By Matt Stoller, a fellow at the Roosevelt Institute. He is a former financial services staffer to Rep. Alan Grayson.(on Twitter at @matthewstoller)
While it’s useful to think of the ratings agencies as incompetent, or as greedy, it’s important to remember that they have an actual policy agenda. They weren’t just wrong in rating subprime tranches of toxic dreck AAA. They were also pivotal in actively creating the policies that led to the financial crisis.
In the early 2000s, several states attempted to rein in an increasingly obvious predatory mortgage lending wave. These laws, pushed by consumer advocates, would have threatened the highly profitable mortgage securitization pipeline.
S&P used its power to destroy this threat. Josh Rosner and Gretchen Morgenson told the story in Reckless Endangerment.
Standard & Poor’s was the most aggressive of the three agencies, however. And on January 16, 2003, four days after the Georgia General Assembly convened, it dropped a bombshell. Because of the state’s new Fair Lending Act, S&P said that it would no longer allow mortgage loans originated in Georgia to be placed in mortgage securities that it rated. Moody’s and Fitch soon followed with similar warnings.
It was a critical blow. S&P’s move meant Georgia lenders would have no access to the securitization money machine; they would either have to keep the loans they made on their own books, or sell them one by one to other institutions. In turn, they made it clear to the public that there would be fewer mortgages funded, dashing “the dream” of homeownership.
It was an untenable situation for the lenders who had grown addicted to the securitization money spigot. With S&P shutting it off to abusive lenders, it was only a matter of time before the Fair Lending Act was dead.
To Brennan and other consumer advocates, it was a shocking and devastating moment in the battle against predatory lending. “We were stunned when we saw the press release,” Brennan said. “We thought, where does this come from?”
Standard & Poor’s said it was taking action because the new law created liability for any institution that participated in a securitization containing a loan that might be considered predatory. If a Wall Street firm purchased loans that ran afoul of the law and placed them in a mortgage pool, the firm could be liable under the law. Ditto for investors who bought into the pools.
“Transaction parties in securitizations, including depositors, issuers and servicers, might all be subject to penalties for violations under the Georgia Fair Lending Act,” S&P’s press release explained.
It ended with a warning: “Standard & Poor’s will continue to monitor this and other pending predatory lending legislation.” In other words, any states that might have been considering strengthening their predatory lending laws as Georgia did should beware.
That press release is here. S&P was aggressively killing mortgage servicing regulation and rules to prevent fraudulent or predatory mortgage lending.
This is far from the only time S&P has thrown its weight around to advance its financial interests. My favorite story about S&P is how its parent company, publisher McGraw-Hill, tried to cancel Barry Ritholz’s book because he wrote unfavorably about the ratings agencies. When I was on Capitol hill, I actually brought this story up to an S&P lobbyist. She told me about how Ritholz got his facts wrong, that the company has a Chinese wall between the ratings agency and the publisher, and that, besides, he was just a blogger. That’s S&P for you.
Of course, on a larger level, this is not an American story, it’s just the latest iteration of the liquidation of society by international investors. As just one more example, Naomi Klein wrote about S&P and Moody’s being used by Canadian bankers in the early 1990s to threaten a downgrade of that country unless unemployment insurance and health care were slashed. Incidentally, there was an aggressive high end tax cut campaign going on at the time.
The current austerity wave in the US is the same play. The goal of S&P is to ensure that there is a bipartisan set of spending cuts to social programs that benefit ordinary people. That their “downgrade” is being taken seriously by Nancy Pelosi, Barack Obama, John Boehner, Bob Reich, Dick Durbin, and most American political leaders shows that they share this goal. S&P is just doing the lobbying work.
While S&P is certainly nobody’s hero and obviously complicit in the financial falsification of securities, lets be fair about one thing, the US does have an serious entitlements problem. Thats not to say its the only problem or that powerful interests in washington are looking out for themselves, but to imply that cuts in social programs is somehow unwarranted, is just as biased.
The US has 66 Trillion USD in present value liabilities to social programs. This reality has been with us for decades and we just refuse to deal with it. For persepctive the US govt debt is currently ablout 10 Trillion USD.
So serious reforms are needed especially to Medicare and Medicaid. Thats not to say we dont need serious tax reforms, improvements in efficiencies in medical, defense and educational expenses, defense cuts or any of the Bowles Simpson recommendations. But it is clear that entitlements are way out of control too and are simply unaffordable as they stand.
Here is PIMCOs latest take on the deficits:
Where in the world did you get this number 66 trillion? Cite something, sil vous plait.
1. Low-end numbers come from the US Treasury’s Financial Report of the United States [including Medicare, Medicaid and Soc Sec, which are treated as off balance sheet because the government is not obligated to continue them (!)]:
2. Gokhale and Smetters (who wrote one of the original papers on fiscal and generational imbalances) found a $63 trillion imbalance in August 2005. Their paper was published by an obscure organization called the Philadelphia Federal Reserve Bank:
3. A high-end estimate of $202 trillion comes from Laurence Kotlikoff of Boston University:
One sees this figure quite a bit–$66 trillion NPV of future entitlement liabilities. However, nobody ever cites the NPV of government revenues over the same time frame. Without this information, it’s the equivalent of saying to a toddler, “Your lifetime personal expenses from here on out are approximately $7 million. You need to file for bankruptcy.”
I should add that I do think that the U.S. faces a long-term solvency issue. However, the $66T number by itself does nothing to advance understanding.
Folks…open your eyes and minds and read the link i sent, which gives a breakdown and also the source (official CBO figures).
Please note, that this NPV of costs is arrived be looking at past revenue and expense growth rate, projecting that outwards in time and giving its current value. So yes it IS next of revenues.
Finally, you can dispute the projections, but the reality is simply as some have pointe out that medical growth rates outstrip revenue groth rates.
How to solve this?
Two ways folks, cut back benefits or raise revenues (taxes). To be fair Bush, who i am sure is hated here, gave a huge tax break to all americans and also added to Federal medical expenses by adding the Medicare Prescription drug Act. How much does each cost us on the budget? many hundred of Billions of Dollars over a decade on Drug program, and more than a trillion on tax cuts.
So folks, whats the answer here? Raise taxes on everyone, cut back some of the benefits, and find ways to reduce the cost growths!
+1 for FraudGuy
So folks, whats the answer here? Raise taxes on everyone, cut back some of the benefits, and find ways to reduce the cost growths! Wile E Coyote
Spoken like a true banker!
Actually, the “entitled” government backed usury and counterfeiting cartel, the banking system, is the root cause of socialism in the US. The banks literally steal purchasing power from all money holders including and especially the poor. Is it any wonder then that there is a need to “steal” some of it back via socialism?
Furthermore some deficit spending is good since it is the only source of new money into the economy. And if the banks were put out of the counterfeiting business then a great deal of deficit spending could be used to bailout the entire population without increasing the money supply (base money + credit).
It’s amazing, now I am being called a banker?! LOL
Folks, for the record I think the bankers got away with murder. Im for clawback of pay, removal of the rats that sank the ship, and a whole host of other reforms that would put money into responsible stewardship and make sure white collar crimes dont pay.
But the point is about the unsustainable medical costs. If you want to start another topic about who caused the “Great Recession” and the injustices behind it, i am not against your point.
It’s amazing, now I am being called a banker? Wile E Coyote
Yes. Bankers have traditionally opposed any money creation outside their own hands. Deficit spending is the ONLY way to create money outside the banking system so by advocating higher taxes and less spending you are advocating less money creation outside the banking system. You are thus a banker tool, an unknowing one I suppose.
