Congress – Page 9 – The Wrongologist

Monday Wake Up Call – February 20, 2023

The Daily Escape:

Oatman, AZ on Route 66 – February 2023 photo by Laurel Anne Lindsay

Some of you may have heard about a study called “The Hidden Tribes of America” by the group More in Common. It’s trying to understand the forces driving political polarization in America today. They classify the American electorate into seven distinct groups, they call “Tribes”.

But their key conclusion is that most people don’t belong on the far left or far right: (brackets by Wrongo)

“…the largest group that we uncovered in our research has so far been largely overlooked. It is a group of Americans we call the Exhausted Majority…representing a two-thirds majority of Americans, who aren’t part of the Wings….most members of the Exhausted Majority aren’t [simply] political centrists or moderates. On specific issues, their views range across the spectrum.”

“But while they hold a variety of views, the members of the Exhausted Majority are also united in important ways: They are fed up with the polarization plaguing American government and society….. [they] are so frustrated with the bitter polarization of our politics that many have checked out completely….. they aren’t ideologues who dismiss as evil or ignorant the people who don’t share their exact political views. They want to talk and to find a path forward.

This chart from the study graphically illustrates the seven tribal groups of the American populace. As you can see, there is a left-wing group that is about 8% of the US population. And there are two right-wing groups that equal about 25% of Americans. That leaves four groups in what the authors call the “Exhausted Majority”. They are 67% of the American populace.

Here are some demographic characteristics of the seven groups:

Progressive Activists: younger, highly engaged, secular, cosmopolitan, angry.
Traditional Liberals: older, retired, open to compromise, rational, cautious.
Passive Liberals: unhappy, insecure, distrustful, disillusioned.
Politically Disengaged: young, low income, distrustful, detached, patriotic,
Moderates: engaged, civic-minded, middle-of-the-road, pessimistic, Protestant.
Traditional Conservatives: religious, middle class, patriotic, moralistic.
Devoted Conservatives: white, retired, highly engaged, uncompromising,

Wrongo identifies as one of the Traditional Liberals, their description rings true.

The authors say that in their research, this tribal membership predicted differences in Americans’ views on various political issues better than demographic, ideological, and partisan groupings. You can read or download the whole study here.

An “Exhausted Majority” may be a positive political development. Wrongo spends nearly every day thinking that there are just two opposing camps. And that they each view each other with fear and loathing, refusing to listen to anything that doesn’t fit their existing narrative. As we’re entering the next presidential campaign, it’s good to know that Wrongo’s view of our polarization might be well, wrong.

Is the “Exhausted Majority” merely a new response to our dysfunctional politics? Wrongo isn’t alone in thinking that what’s wrong with our country will take decades to overcome. Faced with that, people start to look for quick fixes, or a way to stop listening to the wrangling. And you don’t have to be unaligned with either Party to share this sense of exasperation.

The people described in the “Exhausted Majority” are similar. It’s also true that for most people, politics isn’t the be-all-end-all of their lives. They’d prefer that the business of government didn’t require their involvement. They’re trying to get their kids educated, and to keep them safe. They prefer to see political compromise happen without needing to be involved.

But if you can walk away from politics when it frustrates you, then you’re in the lucky minority:

There are large numbers of parents who have discovered that their child is addicted to opioids.
There are many people who had lost their health insurance when they were laid off.
Many sent their daughter to college in the South only to learn that she no longer has any reproductive rights.
Many are worried that books are being taken from public school libraries.
Some fear that they may lose the right to vote.

These people can’t simply throw up their hands and walk away. Only political action will help them. We all know that the political radicals are irredeemable. We also know they make the most noise, but they’re a minority.

The fed-up people on both sides and in the middle have to find a way to take the country back from the radicals, instead of allowing ourselves to be herded into existing opposing camps.

Time to wake up America! We can’t simply drop out. There’s too much at stake. Democrats need to find candidates and a message that can motivate an additional 5%-15% of the “Exhausted Majority” to vote with them. To help you wake up, watch, and listen to the RedMolly band play a very nice cover of Richard Thompson’s “Vincent Black Lightning 1952”. It’s a surprise how beautifully it adapts to a bluegrass idiom, and the dobro work makes it:

“Vincent Black Lightning” is one of the most perfect songs ever written. We saw Thompson perform it live at Tanglewood last summer.

