Another Dirty Secret Newt Gingrich Does Not Want Anyone to Know - The GOP candidate holds up his old nonprofit, Earning by Learning, as a way to teach kids the value of a buck.

Another Dirty Secret Newt Gingrich Does Not Want Anyone to Know - The GOP candidate holds up his old nonprofit, Earning by Learning, as a way to teach kids the value of a buck. Here's what he doesn't mention.

For a politician who once proposed relocating children from single-parent households to orphanages, it was not all that surprising when Newt Gingrich recently declared that, if elected president, he'd ease child labor laws to allow poor kids to work as janitors.

What's notable, however, is the newly minted GOP presidential front-runner's explanation. Gingrich argues that poor children lack role models who can instill in them the value of hard work—something that, say, a part-time job cleaning bathrooms could easily remedy. Making his case to an audience in Des Moines, Iowa, last week, Gingrich touted the work of an educational nonprofit he founded in the early 1990s called Earning by Learning (EBL). The program offered cash—$2 per book—to students as an incentive to read over the summer. What he failed to mention is that his group also led to a formal ethics complaint amid concerns about not just who was funding Gingrich's program, but where that money was really going.

As Gingrich tells it, the program started that first summer in 1990 with 9 kids and ended with 30. "What happened was simple," he said. "The ice cream truck comes by. The kid who's in the program walks up and buys their own ice cream. Their friend says to them, 'How come you have money?' He goes, 'Well, I read.' So kids are showing up to the program saying, 'I demand that you let me read!'"

The point of the story is that private initiatives often succeed where government programs fail. EBL was a lean, mean, private machine. "The overhead is entirely voluntary," Gingrich said of the program in 1995. "The only money goes to the kids. So if you have $1,000 at $2 a book, you can pay for 500 books. Whereas, in the welfare state model, if you have $1,000, you pay $850 for the bureaucracy."

But that description turned out to be false. A 1995 Mother Jones investigation revealed that the program's all-volunteer army came at a hefty price. The group paid its Atlanta volunteers $500 each; nearly half of the total budget of the Houston branch of the program went to one salaried staff position.

A Wall Street Journal report earlier that year was even more damning, revealing that most of the money in the program's endowment in Georgia was being kicked back to Gingrich's friends, including Mel Steely, a former Gingrich staffer who was at the time working on an authorized biography of the House speaker. According to the paper, "90% of the $20,000 raised in the past year went to Steely and two other professors who help him evaluate the program. The children earned less than $10,000, from money leftover from prior years."

The Los Angeles Times piled on, noting that "reading program funds were used to reimburse Steely for travel, lodging and meal expenses during three trips to attend Gingrich's Saturday morning college course." The overhead, in other words, was actually quite substantial.

Much of the funding came from Gingrich himself, in part because he had nowhere else to spend the proceeds of his 1995 book To Renew America. After Democrats cried foul over his decision to go on 25-city book tour hawking the book, Gingrich announced that he'd donate the receipts from the tour to Earning by Learning instead.

But EBL was also, as such charities tend to be, a magnet for activists and groups looking to curry favor with the GOP whip-turned speaker of the House. As Michelle Dally Johnson noted for MoJo, the list of donors was "heavy on conservative activists, elected officials, and party donors, but light on educators and people noted for volunteerism." Some of them were also donors to GOPAC, Gingrich's political action committee, which was itself the subject of multiple ethics investigations. The Houston Automobile Dealers Association, which helped sponsor that city's EBL affiliate, admitted that the relationship gave them more access to Gingrich; the group's president was later invited to testify before Congress about the luxury tax.

It was that overlap between political activism and private enterprise that ultimately led Rep. George Miller (D-Calif.) to formally request an ethics investigation into Gingrich and Earning by Learning in 1996.

House rules prohibit members from using their Congressional resources (such as office space) for personal endeavors. In 2010, for instance, Rep. Charlie Rangel (D-N.Y.) was censured by his colleagues for, among other things, using official House stationary to solicit funds for City College of New York, which was naming its school of public policy after him. Miller, at the behest of Ralph Nader's Congressional Accountability Project, alleged that Gingrich had violated those standards through Earning by Learning.

