Saturday, August 6, 2011

Republicans Put Re-election Ahead of Their Country

The Bigger Picture
Published on August 15th 2011 in Metro Éireann By Charles Laffiteau

In my last column I accused Republicans of ‘kicking the can down the road’ by using a bit of legislative sleight of hand to allow an increase in America’s debt ceiling without agreeing to a plan to address the deficit.
While I applaud the fact that cooler heads within the Republican ranks were able to come up with a way to raise the debt ceiling and avoid a bond default, I nonetheless condemn Republicans for their failure to embrace a plan to take action on the ballooning federal budget deficit in conjunction with raising America’s debt ceiling. By failing to act responsibly to address the budget deficit Republicans in the US House of Representatives have shown that their real priority is getting re-elected rather than doing what is best for their country.
On the other hand, in the US Senate a coalition of conservative Republicans and liberal Democrats put partisan politics aside and drafted a very pragmatic agreement which used a combination of tax increases and spending cuts to cut the current 14 trillion dollar deficit by more than 4 trillion dollars over the next decade. The Senators used the recommendations of President Obama’s bi-partisan deficit reduction panel as a blueprint for developing their own plan to address the nation’s budget deficit while protecting America’s social welfare programs.
In contrast to the uncompromising ‘no tax increases’ stance of House Republicans, Republican Senators agreed with their Democratic Party counterparts that an increase in taxes was an essential part of any practical plan to cut the nation’s deficit. However, the Senate Republicans did not endorse President Obama’s proposal to let the Bush tax cuts for wealthier Americans making over $250,000 per year expire in 2013. Instead they proposed to raise over one trillion dollars in new tax revenues by drastically changing the US tax code.
The US Senate plan proposes to raise tax revenues by eliminating almost all of the current tax deductions and subsidies and then lowering tax rates for all levels of household income. In turn, middle class and lower income households would see their taxes reduced or remain the same while wealthier Americans would see their taxes rise even though their tax rate was lowered because they are the primary beneficiaries of the current tax deductions.
The Senate plan also addresses the deficiencies in the America’s entitlement programs which are the biggest contributor to the budget deficit. The Senators would shore up America’s retiree healthcare program by using means tests and other cost saving measures to cut Medicare costs and would change the way cost of living increases are computed, increase contributions and raise the retirement age in order to ensure that the Social Security program remains self supporting for the next 75 years. The plan would also cut spending by eliminating agricultural and ethanol subsidies and by trimming the budgets of all federal agencies including the budget of the Republican Party’s most sacred cow; the US Defense Department.
Both the Senate and President Obama’s proposals to reduce America’s budget deficit rightly spread the pain of spending cuts and tax increases across all segments of American society. But both plans also lean heavily on spending cuts rather than tax increases to close the budget gap with roughly 85% of the measures reducing expenditures and only 15% raising taxes. As such one would think Republicans would be happy to accept such a tax friendly compromise.
So why do House Republicans refuse to compromise and accept some small tax increases as part of a deal to cut the budget deficit and raise the debt ceiling? Do they really think Republicans will win both the 2012 Presidential election and the 60 seats in the Senate they need so they will no longer have to compromise with Democrats after 2012? No. Congressional Republicans are putting their selfish personal political interests ahead of their country by pandering to no-compromise Tea Party activists in order to get re-elected.

Legislative Sleight of Hand

The Bigger Picture
Published on August 1st 2011 in Metro Éireann By Charles Laffiteau

