More Money-Mad Monday Mikey Musings

Our PA-08 U.S. House rep doled out some king-sized helpings of “conventional wisdom” yesterday in the Bucks County Courier Times (here...glad to see the push-back Mikey is getting in the comments, by the way)…

Since Congress convened in January, no issue has dominated the national discussion and congressional debate more than spending and the deficit.

This actually might be a record of sorts for Mikey – he’s wrong from his very first sentence; I don’t know about “congressional debate,” but when it comes to “national discussion,” as noted here, jobs are the number one concern on a list of five issues (and on that list, the deficit came in last).

Continuing…

From tea party patriots to President Obama, there is now nearly unanimous agreement that government spending is out of control. The time and attention finally being paid to this issue is long overdue.

As is usually the case with Mikey, there is a substantial amount of gall in his umbrage about reducing deficits when, as a member of the dreaded 109th Congress, he helped to make the deficit substantially worse, as noted here.

Over the past three years, the United States has added $5 trillion to our national debt, bringing the total to $14.3 trillion. With nearly 42 cents of every dollar spent by the federal government being financed, we are borrowing trillions each year to feed our spending addiction. Perhaps the most sobering fact is that after July 27, every cent the government spends through the rest of the year will be borrowed.

While the debate in Washington on the size and types of cuts has been vigorous and at times tense, it has failed to focus on the harm out-of-control deficit spending has caused and will continue to cause among private sector job creators.

Get ready for the return of “the confidence fairy” (a good response to that from Professor Krugman is here)…

In order for new companies to start-up or existing companies to grow, certain elements are essential. Three of the most important are availability of capital, economic confidence and predictability of future costs. Deficit spending at the levels we have seen over the last three years has undermined all three.

I wonder if it has occurred to Mikey that cutting government spending can actually increase the deficit? Ezra Klein tells us how here…

Every dollar the Internal Revenue Service spends for audits, liens and seizing property from tax cheats brings in more than $10, a rate of return so good the Obama administration wants to boost the agency's budget.

House Republicans, seeing the heavy hand of a too-big government, beg to differ. They've already voted to cut the IRS budget by $600 million this year and want bigger cuts in 2012...IRS Commissioner Doug Shulman told the committee Tuesday that the $600 million cut in this year's budget would result in the IRS collecting $4 billion less through tax enforcement programs.

And as noted here (about halfway down the page) H.R. 1, the Full Year Continuing Appropriations Act, 2011 passed in February…(included) drastic spending cuts throughout, including to the Treasury Department and IRS (and as noted here, Mikey voted Yes..."Aye" actually).

(Oh, and speaking of the IRS, get a load of this bill Mikey is sponsoring with “Moon Unit” Bachmann, the “Innocent Spouse Relief Act”; Fitzpatrick and Bachmann claim that two years isn’t enough time for an “innocent spouse” to file a return when “an abusive or manipulative spouse does not tell the other person about collection proceedings.”

Now far be it for me to oppose the rights of “innocent” spouses (determined so by a court of law, I would assume), but if two years is not enough time for such a person to file a return, then what would be an appropriate period? Five years? How much projected revenue would be lost if this bill were to be signed into law, I wonder?)

Continuing with Mikey…

Of all the elements, access to capital is the most essential. Like a car loan or student loan, when the government borrows money, it has to make regular payments or risk default. The difference is that government has someone else to pick up the tab - taxpayers.

Last year, interest payments on the national debt totaled $414 billion. This constitutes nearly 3 percent of GDP, the entire economic output of the United States.

As noted here, though, 3 percent is actually pretty low; it was actually around 14 percent in 1980, for example.

Continuing…

Massive debt also reduces the available capital because as our national debt explodes, lenders lose confidence in our ability to make interest payments on time. As Greece and Portugal learned last year, this leads to lower credit ratings, which makes loans even more expensive for U.S. taxpayers. The deficit-driven spending cycle continues.

As noted here, a big part of Greece and Portugal’s problems had to do with the fact that they both traded in their country’s currency so they could be denominated on the Euro; as a result, “to regain competitiveness, (Greece needs) massive deflation; but that deflation, in addition to involving an extended period of very high unemployment, worsens the real burden of their outstanding debt” (and more on Portugal, which faces a similar problem, is here).

Continuing…

Lenders are not the only ones losing confidence in America's fiscal health. A key economic barometer is consumer confidence. When you and I feel that our nation is on firm financial footing, we are more likely to buy a car, replace an old refrigerator or try out the newest smart phone. The same is true for employers. If we expect businesses to buy new equipment, open a new office, or most importantly hire a new employee, they must have confidence in the economy and the government's fiscal stability.

As noted here, consumer confidence is down not because of the debt, but because of “inflation creep” and climbing food and gas prices (and I don’t have a clue as to when, or if, I’ll even consider buying a “smart phone,” Mikey, regardless of the economy).

Employer confidence is linked closely with the final factor: predictability of future costs. Chief among costs are labor, taxes and regulation. Having a clear understanding of what these costs will be tomorrow allows employers to expand and hire new employees today. Rather than begin hiring, many companies are still waiting on the sidelines because of continued uncertainty about future tax rates and related costs.

Unbelievable – as noted here, tax receipts to the government are at their lowest level in 60 years (and if a business isn’t smart enough to shield itself from tax liability to the maximum extent possible with all of the myriad loopholes in our tax code big enough to drive a Cadillac Escalade through, then they don’t deserve to be in business…also, here are more depressing numbers on how the richest 400 individuals in this country have seen their income quadruple because of the disparity in our tax rates).

And speaking of business, I found this link at Fitzpatrick’s web site where he encourages anyone who views it to “share your job creating solutions.” I would be highly interested to see what kind of feedback he has received, if any.

I think it is ridiculous anyway for Fitzpatrick to act as if he is some fiscal savings guru when he has supported tax cuts for the rich, which, as noted here, have done more to explode the deficit than any of the proposed cost-cutting measures between Obama and the congressional Repugs.

What the Repugs in Congress are doing has nothing to do with trying to pay down the deficit. It is all about pursuing a course that will forever enshrine a new Gilded Age of profligate wealth for the very few and ever-more-wrenching poverty and desperation (to say nothing of ever-bleaker job prospects) for the very many.

The trick isn’t to keep this in mind now, though that is important. The trick is to remember it in November 2012 when Mikey runs for re-election, enjoying typically full-throated support from the Bucks County Courier Times and “nod-and-a-wink” approval from the Catholic Church, with their campaign placards for “pro-life” Mikey that will appear near their parishes (but not close enough to church grounds to legitimately endanger their tax-exempt status…I sometimes wonder if one of the oldest institutions on earth has the slightest idea of what it is that’s happening with our economy).

Where are the jobs, congressman?