Saturday Soother – February 17, 2023

The Daily Escape:

Where desert meets mountains, near CA/NV border – February 2023 photo by Austin James Jackson

Liz Hoffman at Semafor has a short analysis of the value of credit card loyalty programs to airlines. Many of us have them and we use them to purchase our everyday goods in order to earn air miles or points that we later use to get a seat upgrade, or to fly for free.

Everyone knows about this “perk” from the airlines, but few of us know just how profitable these programs are to the carriers. It turns out that they are the most lucrative assets on airlines’ balance sheets. The uncertain profitability of the airline business makes them very important since the airlines often lose money.

The airlines used to be secretive about just how profitable their frequent-flier programs were. But, when they were in deep financial trouble during the pandemic, several US carriers pledged their loyalty programs as collateral for new loans when other financing failed.

That required the airlines to open the books on their loyalty programs. And now we’ve learned that their credit card businesses are more valuable to shareholders than their basic business of flying planes. From Hoffman:

“It turns out that United’s rewards card program with JPMorgan Chase is valued today at $22 billion. But United’s market capitalization is $16 billion, meaning investors are assigning negative value to the part of its business that flies airplanes. The same goes for American and Delta.”

From a market valuation perspective, the basic businesses of the big three US airlines are under water. Hoffman provides an eye-opening chart showing that the airlines’ huge investment in aircraft and ground operations doesn’t produce a dime of market value for their shareholders:

As you can see, none of the big three US carriers get any incremental market value from flying planes. So should they either sell off all of that hardware, or spin off their credit card businesses?

They can’t. They need the flights to create demand for the points/miles. The secret sauce behind the success of their loyalty programs is that the actual value of an air mile isn’t clear. Customers think they’re getting a $3,000 upgrade to first class for a few thousand points, while the airlines know that the upgraded seat is unlikely to sell at all, and if it does, it won’t be for anything like that amount.

Foreign carriers have less reliance on their rewards programs. Many operate with government subsidies, so their flights are more profitable. And they serve consumers who are less comfortable with plastic. So their market valuation is less dependent on loyalty programs:

We have to assume that the board members of the airlines have always known about the value of their loyalty programs. But now everyone is seeing the potential value, and the airlines might be thinking that they can wring even more value from them.

What’s distressing about this is that the airlines needed bailouts only two years ago during Covid. The US airlines received $54 billion in federal aid to pay workers during the Covid pandemic. That agreement prohibited them from share buybacks.

That’s because they had continuously bought back shares in the years prior to the bailout. The four biggest US carriers — Delta, United, American, and Southwest — spent about $40 billion buying back their companies’ stock between 2015 and 2020. That effort to improve their market valuation failed spectacularly, since their loyalty programs are now worth more than the companies themselves.

America added a 1% tax on buybacks excise tax for buybacks this year, passed as a part of the Inflation Reduction Act. This will help reduce the deficit and might dampen American corporations’ appetite for stock buybacks. The largest US airlines are making money again, and labor unions don’t want them to spend it on more stock buybacks. In a public petition, some of the largest airline labor unions — representing more than 170,000 pilots, flight attendants, customer service agents — are urging carriers to stabilize operations and invest in workers before spending on buying back more of their stock. We’ll see if that ever happens.

Enough high finance, it’s time for our Saturday Soother. Here on the Fields of Wrong, we’ve had a few warm days that led to the beginning of our spring cleanup. To settle into your soother, grab a mug of coffee and a seat by the window. Start by forgetting about Nikki Haley’s campaign or what to do now that football is over.

Now listen and watch Renée Fleming sing “Nacht und Träume” (Night and Dreams) written in 1825 by Franz Schubert conducted by Claudio Abbado with The Lucerne Festival Orchestra in 2005:

GOP Attacks ESG Investing Rule

The Daily Escape:

Lake Sammamish, Issaquah, WA – February 2023 photo by Everything Washington

Are you following the Republican war on ESG? ESG stands for Environmental, Social, and Governance, key criteria that may impact a company’s market valuation and its business behavior. ESG has become a red line for Conservatives, who argue that companies that follow it are failing to live up to their fiduciary duty to maximize profits for investors.