The case concerned Donald Jones, a Wisconsin-based telecommunications entrepreneur—and a major donor to Gingrich's political action committee—whom Gingrich had invited to work out of his congressional office three days a week in a voluntary capacity (through Gingrich, he'd even received a Congressional ID badge). Jones was there to help work out the wording of the major telecommunications bill that was signed into law the next year.

"That the Speaker would apparently allow a telecommunications executive to act as 'Telecommunications director for Speaker of the House Newt Gingrich' in negotiations over telecommunications legislation—which may affect Jones' own holdings directly—is cause for alarm," Nader's group wrote.

But Gingrich's somewhat contradictory excuse, as explained to the Atlanta Journal-Constitution, was that Jones wasn't working on telecommunications—he was in Washington on behalf of the speaker's Earning by Learning program, for which he served as the president of the Wisconsin chapter. (His telecommunications company, US Cyber, provided the 800 number for EBL, which Gingrich helpfully plugged in floor speeches.) According to Gingrich, "95 percent" of Jones' time at the Capitol was devoted to Earning by Learning.

But that explanation was also problematic. As the Congressional Accountability Project noted, "Earning By Learning is a non-profit organization with no official ties to the United States House of Representatives." Granting office space and official resources would therefore violate House rules. Either Gingrich was using his education nonprofit as cover to allow a top donor to draft legislation directly affecting his own company, or he was using official resources to help out his private endeavor.

With Rep. Nancy Johnson (R-Conn.), a Gingrich ally, in charge of the House ethics committee, the speaker got off with a slap on the wrist, in the form of a formal "letter of admonition" and no further sanctions.

But the controversy over Gingrich's Earning by Learning program spoke to the larger issues at play in Gingrich's dealings. Jones, in his role as an informal adviser, donor, and volunteer at EBL, was illustrative of just how interconnected Gingrich's private and public ventures, collectively known as "Newt Inc.," really were. (In another, related instance, Gingrich transferred money from a scholarship program an ally had set up for inner-city students*, known as the Abraham Lincoln Opportunity Fund, to his political action committee, GOPAC.).........

Will Newt's lack of ethics, money funneling, twisted sense of morals, failure to live up to the promises of E-Learning, letting down the kids, his doubletalk denials and spin make any difference to America's conservatives? Of course not. Conservatism is by definition is unregulated rampant corruption. Democrats are the lightweights in corruption and with a majority of Democrats in both houses of Congress America has a much better chance of taking at least some of the funny money out of politics.

Is Governor Rick Perry a Geroge Bush Neocon With Goofier Hair

Is Governor Rick Perry a Geroge Bush Neocon With Goofier Hair

No one seriously believes that Republicans will nominate the wild-eyed, certifiable Michele Bachmann for president, and Romney the Robot isn’t setting Tea Party hearts aflutter. So it looks like Rick Perry, the Bible-thumping, secessionist hawk—who’s already assembling a team of neoconservative advisers—will get the nod to challenge President Obama in 2012.

Were Perry to win, his victory—especially if the GOP, as seems likely, conquers the Senate—will speed the United States down the merry path to oblivion at least a couple of decades before the rise of China and India do anyway. Worryingly, Perry might be exactly the know-nothing hawk who decides to use US military power to forestall America’s inevitable decline by force, even if it leads to World War III. Like Tea Party fanatics who courted financial Armageddon by insisting that reneging on US debt obligations wouldn’t be so bad, Perry’s own Tea Party Pentagon, staffed by neoconservatives, might decide the nuclear Armageddon wouldn’t be so bad, either, as long as it makes the world understand how exceptional American exceptionalism is.

Indeed, as James Lindsey points out [1] for the Council on Foreign Relations, in his screed, Fed Up: Our Fight to Save America from Washington, a book that he allegedly wrote, Perry declares that “exceptional” America has to be prepared for war with China and India:

“We are now confronted with the rise of new economic and military powerhouses in China and India, as well as a Russia that is increasingly aggressive and troublesome to its neighbors and former satellite nations that are struggling to maintain their relatively newfound independence. There is no reason to believe that armed conflict with any major power is imminent, but the world is rapidly changing, and the United States must be prepared for the ramifications of shifting balances of power.”

