STOCK MARKET WATCH -- Wednesday, 23 January 2013

[Demeter]

7. Three Things Obama Can Do If He Is Serious About Promise to Middle Class

http://truth-out.org/video/item/14073-three-things-obama-can-do-if-he-is-serious-about-promise-to-middle-class

...Jay: So let's narrow the discussion, to begin with, about this promise to fight deficits. There was a promise to, you know, save money on health care. I'm not sure what he means, 'cause I don't know that he's got any new health care initiative coming. He's going to focus on fighting—lowering the deficit, no talk of any kind of stimulus, and no—I didn't hear much in terms of what he's going to do to deal with unemployment. What was your take?

Pollin: I agree with you. He had some nice words about the need to create opportunity for the middle class and poor. But how do you create opportunity for the middle class and poor? The number one way is to create jobs. And by focusing instead on deficit reduction as opposed to any strategy to move toward full employment, to create jobs, this ends up being just rhetoric. And the problem of the deficit is still being treated, even in his own inaugural speech, as the primary economic problem of the day and not a secondary one. The primary problem is the need for job creation. Deficit reduction is a secondary problem.

Jay:Now, you wrote a blog recently about the appointment of Jacob Lew as secretary of the Treasury. And you take that, and you also take the speech, which is sort of still on this narrative that deficit fighting is the critical issue, and you made a critique of this. Why don't you take us through that?

Pollin: Thank you for mentioning my recent blog post. I try to make three simple points that are irrefutable. These aren't, like, huge philosophical issues as to whether 47 percent of the population are freeloaders or not or whether we tax the rich more or not. We can get into that. I have strong opinions. But let's just start with three points that are absolutely irrefutable.The first point is simply we are not in a fiscal crisis. Now, what do I mean by that? If you take the common-sense meaning of the term fiscal crisis, that would suggest that the U.S. government is facing difficulties paying off its creditors next month, two months, six months a year. We're nowhere near close to that.As a matter of fact, the U.S. is now paying, as a share of its overall budget, a historically low amount to creditors relative to, for example, even the 1980s. The 1980s and '90s, under Republican presidents Reagan and Bush, we paid about 16 percent of overall government spending to interest payments on our debt. Today, we're paying 7.7 percent of our total government expenditure on interest payments—less than half. There is no fiscal crisis. That point should frame all debates in Washington about the need for deficit reduction. There is no fiscal crisis.Number two, the interest rates that we're paying, the government is paying on Treasury bonds, how much we borrow, is historically low as well. We're paying less than 1 percent on the money the government borrowed. That's of course the reason why the interest payments are also historically low. Under Ronald Reagan, the hero of the conservative right of this country, when Reagan borrowed, we were borrowing at 15 percent interest. Now we're paying less than 1 percent. Why can't Jacob Lew, the Treasury secretary designate, just hammer on that point over and over again?And then the third point is, of course, the fiscal deficit as a share of GDP is high. It's about 8.5 percent of GDP, which is historically high. But isn't it obvious that the reason we have high fiscal deficits is due to the recession?In 2007, the fiscal deficit was 1.7 percent of GDP, which—. Now, are we going to argue that all of a sudden people started demanding stuff that they didn't want in 2007? No. It's ridiculous. In fact, the deficit is due to the recession and mass unemployment. Solve mass unemployment, you will solve most of the deficit....