Im sorry but you really have no idea what you are talking about. Bankers are against deficits now? This is just nonsense and absolutely uninformed. Where were the bankers complaining about the last decade of deficits?
Please try and be informative and refrain from speaking about things you dont really know.
For the record, the biggest public deficits have been runned by Republicans in recent decades. Republicans (think Nixon, Ronald Reagan, George W Bush) like deficits when they are in office. Republicans who raise taxes and worry about deficits dont get reelected (think George Bush Senior).
You are just being inflamatory and expelling misinformation.
Im sorry but you really have no idea what you are talking about. Bankers are against deficits now? Wile E Coyote
I suppose bankers might not be against deficits SO LONG as they are financed with debt. But deficits require no debt at all; the government would simply spend in excess of revenues. Lincoln did that with the Greenbacks and the bankers hated (and still hate) him for it.
For the record, the biggest public deficits have been runned by Republicans in recent decades. Republicans (think Nixon, Ronald Reagan, George W Bush) like deficits when they are in office. Republicans who raise taxes and worry about deficits dont get reelected (think George Bush Senior). Wile E Coyote
That makes sense since Republicans are pro-banker and so long as deficits are funded with sovereign debt then deficits are pro-banker.
You are just being inflamatory and expelling misinformation. Wile E Coyote
Its hard to speak truthfully about banking without some passion. After all, the bankers got 50-86 million killed in WWII alone.
F. Beard is correct, here, and you are the one who is badly informed.
A sovereign that controls its own currency does not need to issue bonds. And the US is at no risk of default, despite S&P’s rating. Obama basically got into a game of chicken with the Republicans and pretended he has removed the steering wheel from the car. He could easily have called their bluff and circumvented the debt ceiling (or said he would if it became necessary) but he played along with their hostage game because he wanted entitlement cuts too.
As has been explained ad nauseum, Social Security does not have a solvency problem. Basing decisions now on a potential problem 30 years out is ridiculous (if you think 30 year projections are worth anything, I have a bridge I’d like to sell you). And there are plenty of easy fixes if/when a problem looks more imminent, like raising the cap of FICA taxes.
The problem is Medicare, and that is not a Medicare problem, that is a health care cost problem which Obama only made worse with Obamacare. If you want to get hysterical and say that Medicare will go bankrupt, you can use the same cost escalations and say most US households will go bankrupt too. This problem is gonna have to be addressed, but it looks like it will have to get worse before we develop the political will to do so.
It a pleasure to converse with you. May I politely say that I didnt get your post very well. Are you saying you agree with F. Beard that bankers dont like deficits? Or republicans dont either? Because that is not true and nor do you seem to defend that statement in your post.
1) I agree that we are not at risk of default and that we can print ad nauseum our currency. Never did i imply otherwise. Although its horrible for americas confidence to pretend to push the issue to the last minute. So unnecessary.
2) I specifically leave out Social Security because it is either solvent as you say, or mildly out of balance. In either event, either a nonissue or not a big deal.
3)Looks like we agree on Medicare as being out of control costs. I dont rely on projections either, call it 60 Trillion call it 30 T, call it 100 T, but i will politely call your attention to our oh so very current fiscal deficit at near 10% of GDP (1 T) for 2nd year now. Where can we plug 1 Trillion hole to stop our Debt/GDP ratio at a more healthier ratio? Or do you not believe there is any consequences of running deficits ad nauseum? Are you more Reinhart/Rogoff on deficits or Krugman?
I believe he is looking at the 75 year or infinite actuary notation in present dollars.
“The FI measure equals the current level of debt held by the public (representing past overspending) plus the present discounted value of future federal non-interest expenditures less the present discounted value of future federal receipts. In other words, FI shows the extent to which current U.S. federal fiscal policy is not sustainable.
FI equals zero for a sustainable (or balanced) policy—wherein outstanding debt held by the public plus future spending commitments are balanced with future receipts in present value. While FI encompasses all federal programs it can also be calculated separately for specific federal programs, including Social Security.
The FI measure includes all future federal financial shortfalls without a time limit.”
The Peterson Foundation has been tossing a numeric around such as this to scare the public into thiking the debt calculated from the future must be paid today.
Couple this with hypothetical past generational imbalance when compared to oday and the number grows. For example to make up for what your grand mother received in SS benefits, we should be paying more into SS today. It is a conservative view (no sure if Goldwater would see it this way) or an elitist viewpoint on getting rid of SS, Medicare, Medicaid, etc. Andrew Brooks argues this point and Bruce Webb has answered it rather well.
In my humble opinion, the key to the future is not cutting entitlements as much as increasing the numbers of the NonInstional Civilian Population participating in the Civilian Labor Force (Particiption Rate). Cutting entitlements will not increase the percentage of the population in the Civilian Labor Force. Something else needs to be in place such as making it more atrtarctive to nvest in Labor Intensive business versus the present gambling being done on Wall Street today which is sans Labor.
Unless we are going to find a use for the non-working population such as “soylent green,” this option is little more than a race to the bottom for much of the US population.
I did, see the link to the PIMCO website.
It is so obvious why people on the right and the financial rentier interests want to talk about government only. What about household debt. The Federal Reserve said that between 1975 and 2005 the debt of households doubled, and that is with more workers per household. The debt load of the financial sector has exploded. It is obvious what stops people from asking why the overall debt load of society has gone way up, not just government.
The issue is complex, but wealth inequality, our trade deals, the de-industrialization of the country, they all have something to do with this. If you read Marxist economists like Robert Brenner, Paul Sweezy and John Bellamy Foster they say that the origin of the financialization of the economy and the move to the right we’ve seen in the West is the profitability crisis that kicked in during the early 70’s.
Any rate, there is no logical reason why we should talk about government debt in isolation. The debt load of other (private) sectors of the economy has gone up dramatically and this is connected to other issues. The right and the financial interests do it for ideological or self serving reasons. Has nothing to do with an objective analysis of the economy in any way and we all know it.
The USA doesn’t have a serious “entitlements” problem. And let’s stop calling them that — social security and medicare are insurance plans that workers pay into their entire working lives to ensure a barely decent old age. They are a contractually right, just like any other contract — and we know all about the sanctity of contracts don’t we?
Social security is funded fully through 2037, and then only a modest increase in the tax cap (currently ~$106k) will provide full solvency through the end of the century.
There is NO medicare problem, there is a medical cost problem, which medicare actually helps to mitigate as medicare costs and cost increases are lower than private markets. Medicare, as all single-payer systems, is much more efficient than the private sector insurance schemes. You are just mouthing the plutocratic line taken by the Pete Petersons, Bruce Krastings and other hedge fund scum who want to, as Matt states, liquidate society for their gain. Learn something before you ignorantly comment here at NC.
‘They are a contractually right’
Have you ever read the Social Security Administration’s own website on this subject?
This is why I advocate subjecting Social Security to ERISA-1974, making it a contractual right. But SocSec is so monumentally underfunded [a euphemism for ‘looted’] by Erisa standards that Usgov cannot afford the burden of making up the shortfall.
Congressional flim-flam artists shun statutory accountability the same way vampires flee silver crosses.
I don’t know how often I have to say this, but the special treasuries in the trust fund represent a loan to the USG and are just as good as public held treasuries, are not legally subordinate, that position is confirmed by the SSA, and therefore the same 14th Amendment that applies to public treasuries also applies to the SSTF.
Now if SS says we don’t have SS anymore because the supremes say it’s not a contract, fine. I’ll take what I have in the trust fund plus reasonable interest and be on my merry way.