The jury is still out on whether ESG investing delivers the same, better, or worse returns. But, despite any definitive evidence, Republicans hate ESG investing. From Semafor’s Liz Hoffman:

“Last year, Republican-controlled legislatures began passing laws blacklisting state investment funds from doing business with money managers that pushed what they deemed to be liberal agendas, like boycotting gun manufacturers and mining companies. BlackRock, run by Larry Fink, an outspoken supporter of so-called ESG principles, has taken the brunt of the pressure, with at least 10 states pulling their money from his firm or threatening to.”

For the many Republican state governors, treasurers, and attorneys-general who joined in, it’s turned out that several hadn’t done their financial homework before joining the culture war. Some failed to calculate the financial cost of their ideological stance. Semafor cites a few examples:

Indiana’s budget office found that a bill forcing state pension funds to divest from “woke” money managers would cost $6.7 billion over the next decade in lower-than-market returns. That also would force retirees to increase their paycheck contributions.
Executives in one of Kentucky’s retirement funds argued with the state’s treasurer that a recent law requiring them to pull money from BlackRock and 10 other firms seen as hostile to the energy industry would violate their duty to get the highest returns for pensioners.
A 2021 Texas investment blacklist cost municipalities an additional $303 million to $532 million in bond interest, according to a study by University of Pennsylvania. JPMorgan, Citigroup, and other banks left the state after the law was passed, leaving less competition for bond underwriting. That raised interest rates about 40 basis points.
North Dakota voted down, 90-3, a Texas-style bill that would have required the state treasurer to prepare a blacklist of financial firms that have committed to reducing carbon emissions, but would have stopped short of banning state investment funds from doing business with them.

Hoffman concludes that:

“Owning the libs turns out to be expensive.”

There are always trade-offs between principles and profits. Whether Republican politicians decide the political value of the fight offsets the lost profits is another question. This will at some point become a question for voters, who are the taxpayers and pensioners effected by these decisions.

In one way the GOP has already won a battle in the culture war on ESG. BlackRock has changed its marketing to tout its investments in fossil fuels. It also deployed new technology that allows investors to cast their own ballots in corporate elections instead of outsourcing their votes to the firm. Black Rock hopes these moves may blunt criticism that they are pushing a progressive agenda.

But the GOP isn’t giving up on fighting ESG. Politico is reporting that Sen. Mike Braun (R-IN) has offered a joint resolution under the little-known Congressional Review Act (CRA) to overturn the Department of Labor’s recent rulemaking on ESG investing. The new rule took effect on January 30.

The rule allows fiduciaries to take ESG factors into consideration when choosing retirement investments. It potentially impacts the retirement savings of 152 million American workers whose accounts are governed by the Employee Retirement Income Security Act, or ERISA. From Braun:

“You cannot direct funds…to ESG. You’ve gotta go for whatever is going to give you the best financial return….That doesn’t mean that someone couldn’t choose to tell their broker to invest in ESG.”

Braun has 60 days to gather a majority in the Senate to overturn the rule. His has all 49 Republican Senators and Democrat Sen. Joe Manchin. If Braun can get 51 votes in the Senate, and given that the House is controlled by Republicans, the new rule would go away.

OTOH, a study by Penn State found that 70% of registered Republicans surveyed opposed government interference in ESG investments, higher than Democrats with the same position (57%). From Forbes:

“This exposes an irony at the heart of the ESG culture war: right-wing critics are seeking to actively interfere in decisions made by investment professionals about how to safeguard their clients’ money. In any other context, they’d be up in arms about the very thing they’re doing here.”

How silly to expect consistency from the GOP. We’ll see if Braun can find another Democrat in the Senate to join the Republican culture war on ESG.

Ohio’s Airborne Toxic Event

The Daily Escape:

Roan Mountain, NC – February 2023 photo by Spencer Carter. Roan Mountain has the largest naturally growing gardens of Catawba rhododendrons in the world.

Back on February 3, a Norfolk Southern (NS) train carrying hazardous materials derailed near the town of East Palestine, Ohio. Federal investigators say a mechanical issue with a rail car axle caused the derailment. After several days of underreporting, we now know what happened.

Here are some facts: The derailment included 50 cars, 20 of which carried toxic materials, 14 of those contained vinyl chloride. The subsequent fire burned for three days. Then there was a “controlled release” of poisonous gas. And finally, effects of the poison were felt on locals, their animals, and local waterways.

