THAT WAS THEN
The last Republican administration to reduce the debt or deficit by a single penny was Herbert Hoover’s administration (1929-1933) which played a major role in creating the Great Depression. Hoover’s reduction in government spending during an economic downturn was a primary reason among many others, (#2 was being sucked into reverting to The Gold Standard by England) for The Great Depression—and massive unemployment (25%). Reacting with too little too late–the Hoover Dam Construction Project–Hoover’s austerity model has been rejected by economists worldwide….until the Reagan economic bird flu of the mid 1980s.
At the very time when we should be more aware, more enlightened, and better educated; with more objective information at our fingertips than ever before, we resort to listening to modern-day “town criers” who serve at the whim of the corporate kings and televised information spoon-feeders.
Here is what you need to know.
Major Protections From The Great Depression Era Repealed Over the Last 30 Years
See if you can remember the reasons or consequences of the major economic collapses which began only slightly earlier than the Seinfeld television series.
1) The Garn-St. Germain Depository Institutions Act of 1982: De-Regulated Savings & Loan Institutions and allowed them to provide Adjustable Rate Mortgages for home loans and lowered value-to-debt ratios. Essentially, this bill ended New Deal protections for consumers on mortgage lending. Ronald Reagan quoted upon signing: “This bill is the most important legislation for financial institutions in the last 50 years.”
- By 1983– 35% of the country’s Savings & Loans were unprofitable, and 9% were technically bankrupt.
- By 1989, only seven years after the “reform” bill above was enacted by Congress the president had to bail out the industry with a taxpayer-financed bailout measure known as the FIRREA providing $50 billion to close failed Savings and Loans and stop further losses; eventual total collapse of the S&L Industry. All in all, Reagan’s “jack-pot” cost the taxpayers of the U.S. approx. $150 billion (back when that was a lot of money) and caused the disappearance of a once consumer-friendly alternative to the U.S. banking system.
2) Wendy Gramm (wife of then-Texas Senator Phil Gramm) while sitting on The Presidential Task Force on Regulatory Relief in the Reagan administration, was also chairwoman of the U.S. Commodity Futures Trading Commission from 1988 until 1993, applied for and was subsequently granted government exemption for publicly traded energy commodities from government or public disclosure.
This essentially closed energy commodities accountability from government and public disclosure requirements, despite them being Publicly Traded Companies whose shareholders and potential investors had a right to that information.
- The Enron Scandal (An American Energy Corporation)
- Wendy Gramm was paid over $2 million, never convicted, while ENRON donated more than $97k to Phil Gramm campaigns during the time his wife served as Enron Board Member…ALL while she was serving as Chairwoman of the Commodities Futures Trading Commission for Ronald Reagan
- $70 billion loss to investors from embezzled funds, misappropriated trust funds, stolen pension plans and retirement plans of 22,000 employees. Arthur Anderson, a Big-5 accounting firm was forced into bankruptcy due to malfeasance of behalf of ENRON. No charges were ever brought against the Gramms.
- Sarbanes-Oxley Act of 2002 was enacted to re-institute proper accounting procedures and transparency for Publicly Traded companies-Repealed by Jobs Act in 2012.***
- 3) Gramm Bliley Leach Act of 1999 (Also known as Financial Services Modernization Act) Sponsored by Senator Phil Gramm(R) Texas-Repealed the Glass-Steagall Act of 1933** and allowed commercial banks, investment banks, securities firms, and insurance companies to consolidate. Granted exemption to private insurance companies for insuring Publicly Traded Investment Banks. AIG insured $35 for every $1 it was actually able to pay in the event of defaults by customers of Investment Banks.
**Note: Glass-Steagall Act (separated Commercial Banks which catered to businesses with low-risk, low-return earnings on operating capital from Investment Banks, which catered to investors who wanted more aggressive returns which meant higher risks).
*** President Obama has repeatedly shown a lack of the necessary grasp of macroeconomics from attempting to name Larry Summers as Fed Chairman, to the more recent support for the Trans-Pacific Partnership trade pact….in my humble opinion.
- Real Estate collapse of 2008 and Investment Bank collapse of 2008, bankruptcy of Lehman Brothers Investment Bank and AIG(American International Group); government bailout of $750 billion and the beginning of The Great Recession.
4) Commodity Futures Modernization Act of 2000–Repealed the Commodity Exchange Act of 1936. Investment Banks, Hedge Funds, and Pension Funds were once again allowed to use depositor money to buy and sell commodities based on pure speculation without oversight. Financial institutions today own 61% of all investments in wheat, oil, and corn (ethanol, high-fructose corn syrup, etc.) and can raise or lower prices through pure speculation ignoring actual supply vs demand while cornering entire markets with pennies on the dollar.