Then we can let the supremes work on important things like our contract with Afghanistan, Libya, Nation Builders of Iraq, and on and on.
So the only answer to my multiple points is that the fascist supreme court decided that social security is not a contractual right — that is why I mentioned the “sanctity of contracts” in my original post — because we all know that contracts the wealthy enter into are sacrosanct, and the ones workers enter into are easily breakable, either by de jure or de facto means. None of this precludes the economic and moral reality that we pay into social security and have an economic and moral right to old age income from that fund. It is not simply a grant of money for nothing. Neither is medicare.
Additionally, the points I made about social security’s solvency and medicare’s cost effects stand. And let’s dispense with all these scary 75 year projects of tens or hundreds of trillions of dollars designed to scare everyone. Any economic projection longer than 10 years is highly suspect, and 75 years is a joke and a farce.
Entitlement to receive Social Security benefits, like other welfare benefits, may not be a contractual right but is a property right protected by the 14th Amendment. See Goldberg v. Kelly.
“Entitlement” is a legal term of art. It describes any government program that confers a property right protected by the 14th Amendment on recipients, so that there must be due process if recipients are denied the benefits. In other words, everyone who is eligible and qualified for an entitlement program’s benefits must receive them, and if they do not receive them, there must be a hearing with an impartial decision-maker and a written decision that conforms to the regulations of the program. Entitlement programs are Social Security, Medicare, Medicaid, food stamps, Veterans’ Benefits, TANF, and unemployment benefits. Some examples of non-entitlement programs include student loans and SCHIP.
Goldberg was a very important decision, because until Goldberg, state and federal benefits program were facially nondiscriminatory but in practice discriminated broadly against recipients based on race, national origin, and family status. Goldberg was a victory for the Civil Rights movement and an important step toward eradicating poverty.
Plutocrats hate entitlement programs because the only way they can stop providing the benefits is to kill the program outright, which in the past has been politically unpopular. So they have, among other things, waged a propaganda war for the last 40 years to turn people against them.
Thank you for clearing that up Yankee Frank. I don’t think ole Wile is going to go for though. These neo-liberals have pretty thick skulls.
Yes, we Americans do tend to feel entitled to the things we have pre-paid for.
Does that make us whiny babies or savvy consumers?
I want what I have paid for.
Glad you mention Medicaid and Medicare. It’ll allow me to dispel a tenacious myth; the growth in health care expenditures is NOT caused mainly by Medicare and Medicaid, but by the total lack of control in the private sector.
THAT SAID, it should go without saying that if we could force the bandits in CONgress to take off their dirty paws from these programs, we could do an even better job of controlling the costs of these programs.
After all, there is a reason why health care systems controlled by civil servants elsewhere in the democratic world are much better able to control the cost curve without sacrificing overall quality. (Unless one wants to believe the false anecdotes spewed by the right wing propaganda machine) They do not have to constantly deal with fickle politicians who can threaten them with budget cuts every time they try to make them hear reason.
Thank you. Medicare, Medicaid, and even commercial insurance are a reflection of the overall cost of healthcare which outstrips inflation.
What is common place in booming countries such as Germany, Canada and Australia is a major problem for the filthy rich in the US. The safety net, backed by taxes paid by everyone during decades of work, is a matter of fact in these countries. In the US, my money the government keeps, is called entitlement. My guess is that the filthy rich feel entitled to it through their legalized theft.
The only thing I wonder about is how the word “entitlement” can to mean “something that we are NOT entitled to”?
I was under the impression that a monetarily sovereign nation (off the gold standard) is not dependent upon revenues to pay for things like entitlements.
You were wrong about that. Sorry it took so long to find that out.
I guess we better start asking the following:
How soon will the Pentagon run out of money?
How about the Supreme Court or Congress, what are the projections?
The Bureau of Prisons
The Centers for Disease Control and Prevention
The Coast Guard
The Department of Justice
The Department of State
The Department of Labor
The Department of Transportation
The Department of the Treasury
The Department of Health and Human Services
How are these budget bloated departments able to escape the same spending scrutiny that entitlements are under without even the benefit of a singe penny in taxes?
Why can we keystroke trillions in credit to bailout the banks but we cannot fund entitlements?
If I’ve been misinformed, I’ll be happy to take the education.
That’s called “spending priorities”. They prioritize how much spending they do and where because money and credit are not unlimited.
The way to play the game is to tell you it is unlimited, then when it’s your turn to get some…they simply say they miscalculated and ran out.
Then you are on the street with your organ grinder monkey and empty tin cup making speeches about how they are wrong about that and you know about MMT and monetary sovereignty and can prove it.
Peter, you have to know that Cedric is one of our neoliberal propagandists on NC. You are absolutely correct that our spending is only limited by the limit of goods and services available in the real world and the only real constraints are political ones — whether our leaders have a moral or a fascist vision for the country. Unfortunately, they are fascists and so whenever the people’s rights and claims are brought up, we don’t have the money, and whenever the MIC and the banksters claims arise, we always have enough money. Its a farce and no one buys it anymore except for the plutocrats, the MIC, the multinational corporations, the banksters, and their lackeys — in other words roughly 3% of the population.
I don’t doubt the fibs and deceit. What is limiting the creation of credit & money?
I’m new. That explains quite a bit. That sucks that you have a neoliberal infestation problem.
??? I didn’t even know what a neoliberal was until I started reading this blog.
But I’ve heard far more MMT than I care to here and on any other board they allow it, and MMT is THE tool of neoliberalism, and it’s proponents ARE the usefull idiots.
If you think MMT is the tool of neolibearlism, you are nuts.
Neolibearlism is all about the promoting the rights of rentiers (with neoclassicla economics as the justification) and using the apparatus of the state to do so. One of their pet mechanisms is to use financial crises (induced by the same rampant deregulatory policies) to strip even more from the lower orders. Read Shock Doctrine.
MMT is a mechanical description of how monetary systems work. Many MMTers are also followers of Keynes (and not “Keynesians” as popularly understood, we discuss how “Keynesians” bastardized Keynes in ECONNED), and are the polar opposites of neoclassical economists.
You really need to get better informed, you have this utterly backwards.
Moi? It seems to me neoliberals and rentiers have been making great use of modern monetary theory (I could call it fiat currency and fractional central banking – I choose not to call it the System of Kansas City, MO) in obtaining bailouts; free money for speculation, invest in BRICS and gut the US economy, LBOs; shifting losses to the public; saying taxes aren’t neccesary (until we get inflation – then we’ll get the next spin) etc…they just don’t wear the white hats when they do it.
It’s a wonderful system for neoliberals. That’s probably why they invented it.
“It’s a wonderful system for neoliberals. That’s probably why they invented it.”
I’m with you. And that’s why I said a few weeks ago that the MMT-ers can’t use the term “MMT” to describe what they claim TO BE the existing “modern monetary” system (ie., the monetary system created and comandeered by the neoliberal financializers) and their own policy agenda by the same term without courting confusion.
Which is why I just call them “liberal policy entrepreneurs,” and regard them in the same light that I regard Jacob Hacker of Obamacare infamy.
(Although I also think I might have once called them “those *ssholes over at the Roosevelt Institute.”)
We’ll see, perhaps.
ditto. It would have to be a theory of something, you would think?
I don’t want to sound naive about neoliberals either. I have actually met some in my 30 years in the working world – it’s just that we didn’t know they were called neoliberals. We referred to them as “assholes”, but I guess that doesn’t make them any less neoliberal, for what it’s worth.