The axle problem is important since it is the cause of all the hardship in East Palestine. Trains use steel wheels on steel rails because they produce 85+ % less friction than rubber truck tires do on roads. The contact point of a wheel on the rail is about the size of a dime. Compared to trucks, trains are cheaper (4 cents vs 20 cents per ton-mile in the US), and more sustainable: One ton of freight can be moved over 470 miles on a single gallon of diesel fuel.

But sustaining that economic advantage requires the railroads to maintain all that steel in good working order. Otherwise if things go wrong with a train that’s 4.5 miles long, they can go very, very wrong. And reporting seems to indicate that NS didn’t maintain its steel wheels correctly.

Also, the derailed NS train was not classified as a “high-hazard flammable train,” despite its hazardous and flammable cargo. Such a classification would have lowered its speed and affected its route. From Lever News:

“Though the company’s 150-car train in Ohio reportedly burst into 100-foot flames upon derailing — and was transporting materials that triggered a fireball when they were released and incinerated — it was not being regulated as a “high-hazard flammable train,” federal officials told The Lever.”

Apparently when current transportation safety rules were first created, a federal agency sided with industry lobbyists and limited regulations governing the rail transport of hazardous compounds. That decision effectively exempted many trains hauling dangerous materials including the NS train in Ohio, from the “high-hazard” classification and its more stringent safety requirements.

Generally, workers want safety and the bosses want money. Safety requires additional time, more workers, and money. Deregulation contributes to the lack of safety. Using vinyl chloride in a chemistry lab requires safety equipment. Tank cars containing thousands of gallons of it should require more than the government apparently thinks is safe.

Wrongo always looks at the politics in these sorts of industrial disasters because they are usually caused by the economics created by politics.

Given how dangerous these chemicals are, and given how they are used and transported, we have to expect accidents like this to happen. But the government should be able to tell us whether the current accident rate is higher or lower than expected, and if higher, what should be done to correct the problem.

We trust the bureaucrats that make the rules to balance safe operations against the risk of an airborne toxic event like this. Wrongo’s brief look into this one incident doesn’t evidence that kind of trust. It appears that the bureaucrats who make the rules on railroad safety were influenced by the industry and wrote a rule that puts the economics for the railroad industry ahead of public safety.

These issues exist everywhere in the relationship between industry and government. There’s always pressure by the industry on the bureaucrats to deregulate. In a man-made disaster, that can place greater burdens on the communities, like just happened in East Palestine.

This is what the Michael Lewis’s book “The Fifth Risk” is about: People who go to school, get extensive training and then work in obscure corners of the government. Lewis talks about how important these people are, and how for decades they’ve been denigrated, vilified, and ignored, largely by Republicans.

This is another area in which the GOP is awful in a completely lopsided way to Democrats.

The existence of corporations who can impose risks on the rest of us is what happens when there is unequal political power. We need a state with a strong regulatory system to protect us. The state must build regulatory regimes for chemical spills that shift the risks back onto those who create them.

NS in this case, has said that they will be fully responsible for the damages caused in East Palestine.

That’s encouraging, but how does that little town with a population of less than 5,000, or even the state of Ohio hold NS to their word?

China’s Spy Balloon

The Daily Escape:

Zion NP in snow – January 2023 photo by Rich Vintage Photography

What is it about the Chinese balloon story? Why did the media and politicians go totally nuts about it? Here’s what Damon Linker thinks:

“Degraded American public life”. This is another example of Wrongo’s column yesterday about how we’re all living in our virtual vertical communities. The Republican political vertical immediately locked in, like a cat watching a laser pointer, to this mostly low-risk intrusion into US airspace by China. From Forbes:

“Talking heads on cable TV are up in arms about the Chinese spy balloon that was floating across the continental US, before it was shot down Saturday afternoon. Conservative commentators have insisted President Joe Biden should’ve ordered the balloon be shot down earlier and that a foreign balloon flying over US territory never would’ve happened under President Donald Trump. But it did happen under Trump…”

It happened under Trump at least three times.

The Pentagon says it was definitely a surveillance balloon and that China had the ability to maneuver it using external propellers. OK, if you’ve ever sailed a boat even in a moderate breeze, paddled a canoe across a windy lake, or bicycled on a windy day, you know maneuvering in high winds is very difficult. So how will a balloon generate enough power to overcome the prevailing winds at 60,000’? And the balloon doesn’t have an aerodynamic shape. So bottom line, you aren’t controlling the path of a balloon in any sizable wind.

