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Murphy’s Law, written by Barbara Murphy, appears monthly in The Golden Times. The column represents the opinion of the author and is not necessarily the opinion of the publisher.
Deficit Debacle Is Proof Positive
That Government Is Seriously Dysfunctional
The deficit debacle in Washington has been a continuing embarrassment to the American people, a crime against democracy an exercise in lunacy, and proof positive that our government is dysfunctional and needs to be replaced by a better system and better people. At least, we should get rid of the Tea Party Republicans.
The bitter truth is that America is no longer a Democracy. It has become a oligarchy — a form of government in which power is vested in a few people — in America’s case a few very rich people.
Their goal is to reduce taxes to the point where the federal government is so weakened and so poor it cannot help the old, the sick and needy children.
The oligarchs would grow richer and richer while the rest of the country is reduced to third world status.
In forcing the long, dismal and stupid fight over the debt ceiling, the oligarchs drew attention from away from the nation’s biggest problem — the millions of jobless Americans — and did incalculable harm in a myriad of other ways. Older and disabled Americans were saddled with the fear they would not get their Social Security checks. President Obama said he “could not guarantee” that the August checks would go out and nobody rebuked him. Nobody stood up and said “Mr. President, you are just using a lousy scare tactic. You know very well those checks will go out.”
Elderly people with all or most of their retirement money in stocks were scared to death by predictions that a default would cause the stock market to tank and they would lose everything they had saved for their old age.
The jobless — who should have been Congress’ chief concern — were told to expect that a default would send the country into an economic tailspin that would greatly worsen the unemployment situation.
We were all made to worry that a default would send interest rates through the roof, making it harder or impossible for people to get mortgages or mortgage modifications or for students to get loans to finance their college education.
We were frightened by stories that China, our major lender, would decide this country was a bad bet and would dump all the U.S. Treasury bonds it had bought, leaving America on its knees.
Throughout the circus on Capital Hill, credit rating agencies warned that a default would compel them to downgrade America’s AAA rating, making it much harder to sell the bonds it needs to finance its enormous debt.
One credit rating agency didn’t wait to see if the U.S. would default or not. In mid-July, the Eagan-Jones credit rating agency downgraded America’s credit rating from AAA to AA+. The agency thought the financial uncertainty generated by Congress’ failure to reach a compromise was enough to warrant the downgrade.
All through the debt crisis, we were assured that we could depend that a deal would be reached because “America has never defaulted.” That wasn’t even true. The country defaulted in 1790; some economists believe that the U.S. defaulted in the 1930s when it refused to re-pay creditors in gold; and there was a technical (but expensive) default in 1979.
Prof. Terry Zivney and Prof. Dick Marcus of Ball State University in Indiana did a study showing that the 1979 default was small and inadvertent but nevertheless had major consequences.
According to the Washington Post’s account of the study, “the U.S. Treasury missed payments on about $120 million because of a computer problem and because, like today, Congress had been playing a game of chicken with the debt limit.” The result was thousands of late payments to holders of Treasury Bills. The investors, some of whom joined a class action suit against the government, were eventually paid in full with back interest.
However, according to Profs. Zivney and Marcus, that brief failure to meet some obligations had expensive consequences. The two men concluded that what amounted to “a series of defaults resulted in a permanent increase in interest rates of more than half a percent, which over time translated into billions of dollars in increased interest payments on the nation’s debt, a cost shouldered by taxpayers.”
Profs. Zivney and Marcus wrote: “The impact is smaller at first, because only new debt is affected. But over time, as the older debt matures and becomes refinanced at higher rates the entire cost of the default is realized.”
There is little doubt in my mind that Republican House Speaker John A. Boehner and the few moderate Republicans left in the House wanted a deal months ago but they had the hoard of newly elected Tea Party members with knives out insisting that a tax increase could not be part of any deal. President Obama would not agree to a deal without “enhanced revenues.”
It’s one of the great ironies of American political life that poll after poll shows that most Americans want the services the government provides but they don’t want to pay for them — that is, they are opposed to any tax increases. That is stupid and childish. You only get what you pay for, or as the sage Oliver Wendell Holmes Jr. said “taxes are the price we pay for civilization.”
Conservative David Brooks wrote a column on July 4 in the New York Times entitled “The Mother of All No-Brainers.” Mr. Brooks pointed out that many important Democrats were open to a large budget deal — three to four trillion in spending cuts, even cuts in Medicare — if the Republicans would be willing to raise taxes.
“If the Republican were a normal party,” Mr. Brooks wrote, “it would take advantage of this amazing moment. It is being offered the deal of the century: trillions of dollars in spending cuts in exchange for a few hundred billion dollars in revenue increases.”
But Mr. Brooks said he had no confidence that the Republicans would seize the opportunity because the GOP “has been infected by a faction whose members do not accept the logic of compromise no matter how sweet the terms.”
Fanatical in their attachment to a “no new taxes” philosophy, Mr. Brooks said, “the members of this movement have no sense of moral decency. A nation makes a sacred pledge to pay the money back when it borrows money. But the members of this movement talk blandly of default and are willing to stain their nation’s honor.”
The members of the movement Mr. Brooks is talking about not only believe fanatically in their “no new taxes” philosophy, they are slaves to this belief and to the rich and powerful people who have convinced them they’d be better off with a shrunken, money-starved government unable to help the old, the needy, the veterans, the disabled and all the other disadvantaged people in this country.
The Tea Party types don’t seem to realize they are destroying the very benefits that they themselves will need some day.
