organized tactics and interconnections than is commonly known.”

So we’re not in this hostage crisis by accident. The GOP even changed the House rules so they could maximize this confrontation. Republicans saw Obama fold in December 2010 on the Bush tax cuts and in August 2011 on the last debt ceiling hike. They think they can make him fold again here, and on every subsequent debt ceiling hike, and sadly, history is on their side on this. As Ted Cruz put it a few months ago: “If you have an impasse, you know — one side or the other has to blink. How do we win this fight? Don’t blink.”

Another small digression: If, like Ralph Nader this morning, you’re wondering why the right-wing of the GOP always seems to pull these sorts of stunts off while the left-wing of the Dems are usually completely marginalized, two quick answers: 1) The lefties don’t have billionaires backing their plays, and 2) we’re the People’s Front of Judea. They’re the right, they’re inherently better at the goose-stepping.

That being said, this whole episode also illustrates why it’s useless for Democrats to try to meet these fools halfway on policy: Republicans have now spent almost three years voting constantly to end the Affordable Care Act. To break a health care law originally penned by the Heritage Foundation and enacted by Mitt Romney, they have shut down the government and sent us to the brink of an economic default. So, how, exactly, would things be different if we had just passed Medicare for all, and/or a public option? They were going to lose their shit regardless, just like they did on Social Security, on Medicare, and any other progressive issue you can think of. There’s no point in trying to placate people who aren’t bargaining in good faith.

Anyway, as it happens, and as Andrew Sullivan recently pointed out, we’ve seen a minority party in America rejected at the polls try to take the entire nation hostage before. Here’s Abe Lincoln in 1861:

“What is our present condition? We have just carried an election on principles fairly stated to the people. Now we are told in advance, the government shall be broken up, unless we surrender to those we have beaten, before we take the offices. In this they are either attempting to play upon us, or they are in dead earnest. Either way, if we surrender, it is the end of us, and of the government. They will repeat the experiment upon us ad libitum. A year will not pass, till we shall have to take Cuba as a condition upon which they will stay in the Union.”

So too here: This time the scalp the GOP wants is the Affordable Care Act, or the Ryan budget, or social insurance cuts, or Malia Obama. “‘The girl. Bring us the girl,’ said Congressman Steve King (R-IA)..’The bill may pass, but the firstborn shall be ours.'” It’ll be something else the next time and the time after that.

That’s why John Judis is calling this “one of the worst crises in American history“, and why Jon Chait wrote that “Allowing Republicans to default on the debt now is better than trading something that allows them to threaten it later.” Because if Obama buckles this time — and, let’s remember, we already gave the GOP their sequester-funding-levels — the Republicans will just keep taking the American government and economy hostage to get whatever they want. And quicker than you can say he-said, she-said, the rest of the lazy Beltway media will come to treat this sort of hostage-taking as politics as usual. It has to end here, or it never will.

Strange Voices Are Saying…

“I don’t think there’s much hope at this point in blocking the nomination from the outside; apparently a chief executive can make terrible choices for dodgy reasons whenever he wants, as we’ve learned time and again…It’s good to be the king, especially when the court is so cowed (and by court I mean the professional DC liberal class).”

As rumors fly that — despite the obvious terribleness of the pick — Obama has virtually settled on Larry Summers as Fed Chair, David Dayen wonders aloud if this is all part of a Grand Bargain redux:

“You’re a President with a very tough set of fiscal fights coming up. You’ve wanted entitlement reforms for five years, but cannot get it worked out. You’ve been playing footsie with the Senate Republican caucus all year. Now you’re in a situation where you need Republican votes…I mean, any rational human would have given up on grand bargaineering by now…[but now] the White House can argue that they simply had to go along with, I don’t know, the chained CPI measure they put in their own budget, because it was a way to ‘get’ Larry Summers, among other things.” Frighteningly plausible.