A balloon actually sucks for spying. A quick look at earth.nullschool.net shows that the current winds at the specified latitude are running between 50-100 mph. No balloon with a propeller can plow through that. It’s likely that the propellers aren’t for propulsion, but for changing the direction that the antenna is pointing, so that it can phone home.

It’s possible that as the Pentagon says, the deceased balloon was gathering data on our defenses, but all nations do that all the time. So where’s our politicians’ and the media’s common sense? Their hysterical reaction is totally on brand, but as always, very depressing.

We have to hope the politicians and generals who control America’s nukes have better minds than our GOP politicians.

Let’s deal with the question about why Biden didn’t shoot it down over land. One issue was that the debris field when the balloon remains hit the ocean was seven miles long. One advantage of knocking it down where they did is that the ocean is only about 50’ deep off the Carolina coast. Imagine a seven-mile debris field spread across any American state: It would be a fantastic opportunity for souvenir hunting.

Back in 1945, before WWII ended, Japan sent thousands of bomb-carrying paper balloons via the jet stream towards North America. Only a small percentage of the balloons reached land. But six people, five of them children, were killed by one balloon that landed in Oregon.

There’s a (possibly apocryphal) story about a US Navy ship firing on a suspected Japanese balloon until they finally realized that they were shooting at Venus.

Bottom line, Biden and the US military showed professionalism and caution in tracking and attacking the balloon. The US military was able to jam the balloon’s instruments as it crossed America, while collecting information about Chinese intelligence gathering capabilities. They shot it down when and where the risk to civilian casualties and property damage was deminimis. From Robert Hubbell:

“But the ‘spy balloon’ did allow the Chinese military to glean one significant piece of intelligence about America—that Republicans are clowns who cannot be trusted to run the US military again.”

One Republican said Biden should be impeached. Several wanted to “SHOOT IT DOWN NOW”. Consider this tweet from Rep. Joe Wilson (R-SC):

Does anyone believe the balloon threatened the lives of millions of American families? Or that Biden and Harris should resign? Wilson forgets to say that resignation would make House Speaker Republican Kevin McCarthy president. It’s just awesome how serious the Republican Party has become.

All of the hostile one-upmanship aimed at China over the balloon served to show that there is no downside to an American politician taking a hawkish stance towards China.

China remains a crucial trading and economic partner and competitor, but both Republicans and many Democrats are happy to take a battering ram to our relationship with China. And the media decided to work the Chinese balloon story rather than spend time talking about Friday’s blockbuster jobs report, or how unemployment reached a 50-year low.

That news wasn’t important or exciting enough when there was a Chinese balloon on the horizon.

America’s relationship with China has always been fraught. If you’re as old as Wrongo, you remember 1971’s Ping-Pong diplomacy, one of the first official contacts between the countries since before the Cold War.

You may ask, what’s happened since then? Well, the balls have gotten bigger.

Monday Wake Up Call – January 30, 2023

The Daily Escape:

Late afternoon, Mt. Baker, WA – January 2023 photo by jsmooth

Let’s take on a few key questions raised by the death of Tyre Nichols at the hands of the Memphis police. Wrongo’s primary question is: “Is the life of a police officer worth more than the life of any other citizen?”

Police in the US are trained to see every interaction with the citizens that they are sworn to “protect and serve” as a potentially life-threatening situation. Their primary concern is to go home at the end of their shift, healthy and in one piece.

That level of fear encourages aggression. All police have heard stories of other officers shot as they approached a car, So they often are as tense as a solider in a warzone. And in an America that’s drowning in guns, that fear is well-placed.

When there’s a confrontation with a suspect, police culture focuses the cop on making the suspect comply with the cop’s initial order. And police culture tilts toward the use of physical force when compliance isn’t immediate.

Police culture is based in male bonding, and in an “us vs. them” mentality. Police culture brings with it a code of silence to protect even wrongdoers. Finally, police culture is reinforced by local police unions that are led by mostly older white men, who oppose any progressive change.

A second question is: “Where should we assign blame for continued police violence?” Sherrilyn Ifill’s newsletter has useful context. She asks if the failure of white people to effectively confront and contain the violence by white cops against Black people should be considered as a failure of the Black Lives Matter (BLM) movement, as some pundits suggested this week.