In my last column I discussed some of the misconceptions Tea Party activists and the ‘debtors’ have regarding raising America’s debt ceiling. But what dismays me even more is the fact that the Republican Majority leader, Eric Cantor, and the Republicans in Congress who are catering to these anti-tax right wing voters, refuse to challenge the ‘debtors’ utterly false notions.
The US Chamber of Commerce, a frequent foe of many of President Obama’s legislative proposals, as well as many American CEOs have spent much of the past year holding numerous educational meetings with members of Congress who are opposed to raising the debt ceiling. In these meetings they have repeatedly warned lawmakers of the adverse impact a US Treasury bond ‘default’ will have on America’s deficit as well as both the American and global economy.
More specifically, they have warned Congress that failing to raise America’s debt ceiling will not only lead to an increase in the interest America pays on its future bonds, but that these increased interest payments will also add to America’s budget deficit rather than reduce it. They have also warned legislators that an increase in the interest rate for US Treasury bonds, also known as ‘T-bills’, will do serious damage to America’s still fragile economic recovery.
This is due to the fact that the interest rates consumers pay for auto and home loans as well as their credit cards is tied to the interest rate paid on T-bills. Furthermore, the ripple effect of an increase in T-bill interest rates also extends to the interest rates businesses pay on the bank loans they use to finance their businesses as well as the corporate bonds they issue to finance expansions of their business operations. These higher interest rates have a chilling effect on the American economy because they leave consumers and businesses with less money to spend.
Economists from across the political spectrum have warned that a Treasury bond default will probably push the American and global economy back into a recession since the resulting higher interest rates act like a tax increase. Higher interest charges amount to a tax increase for American consumers and businesses with outstanding loans because they reduce the amount of money available to purchase goods and services as well as the money available to pay wages.
While the rise of developing economies in China and India has reduced the world’s reliance on the American economy as the sole engine of global economic growth, the fact remains that the American economy is still the world’s largest economy. America is not only China and India’s largest trading partner; it is also the largest or second largest destination for exports from the EU and Japan as well as many other developed and developing countries. As such, when America sneezes (economically), the rest of the world still catches a nasty cold.
Despite the pleas of economists and business executives to Republicans in the House of Representatives that they stop playing Russian Roulette with the American and global economy by refusing to raise America’s debt ceiling, lawmakers like Eric Cantor persist in doing so. They also know full well that more than 60% of America’s current debt bill is due to budget deficits Republicans ran up during better economic times to finance things like tax cuts for wealthier Americans, a prescription drug benefit for American retirees and the Iraq war.
Fortunately for holders of American bonds, less ideological Republicans have crafted a compromise measure to avoid a bond ‘default’. Thanks to a bit of legislative sleight of hand, Republicans in Congress will appease their Tea Party activists by voting against an increase in the debt ceiling. This will make President Obama solely responsible for increasing America’s debt ceiling when he vetoes their bill. Unfortunately, this bit of legislative trickery also means Republicans have decided to kick the can down the road when it comes to dealing with America’s budget deficit.

The Debt Ceiling "Debate"?

The Bigger Picture
Published on July 15th 2011 in Metro Éireann By Charles Laffiteau

The big debate currently underway here in the states is over raising the United States debt ceiling. Unfortunately, many Americans including some members of Congress don’t really understand what raising the debt ceiling is all about. So today I will attempt to explain what it really means and the ramifications for the American and global economy if Congress doesn’t take action to raise it by August 2nd.
Many Tea Party activists and Republican conservatives in Congress are under the mistaken belief that raising the US debt ceiling is like getting an increase of your credit card’s credit limit. Since the American federal government is already deeply in debt, they don’t want an increase in the debt ceiling because they are under the mistaken belief that they can hold the line at America’s current 14 trillion dollar level of debt. But these right wing ‘debtors’ have in fact replaced ‘birthers’ as the latest wave of conservative demagoguery that has no basis in fact.
What many Americans don’t understand is that the US Treasury sells American bonds worldwide and that these bonds mature at intervals ranging from one to twenty years. When the bonds do eventually mature the US government pays off the bondholders, many of whom are American citizens, and issues new bonds to sell to investors. By refusing to raise the debt ceiling Congress would in effect say the US Treasury department can no longer issue and sell new bonds to pay off the bonds issued 10 years ago when Republicans also controlled the White House. In other words the Republican Congress would be repudiating the debts it ran up in 2001
The ‘debtors’ are also under the mistaken belief that if America doesn’t pay off bondholders when their bonds mature that this won’t have any impact on them or the American economy. Since America has never defaulted on any of its sovereign debt during its two hundred plus years history, the ‘debtors’ say President Obama’s predictions of severe consequences for America’s economic recovery are wrong even though they can’t find a single economist or business CEO who agrees with them. In other words, the ‘debtors’ and their supporters in Congress are just like their ‘birther’ cousins in that they don’t like to be confused with facts.
Although the ‘debtors’ and their allies in Congress are correct in their belief that America has never defaulted on its debts, there was an incident back in 1979 that gives us some idea of what will happen if Congress doesn’t raise the debt ceiling and we do default on August 2nd.
Back in 1979 America actually went into what was called a ‘technical default’ when the government simply failed to pay off about 120 million dollars worth of US Treasury Bonds. This brief ‘technical default’ wasn’t because the debt ceiling needed to be raised or because of disagreements between Republicans and Democrats over the federal budget. It happened because of some computer system failures at the US Treasury Department that resulted in thousands of bondholders not receiving their checks until a few days after the computer snafu was discovered.
But even though this was a ‘technical default’ due to computer system failures rather than political discord, America still paid a heavy price for this default. For the next six months following this brief 120 million dollar ‘technical default’, the interest rate America was obligated to pay on new bonds it issued was a full ½ percent higher than the interest rate it paid on bonds issued in the six months before the default.
Now ½ percent additional interest may not seem like a lot, but when your debt is at 14 trillion dollars, that works out to about 4 billion dollars more per day in interest. In other words, if the ‘debtors’ get their way, America will only get deeper into debt.