- Price Spiking and Price Bubbles, are caused by speculation without the institutions ever having to actually pay for the contracts or receive the products.
THIS IS NOW
Congressional Republicans vowed this year to take a more “dynamic” approach to budgeting in their drive to eliminate the deficit within a decade. Their goal was to squeeze out a lot more in projected revenues over the coming years through rosy assumptions about the long-term economic and budgetary impact of their tax and spending policies.
Shortly after the GOP took control of Congress in January, the House Republicans adopted a new rule requiring budget scorekeepers at the Congressional Budget Office and the Congressional Joint Committee on Taxation to do an analysis of “major” legislation that projects the macroeconomic effects of the policy changes over time.
The analysis, known as “dynamic scoring,” has been denounced by economists dating back to the Reagan administration of the 1980s because it is so imprecise.
The end result – put on full display last Thursday when the House adopted a fiscal 2016 budget blueprint along party lines, 226-197 – was far more a reflection of wishful thinking than well-reasoned budgetary policy making. Republicans used dynamic scoring to hide a gaping $2 trillion hole in their “balanced budget.”
Here are your “Deficit Hawks” at work….
The final version of the budget is rife with many of the same spending gimmicks and accounting sleights of hand that drew sharp criticism from budget watchdogs and Senate Budget Committee Chair Mike Enzi (R-WY) when he first unveiled their respective drafts of the new budget. Those include:
- Boosting next year’s defense budget by $38 billion over a $523 billion spending cap through a back-door method that will add all of that spending to the deficit. The Food Stamp Programs and Department of Education budgets together are 1/100 of .1% (one penny of every one thousand dollars) in this budget.
- Hijacking the overseas contingency operations account created to fund the U.S. wars in Afghanistan and Iraq as an all-purpose slush fund for future spending increases by the Defense Department.
- Calling for the repeal of the Affordable Care Act – something highly unlikely to happen – while retaining for accounting purposes the $1 trillion of long-term Obamacare taxes for use in other programs.
- Claiming hundreds of billions of dollars in future savings with no specificity of how those savings could be achieved.
- The FDIC and the fund that is supposed to be adequate to cover up to $100,0000 of each depositor’s account held in federally insured bank accounts has been decimated by the austerity spending restrictions put into place by Republicans after the 2008 Home Equity Crash.
- So you think your money in a federally insured bank is safe? The same thing could happen to you that happened to all the people who lost their life savings in 401(k) plans that were illegally stolen by employers before and after the 2008 Home Equity Crash. Banks are not paying their premiums to the FDIC and the GOP has neutered almost every government agency’s ability to operate except defense….the reserve fund is woefully underfunded. Remember, the super-insurance-provider AIG pre-2008 had sold insurance to Investment Banks claiming to cover them in case of mortgage defaults but only had $1 in reserve for every $35 it was insuring. The FDIC is now in almost the identical boat.
- In December 2014, over the objections and filibuster of Elizabeth Warren, (D-Massachusetts), Congress officially made the U.S. taxpayer as the official funding source should a repeat of 2008 occur.
Rep. Chris Van Hollen of Maryland, the ranking Democrat on the House Budget Committee, dismissed the GOP budget plan yesterday as “Alice in Wonderland Accounting.” But the situation is even worse than it appears to be, and here’s where “dynamic scoring” comes in.
Republican lawmakers are using “Enron-style accounting gimmicks” to hide the reality that – as currently conceived — the GOP’s new budget will never balance. And he says the “trickery” begins with the presence of nearly $2 trillion of bogus projected tax revenues over the next 10 years.
Just do the math. Even the ultra-conservative Heritage Foundation sees this ridiculous farce.
“In an attempt to explain themselves, the budget authors will again claim that the revenues that are repealed along with Obamacare will be replenished, dollar for dollar, from tax reform.” The Heritage Foundation says, “This is disingenuous.”
In short, nearly $2 trillion of tax revenue that would be lost under these budget assumptions would somehow miraculously reappear in the budget as a result of revenue-neutral tax reform – or dynamic scoring.
This is what Republicans in Congress call effective leadership? Come on. I may have been born at night, but I wasn’t born last night. This is the scariest shit I’ve seen since the repeal of Glass-Stagall…and that gave me nightmares.
OH, and just a quick statistic for you. The U.S. buys and uses three-fifths of the cellphones, smartphones, televisions and computers in the world. Not a single one of any of them are made here.
Harvey A. Gold