No one here knows how to talk about anything.
This “person” shows up to a discussion of the financial industry and starts raving about how we need to shut-up about the financial industry and start talking about social programs.
The issue at hand is not the current temperature in Sakarata, Nigeria….
The issue is S&P. And on a larger plane, the financial industry.
You people are pathetic.
Insightful stuff, Thanks.
I’ve taken a liking to just going “wow”.
“The current austerity wave in the US is the same play. The goal of S&P is to ensure that there is a bipartisan set of spending cuts to social programs that benefit ordinary people,”
That was the finishing point of the article. I totally agree about the criticism of the S&P but the article says
S&Ps “goal” is to ensure spending cuts to social programs.
Medicare and Medicaid are subsets of the larger health care ticking time bomb, worse than the other ticking time bombs, with the exception of the actual ticking time bombs, strapped to ICBMs and nuclear sub delivery systems.
Health care costs as a percent of the annual GDP is approaching 20%. That is what is unsustainable, the entire health care industry, public and private.
In less than 10 years, it will cost private health care providers $25,000 for a standard family health care benefit, the one with deductions, co-pays. Before then, most private businesses will have pealed this benefit off altogether as an offering. We have to carefully transition to the inevitable universal and national health care payment system. We already have the best medical system, for the most part, doctors, nurses, meds, devices, etc are in place, but the financing of the actual health care system will move from the rent seeking insurance companies, to a single public authority.
Anytime you hear the word entitlements that include medical coverage, you are hearing attacks on universal single payer. Anytime you hear the word entitlement along with baby boomers and SSI, you are hearing profits being squeezed out the hide of the American people. It will not happen without a bloodbath. Not a metaphorical or political bloodbath, but real blood gushing out of real bleeding people. People are rising up in the most developed countries in the world against the profit taking global wealth aristocracy. And the more the aristocrats persists in their intransigence, the more severe the social revolts will be. The empirical evidence is in: from the urban riots across America in 1960’s to Libya, Syria, Tel Aviv and the trial of Mubarak and Wisconsin recalls, the people are in open revolt. It starts with protests at the beginning of the spectrum, moves to the ballot box, and if there are still no results, open civil warfare without heed to the cost of life, because life can become so unbearable, it is better to die in resistance to your personal liquidation as a human being, than submit to permanent menial servitude when you know that it does not have to be this way. Not politically, not economically, not with technology, not with the previous experience of how good life can be within the living memory of so many millions of Americans. I will not submit. Many more that I know will not submit. The whole world, in country after country shows that they will not submit.
I’m with you Paul.
F**k you. end 3 wars and we’ll have all the money we need to give everyone in the USA a free education and free health care.
I’m with you too MK
I certainly agree there is an entitlements problem, but I would disagree about who has the entitlement problem. Its the military with the entitlement’s problem not the American people.
It’s the military that has decided since WWII it is entitled to maintain perpetual war. It is the military that has decided it is entitled to keep a 1000 bases around the world. It is the military that has decided it is entitled to be in 60 or 70 countries subverting the governments of those countries. It is the military that has decided it needs a budget that equals the rest of the world’s combined.
The military has the entitlement problem, not the American people, who have paid for their social security and medicare, only to have it stolen from the government lock box by the military.
Wake the fuck up!
Oh, I forgot to mention the industry with the biggest claim to entitlements, the financial industry.
Since 1913 the banks have believed they are entitled to issue our currency rather than have the currency issued by the US government. Now that is an entitlement we all would like to have. Just let me be entitled to legally counterfeit money in my garage. That’s an entitlement we all could get on board for.
What a serious omission of entitlement.
I do agree with the anti war sentiment in that the military, however fine an organization they are, do spend money like drunken sailors. I would like to see that expenditure cut and the money applied to social causes. The anti war spending sentiment I hold is bone deep and it is the only reason I look with an open mind to Ron and Rand. When Panetta says we cannot cut anymore money or the Pentagon will not have enough money to hold national security, I do not believe it. I think it is a great big lie.
Panetta is living proof that 45 years in the moral vacuum of Washington D.C. shrivels the soul and poisons the conscience.
PIMCO: Another disinterested observer. (-;
We don’t have an entitlements problem, except that there aren’t enough of them. What we have as an out-of-control FIRE sector that’s bleeding Medicare, our bank accounts and pensions and the real economy dry. Cut them down to the 3% of gdp that they were before deregulation, and entitlements, unemployment and revenues will take care of themselves.
Now we’re getting somewhere. Great point Zap.
The story that entitlements in the US are unaffordable is a myth spread by the right wing think tanks, certain corporate interests and the politicians that they support. Independent groups have shown that their claims are without merit. The huge pools of cash now in the hands of the richest Americans are now an embarrassment to the places where such hordes of wealth must be stored. False claims and false news should be criminalized.
Agreed. But by using the wingnuts Orwellian term “entitlement” for Social Security, we empower their devious lie that a paid-for pension or well-capitalized insurance policy is undeserved welfare, or that workers taxes expressly dedicated for Medicare should instead be squandered on war profiteers — to pay down debt for unfunded slaughter in Afghanistan and four other ongoing wars.
I think the best way to deal with them is to ignore them and just print up the money we need to get on with it.
“S&P is how its parent company, publisher McGraw-Hill, tried to cancel Barry Ritholz’s book because he wrote unfavorably about the ratings agencies.”
Ha! McGraw Hill published the latest edition of Minsky’s ‘Stabilizing an Unstable Economy’.
The irony… oh! the irony.
Despite the slur of Barry as a blogger, they knew his book would be read, so he was a threat. The only people who read Minsky are already sympathetic to his ideas, hence no threat.
All the noise being shouted about today of the “why we have to cut SS, medicare, medicaid, and all the rest of the programs seems to me, to be just more of the “KABUKI” that we witnessed from the so called esteemed elected leaders in Washington. It’s to me, the same thing that Bernard Madoff pulled with his play, only he quit before the crunch. If these so called experts want to cut entitlements, then they should champion the Health industry, Financial/Military/Industrial Cabals, as well as the cancerous rot within the elected so called elites, who I believe have a long list of entitlements at the taxpayers expense. Start calling it like it is, corruption, from the top down.
Of course, the oath of political office should reflect the realities of the day, perhaps it should read: “I swear to uphold the benefits to the plutocracy of the U.S.A. no matter how greedy, corrupt, they are”. I could go on, but I’m sure that others can add prose to the chant.
OMG! Guys, the political agenda here is staggering. Terry McGraw, in addition to running McGraw-Hill, is leader of the Business Roundtable which has a stated goal of privatizing Social Security. According to a 2002 article in The Nation, McGraw’s ties to the Bush family go back 3 generations. McGraw-Hill runs Platts, a gas and energy info agency whose biggest client at one time was Enron and which has had numerous lawsuits regarding market manipulation. In addition, if you read the Nation article, you will find that McGraw-Hill has been a billion dollar beneficiary of the No Child Left Behind debacle. More to say, but that’s enough for now. Go team!
Maybe this one is interesting as well. From a Spanish Website, translated by google:
On July 27, when all eyes were on whether Republicans and Democrats raising or spending ceiling, a decisive meeting took place in the Sub-Committee on Financial Services of the House of Representatives in Washington. There, representatives of major debt rating agencies outlining their complaints about the new regulation is designing the highest financial authority of the U.S., the SEC.
“In a global economy is particularly important that the scoring methods are not subject to the influence of one or more countries seeking to benefit their own qualification,” said the president of the rating agency Standard & Poor’s Deven Sharma.