What does the future hold for Israel and Palestine

The Bigger Picture
Published on July 1st 2011 in Metro Éireann By Charles Laffiteau

Today I want to turn my focus away from President O’Bama and his recent trip to Europe and discuss the world’s longest running conflict, the ongoing disagreement between Israelis and Palestinians over the future of Israel and Palestine.
Middle East adviser, Aaron Miller says that “In an existential conflict driven by memory, identity, religion and national trauma, the Israeli and Palestinian capacities to absorb and inflict pain are limitless.” The Islamic world has become a breeding ground for terrorists because Muslim sympathies for the plight of Palestinians, fuels the popular anti-American sentiments which drives recruits to al-Qaeda and its affiliated terrorist organizations.
On one side you have Israeli Prime Minister Benjamin Netanyahu, who represents a brand of Zionism that portrays Jews as eternal victims and uses this as an excuse to brook no sympathy for Palestinians who lived in parts of present day Israel for centuries.
So when President O’Bama publicly stated his support for using the pre-1967 Arab-Israeli War boundaries as the starting point for negotiations over the boundaries for a Palestinian homeland, Netanyahu quickly jumped on his high horse and proceeded to lecture President O’Bama about why Israel needed more defensible borders than it had prior to 1967. Although many political observers thought Netanyahu’s lecturing was both unseemly and uncalled for, many Republican and Democratic politicians in Congress also chided President O’Bama for his remarks and gave Netanyahu a score of standing ovations when he gave a speech in Congress.
Politicians in Congress responded in this way because the lobbying influence of the American Israel Public Affairs Committee (AIPAC) is still very strong on Capitol Hill. But I think they are sadly mistaken if they believe kowtowing to AIPAC will win them any votes. While AIPAC has lurched to the right in defense of whatever Netanyahu proposes, American Jews under the age of 55 do not cast their votes based on America’s support for Israel. More than 75% of them vote Democratic and will continue to do so because they don’t agree with the Tea Party conservatives who currently dominate Republican Party politics.
On the other hand, representing the right wing of Palestinian politics we have a Hamas regime ostensibly concerned with establishing a homeland for Palestinians, when in fact what they really want is to establish an authoritarian regime along the lines of the one that currently rules Iran. The evidence of Hamas’ true intentions is already on display in Gaza where its internal security forces have been given free rein to bend dissident Palestinians to its will. For example when Palestinians protested that the taxes imposed by Hamas were adding to the burden of citizens most affected by the Israeli blockade they were rounded up and hauled off to jail.
So it is clear to this observer that Netanyahu and his right wing Israeli supporters as well as Hamas and its right wing Palestinian supporters actually have vested political interests in prolonging the Israeli-Palestinian conflict rather than settling it. Why? Because the ongoing Middle East conflict is used by both sides as a way to maintain their political power. While there is a middle ground here, both sides have shown that they will do whatever they can to crush anyone who advocates peaceful coexistence.
Juliano Mer-Khamis is a case in point. He was the Jewish son of Arna Mer-Khamis, a Zionist pioneer who later became a Palestinian rights activist. Juliano had rebuilt his mother’s performing arts workshop for Palestinian children in the West Bank town of Jenin, which the Israeli government bulldozed because they were using acting classes to teach Palestinian teens how to become more confident. Since Hamas also had no use for self confident Palestinians, a Hamas gunman permanently silenced Juliano by shooting him five times, thus ridding both sides of a mutual irritant. So much for the middle ground. If the Israeli government can’t silence you, Hamas will do the job for them.