Cliff Notes: A Confederacy of Dunces
Yesterday in an interview with CNBC, Treasury Secretary Timothy Geithner said that the Obama administration is “absolutely” prepared to go off the cliff if Republicans don’t budge on raising tax rates for those making more than $250,000 a year. On the same day, the White House told the Pentagon to start planning for across-the-board spending cuts if Congress fails to act. Sounds like a far cry from the “grand bargain” that President Obama predicted in an interview with the Des Moines Register in October. But keep in mind that this is the same administration that (just a few months earlier) confidently promised the American people that the sequestration “will not happen” and issued letters to defense contractors telling them not to issue layoffs. With the House focused on eliminating the word “lunatic” from federal law while Speaker Boehner says talks are going “nowhere,” it’s not surprising that the American people are losing whatever little confidence they had in Washington.
OBAMA ADMINISTRATION SAYS IT’S “ABSOLUTELY” PREPARED TO GO OFF THE CLIFF
Is The White House Prepared To Go Off The Cliff? “Absolutely”:
“President Barack Obama’s administration will ‘absolutely’ let the United States fall off the fiscal cliff as scheduled, unless Republicans give in to his Obama’s demand to raise tax rates at upper income levels, Treasury Secretary Timothy Geithner said Wednesday.” (“Geithner: Obama Administration ‘Absolutely’ Willing To Go Off Fiscal Cliff,” Associated Press, 12/6/12)
BUT MONTHS EARLIER THEY WERE TELLING DEFENSE CONTRACTORS THE EXACT OPPOSITE
President Obama Has Said For Months That Sequestration “Will Not Happen.” Administration Told Businesses Not To Issue Layoffs:
“Obama: Defense Sequester ‘Will Not Happen.'” (Lori Montgomery, “Obama: Defense sequester ‘will not happen,'” Washington Post, 10/22/12)
The White House Sent Letters To Defense Contractors Pressuring Them Not To Plan For The Fiscal Cliff. “The Obama administration issued new guidance intended for defense contractors … reiterating the administration’s position that the companies should not be issuing layoff notices over sequestration.” (Jeremy Herb, “Obama administration tells contractors again: Don’t issue layoff notices,” The Hill, 9/28/12)
The Labor Department Called Preparing For Sequestration “Inappropriate.” “The Labor Department issued guidance in July saying it would be “inappropriate” for contractors to issue notices of potential layoffs tied to sequestration cuts.” (Jeremy Herb, “Obama administration tells contractors again: Don’t issue layoff notices,” The Hill, 9/28/12)
The Office Of Management And Budget Promised Compensation. “Friday guidance from the Office of Management and Budget raised the stakes in the dispute, telling contractors that they would be compensated for legal costs if layoffs occur due to contract cancellations under sequestration — but only if the contractors follow the Labor guidance.” (Jeremy Herb, “Obama administration tells contractors again: Don’t issue layoff notices,” The Hill, 9/28/12)
Des Moines Register: “Obama Confident Of ‘Grand Bargain.’” “President Barack Obama told The Des Moines Register this week that he thinks he can reach a ‘grand bargain’ with Republicans in the first six months of winning a second term that will decide the question of what government will do and how to pay for it.” (Kathie Obradovich, “Obama confident of ‘grand bargain,'” Des Moines Register, 10/25/12)
Now The White House Is Telling The Pentagon To Prepare For Across-The-Board Cuts:
“The Pentagon said on Wednesday the White House budget office has directed it to begin planning how to implement billions of dollars in across-the-board spending reductions if Congress and the president fail to agree to avert the cuts before January 2.” (David Alexander, “After months of delay, Pentagon told to plan for ‘fiscal cliff’,” Reuters, 12/6/12)
WHILE WASHINGTON DEBATES “LUNATICS” AND “IDIOTS,” FISCAL CLIFF TALKS GO “NOWHERE”