Ironic accusation, warning that the supposed benefit is none other than the SEC’s intention to put to heel these entities have for years been rampant without their errors have no punishment and are scrambling like wild beasts against any attempt control.
If they do go ahead the new regulation, agencies should be subject to controls attempts, test evaluation of its employees, the study of conflicts of interest. This triggers squarely against bad practices they are implementing for years. Among other things, because their income comes directly from the entities who have to assign grades: banks, investment funds and even countries, and also charge a fee for financial analysis.
So, the U.S. wants to regulate – and then comes the downgrade. No relation there whatsoever, I assume.
No, none. (lol)
This article is spot on. It amazes me how the rating agency are the real market movers, yet their negligence has gone unaccounted for. To me these companies should be the one’s best prepared, calling things well before. Instead it appears they make their calls at the worst possible times which is exactly predatory.
and so the purpose of this companion article to yesterday’s post by Yves is to do what exactly?
the author makes many assertions such as the chat with an S&P lobbyist, forgive me but why should I believe that story?
I mean like the author has no political affiliation right?
a regular contributor at DailyKos…oh my
Surely if S&P’s credibility on the downgrade is called into question by its pitiful performance in the mortgage mess then it is fair to call into question the Stoller’s credibility with respect to his affiliation with extreme left wing interests.
And the purpose of this comment is what? The author makes many claims about the terrible fact that authors in general have political leanings.
Do you see how this is counterproductive? Engage with the arguments, not the authors.
I am sorry that the irony evades you
You assume that the fact that someone has an opinion automatically makes their analysis suspect. Stoller shows that S&P’s past performance makes their analysis suspect. Do you see the difference?
I didn’t realize S&P was a political organization.
If you want an overview of the intellectual superstructure of the right wing and its plans, not only for the Federal Government, but also each and every state government, you must regularly review the “research” of KOCH FUNDED MERCATUS CENTER OF GEORGE MASON UNIVERSITY.
Here is a sample of their handy work in destroying Democracy in America and replacing it with the highest ROI in the “free world”. I wonder what part is the enslaved
Perhaps the Gov’mint should have sanctified the shooting of borrowers after they’d been rolled, you know, to keep good graces with organized crime:
“Because of the state’s new Fair Lending Act, S&P said that it would no longer allow mortgage loans originated in Georgia to be placed in mortgage securities that it rated. Moody’s and Fitch soon followed with similar warnings.”
‘S&P’s move meant Georgia lenders would have no access to the securitization money machine.’
In retrospect, Georgia would have better off saying ‘Fine, y’all go ahead with your damn-yankee bubble machine. We’ll save and lend right here at home, thanks.’
‘McGraw-Hill tried to cancel Barry [Ritholtz’s] book because he wrote unfavorably about the ratings agencies.’
James Altucher wrote an eye-opening exposé on how little money he actually made from five traditionally published books — and how spectacularly dysfunctional his agent and publisher were in promoting them.
Self-publishing sounds like the ticket to stick a sharp knife in the rancid guts of a rating agency.
Create their own bank like one of the Dakota’s did and leverage their state worth to fund it? Could work . . . I wonder what the Feds would think?
Last year, I got my cancelled mortgage back from a local savings bank. They held it for the entire 30 years. Yet they offer competitive rates and continue to thrive.
Nothing prevents banks from holding their own mortgages as assets. The lure of securitization was simply to hike fee income from bubble-driven securitization volume.
That regulators — particularly the PhD morons of the Federal Reserve — were unable to spot the perverse incentives and collapse of underwriting standards is scandalous.
The late, great housing bubble is Exhibit A for the case that the Marriner S. Eccles Federal Reserve Building should be demolished, and its grounds sodded with salt to ensure that this monstrous carbuncle never grows back.
Book writing is like acting or sports. Extreme power law payoffs. A few make bundles, most make very little or nothing. Self publishing isn’t really an answer. Self published books (save by very big names) won’t get reviewed. And the publisher (and all publishers are horrible) do provide services: a legal review (liability on books is MUCH worse than on other forms of writing, the standard is effectively defamation, you can publish something 100% factual and still pay damages), page layout (yes that is something), editing/proofreading (the editing usually sucks but my publisher did a decent job of proofreading and fact checking). These all cost hard out of pocket dollars if you do it yourself and your sales will be lower.
The ‘extreme power law’ phenomenon applies in the self-publishing field as well:
Sadly, nonfiction works about economics aren’t likely to become best sellers, unless they promise to credulous readers the tantalizing possibility of overnight, unearned wealth.
On the other hand, how can one make money writing porn, when it’s posted for free at literotica.com?
I give up …
You need to read the book to see what happened next. Mortgage rates in the state went up and even after backing down, IIRC the governor who backed the measure was voted out.
S&P topples governments. Never forget that. Obama might have made it (Intrade last night was pegging his reelection odds at 52%) but I think he’s over.
I don’t understand the reference to Robert Reich. Most of his stuff sounds similar to this post. Here, for example. http://abcnews.go.com/Business/us-default-sp-warning-us-irresponsible-highly-political/story?id=14169083 . Please explain.
I agree. I’d like to understand what you mean about RReich in particular.
Don’t have a substantive answer for you, but whenever I read Reich’s stuff he either pulls his punches or he’s unwilling to say certain things (or he’s simply unaware of some things.).. Never really come away thinking he’s on to something.. His latest book too was about 2 years behind the curve, and would’ve been much better if he’d just read David Harvey’s The Enigma of Capital (see e.g. this, this, or <a href=http://beta.epw.in/newsItem/comment/189958/this). But because Harvey’s not part of the mainstream, whereas Reich sort of feels he is, I doubt Reich will ever admit to knowing him even if he does.
based on their previous behavior and apparent biz practice the solution is obviously to have the federal government hire them to re-review their work at pay them a nice fat fee
Dear President Obama,
In light of the above, and considering the potential enormity of the costs of the recent downgrade, I must ask you a simple question:
How is this “Look Forward, Not Backward!” doctrine is working out for you?
I’ll stipulate that S&P is Satan incarnate.
Nevertheless, the downgrade from AAA to me appears warranted based on the fact that a faction in Congress with blocking power over a deal appeared to want default, or at least were indifferent to it. Forget about ability to pay, this is about WILLINGNESS to do so. Forget about S&P as the messenger. Instead, I’d genuinely like to see commenters engage the issue of whether the demonstrated behavior of Congress in terms of willingness to repay maturing debt warrants a AAA rating.
Instead, I’d genuinely like to see commenters engage the issue of whether the demonstrated behavior of Congress in terms of willingness to repay maturing debt warrants a AAA rating.
Why? What’s the point?
U.S. treasuries remain the safest investment on the planet. Every other sovereign nation except maybe Germany is less credit worthy. And the U.S. dollar is the world reserve currency.
If the US isn’t worthy of the AAA rating, then no country currently is. Perhaps we should just abolish the AAA rating as an example of fallacious “this one goes to eleven” thinking.
I still prefer that we keep the scale absolute. If I envision all 200 of the world’s “sovereigns” clamoring around Professor S&P demanding that he grade on a curve and at least 7 sovereigns receive an AAA grade in good sovereignness…well, things just get too silly. Plus my spell checker says sovereignness is not a word, so there’s a problem right off the bat.
Next thing you know we’ll be on a pass-fail system.
I’d argue that what S&P has done is abolish any pretense of an objective rating system in favor of the kind of subjective approach we see in ice skating, platform diving and gymnastics.