And Perry adds, concerning the “reset” in relations with Russia:

“It was a slap in the face to a number of our allies. As a Wall Street Journal article put it, ‘Some prominent figures in the region, such as former Polish President Lech Walesa, worried the new US administration was turning away from its traditional allies in Central Europe to placate Russia’.… Surely we can’t be serious?”

In his speech proclaiming his candidacy, in which he said elegantly that “we don’t need a president who apologizes for America,” and he added: “What I learned in my 20’s traveling the globe as an Air Force pilot, our current president has yet to acknowledge in his 50s—that we are the most exceptional nation on the face of the earth.”

No surprise, of course, that Perry is consorting with left-over neocons [2] from the Bush administration, as National Review reported in July, such as Douglas Feith, the ¨uber-hawk who oversaw the war in Iraq, and Bill Luti, Feith’s compatriot in the Bush White House, who joined with Vice President Cheney to persuade Bush that an unprovoked attack on Iraq was the right thing to do, and Dan Blumenthal, another Bush veteran who’s taken up residence at the American Enterprise Institute. Though the Tea Party types who support nut-libertarian Ron Paul oppose wars such as Iraq and Afghanistan and want to reduce the size of the Pentagon, Perry appeals to the other side of the Tea Party and to traditional Republican hawks who oppose the libertarians’ outright isolationism. Indeed, a source close to Perry told National Review [3] that Perry does not exhibit “the neo-isolationism that you might expect from certain people [close to] the Tea Party.” (According to Politico, Donald Rumseld is setting up Perry’s encounters [4] with the neocons.)

That silly soundbite about 'apologizing' for the US is from the conservative myth that President Obama - our Republican-Lite president does not believe in American exceptionalism. Besides a burning desire to fix any and all problems with more wars, patriotic Americans might want to ask themselves if they want someone like Perry, who has flirted with treason against the United States to be the guy with his finger on the nuclear button. Funny how conservatives make up reasons out of thin air to impeach Obama for supposedly not being American enough, but conservatives can openly advocate and campaign on the most venal and evil anti-American beliefs.

Does God Love The Wealthy More Than Average Americans? The Tea Party Thinks So.

The Chart: a comparison of Bush verses Obama's contribution to the deficit. If based on what is spent during their administrations makes the biggest spender a communists than Bush was Mao with a cowboy hat.

Does God Love The Wealthy More Than Average Americans? The Tea Party Thinks So.

Every once in a while, you come across a news story that’s more than a story. It’s a revelation.

On Sunday morning, that’s what greeted readers of the Washington Post searching for insight into the Great Debt Showdown. The first two thirds of a piece by David A. Farenthold and Dan Balz is a familiar recitation of the tribulations of Speaker John Boehner as he struggled with defiant new members of the House Republican conference. Nothing earth-shattering there. But then, out jumps a nugget of naked truth that simply takes your breath away. It concerns the god served by Tea Party-backed GOP members who have held the country hostage in a sham debt-ceiling crisis. Keep in mind that the passage below is not a parody:

Not even gentle persuasion could overcome higher powers Thursday. As Boehner was in his meetings, three freshman Republicans from South Carolina were in the House chapel nearby, in quiet discussion and in prayer. Reps. Mick Mulvaney, Tim Scott and Jeff Duncan wanted a stronger provision to guarantee a balanced-budget amendment and knew they would be lobbied furiously in the hours to come.

At one point, Duncan said, Mulvaney picked up a Bible and read a verse from Proverbs 22: “The rich ruleth over the poor, and the borrower is servant to the lender.”

“It’s telling me to really be bold, to really fight for structural changes,” Duncan said.

“Mulvaney snapped the Bible closed. And I said, ‘Guys, that’s all I need to see,’?” Duncan said. “Tim said, ‘Yep.’ And we stood up and walked out.”