She disagrees. You can read her piece here.

The BLM movement helped white Americans understand what systemic racism meant. It showed America how it impacted people’s lives through violence by police throughout the US. But to ask a Black political movement to change police culture which tilts conservative, White and military, places the burden on the wrong political organization. The correct place for managing this change is local city governments and their citizens. They need to take on the task of creating true civilian control over their local police forces.

The fact that the five officers charged in Nichols’s murder are Black complicates discussion of the role of race in policing. We’re used to cases involving White officers and Black victims. But this case makes it clear that there’s a larger issue at work: an entrenched police culture of aggression and dehumanization of Black people. It is as much the system and its tactics that fosters violence, as it is the racial identity of the officers involved in the brutality.

The NYT quotes Professor Jody Armour, a University of Southern California law professor:

“It’s not just a Black and white issue, but a Black and blue one. And when you put on that blue uniform, it often becomes the primary identity that drowns out any other identities that might compete with it.”

After the George Floyd killing by cops in 2020, Americans realized that police violence was a national and possibly an intractable problem. Various US states approved nearly 300 police reform bills after Floyd’s murder, creating civilian oversight of police, more anti-bias training, stricter use-of-force limits, and alternatives to arrests in cases involving people with mental illnesses, according to a recent analysis by the Howard Center for Investigative Journalism.

But as the NYT’s Charles Blow says, America caught Covid and then simply walked away before the work was done:

“Too many liberal politicians showed us that their commitment to legislation, and even language, to protect Black lives from police violence was polling dependent….They ran scared of being labeled woke or of supporting a “defund the police” ideology.”

“Police unions also learned a lesson: that they could survive the most intense and coordinated denunciation of their practices they had ever faced and still dodge federal legislation to address the violence that happens on their watch.”

We like to say, “this isn’t who we are.” The evidence, though, is that this is exactly who we are.

Time to wake up America! Let’s ask why police lives should be worth more to our community than the lives of those they are sworn to protect.

To help you wake up, listen to the late Tom Verlaine of the band Television who died last week. Television’s first two albums, “Marquee Moon”, and “Adventure” were critical successes but didn’t sell. “Marquee Moon” is considered one of the defining releases of the punk era.

Wrongo and Ms. Right lived in a loft in lower Manhattan in the very late 1970s – early 1980s. Wrongo occasionally went to CBGBs, then the mecca of punk rock. Once, we had the Dead Boys entertain at a party at our lakeside weekend place. It’s tough to think that the icons of early punk music are now in their 70s.

There aren’t many videos of Television performing live. But here they are doing “Foxhole” from their album “Adventure”, at the UK’s Old Grey Whistle Test in 1978:

The band included Verlaine, Richard Lloyd, and Fred Smith on guitar, with Billy Ficca on drums.

Sample Lyrics:

You show me the war but the war’s such a bore.
In the line of duty, in the line of fire
A heartless heart is my proper attire.

Sunday Cartoon Blogging – January 29, 2023

By now, everyone has heard about the killing of Tyre Nichols at the hands of five former Memphis police officers. Some of you may have also viewed the video of Nichols’s beating by those officers. We won’t be linking to it on this blog, ever.

Wrongo will have more to say about this during the week. But for now let’s understand that this is due in large part to the US failing to get police reform. There was a comprehensive package of legal reforms, called the George Floyd Justice in Policing Act that passed the House in 2021 but could not break the Senate filibuster. On to cartoons.

Never forget that there are two Americas:

Congress is useless:

What we should mean when we say “Everything everywhere”:

What threatens school kids more?

Soon it will be on milk cartons:

Making good news into Fox News:

What’s The GOP Plan For Negotiating On The Debt Limit?

The Daily Escape:

Dream Lake, Estes Park CO – January 2023 photo by Rick Berk Photography

(Wrongo and Ms. Right send healing thoughts to friend and blog reader Gloria R.)

We’re all aware that House Republicans are refusing to lift the debt ceiling unless Biden gives them well, something? And Republicans still haven’t decided what they want. The GOP also wants a balanced budget, but they can’t say what should go, or what should stay.

From the WaPo: (Brackets by Wrongo)

“They [GOP] say they want to reduce deficits — but meanwhile have ruled out virtually every path for doing so (cuts to defense, cuts to entitlements, wiping out nondefense discretionary spending, or raising taxes).”