S&P might have had some credibility if it had done its partial downgrade DURING the debt ceiling debate, but to do so after that debate had resulted in a compromise that proved the political posturing for what it was, well that was ludicrous.
Regardless of where yields on the 10 year and 30 year treasuries go, the natural expectation of such a downgrade is that yields will go up, perhaps significantly. The fact that the S&P did the partial downgrade in a deflationary environment where treasuries remain the safest bet demonstrates an intention to reward the ongoing flight to safety with higher yields. We’ll see if this ultimately materializes, but I don’t see how S&P can be viewed as having any objectivity whatsoever.
They did make a warning early this year. So did Moody’s. Not sure if Fitch said anything. They made another recently, but that was because the US might default from hitting the debt ceiling. That is logical, from a rater standpoint. So if they waited until after the debt ceiling resolution to see what the long term debt management plan is, that is reasonable too. The only valid grip there I see is they could have waited until the end of the year until we actually see the outcome of the “super congress” plan. But if tax increases are off the table, then why wait?
They were catching flack for downgrading EU members and not the US. When considering the difficulty in trying to objectively rate sovereigns around the world, and make that seemless with corporations and other RE instruments, I start to get a little sympathetic about their problem.
But I think their involvement in CDOs was criminal and someone in that division and also upper managenet should have fried.
S&P had us rated AAA all through WWII, while our debt was much higher relative to the size of the economy and we were engaged with Germany & Japan in a struggle that might have gone either way. At this point we’d be better served to find out what ratings the National Enquirer is giving us.
It it the Executive, not Congress, that pays the bills.
We’ve discussed on this blog repeatedly that the Treasury has several routes for ignoring the debt ceiling. It’s a phony constraint.
I guarantee that Obama would have reversed himself and used one of these routes if the debt celling crisis had dragged on. There is no way this Administration would default on Treasuries.
S&P basically hoist Obama on his own petard, his playing along that the debt ceiling really was binding. Remember, Obama wanted entitlement cuts too.
Social Security is a Ponzi scheme which requires an exponential growth in population coupled with an exponential growth in high paying jobs.
Saying you deserve payout is like a Ponzi ‘investor’ saying he/she deserves payout. Excuse me, but you’re the fool who believed it could continue.
To those of you calling it a contractual obligation with the government… Give me a break. Since when do governments keep promises? They always promise more than they are able to afford. Again, you’re the fool who believed it could continue.
The heart of this problem isn’t with greedy corporations, greedy banks, or incompetent governments. It’s with fools who believe their lies.
You Baby Boomers need to grow up. The younger generations are fast becoming more mature than you.
Social Security is only a ponzi scheme in the sense that population growth is a ponzi scheme. If 1 billion elderly need 10 billion workers to care for them, the 10 billion will need 100 billion workers in the next generation. Earth resources can’t handle that in the long run, and population growth will stop whether we like it or not.
The question is, will we reach a steady state, or will we crash?
Social Security is not the problem.
Cuts both ways, Dustin. Maybe a Citizens revolt installs a government that returns the favor. You know those long term Treasuries you people hold? Suckers.
Hey Wile E Coyote while you are at it why don’t you tell us about the massive off-shore tax avoidance/evasion going on that would help pay for the entitlements?
Yes, indeed. As i say, revenues need to go up. If you read my post carefully, you will see that i back the Bowles Simpson recommendations. That would reform tax code, removing tax loopholes for the rich and many unnecessary and undesireable corporate subsidies.
I think the problem often with these discussions is that when one person points out a problem another points to a different problem, but equally vailid. No one is refuting that the US system is full of problems and ALL need to be addressed. But that doesnt take away from the fact that we have an out of control medical system which is not afforadable at current levels of revenues and growth in cost rates.
“But that doesnt take away from the fact that we have an out of control medical system which is not afforadable at current levels of revenues and growth in cost rates.”
Exactly. Everyone keeps tap dancing around the real problem. I read somewhere that the average person pays around $55k into Medicare over his/her working life and collects around $161k in benefits during retirement. There’s your problem right there. That’s unsustainable. And at the rate healthcare costs are climbing, it’s going to get more unsustainable.
Either we raise taxes or cut benefits. Unless some brave soul(s) are going to take on the health care industrial complex and deal with costs, which I think about as likely as financial regulatory reform.
A prime example from an NYT article:
According to one site, ‘Mirena [IUDs have] an estimated production cost between $10 and $40.’
With contraceptive coverage being made mandatory, taxpayers will now pay a markup of between 30 and 120 times to the rent seekers who extract these preposterous prices.
This system is patently broken. But in an act of monumental stupidity and fecklessness, Obamacare entrenched it. CONgress’s 202 members who are attorneys come from a cost-plus time bubble profession of ‘customary rates’ and passed-on expenses. Our lawyer president spent his entire career in government-funded positions. It shows.
Today Israel set out to reduce the cost of living. Absurd expenses, harmful costs, should not be allowed to linger until they have produced financial hardship among the population. This is a form of theft.
Whatever S&P’s relationship with the GOP, it seems counter productive to attack them so forcefully. It doesn’t resonate with the voters and the reaction makes it seem like the Obama administration IS responsible. Wouldn’t it have been smarter to use the downgrade to highlight the GOP’s intransigence?
Hey Wile E Coyote while you are at it why don’t you tell us about eliminating the several wars that we are fighting—so as to save the other half of our expenditures? And tell us how to “reform”, by a few tens of billions, our ever-increasing and largely ineffective NSA/TSA? And why don’t you tell us how to redo “free trade” so that our nation makes some of its own products, something beside arms/munitions, which, as any reasonable person knows, is the healthiest long-term method for getting those “revenues to go up”.
You are right, “we have an out of control medical system”. Not out of control social security. Not even out of control medicare. It is the “medical system”.
And why are you so frightened to make people who have way more money than they need, pay more in taxes?
Paticia, if the medical system is out of control, then the promise to pay those costs are also going to be out of control in the long term.
So we have a choice. Raise taxes to cover our deficits or cut federal expenditures such a health (which is a problem).
As to your pointing to other problems, i agree. I hate wars and their costs and i think Iraq was a disaster and Afghan we shoul dhave been out of. But we currently are running an annual deficit of about 1 Trillion dollars. So even if you cuts both wars tomorrow you would only save about 300 Billion (but its a good start!).
Everyone needs to man up. We are out of control, and we all need to realize it. As for the rich, yes they should obvious be put back to Clinton tax rates. I would also make sure any future wars are financed solely by the rich!, since the average american is dying for our country and their possesions. Lets see how often we would go to war then!! Thats how it was done in WW1 and WW2, high taxes on the very rich.
You contradict yourself. First you write: “So we have a choice. Raise taxes to cover our deficits or cut federal expenditures such a health (which is a problem).” Then you go on about getting out of two of our several wars and raising taxes on the wealthy either somewhat or to the level during WWII.
You need to organize and clarify your thinking so that you are making comprehensive sense. (For eg: a plan is not either taxes or “entitlement reform”.) Or, if you are doing ye olde politico two-step of agreeing with a golden smile as you sidestep into the same old corporatist dance, your hard hard work will be meaningless here.
S&P dances a lot like you.
I just spent the last 10 days with extended family and old friends, all of whom carry varying degrees of conservative ignorance. I took some of it out on you. Sorry.
Look, you say you agree with Bowles/Simpson. If you are willing to think it through carefully, that committee was pro forma about this/that cuts, whereas the passion in their proposal was “entitlement reform”, front/middle/last. Do not let them lie to you.