These gentlemen would like for us to construe their prayerful moment as spiritual concern for suffering Americans. That’s a tough sell, because the god worshiped by these devout South Carolina congressmen is not Yahweh. It is not the deity served by Jesus, he of throw-the-money-lenders-out-of-the-temple fame.

The god of the Tea Party freshmen is certainly ancient and powerful. He was last employed as one of the chief princes of Hell. And his name is Mammon. On leave from his post in Hell, Mammon is doing a bit of temp work. The avatar of wealth and greed has rolled up his sleeves and taken up residence in the People’s House, where he currently advises GOP freshmen on policies contrived to do his bidding.

Now, if Congressman Mulvaney had not shut his Bible so quickly, he might have come across another interesting passage, this one from the Gospel of Matthew.

No one can serve two masters, for either he will hate the one and love the other; or else he will be devoted to one and despise the other. You can not serve both God and Mammon.

—Matthew 6:19-21,24

But there was really no need for the freshmen to read this passage. Mulvaney, Scott and Duncan know  who they are really serving. They must understand that the budget cuts they have fought for tooth and nail will take money from the most vulnerable members of our society and fill the coffers of the rich — though you wouldn’t necessarily think they’d invoke the Christian Bible in support of their trickle-up economics.

But Mammon’s power has been known to be irresistible. Those who fall under his spell frequently turn their backs on justice and become the fawning lapdogs of the rich (peruse the Koch-Mulvaney connections here).

Today we learn that the deal currently in the works to avert an historic U.S. default would require Americans rendered jobless by the financial crash caused by Wall Street to suffer even as bankers take in record-breaking profits. Medicare would be placed on the chopping block. Tax loopholes for the wealthy would remain open. The economy would be further weakened. Pain would be inflicted on just about everybody but the privileged and the powerful.

The God of Greed can look upon his work with satisfaction. His troops are delivering. The angels have fled. He knows his kingdom is coming. And Mulvaney, Scott, and Duncan have secured their place in it.

There have been a lot of Christian cults over the last 2000 years. To that historical list we can add the Republican party which has become just another fringe cult.

Moving The Goal Posts to Appease Conservative Zealots

Moving The Goal Posts to Appease Conservative Zealots

If you want a short encapsulation of how far right the economic debate has moved, check out this passage from the Washington Post:

    Sen. Bernard Sanders, a Vermont independent with socialist leanings, delivered a 90-minute address Monday outlining his plan calling for 50 percent of all savings to come from tax increases. “The wealthiest Americans and the most profitable corporations in this country must pay their fair share,” Sanders wrote Monday in a letter to Obama.

    Such a proposal has no chance of passing because Republicans and many Democrats believe steep tax increases are both politically unpopular and potentially harmful to the struggling domestic economy.

So the socialist plan for one of the lowest-taxed advanced economies on Earth -- a country that could balance its budget entirely through tax hikes and still have a tax burden that ranks in the lowest third among the OECD -- is to cut the deficit with a plan consisting of half spending cuts. And that plan is immediately dismissed as so wildly unrealistic it stands no chance of passage. Cut hundreds of billions of dollars of spending and also raise taxes to cut the deficit, during a massive economic crisis? Go back to Russia, you crazy socialist!

This serves as a great example of how far to the extreme Right the national conversation has shifted. How dare we increase taxes on the richest one percent of the population and solve our REVENUE problem. We must slash Medicare, education, child health care first. President Obama, the supposed socialist anti-Christ Kenyan Muslim is pretty much going along with Republicans. After its all over the extreme Right - those nutters who call themselves "conservatives" will still be calling him names and claiming he didn't cut enough.

Republicans Fight to Let Corporate Bosses Break Laws Protecting Their Workers

Republicans Fight to Let Corporate Bosses Break Laws Protecting Their Workers

Working America labors under the weakest protections from abusive management in the developed world, by far. We take it as a given that our bosses can fire us for any reason (with a few exceptions like discrimination on the basis of race or gender), or no reason at all – a notion that would shock and appall working people in most advanced economies.

But corporate America doesn't want the very modest protections that do exist in this country to be enforced. Even as companies lay claim to many of the Constitutional rights of citizenship, they want to be held above the rule of law when it comes to their employees.