*
Barbara Murphy, 78, writes for The Golden Times about controversial issues each month.
That Government Is Seriously Dysfunctional
The deficit debacle in Washington has been a continuing embarrassment to the American people, a crime against democracy an exercise in lunacy, and proof positive that our government is dysfunctional and needs to be replaced by a better system and better people. At least, we should get rid of the Tea Party Republicans.
The bitter truth is that America is no longer a Democracy. It has become a oligarchy — a form of government in which power is vested in a few people — in America’s case a few very rich people.
Their goal is to reduce taxes to the point where the federal government is so weakened and so poor it cannot help the old, the sick and needy children.
The oligarchs would grow richer and richer while the rest of the country is reduced to third world status.
In forcing the long, dismal and stupid fight over the debt ceiling, the oligarchs drew attention from away from the nation’s biggest problem — the millions of jobless Americans — and did incalculable harm in a myriad of other ways. Older and disabled Americans were saddled with the fear they would not get their Social Security checks. President Obama said he “could not guarantee” that the August checks would go out and nobody rebuked him. Nobody stood up and said “Mr. President, you are just using a lousy scare tactic. You know very well those checks will go out.”
Elderly people with all or most of their retirement money in stocks were scared to death by predictions that a default would cause the stock market to tank and they would lose everything they had saved for their old age.
The jobless — who should have been Congress’ chief concern — were told to expect that a default would send the country into an economic tailspin that would greatly worsen the unemployment situation.
We were all made to worry that a default would send interest rates through the roof, making it harder or impossible for people to get mortgages or mortgage modifications or for students to get loans to finance their college education.
We were frightened by stories that China, our major lender, would decide this country was a bad bet and would dump all the U.S. Treasury bonds it had bought, leaving America on its knees.
Throughout the circus on Capital Hill, credit rating agencies warned that a default would compel them to downgrade America’s AAA rating, making it much harder to sell the bonds it needs to finance its enormous debt.
One credit rating agency didn’t wait to see if the U.S. would default or not. In mid-July, the Eagan-Jones credit rating agency downgraded America’s credit rating from AAA to AA+. The agency thought the financial uncertainty generated by Congress’ failure to reach a compromise was enough to warrant the downgrade.
All through the debt crisis, we were assured that we could depend that a deal would be reached because “America has never defaulted.” That wasn’t even true. The country defaulted in 1790; some economists believe that the U.S. defaulted in the 1930s when it refused to re-pay creditors in gold; and there was a technical (but expensive) default in 1979.
Prof. Terry Zivney and Prof. Dick Marcus of Ball State University in Indiana did a study showing that the 1979 default was small and inadvertent but nevertheless had major consequences.
According to the Washington Post’s account of the study, “the U.S. Treasury missed payments on about $120 million because of a computer problem and because, like today, Congress had been playing a game of chicken with the debt limit.” The result was thousands of late payments to holders of Treasury Bills. The investors, some of whom joined a class action suit against the government, were eventually paid in full with back interest.
However, according to Profs. Zivney and Marcus, that brief failure to meet some obligations had expensive consequences. The two men concluded that what amounted to “a series of defaults resulted in a permanent increase in interest rates of more than half a percent, which over time translated into billions of dollars in increased interest payments on the nation’s debt, a cost shouldered by taxpayers.”
Profs. Zivney and Marcus wrote: “The impact is smaller at first, because only new debt is affected. But over time, as the older debt matures and becomes refinanced at higher rates the entire cost of the default is realized.”
There is little doubt in my mind that Republican House Speaker John A. Boehner and the few moderate Republicans left in the House wanted a deal months ago but they had the hoard of newly elected Tea Party members with knives out insisting that a tax increase could not be part of any deal. President Obama would not agree to a deal without “enhanced revenues.”
It’s one of the great ironies of American political life that poll after poll shows that most Americans want the services the government provides but they don’t want to pay for them — that is, they are opposed to any tax increases. That is stupid and childish. You only get what you pay for, or as the sage Oliver Wendell Holmes Jr. said “taxes are the price we pay for civilization.”
Conservative David Brooks wrote a column on July 4 in the New York Times entitled “The Mother of All No-Brainers.” Mr. Brooks pointed out that many important Democrats were open to a large budget deal — three to four trillion in spending cuts, even cuts in Medicare — if the Republicans would be willing to raise taxes.
“If the Republican were a normal party,” Mr. Brooks wrote, “it would take advantage of this amazing moment. It is being offered the deal of the century: trillions of dollars in spending cuts in exchange for a few hundred billion dollars in revenue increases.”
But Mr. Brooks said he had no confidence that the Republicans would seize the opportunity because the GOP “has been infected by a faction whose members do not accept the logic of compromise no matter how sweet the terms.”
Fanatical in their attachment to a “no new taxes” philosophy, Mr. Brooks said, “the members of this movement have no sense of moral decency. A nation makes a sacred pledge to pay the money back when it borrows money. But the members of this movement talk blandly of default and are willing to stain their nation’s honor.”
The members of the movement Mr. Brooks is talking about not only believe fanatically in their “no new taxes” philosophy, they are slaves to this belief and to the rich and powerful people who have convinced them they’d be better off with a shrunken, money-starved government unable to help the old, the needy, the veterans, the disabled and all the other disadvantaged people in this country.
The Tea Party types don’t seem to realize they are destroying the very benefits that they themselves will need some day.
*
Barbara Murphy, 78, writes for The Golden Times about controversial issues each month.