If this nation cuts the whopping “War on Terror” everywhere, then corrects trade issues, then rights our absurd tax rates on the wealthy, then establishes a healthy tax for any international corporation that wishes to do business here (together with quitting subsidization of aforesaid), then revises the corrupt medical system,then, after all that has been reconstructed for health and justice of our nation, only then you can ethically look what might remain to be adjusted in social security and medicare.
Why in that order? Because any ethical people protects their old and young and disabled and poor. Have you gone to church/temple/mosque? You know this.
Patricia, thanks for bettering the tone. I know these are hot button issues and we may all get to frustrated that we tend to talk past one another instead of to one another.
Bowles Simpson was what it was supposed to be, unacceptable to either side to some degree. They did a bit of everything, including, very importantly, reforming corporate and individual tax code. They also did cuts to military (that problematic sacred cow). We may argue about too much here or too little there, but in the world we live in, it was a compromise worth supporting. Look where we are now? At the brink of default cause of political wrangling. Believe me, the Tea partiers were not behind Bowles Simpson, so we must learn to take what we can swallow instead of what we want that we cant get.
I feel bad for those that are suffering, but i know there will be a heck of a lot more pain if we dont start doing the work we need to do now, even if unevenly but atleast comprehensively.
The US would be much better off if Obama got behind Bowles Simpson and let the uncompromising left and right shoot themselves in the foot.
And yet, even the truest tone in the universe won’t get you to face the question, will it, Mr. Coyote?
You write: “We may argue about too much here or too little there…” And again: “I feel bad for those that are suffering, but…”
You are that coyote of low moral purpose, Wile, right? You have looked down and found yourself hanging in the air far from the cliff’s edge. Your legs are twirling as you start your descent, and in your head grinds the same old angry trickses against Roadrunner. Same as it ever was.
Good day, sir. Enjoy your landing.
The US would be much better off if Obama got behind Bowles Simpson and let the uncompromising left and right shoot themselves in the foot. Wile E Coyote
The US would be better off if it considered that the Torah commands periodic debt forgiveness for even legitimate debt (Deuteronomy 15). How much more then does that command apply to debt to what is essentially a government backed counterfeiting cartel?
But the counterfeiting cartel cheats savers too, so a universal bailout is more appropriate.
So much for the tone…was nice while it lasted ;). I know you are probably a very good person, just calm down. Its Sunday :).
Bit of the male superiority going there, Wiley, old boy?
Sunday, for me, seems a particularly apt day for truth-telling–probably an out-dated habit developed from all those sermons I used to hear as a child.
LOL, you are in a militant mood today for a church goer. If I open the door for you, would you call me a male chauvinist?
I personally find the truth isnt told, its often needs to be discovered, or uncovered. Polite discourse allows others to attend the unveiling. :)
“unacceptable to both sides to some degree” really is a bullshit standard. I wish people were forbidden from using that ‘argument’, and would take the substance seriously.
Anyway, I’m terribly sorry for you, but you have been weighed and found wanting, Wile E. The arguments offered in your posts are just a tad too superficial, even aside from the fact that you keep talking about stylistic issues without meaningfully engaging with the questions that are being directed your way. And that, old chap, is the worst kind of rudeness in conversation: not taking your opponent seriously.
If you bother to read all my posts i state numbers and facts here and there, none of which have been refuted. That you focus on a use of generalization of politics as the thrust of my agruments (which i would be glad to go toe-to-toe on the details, just name what detail you are defending) smacks of very unsophisticated sophistry.
You provide no counter facts to my numbers or my factual presentation of decifits and politics. You, ol’ chap, fall prey to your own misguided criticism. How rude indeed :)
So we have a choice. Raise taxes to cover our deficits or cut federal expenditures such a health (which is a problem). Wile E Coyote
To do either in a Depression is stupid.
The population has been driven into unserviceable debt by the government enforced and backed counterfeiting cartel. The population thus needs money to pay off that debt or the debt needs to be forgiven.
I do not want to hear any criticism of S&P from any REPUBLICAN or TEA BAGGER.
S&P in a private entity. The Government does not have any business interfering with their operations.
S&P’s corporate tax should be ZERO. You will not investigate any of their ratings over the last 11 years.
Is Standard & Poors just positioning itself for growth in China as a result of this manuever? I have a major problem with S&P’s analysis. The major risk is inflation that would result from the government would print money to pay its bills. If that is the risk, then all dollar denominated loans would have to be downgraded.
In most of the commentaries about the way in which elites influence policy the focus seems to be in how policies like austerity damage the economy and non-elites in particular.
The math on this does not seem complicated and there are concrete examples which demonstrate the idea.
What I do not see very often is an explanation of how elites benefit from these bad macro-economic decisions. I am not saying there is no connection. I am saying that I have not read enough “connect the dots” type comments to make it clear to me.
So, who makes money from the pro-cyclical austerity policies of Ireland and the U.S.?
So, who makes money from the pro-cyclical austerity policies of Ireland and the U.S.?
The real value of the down-cycle is the consolidation of political and economic power by the capital holders. The monetary payoff comes during the next bubble.
For example, “austerity” allows the capital holders to buy assets at a lower price than they sold them for during the last asset bubble they manufactured. Austerity also frees up state-owned assets for sale at bargain-basement prices (who wants to buy the Parthenon? And what is that cultural treasure really worth?).
Abd remember that the reason everybody is calling for “austerity” is that we bailed the capital holders out of their bad bets, which allowed them to keep the profits they made during their bubble. The result of austerity will be deflation, which means that the money the capital holders were allowed to retain will be able to purchase more for less. That’s how the same people win on both sides of the cycle.
So, let’s name some names here. Again, I am not doubting the conclusion, just trying to connect the dots.
Governments selling infrastructure. We’ve written about it before on this blog. It’s a ripoff. The only way to deliver the returns the investors want and pay for the huge fees of putting the deals together is by jacking up prices and cutting service.
What’s the point in naming names? The very narrow class of people that we’re talking about are merely doing what that same narrow class of people have been doing for the last few centuries, if not longer. If we somehow got rid of the current bunch, whoever replaced them would wind up doing the same thing if nothing is done to change the dynamic you get when leveraged financial speculation is accepted as legitimate economic activity instead of treated as the crime it is.
The focus needs to be on changing that dynamic, i.e., changing the rules of the game. And you can only do that by changing the institutions that drive societal values. FDR and his administration did this rather abruptly and by fiat in the wake of the Great Depression. Neoliberalism’s founders did this over the course of 30-40 years. It needs to be done again, preferably quickly.
Here’s an interesting piece making a similar point about institutional change in the context of the Glorious Revolution:
Whenever times get tough there are always people who point the blame. Sometimes it’s based on ethnicity, sometimes on race, and sometimes class, but it always involves an allegation of conspiracy by those who don’t agree with you. The idea that a group at S&P decided on a strategy to stop good people from doing something to interupt their gravy train is too nutty to even discuss.
It’s possible that there was within S&P a concensus around policies that disagreed with the political views of the writer, but even this is unlikely. It’s far more likely that people did a series of things that were not connected in their minds that eventually came together to cause a disaster. I think that’s what happened with the entitlement crowd. They didn’t set out to break the government, but taken together their committments were unsustainable. It wasn’t a conspiracy and it wasn’t really stupidity: it was simply a failure to think through how everything they wanted interacted with everything else.
I think that’s what happened with the entitlement crowd. They didn’t set out to break the government, but taken together their committments were unsustainable.
