Bipartisan talks to set short- and long-term spending limits should include a substantial job program that would be effective immediately. The immediate crisis in America is jobs, not deficits, which are declining.
Economy & Budget
Tax reform is likely to be one of the hot-button topics in the months ahead as politicians on both sides of the aisle grapple with how to make the federal income tax system flatter, fairer and less complicated.
The tax code itself has been altered, fixed, reformed, flattened, expanded and criticized since it was created in 1913 by constitutional amendment. Now it just may be time to get rid of the income tax altogether as a failed, progressive experiment.
Ernest Hemingway said write one true sentence. Here I write two.
The first is widely known. The recent fiasco increases the odds Democrats can win back control of the House and keep control of the Senate.
The second true sentence is the big secret which you read here first: the Tea Party won a great economic victory in the shutdown battle by forcing President Obama and Democrats to accept more than $70 billion of spending cuts and forcing them to accept continuation of the budget cuts of the sequester.
The latest offer from those I have called Banana Republicans would keep the government shut down and threaten again to default the nation and crash world markets in a few weeks unless Republicans get their way.
This is financial terrorism, pure and simple.
The circular logic of President Obama’s press conference performance on the debt ceiling would be funny if it wasn’t so tragic.
Obama proclaimed he would not negotiate with Congress on raising the debt ceiling, while at the same time explaining that, “There comes a point in which if the Treasury cannot hold auctions to sell Treasury bills, we do not have enough money coming in to pay all our bills on time. It’s very straightforward."
So it seems that Obama by refusing to negotiate is willing to allow this very occurrence if he doesn’t get his way. Yet he attacks his political opponents, who have actually proposed a path forward for both ending the government shutdown and raising the debt ceiling, as holding the nation hostage.
Congress would be well-advised to solve the crisis that has driven its popularity down to levels of defective dog food. There is a real prospect of a U.S. default that would crash the markets and the economy. If default happens, the people of an angry nation would surround both houses of Congress waving pitchforks and lifting a finger that would not be a thumb pointed upward for victory.
In preparation for my column on Thursday I have been privately canvassing opinion on both sides of the aisle and suggesting my own version of a deal, which will be detailed in my column if and only if I believe there is some prospect of success.
Because of the extremism of their policies and tactics in threatening to shut down the U.S. government within the day and destroy the full faith and credit of the U.S. by denying a debt ceiling increase in mid-October, Republicans in the House of Representatives, dominated by Tea Party fanatics, could crash financial markets around the world this month.
Many of the great financial crashes have historically occurred during October. It could happen again. Let's understand the interplay between the shutdown crisis over spending, which reaches a crescendo today, and the debt-ceiling crisis, which reaches a crash point in mid-October.
Today the House GOP fanaticism would close the Statue of Liberty and undermine the ability to government to function. And then, the debt-ceiling crisis would be a direct attack on the financial integrity of the U.S. The shutdown crisis further erodes what little credibility remains for the Congress. The debt-ceiling crisis would destroy the good faith and credit of the U.S. itself, shattering confidence throughout global markets and probably causing a financial crash.
In my latest column, Banana Republicans 2013, I criticized rightist Republicans who again threaten to shut down the government over spending bills and then trigger a default during the coming debt-ceiling debate.
That column generated significant reader interest, and this sequel is equally noteworthy. A coming financial firestorm will involve banana republic bankers: bailed-out banks jacking up fees and interest rates as their holiday gift to taxpayers who paid for their bailout.
The "Today" show on Friday aired an excellent segment about the latest surge in bank fees. I just learned that my own bank, one of the largest banks in America that received some of the largest bailouts, is attacking its customers with new fees and Mafia-like interest rates. In my case — I kid you not — they go into effect Dec. 24, 2013, on Christmas Eve.
Don't miss the story in The Hill in which Washington Mayor Vincent Gray suggests that cuts in the defense budget from the sequester may have contributed to the latest mass murder that shook the nation Monday.
It is too early to conclude, and I am not suggesting here, that Defense Department security spending was cut in a way that helped the killer gain access to the Navy Yard. Though I am charging this: The sequester has done significant harm to the American economy and should be repealed.
The chairman of the Federal Reserve Board is the most important economic job in America. With President Obama and Congress unable to agree on major economic policies, the leadership of the Fed is more economically important than the president, the secretary of the Treasury, the House, and the Senate.
To some degree I agree with the view of libertarians such as former Rep. Ron Paul (R-Texas) that the Fed has become a de facto bailout agency for banks. I strongly disagree with Paul and others about this: The great economic folly is the failure of any policy to boldly create jobs, and the Fed needs to boldly act, but act in different ways than top-down monetary policy.
With Lawrence Summers no longer under consideration for the Fed job, Obama should nominate Janet Yellen to chair the Fed. Yellen is an internationally respected economist with a long track record of being proven right.