The fact that Republicans are up in the air about what to do highlights the likely Democratic strategy is against their threats about the debt ceiling. Again, from the WaPo:

“Sensing Republicans are on the verge of a blunder in their schemes to use the debt ceiling to hold the economy hostage and try to extract draconian spending cuts, the White House has developed a two-part response strategy.

Part 1: Lay out the simple argument that Republicans are recklessly inviting an economic meltdown even by talking about a possible default.

Part 2: Force House Republicans to put forward a plan on the table and watch as they struggle with the fallout.”

The Democrats along with Senate Minority Leader McConnell (R-KY) are daring Republicans to put forward a plan. Senate Majority Leader Schumer (D-NY) said:

“If House Republicans are serious about taking the debt limit hostage in exchange for spending cuts, the new rules that they adopted require them to bring a proposal to the floor of the House and show the American people precisely what kind of cuts they want to make….”

Everyone who follows politics knows that Republicans never take much interest in fiscal sobriety when their Party is in control. They agreed to raise the debt limit three times while Trump was in power.

It seems that Republicans are doing the Democrats’ job for them. They are asking for an economic catastrophe and seeking draconian cuts that their base doesn’t want.

Consider the Republican desire to reduce our deficits. They have pledged to balance the budget (that is, to have a zero annual budget deficit) within 10 years. But they haven’t laid out any plausible mathematical path for getting there. And of the current debt ceiling, 90% of it was committed before Biden took his job.

Some Republican House members want to cut military spending, an idea that both Speaker Kevin McCarthy (R-CA) and Rep. Jim Jordan (R-OH) are on board with. But others, including House Appropriations Chair Kay Granger (R-TX), have said defense spending cuts aren’t on the table. Rep. Michael Waltz (R-FL) said:

“We’ve got to get spending under control, but we are not going to do it on the backs of our troops and our military,”

Waltz thinks Republicans should focus on “entitlements programs,” such as mandatory spending programs like Social Security, Medicare, and Medicaid. But the bi-partisan popularity of these programs makes them hard to cut.

And last Sunday, Rep. Nancy Mace (R-SC) was asked to name one thing she was willing to suggest as a spending cut. She instead stated things she wouldn’t put on the table:

“Well, obviously no cuts to Medicare or Medicaid or Social Security….That’s a nonstarter for either side.”

Wrongo has repeatedly suggested tax increases which would help lower deficits, but Republicans have ruled that out.

Instead they’ve changed the House rules so tax cuts will be much easier to pass, and tax increases harder to pass. The House’s rules package now says that any increase in taxes would require a three-fifths vote (60%) rather than a simple majority as previously.

They’ve also proposed doing away with income taxes, payroll taxes, estate taxes and even the IRS itself in favor of a supersized sales tax that would provide most revenue to the government. Republicans would substitute a 30% sales tax on all purchases and in exchange, do away with income, Social Security and Medicare taxes.

That means workers would keep the gross amount of their paychecks. But it also means that buying everything from groceries to automobiles would be hugely more expensive. It also provides a big tax cut for the wealthy and businesses.

The result is a smaller tax burden for the highest earners and a bigger one for people in the middle.

Once you reject trimming entitlements or defense spending and bake in the cost of the GOP’s proposed tax cuts, you’re left with an additional $20 trillion hole in the Federal budget over the next decade.

OTOH, the White House is expected to release its detailed budget in early March. It will build on budgets it has released previously. Republicans want Biden to negotiate on what to do about money we’ve already spent.

Try doing that with YOUR creditors.

Monday Wake Up Call – January 23, 2023

The Daily Escape:

Near Government Camp, OR – January 2023 photo by Mitch Schreiber Photography

Everyone is talking about the national debt and/or about increasing the nation’s debt limit. Congress should increase the debt limit because it’s the right thing to do. But there are many in the “very serious” media who are concerned that the Fed can’t continue to hike interest rates to 5.0% or higher because the government can’t afford to pay such high interest rates on our gargantuan debt.

Some pundits are pushing the idea that the Fed must cut interest rates or else. Or else what? The US government won’t go broke, regardless of how high interest rates rise.