This desire lays at the heart of a recent barrage of assaults on the National Labor Relations Board (NLRB), a New Deal agency that for over 75 years has been tasked with enforcing the very modest protections for organized workers afforded by the National Labor Relations Act. The agency, according to former NLRB general counsel Fred Feinstein, “has the stated purpose of encouraging private-sector collective bargaining, protecting employees’ right to form a union to improve working conditions and preventing retaliation for exercising these rights.” He adds that passage of the law “helped the U.S. climb out of the Great Depression and encouraged the growth of a vibrant middle class for much of the last century.”

The primary focus of conservative outrage at the NLRB of late has been its complaint against Boeing for locating a new plant in South Carolina as an explicit act of retaliation against its unionized Washington state workers for going on strike – for exercising a right guaranteed by the law.

The company's CEO claimed that he'd “made a rational, legal business decision about the allocation of our capital and the placement of new work within the U.S.” The spin is that the company was simply pursuing its business interests according to “free market” principles, when pasty government bureaucrats intervened. But the truth is very different. Boeing can indeed locate its operations wherever it wants to for any legal reason, including seeking out states with low union rates and cheaper labor costs. What it cannot do is break the law, and that is what is alleged in the case.

As the American Constitution Society (ACS) explained it, “The right to strike is protected by law, and an employer’s retaliating against employees for exercising their legal rights violates the NLRA, the law the NLRB enforces.”

    After the charge [against Boeing] was filed, the NLRB’s regional office in Washington investigated the case. That investigation involved taking sworn affidavits from witnesses and collecting other relevant evidence. Boeing had the right to present its evidence during the investigation. The evidence included public statements by Boeing officials – and reported in the Seattle Post Intelligencer Aerospace News and the Seattle Times– that they were angry that Boeing employees in Washington had gone on strike in the past. Boeing officials also said that they would, therefore, move work that was originally going to be done in Washington to a plant in South Carolina. This evidence... supports a finding that Boeing violated § 8(a)(1) and (3) of the NLRA.

Boeing has been the driving force behind the backlash against the NLRB, and the right has been quick to jump on the bandwagon. Sarah Palin, ignoring the fact that we have far fewer protections for workers than any other developed country on the planet, offered what has become an industry-standard talking-point, predicting that “eventually every state will suffer when businesses declare 'enough is enough' with these tactics and decide to relocate in more business-friendly countries.” And during the recent GOP debate in New Hampshire, Newt Gingrich called on Congress to “Immediately...defund the National Labor Relations Board which has gone into South Carolina to punish Boeing, which wants to put 8,000 American jobs in South Carolina.”

Rep. Darrel Issa, R-California, told MSNBC host Joe Scarborough that “[If] the labor union wants to make a suit, make a suit but for the government to spend your tax dollars to pursue seems to be over the top.” Issa was either misinformed about the labor laws in this country, or he was intentionally misleading the show's audience: according to the National Labor Relations Act, unions cannot sue companies for violating the labor laws. Their only recourse is to file a complaint with the NLRB – if it were defunded, union workers would have absolutely no protection whatsoever against illegal practices on the part of employers.

Even the most modest rules that might help working people form unions are under assault today. As labor journalist Mike Elk reported, the NLRB proposed a new rule this week that would simply streamline the union elections process. “Companies seeking to stop union drives often delay union elections by months in order to allow more time for extended anti-union intimidation... campaigns,” he wrote. Those extended campaigns often involve firing” organizers – in a 2007 study, economists John Schmitt and Ben Zipperer found that “about 1 in 5 union organizers or activists can expect to be fired as a result of their union organizing.” According to John-Paul Ferguson of the Stanford Business School, under duress, 35 percent of petitions filed by workers to hold a union election don't result in one being held (PDF).

A study of employer activities during NLRB administered union campaigns between 1999-2003 by Cornell University's Kate Bronfenbrenner (PDF) found that it was “standard practice for workers to be subjected to threats, interrogation, harassment, surveillance, and retaliation for union activity.”