House Votes Overwhelmingly To Remove The Word “Lunatic” From Federal Law (“Idiot” Remains). “The U.S. House voted to remove the term ‘lunatic’ from sections of federal law, while the word ‘idiot’ would remain. The bill, which passed 398-1, would amend a section of the U.S. Code that defines the meanings of certain words used in acts of Congress.” (Timothy R. Homan, “Congress Erases ‘Lunatic’, Keeps ‘Idiot’ in Federal Law,” Bloomberg, 12/5/12)
House Speaker John Boehner: “Right Now I Would Say We’re Nowhere. Period. We’re Nowhere.” (Greg Clary, “Boehner ‘Flabbergasted’ At Fiscal Cliff Proposal,” CNN.com, 12/2/12)
MEANWHILE, SHOPPERS AND BUSINESSES PREPARE FOR THE WORST
New Survey: Shoppers Across The Country Are Already Cutting Back, Holiday Spending “Virtually Flat” Amid Fiscal Cliff Concerns:
“Despite more economic optimism compared with a year ago, the CNBC All-America Economic Survey finds holiday spending will be virtually flat as uncertainty and fiscal cliff concerns weigh on consumers.” (Steve Liesman, CNBC’s Squawk Box, 12/6/12)
Businesses Are Rapidly Moving To Shield Themselves From The Fiscal Cliff Fallout:
Businesses Have Held Back On Buying Capital Goods Until The Outcome Of Negotiations In Washington Becomes Clear. “’The impacts of the potential cliff are already being felt,’ Brian T. Moynihan, CEO of Bank of America Corp.’s, said. In the bank’s survey of chief financial officers, ‘the number one issue they see is the fiscal cliff. They tell us it’s affecting their business plan. That uncertainty continues to hold back the recovery. Simply put, our clients tell us they will not be aggressive in times of uncertainty.’” (Hugh Son, “BofA Chief Moynihan Says Fiscal Cliff Already Hurts Economy,” Bloomberg, 11/13/12)
Corporate Executives Say They Are Slowing Or Delaying Big Projects To Protect Profits Amid Easing Demand And Rising Uncertainty. “‘The whole world is looking for stability and clarity from the United States,’ said David Seaton, chief executive of Fluor Corp., a large engineering and construction firm. If uncertainty isn’t removed, he said, ‘People will sit on their war chests of cash and return it to shareholders. You’ll have a retarded growth trajectory.'” (Sudeep Reddy and Scott Thurm, “Investment Falls Off a Cliff,” Wall Street Journal, 11/18/12)
Business Owners And Investors Are Rapidly Maneuvering To Shield Themselves From The Prospect Of Higher Taxes Next Year, A Strategy That Is Sending Ripples Across Wall Street And Broad Areas Of The Economy. “’In my 30 years in practice, I’ve never seen such a flood of desire and action to transfer a business and cash out,’ said Kenneth K. Bezozo, a partner in New York with the law firm Haynes and Boone. ‘We’re seeing a watershed event.’” (Nathaniel Popper and Nelson D. Schwartz, “Investors Rush to Beat Threat of Higher Taxes,” New York Times, 11/18/12)
Wealth is not Created at the Top: It is Only Devoured There
The UK has left the EU and we can argue about the minutiae of Wealth until we’re blue in the face. But the overriding factors are apparent and in one of the richest countries in the world it is shocking that so many people can’t even be sure if they are going to be able to eat enough today or provide for their loved ones.
These days, politicians from the left to the right assume that most wealth is created at the top. By the visionaries, by the job creators, and by the people who have “made it”. By the go-getters oozing talent and entrepreneurial-ism that are helping to advance the whole world – Opinion by Rutger Bregman
… across the spectrum virtually all agree that wealth is created primarily at the top and so entrenched is this assumption that it’s even embedded in our language. When economists talk about “productivity”, what they really mean is the size of your paycheck. And when we use terms like “welfare state”, “redistribution” and “solidarity”, we’re implicitly subscribing to the view that there are two strata: the makers and the takers, the producers and the couch potatoes, the hardworking citizens – and everybody else.