For Want of a Spreadsheet Check…

“This error is needed to get the results they published, and it would go a long way to explaining why it has been impossible for others to replicate these results. If this error turns out to be an actual mistake Reinhart-Rogoff made, well, all I can hope is that future historians note that one of the core empirical points providing the intellectual foundation for the global move to austerity in the early 2010s was based on someone accidentally not updating a row formula in Excel.”

As Mike Konczal of Rortybomb explains, the Reinhart-Rogoff paper “Growth in a Time of Debt,” which argued that high debt-to-GDP ratios stymie growth and has been one of the key economic foundations for recent deficit hysteria, turns out to be fundamentally flawed.

“This has been one of the most cited stats in the public debate during the Great Recession,” embraced by both Paul Ryan and the Washington Post. And it’s totally upside down. As Konczal says, “[t]he past guides us…it tells us that a larger deficit right now would help us greatly.”

Update: Dean Baker weighs in. “If facts mattered in economic policy debates, this should be the cause for a major reassessment of the deficit reduction policies being pursued in the United States and elsewhere. It should also cause reporters to be a bit slower to accept such sweeping claims at face value.”

Don’t Blame Me, I Voted for Kodos. | Deficits Now!

“Barack Obama proposes a painful hit to middle-class and working-class seniors, in return for an increase on taxes on the rich so small that they will hardly notice. Bargain? Yes. Grand? Not so much. By legitimating changes that could lead over time to the conversion of Social Security into a means-tested program for the elderly poor only, Barack Obama has proven himself to be a true and worthy successor of his predecessor, George W. Bush.”

As Obama — to no one’s surprise who was watching the last two years closely — definitively reveals he wants to go all Nixon-in-China on Social Security, Michael Lind notes the many similarities between Bush and Obama on social insurance. “Both Bush and Obama crafted their Social Security plans solely with an eye to the approval of the bipartisan economic elite, most of whom prefer cutting Social Security benefits, which they don’t need, to raising taxes on members of their class.”

One key difference: When Dubya tried to slash Social Security benefits in 2005, Democrats stood up as one against him. Now that an ostensible Dem is in the White House and wants to enact social insurance benefit cuts for ridiculous reasons, not so much. But this time, we can’t countenance the usual Third Way spinelessness. As PCCC’s Stephanie Taylor said: “‘You can’t call yourself a Democrat and support Social Security benefit cuts…The President has no mandate to cut these benefits, and progressives will do everything possible to stop him.'”


“People really don’t like deficits…But hold on a second. Why do we hate deficits? ‘Balancing the budget’ sounds really nice, but what reason do we have to believe it’s actually valuable?” In the WP and in very related news, Dylan Matthews punctures the various talking points driving deficit hysteria:

We’re broke! America is going to be bankrupt! We’re really not. The U.S. Treasury never has to default on any of its debts. That’s because we control our own currency. If we owe debts and don’t have the tax revenue to pay them, we can always just print the money and hand it over. That may not be the best approach, and in the very worst-case scenario this leads to hyperinflation so bad that defaulting is the less-bad option. But we’re so far from that situation today that worrying about it doesn’t seem worthwhile.”


Update: “The president’s major purpose is not to address mass unemployment, not to build a new foundation for the economy, not to revive the middle class or redress Gilded Age inequality. The president’s overriding priority is to cut a deal – and a deal that continues to impose austerity on an already faltering recovery.”

As Obama’s budget is officially released — $2 of spending cuts for every dollar in revenue is NOT a good thing. See also: Austerity in EuropeRobert Borosage reads the administration the riot act. See also Bob Kuttner: “You can understand Republicans wanting to crush government and hoping to slow the recovery in a way that harms the Democrat in the 2014 midterm elections. But what is the president thinking?…Now voters can conclude that they can’t trust either party.”

Oh yeah, and all that happy talk about addressing climate change and raising the minimum wage in the State of the Union? You won’t see it in this budget. Meanwhile, the GOP are loading up the cannons.

The Clown has a Point.