    63%of employers interrogate workers in mandatory one-on-one meetings with their supervisors about support for the union;

    54% of employers threaten workers in such meetings;

    57% of employers threaten to close the worksite;

    47% of employers threaten to cut wages and benefits; and

    34% of employers fire workers.

Some of that is what labor organizers say happened during an organizing campaign among Target employees at a New York outlet last week. The New York Times reported that according to the UFCW local, workers at the Valley Stream store had endured a “campaign of threats, intimidation and illegal acts by Target management.” UFCW has called on the NLRB to investigate the claim and call for a new election, enforcing a law that would be unenforced entirely were the agency defunded.

Conservatives like to claim they are pro freedom and individual rights. That has become one of the longest running jokes in America. They believe in the power of the economic elite and everyone who is not a member of the plutocracy is wage slave who better not get uppity with their plantation masters. 

Destroying Medicare to Balance the Budget is a False Narrative. We Have a Revenue Problem.The United States Is a Low-Tax Country

Destroying Medicare to Balance the Budget is a False Narrative. We Have a Revenue Problem.The United States Is a Low-Tax Country

Ten Charts that Prove the United States Is a Low-Tax Country ( see above).
Our Citizens and Corporations Pay Much Less Than They Once Did and Much Less Than in Most Other Countries.

The United States is a low-tax country. That’s true for individuals and for corporations, and it’s true whether you compare us to other countries or the America of the past. No matter how you slice it the conclusion is the same.

Conservatives like to claim that our budget deficits are purely a “spending problem.” Said Senate Minority Leader Mitch McConnell (R-KY): “We don’t have this problem because we tax too little. We have it because we spent too much.”

It’s a popular talking point, but it simply isn’t true. Deficits do not stem from spending levels alone. They are the product of a mismatch between spending and revenue. And when revenue is as low as ours is, you end up with big deficits.

Recently, President Obama met with a group of House Republicans to discuss the federal budget and the national debt. During the course of that meeting, the president noted, correctly, that taxes today are even lower than they were under President Ronald Reagan. This fact was met with “a lot of ‘eye-rolling’” from the Republicans. They didn’t believe him.

This anecdote suggests that perhaps the reason conservatives think we don’t have a revenue problem is because they don’t know the facts. Taxes today are lower than they were under President Reagan. They’re lower today than they’ve been in 60 years. And they’re lower than they are in most developed countries.

We do have a debt problem coming down the road. That debt problem is the result of an aging population, rising health care costs, and, yes, revenue levels that are too low.

Michael Linden is the Director for Tax and Budget Policy at American Progress, Seth Hanlon is Director of Fiscal Reform for CAP's Doing What Works project, and Jordan Eizenga is a Policy Analyst with the Economic Policy team at American Progress.

Amazing what trash becomes a national narrative, pushed along by the so-called liberal media. As of today in order to be a'serious adult" one has to beleive that our national finances are in such diaarry we must destroy or severely cripple programs such as Medicare, Medicaid and Social Security because the deficit is high. One of the reasons for that is simple: The Bush tax cuts and a low tax on capital gains. In other words we have a revenue problem. Republicans, the people who lost 17 trillion dollars of America's wealth in the Great Recession which begin in 2007, claim taxes are too high. How often do conservatives have to burn America before people get tired of being burned. Time to say enough with the kind of BS spoon feed the American public by serial lying snake oil salesman like Mitch McConnell(R-KY) and the Anti-America stooges at Fox News.

Why Do Republicans Hate America - The Newest Conservative Attack on The Middle-Class

Why Do Republicans Hate America - The Newest Conservative Attack on The Middle-Class

By law, a statutory limit restricts the total amount of debt the federal government can accumulate. Only Congress can raise this limit. On the heels of the worst recession since the Great Depression, this “debt ceiling” is projected to be reached sometime early next year. Increasingly, conservatives are pledging to vote against any increases to the debt ceiling—even if this means shutting down the federal government. This reckless pledge would have disastrous consequences for the U.S. economy and the global financial markets, and would severely worsen the long-term budget situation to boot.