Bankers, pharmaceutical giants, Google, Facebook … a new breed of rentiers are at the very top of the pyramid and they’re sucking the rest of us dry
In reality, it is precisely the other way around. In reality, it is the waste collectors, the nurses, and the cleaners whose shoulders are supporting the apex of the pyramid. They are the true mechanism of social solidarity. Meanwhile, a growing share of those we hail as “successful” and “innovative” are earning their wealth at the expense of others. The people getting the biggest handouts are not down around the bottom, but at the very top. Yet their perilous dependence on others goes unseen. Almost no one talks about it. Even for politicians on the left, it’s a non-issue.
To understand why, we need to recognise that there are two ways of making money. The first is what most of us do: work. That means tapping into our knowledge and know-how (our “human capital” in economic terms) to create something new, whether that’s a takeout app, a wedding cake, a stylish updo, or a perfectly poured pint. To work is to create. Ergo, to work is to create new wealth.
But there is also a second way to make money. That’s the rentier way: by leveraging control over something that already exists, such as land, knowledge, or money, to increase your wealth. You produce nothing, yet profit nonetheless. By definition, the rentier makes his living at others’ expense, using his power to claim economic benefit.
But here comes the rub. Most rentiers are not as easily identified as the greedy banker or manager. Many are disguised. On the face of it, they look like industrious folks, because for part of the time they really are doing something worthwhile. Precisely that makes us overlook their massive rent-seeking…
The problems we face are that the politicians are firmly in the hands (pockets) of the uber wealthy. We live in a corporate plutocracy and those holding all the wealth and therefore power have no intention of changing the status quo, even if it isn’t sustainable. They remind me of bacteria (or cancer) devouring the host body more and more even though eventually it will kill them too.
Donald Trump Forgets Important Lesson From Grandad:
Harper’s Magazine reprints an interesting letter from US President Donald J. Trump’s own grandfather that may get you thinking. Here is it then:
The Emigrants – By Friedrich Trump – From a letter written in 1905 by Friedrich Trump, Donald Trump’s grandfather, to Luitpold, prince regent of Bavaria. Trump had been ordered to leave Bavaria for failing to complete mandatory military service and to register his initial emigration to the United States twenty years earlier.
Prince Luitpold rejected Trump’s request for repatriation; the family later settled in New York. Translated from the German by Austen Hinkley.
Most Serene, Most Powerful Prince Regent! Most Gracious Regent and Lord!
I was born in Kallstadt on March 14, 1869. My parents were honest, plain, pious vineyard workers. They strictly held me to everything good — to diligence and piety, to regular attendance in school and church, to absolute obedience toward the high authority.
After my confirmation, in 1882, I apprenticed to become a barber. I emigrated in 1885, in my sixteenth year. In America I carried on my business with diligence, discretion, and prudence. God’s blessing was with me, and I became rich. I obtained American citizenship in 1892. In 1902 I met my current wife. Sadly, she could not tolerate the climate in New York, and I went with my dear family back to Kallstadt.
The town was glad to have received a capable and productive citizen. My old mother was happy to see her son, her dear daughter-in-law, and her granddaughter around her; she knows now that I will take care of her in her old age.
But we were confronted all at once, as if by a lightning strike from fair skies, with the news that the High Royal State Ministry had decided that we must leave our residence in the Kingdom of Bavaria. We were paralyzed with fright; our happy family life was tarnished. My wife has been overcome by anxiety, and my lovely child has become sick.
Why should we be deported? This is very, very hard for a family. What will our fellow citizens think if honest subjects are faced with such a decree — not to mention the great material losses it would incur. I would like to become a Bavarian citizen again.
In this urgent situation I have no other recourse than to turn to our adored, noble, wise, and just sovereign lord, our exalted ruler His Royal Highness, highest of all, who has already dried so many tears, who has ruled so beneficially and justly and wisely and softly and is warmly and deeply loved, with the most humble request that the highest of all will himself in mercy deign to allow the applicant to stay in the most gracious Kingdom of Bavaria.
Your most humble and obedient,
… Well then. Long ago, yes.. Still applies? You tell me.
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