Hilarious. It was the “entitlement crowd” who caused the financial crisis that started in 2008 and required a series of measures that burdened the government with unprecedented and massive debt to bail them out.
I’ve heard the banksters called a lot of things, but calling them the “entitlement crowd” is a new one to me. Brilliant!
Oh, wait. You’re saying that its all the people who demand things like Social Security and Medicare that “broke” the government. Hell, that’s even more hilarious. I can just picture grandma holding a gun to Dubya’s head and telling him to fund TARP and TALF because those programs were vital to Social Security and Medicare, don’t you know!
The financial crisis was the trigger for everything that’s happened, but the debt problem throughout the West is massively larger than the cost of bailing out the banks. Borrowing from future generations is what has turned this into an existential crisis.
“Borrowing from future generations is what has turned this into an existential crisis.”
Gag. They’ve got you, hook, line and sinker.
There is no such thing as “borrowing from future generations” as far as money is concerned. No less a libertarian than Murray N. Rothbard has said that the National Debt should be repudiated. But in any case, it could be paid off tomorrow with a few trillion dollar coins.
A rare find! The this article, esp. its last para, concisely sums up the bipartisan “debt-ceiling crisis” for what it was: Bipartisan fraud, implemented by scare tactics, abetted by the usual class-warped institutions (media, academe, S&P, etc.) on behalf of the latest iteration of the offensive of big capital, underway since the 1970’s. (“The past percentages are not good enough,” pronounced Nelson A. Rockefeller in 1974–no economist he, but a harbinger of the imperatives of his class.) The only “truth” to the debt/deficit “crisis”–which several of this site’s posters regularly misconstrue in fussing about the solvency of Social Security, Medicare, etc.–is that the remnants of the welfare state are indeed incompatible with the extension of the status quo in every other respect–the accumulation of oligopolistic capital, the expansion of corporate welfare, the continued shredding of the U.S. constitution, even more militarism and, most of all, U.S. dominance in a world (and biosphere) literally sick of what ails the “exceptionalist” U.S. of A. In the meantime, the reserve army of petty-bourgeois insanity epitomized by the Tea Partiers will continue to percolate as a reliable protofascist vanguard of big capital’s offensive; permitting corporate stooges such as Obama to don the mantle of “lesser evil” for all the fools who will continue to support him.
Could it be S&P reflects the interest of bondholders — ooh I’m totally shocked. Yeah, I mean they were idiots for mssing the 2008 crash, but regarding the USA downgrade? Has anyone been watching the news? It’s hardly surprising. (Though I admit, I didn’t think they had the balls. Good going!)
Yep that sounds right. Lenders to sovereign governments are the ultimate financial parasites. Government is merely their collection agent for the rent.
I´m sorry, but cry me a river…
All of a sudden this blog and it´s readers seem to discover the potential issues concerning current S&P ratings. In any analysis before the last downgrade (that of the US), the ratings were pretty much accepted as the holy grail, and used as a basis of analysis for e.g. Greece, Ireland, Portugal, Spain(!).
Now “obviously” S&P is wrong, wrong and wrong…
I´m not defending the rating agencies, they seem to be very much of a lagging indicator, but you can´t really have it both ways, either you ignore/critizise their ratings what Europe is concerned, or when basing your comments&articles are based based on these ratings, you don´t start whyning when the US gets downgraded.
either you ignore/critizise their ratings what Europe is concerned, or when basing your comments&articles are based based on these ratings, you don´t start whyning when the US gets downgraded. Bernd
Those countries in Europe are not monetarily sovereign; the US is.
Still, I don’t argue with the S&P downgrade since in the US our politicians are so stupid that they think our debt in a currency we create is equivalent to the debts Greece owes in a currency it CANNOT create.
You’ve not been reading this blog or not closely.
We’ve discussed MMT at length. A monetary sovereign is not at all like the countries of the Eurozone. We’ve also derided the rating agencies rating Japan (another monetary sovereign) as single A (they are now back up to AA). Guess what, as MMT would predict, the A rating did not affect Japan’s ability to finance cheaply one jot.
Bernd, one can recognize that S&P et al are corrupted and also understand that they remain a power in the system. What you call “whyning” is actually astute protest by people who can think systemically as well as para-systemically.
Moreover, they are not merely lagging indicators. For eg., they are making part of their threat for an additional down-grading, additional cuts in “entitlements”, an obvious stage for the future work of our supra-congressional committee.
Stoller is saying something that I said here yesterday. S&P’s credit downgrade of the US is part of the plan to loot Social Security, Medicare, and Medicaid. Kleptocracy is a system, and the ratings agencies play a useful part in that system. S&P provides an “objective”, “scientific”, “expert” rationale for why entitlements “must” be cut. They give cover to the looters and the politicians they own. The whole goal here is to loot these programs, but now they can say that they don’t want to but they “have to”. A similar argument is that “we” can’t afford them, that the money is not there. This is of course a lie. The money is always there for the looters, for their trillion dollar tax cuts, wars, and bailouts. It is just not there when it is anything to benefit the rest of us. More it is trillion dollar budget cuts for us.
I could not help but note how much of this thread was hijacked by the false issue of the government’s future liabilities. The US government has been around for 220 years and been in debt during almost all of that period. Using the future liabilities argument we can conclusively prove that it is virtually impossible for the US to exist for anything like that long. That the argument doesn’t remotely correspond to reality doesn’t seem to faze its promoters for even a moment. Nor does it explain why we can afford the tax cuts, bailouts, and wars for the rich but not entitlements. It ignores the country’s massive wealth inequality. Yes, we can afford not just good retirements, but good healthcare for all, good solid stable jobs, good housing, good education, good infrastructure, and a good sustainable industrial base. We just can not as long as so much of the nation’s wealth and resources are tied up in the hands of a few kleptocrats and our political system is owned by them.
Thanks Hugh. As usual you’ve put the focus where it should be.
So agree Hugh.
In 1945 we had about 2 billion people on the earth. They needed X number of dollars to make commerce function. But of course they did not have it. Most of the 2 billion were in poverty and there was no commerce. If you want commerce you have to print up enough money to make it work.
It’s time for a little realistic snark. We should simply take note that the US credit rating has been downgraded from AAA to GOP. Pass it on …
I take seriously the view presented by NC that much
political theater took place in the run-up to the passage
of the Budget Control Act Amendment of 2011 (the text of
which is impenetrable to me …).
A question that baffles me is whether there’s a script for
what happens next (say up to January 2012), and how much
of this might be settled or agreed upon by the
Republicans in the Congress, the Democrats in the
Congress, the Tea Party representatives in the House
and the Administration?
With Obama in charge you can bet it’s coordinated and concerted.
From a world where the elephants have shed their trunks to better sing the hee-haw chorus,
where the donkeys are flying over the edge of the grand canyon like Thelma and Louise rather than walking the long slow trail,
where acronyms have taken the place of usual nouns and carry more power for it,
where double-speak such as “entitlement reform” echo and re-echo and everyone knows what it means,
from this world, I am away, in my little house again, cozy and comfortable and grateful for Yves.
I found this humor to be apropo for todays critique of S&P. It finally shows to the public S&P’s highly secretive rating model.
I too am very grateful to Yves and too all here that take the time to share their opinions. We need more sites like these that push information out to the public and allow us to come together as a community and discuss the issues.
“Kleptocracy”: rule by thieves
Zerohedge once opined that the economic system that follows capitalism is whorism. I disagree. Whorism is the political system that follows republicanism. Kleptocracy is the economic successor to capitalism.
Whorism + kleptocracy = corporatist fascism, which is what we have today.