While it’s true that the government’s cost of borrowing rises when interest rates rise, what these pundits are missing is that US tax receipts (which are used to pay that interest expense) have also spiked. They’re also missing the fact that interest expense as a percent of tax receipts was at a historic low in Q1 2022. And while it has moved up, it remains quite close to historic lows. Interest expense as a percent of tax receipts is one primary measure of whether the government can afford the interest expense or not. Wolf Richter of Wolf Street provides us with a chart:

As you can see, while the percentage of interest/tax receipts has “spiked” in 2022, it was at a historic low in 2021. And compare that to when the ratio hovered around 50% in the 1980s and early 1990s. In Q3 2022, it was 22.9%, still very near a historical low.

One reason for this was that inflation helped to increase tax receipts thereby lowering the government’s burden for paying interest on our existing debt.

Between the Trump and Biden administrations, the government’s debt spiked by 34%, or by $8 trillion, in the past three years. That additional debt quickly added a lot of interest expense for the government, as we see with the spike above on the chart in 2022.

As older Treasury securities mature, and assuming the national debt doesn’t go down, they are replaced by new Treasury securities with today’s higher interest rates, and the higher interest costs of those new securities are starting to show up in the government’s interest expense. Richter says that total interest expense in Q3 2022 spiked by 24% from a year ago and by 43% from two years ago. This spike in interest expense looks like this:

And this scary chart is what the GOP will be presenting as their reason to cut the debt. When you omit the spike in tax receipts and the historically low level of interest expense as a percent of tax receipts, as we saw in the first chart, you’re not presenting the whole picture.

Another way to look at the situation is Government interest payments as percent of nominal GDP. This is a classic measure of the cost of government debt compared to the overall economy. Richter offers us another chart:

As you can see, by this measure, interest on our national debt remains lower than it was at any time between 1977 and 2003. And it has remained in a narrow band from 2004 to today.

Without question, we should reduce our national debt. But unless and until interest expense on our debt returns to the level of 50% of tax receipts as it was in the 1980s, we shouldn’t expect much to change in Washington. If it starts to get near those highs, maybe we’ll see action by Congress to increase revenues and reduce spending. And despite all the GOP’s screaming, the Federal Reserve is doing the right thing: Hiking interest rates to stem inflation.

Time to wake up, Congress! The Fed is trying to gently nudge you into thinking that the country needs to raise revenues while also cutting expense. You need to consider the revenue side of the equation more seriously, if for no other reason than what will happen to our currently high tax receipts whenever the coming recession strikes.

To help you wake up, listen to the late David Crosby’s song “Laughing” from his first solo album, 1971’s “If Only I Could Remember My Name. Crosby wrote it for the former Beatle George Harrison, who never used it, so Crosby used it instead:

Several legendary musicians appeared on this recording, including Graham Nash and Joni Mitchell on background vocals; Jerry Garcia on pedal steel guitar, and Bill Kreutzmann on drums. Garcia is magical.

Sunday Cartoon Blogging – January 22, 2023

There’s a difference between America’s national debt and our debt limit. Without question, our national debt must be reduced. That can happen only two ways, or by a combination of the two. We can increase taxes, or reduce future spending, or do both.

The debt limit is how much in total the US government can borrow. It uses borrowing (issuing treasury notes and bonds) to meet obligations for previously contracted goods and services. This is what must be increased as soon as possible by both Houses of Congress.

But Republicans say they won’t agree to increase the debt limit without action to reduce the national debt. The national debt is the accumulation of all the annual deficits (and any surplus – thanks, Bill Clinton!) that various administrations have racked up. It currently sits at $31.4 trillion.

The four Republican presidents from Reagan to Trump are responsible for more than half of that debt; they added $17.46 trillion to it by running whopping deficits each year. Trump was responsible for nearly half of that, $8.2 trillion, in just four years. About $3.9 trillion was pandemic relief and $2 trillion was the big tax cut he gave to the wealthy.

Republicans can’t explain why they voted to increase the debt ceiling every year of Trump’s administration. Even as he was racking up trillions of dollars of debt by increasing the annual budget deficit from the $665 billion he inherited from Obama, to a whopping $2.1 trillion deficit in just four years ̶ the highest in US history.

But in the past two years, Biden has cut that $2.1 trillion deficit by 33%, to $1.4 trillion. That isn’t stopping the GOP from screaming that spending has to be curbed because there’s a Democrat in the White House. On to cartoons.

A high-stakes game of chicken: