Kevin Zeese and Margaret Flowers
Published: Thursday 21 February 2013
Nearly the entire European Union, including its core economies of Germany, France, and the United Kingdom are all now clearly mired in recession.

The Leeches are Back and are Urging the Wrong Prescription: The Grand Bargain Returns

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Leeches could also be used in bloodletting. The withdrawal of so much blood as to induce syncope (fainting) was considered beneficial, and many sessions would only end when the patient began to swoon.

As the economy shows signs of recession, the leeches return. Alan Simpson and Erskine Bowles have issued a new report calling for even deeper austerity. It is not what the economy needs as it stagnates and sputters toward a possible new collapse. Their report combined with President Obama’s State of the Union, the sequestration and Republican dogma are all combining to bring on another round of budget cuts, which will only make recession more likely.

It is important to put the current economic debate in context. Dr. Jack Rasmus, an economist who gets it right more than any other we are aware of, provides the framework with his in-depth analysis of the US GDP over the last 15 months.  He summarizes the present dismal situation:

“Nearly the entire European Union, including its core economies of Germany, France, and the United Kingdom are all now clearly mired in recession. The Euro southern periphery is in a bona fide depression. Japan has entered its third recession since 2008. China, India, and Brazilian growth rates have fallen by half. And the US in the fourth quarter 2012 has come to a virtual economic standstill, the second time in two years in which a quarterly GDP recorded virtually no growth.”

Rasmus predicts “The dual strategy of capitalist politicians across the globe—of QE and money injections into the banks and financial system combined with austerity for the rest—has clearly failed and will continue to fail even more visibly.” Rasmus foresees a double dip recession, with the shrinking US GDP of the last quarter as a harbinger of things to come.

Simpson and Bowles come into this situation recommending the wrong prescription – more cuts to Medicare, Medicaid, Social Security and other social programs, as well as closing corporate tax loopholes.  They want to cut $2.4 trillion from the federal deficit over the next decade, $1.5 trillion more than President Obama has called for and this is on top of the $2.7 trillion in reductions that have already been implemented causing the most rapid fall in deficit to GDP ratio since World War II. All of this means an ‘Obama recession’ becomes more likely.

No doubt Republican dogma of shrinking federal government and low taxes deserve a lot of the blame, but President Obama does as well.  His State of the Union address kept the Grand Bargain of cuts to essential programs along with closing corporate tax loopholes on the table.

Dr. Richard Wolff cuts through the rhetoric of “fiscal cliff,” “austerity” and “market” to pinpoint who benefits from austerity, writing that those who own the “US public debt are easy to list: large banks, insurance companies, large corporations, wealthy individuals and central banks around the world. Austerity justified as satisfying ‘the market’ in fact serves those US creditors first and foremost.”

Multiple  commentators have noted President Obama's sly language on Medicare cuts and his silence on protecting Social Security. Symptoms of a sick health care system continue to show.  Executive salaries at non-profit hospitals continued to rise despite a frail health care system. And though the US ranks dead last in male life expectancy and near the very bottom in prevention of premature deaths, infant mortality, total health care coverage, number of practicing doctors, and prevention of deaths due to heart disease among developed nations; we may begin to look better in the international rankings soon – not because health care is improving here but because bankers are now demanding privatization of European heath care systems which will bring their outcomes down too.

The more we learn about Obama’s Treasury Secretary appointment, Jacob Lew, the less hopeful we are of decent policies coming from his leadership.  Confirmation hearings have brought out his Romney-like economics: personal investment in the Cayman Islands,  creating foreign tax havens for customers when he was at Citi, and that prior to Citi, when he was an executive at NYU, he steered students to expensive Citigroup loans. Of course, we remember his $950,000 bonus when Citigroup was bailed out. It seems impossible for Americans to trust Lew’s economic ethics and plutocratic economic behavior.

All this talk about austerity comes as we learn that the Federal Reserve continues to bailout the big banks, not only by pumping $85 billion each month into banks through Quantitative Easing, but court documents revealed that the Fed also forgave $7 billion in mortgage security losses by Bank of America. Bailouts continue but outside of the public eye and should lead to more calls for Fed transparency, which is unlikely to come from the two Wall Street parties.

And, austerity comes at a time when new census analysis shows that during the Obama ‘recovery’ only the rich got richer; the poorer got poorer.  According to a new analysis by Emanuel Saez. perhaps the leading economist on incomes in the world, from 2007-2009 the “average  real income for the bottom 99% . . . fell sharply by 11.6%, . . . by far the largest two year decline since the Great Depression.” And new data covering 2009-2011 indicate that “Top 1% incomes grew by 11.2% while bottom 99% incomes shrunk by 0.4%. Hence, the top 1% captured 121% of the income gains in the first two years of the recovery.” [Emphasis added.] We got a glimpse into the rigged system this week when it was reported that Facebook, which made $1 billion in profits, will be paying no income taxes, indeed will receive a $429 million refund. Why? Tax deductions allowed for executive pay in stock options.

And, don’t believe that the rich getting richer will create jobs. The claim that the wealthiest are job creators has been proven to be a myth. Another myth exploded in this week’s news was that it was important to pay CEO’s exorbitant pay to prevent their unique talents from being lured away. Both myths are not consistent with the facts.

What will another economic collapse cost us?  The GAO issued a reportthis week that indicated the last collapse cost the US economy $22 trillion; that is about 1.5 years of total GDP.  And, most of that came on the back of homeowners suffering from the housing collapse.

What is the alternative? Countries that are breaking from the Washington Consensus are showing the way. This week an analysis by the Center for Economic and Policy Research of Ecuador found “government’s taking control of the Central Bank, implementation of capital controls, increased taxation of the financial sector, and other regulatory reforms. It concludes that these played a major role in bringing about Ecuador’s strong economic growth, increased government revenue, a substantial decline in poverty and unemployment, and other improvements in economic and social indicators.”  Unemployment has fallen to 4.1 percent, the lowest level in 25 years and poverty has been cut 27 percent below its 2006 level.

The report gives us hope finding: “Ecuador’s success shows that a government committed to reform of the financial system, can – with popular support – confront an alliance of powerful, entrenched financial, political, and media interests and win.” By the way, Raphael Correa won re-election on Sunday by a landslide with more than 60% of the vote in a race with 8 candidates.  Is there any US politician that wants to get on the side of the people?

Kevin Zeese JD and Margaret Flowers MD co-host Clearing The FOG on We Act Radio 1480 AM Washington, DC and on Economic Democracy Media, co-direct It's Our Economy and were organizers of the Occupation of Washington, DC. Their twitters are @KBZeese and @MFlowers8.

This article is based on a weekly newsletter from It’s Our Economy. You can sign-up here to receive this free newsletter.



ABOUT Kevin Zeese

 

Kevin Zeese is an attorney who has been a political activist since graduating from George Washington Law School in 1980.  He works on peace, economic justice, criminal law reform and reviving American democracy. His twitter is @KBZeese.  Zeese has used his law degree to work to end the war on drugs, stop the use of the military and National Guard in drug enforcement and allow the medical use of marijuana. He has filed bar complaints against lawyers in the Bush and Obama administrations who used their legal degrees to justify torture, as well as against Justice Clarence Thomas for conflicts of interests. He has also filed complaints against attorneys at Hunton and Williams who worked with the Chamber of Commerce and HB Gary Federal to target him for his work criticizing the Chamber. Zeese serves on the steering committee of the Bradley Manning Support Network.  Zeese filed a complaint with the Justice Department against Rupert Murdoch and News Corp for violations of the Foreign Corrupt Practices Act as well as with DOJ against Karl Rove’s American Crossroads for violating the non-profit tax laws and the federal election laws.

Second that

Second that

The Capitalists now rule the

The Capitalists now rule the World and a capitalist world doesn't look good for Mankind. The good news is that the capitalist reign of tyranny and injustice will galvanize the peoples of the world against capitalism once and for all. One Earth, of the People, by the People and for the People may very be the resulting backlash.

This whole episode is very

This whole episode is very simple to analyse. Money can be made in either an expanding or collapsing market. As an expanding market is out of the question right now a collapsing market will do just as well. As a bonus a collapsing market will enable the money masters to advance their anti labour and anti civil rights agendas domestically, keeping the masses off guard and distracted around international agenda. So austerity as practised in other parts of the empire is coming home to roost. Wars, covert and open will continue and expand. What will Obama do? This quote from a talk he gave addressing an elite crowd should clue you in..."I'm the guy separating you from the pitch forks..." Or how about Congress asking the executive branch, but receiving no reply, as to whether the constitution was still suspended from the last time Obama had renewed the Continuity of Government Act, first invoked by Cheney on 9/11....AND MORE ET CETERA.

It looks like Obama's dropped

It looks like Obama's dropped the ball this time. The sequester agreement that would've gone into effect on Jan.1st protected Social Security, Medicaid and Medicare from cuts. In the 11th hour, he signed a temporary fix with another sequester agreement going into effect on Mar.1st that does not(!?!) It's time to raise hell with him, Congress and the Senate, so please sign this petition. http://signon.org/sign/dumb-sequester-deal

I am trying to get Dr

I am trying to get Dr Stephanie Kelton on the Rachel Maddow show. Go to neweconomicperspectives.com to learn about the Modern Monetary Theory her group has developed. It explains how a fiat system works better than anything else I've seen. Most people aren't aware that we're on a fiat system and none of our politicians understand how it works. If you like what they are saying, please drop a line to Rachel requesting she have Stephanie as a guest at rachel@msnbc.com

Guyachs, Correct me if I'm

Guyachs, Correct me if I'm wrong, but my understanding of Modern Economic Theory is that it is a system of regulations imposed on the current monetary system based on fractional reserve banking, leaving the big banks as they are but regulated. This is a problem as regulations can be abrogated it seems quite easily by the power elites. Remember we once had Glass Steigal to protect the economy from avarice. Only changing the system to a full reserve system with a fiat currency will the powers of bankers over this world be brought to heal.

Guyachs, Correct me if I'm

Guyachs, Correct me if I'm wrong, but my understanding of Modern Economic Theory is that it is a system of regulations imposed on the current monetary system based on fractional reserve banking, leaving the big banks as they are. This is a problem as regulations can be abrogated it seems quite easily by the power elites. Remember we once had Glass Steigal to protect the economy from avarice. Only changing the system to a full reserve system with a fiat currency will the powers of bankers over this world be brought to heal.

I see what Rasmus is against

I see what Rasmus is against but what is he for?

It is incomprehensible that

It is incomprehensible that anyone would even bother with anything that Simpson and Bowles have to say. Has everyone forgotten that these two political hacks chaired a FAILED commission? They couldn't convince even a small group that their ideas and recommendations were the right track for our economic recovery? So why does any thinking person care what they have to say? Read my lips… saying the same thing over and over does not make it true, does not change its meaning, and certainly does not mean it improves with the telling.

This new Grand Agenda never

This new Grand Agenda never went away. It has been ongoing since the Reagan admin. Once the middle class embraced an agenda against the poor, we knew it was just a matter of time before the middle class would be the target. This Grand Agenda was largely the product of Newt Gingrich & Co, a history buff. US history shows h0w, while this isn't the first time that the powerful rich gained a dangerous degree of control over govt, one thing always tripped them up: The poor and middle class always united to push back, to the benefit of both. Gingrich promoted a historically-proven strategy to "re-educate" the public in ways that would pit the middle class against the poor -- divide and conquer. It has been stunningly successful. It was always the poor -- those who had nothing left to lose, no consequences to fear -- who stood on the front lines of the push against a dictatorship of the elite. So, the trick was to get the middle class to throw the poor off the cliff, and then move in to attack the middle class. It worked.

Bowles & Simpson are 1%ers

Bowles & Simpson are 1%ers who have a financial conflict of interest -- they won't recommend raising taxes on themselves and their filthy rich colleagues in the top 1% when it's painless for them to screw the dirty peons in the lower 99%.

Herbert Hoover's economic austerity policies are something we all know will send the country plummeting into the Great Depression II, but Congress isn't concerned because they have overly generous paychecks coming in and pension rights and special retirment health care benefits for themselves paid for by the dirty peons.

True. But as long as the

True. But as long as the majority of the middle class assume that austerity measures will hit only the poor, not effecting the middle, there is no way to stop it. Because this generation is so apathetic (at best) toward the poor, they're oblivious to the fact that the poor have been drained out. It's necessary to drain the middle class now.

DHFABIAN, I agree with the

DHFABIAN, I agree with the drift of both your comments above. The great transfer of wealth from the many to the few started in 1980, and intensified with the "financial crisis" late in 2008, when millions of "middle class" and working poor lost jobs, homes, and savings. Less obvious is that the wealth transfer has been ongoing and will continue. Obama has done an outstanding job of obscuring that transfer, and the plans of the elite to continue it.

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ABOUT Margaret Flowers

Margaret Flowers, M.D. is a pediatrician and mother of 3 teens from Baltimore, MD. Margaret left medical practice in 2007 to advocate full-time for single payer health care. She served as Congressional Fellow for Physicians for a National Health Program and is on the board of Healthcare-Now. She is co-director of ItsOurEconomy.us. She has organized and participated in protests for health care, peace and economic justice which have included arrests for nonviolent resistance.

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