Hey all. Apologies yet again for the lack of updates around here. As I said a couple of times last year, I’m still figuring out where the old Ghost fits in the scheme of life these days. There’s a negative feedback loop happening where I don’t post at GitM that often, so fewer people swing by here, so there are no comments or feedback on the posts that I do spend some time on, which makes me even less inclined to post, so thus even fewer people swing by here…you get the point.

I was thinking of starting up the movie reviews around here again for 2013, but having just spent a looong time on another giant project that few if any will ever peruse, I’m not really seeing the point of dedicating myself to spending even more hours of my day writing long-winded reviews that nobody ever reads. It’s just a lot of work with very little gain. I’ve been writing this blog for over 13 years and the reviews for over ten — If either were ever going to gain an audience, they would have done so by now.

As for politics…eh. On the domestic front, all reasonable and common-sense attempts at achieving forward progress have been stymied for years now, mainly because of bipartisan infatuation with a totally fake problem. Sure, Obama (finally) talked a good game last night about climate change, voting rights, infrastructure, equal pay, housing, the minimum wage — things we expected from a progressive president four years ago, and that would undeniably make a profound difference for a lot of American families. But this is year five of this presidency — We know the score by now. When push comes to shove, he’ll be promoting Simpson-Bowles nonsense, extolling the Grand Bargain again, and advocating a chained CPI, all because, presumably, those evil, evil Republicans made him. Good cop, bad cop.

Over on foreign policy, our Hope-and-Change president has accorded himself the power to kill anyone he so desires by executive fiat. And the response? Ostensible progressives back this ridiculous play, and a full 83% of America is totally cool with Death from Above without due process. Awesome.

Speaking of due process, it is flat-out-ridiculous that we live in a world where Aaron Swartz was hounded to suicide by a DoJ-enabled Javert for freeing up JSTOR articles, of all things, and Bradley Manning is kept in a tiny box as Public Enemy #1 for exposing bad behavior by the military. And yet, our national torture experiment has still gone unpunished (because, hey, it worked!), and not a single bankster of note has been prosecuted, despite the massive levels of fraud that have been exposed and that brought the American economy to its knees. To the contrary, the president can’t stop asking self-serving and patently corrupt assholes like Jamie Dimon and Lloyd Blankfein how we can better structure our public policy to cater to their whims.

Admittedly, I partake in it myself semi-often, but I’m just tired of a Twitter-driven political-journalism culture that seems to think that the lulz of Marco Rubio being really thirsty is a more pressing issue to cover than the myriad holes in his obviously stupid, self-serving, and faith-based ideas. Or that Jack Lew having a funny signature is a more vital point to discuss about the probable next Treasury Secretary than whatever the hell he was doing at Citigroup when the goddamned house was burning down.

I hate on the hipster Twitter kids, but establishment journalism is even worse. We live in a world where the totally inane Politico rules the roost and “wins the day”. Where our papers of record will keep warrantless wiretaps and drone bases quiet for years because the powers-that-be asked them to. Where idiot right-leaning “centrists” like David Brooks, David Gergen, Gloria Borger, and Cokie Roberts are queried for their inane views constantly, even though they don’t know anything and have never done anything with their lives but constantly mouth Beltway platitudes as if they were Holy Scripture. Where “journalists” like Chuck Todd, John King, and Jake Tapper — the latter of whom, let’s remember, made it big by kissing-and-telling on his Big Date with Monica Lewinsky — are taken seriously because they tsk-tsk about deficits like Serious People™ and passively nod along whenever obvious liars are lying. This isn’t journalism. It’s Court Stenography, Versailles-on-the-Potomac.

Ain’t no use jiving. Ain’t no use joking. Everything is broken. So, no, I don’t feel particularly inclined to talk about politics these days either, because there’s only so many times you can bellow in rage about it all, especially when nobody swings by this little corner of the Internet anyway. I’m not officially quitting GitM or anything, but let’s be honest. I’m not really what sure when, if ever, it’ll get its groove back. I’m not sure I see the point. And besides, as Richard said, a withdrawal in disgust is not the same as apathy.

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