This conservative pledge has historical antecedents. In the fall of 1995, congressional Republicans refused to raise the debt ceiling for a period of about six months, until they reversed course in March 1996 in response to plummeting poll numbers. This original “debt ceiling crisis,” as it’s become known, was extraordinarily costly, roiling the financial markets and forcing two government shutdowns.

The consequences of refusing to raise the debt ceiling would be even more costly today, given the precarious state of the U.S. economy and global financial markets, and potentially could be disastrous. Unlike in 1995, when our economic outlook was good, we are currently fighting our way out of the Great Recession and coming off of the worst financial crisis since the 1930s.

Nonetheless, led by the advice of Newt Gingrich, the former House Speaker who was the architect of the 1995-96 debt ceiling crisis, many conservatives are clamoring for a repeat of this past episode in recklessness.

The budgetary consequences of this conservative pledge would be catastrophic and far-reaching, forcing the immediate cessation of more than 40 percent of all federal government activities (excluding only interest payments on the national debt), including Social Security, military operations in Iraq and Afghanistan, homeland security, Medicare, and unemployment insurance. This would not only threaten the safety and economic security of all Americans, but also have dire impacts for the economy and job growth.

In short, the economic consequences of such a large and precipitous drop in spending would be crushing, and almost certainly result in a severe drop in economic growth and employment at a time when we can least afford it.

Moreover, such a move could lead to a panic in the international financial markets. Following the 2008 financial crisis, we have seen debt crises hit Ireland, Greece, and Italy, with fears that this could spread further and cause a global economic downturn. The financial markets are on edge today, with U.S. Treasury bonds being the safe haven for most investment capital. Refusing to raise the debt ceiling would recklessly disrupt the sale and purchase of new Treasury bonds, and could potentially cause a run on outstanding Treasurys as well, as investors sought other investments. This could have catastrophic consequences for our economy as well as the economic stability of the rest of the world.

Refusing to raise the debt ceiling would also exacerbate the problems with our long-term budget outlook. The budget deficit right now is the result of two distinct sets of changes since 2001, when we last had a budget surplus. First, a series of long-term policies enacted by the Bush administration—most notably the Bush tax cuts of 2001 and 2003, the decision to fight two major wars without raising taxes, and the passage of an unfunded Medicare Part D prescription drug program—created permanent structural budget deficits that will remain with us over the long term unless they are addressed. Second, the poor economy caused a drop in tax receipts alongside higher “countercyclical” spending, such as for unemployment insurance and food stamps.

Implementing a debt ceiling freeze ignores the first set of issues and makes the second set of issues worse by forcing a massive multitrillion dollar hit to an already struggling economy and threatening to take us into a second Great Depression. This is hardly responsible policymaking. So let’s delve a little deeper into the consequences of such conservative folly. As we will demonstrate, the results of a replay of 1995 in 2011 would be the height of recklessness for our economy and global financial markets.
A replay of 1995

The most recent pledge to freeze the federal debt ceiling is notable because congressional Republicans tried the same thing following their takeover of Congress in 1995. That fall, Republicans refused to raise the debt ceiling unless then-President Bill Clinton agreed to enact major planks of the radical “Contract with America” proposed by the Republican Party, such as a $270 billion cut to Medicare, steep cuts to education funding, and massive deregulation measures. Indeed, then-Speaker of the House Newt Gingrich at one point threatened to force a default on the national debt if Republicans did not get their way.

This standoff, which lasted until March 1996, ended with the Republicans backing down as the public increasingly became turned off by the government shutdowns that resulted.

The “1995-96 debt ceiling crisis,” as it is known, caused significant turmoil for our economy, forcing the Department of Treasury to suspend all new debt issuances and causing two temporary shutdowns of all “nonessential” federal government activities, including a cessation of toxic waste cleanups, disease control activities, and a suspension of many law enforcement and drug control operations, among many others. Ultimately, this episode cost the American taxpayer over $800 million, and rattled the confidence of international investors in U.S. government bonds.

Indeed, it was only through the use of some fairly extraordinary measures by President Clinton’s Treasury Department, including a temporary use of retirement funds for former government employees, that the United States managed to avoid defaulting on its national debt during this period. Unfortunately, such measures would not be as effective today, as analysts at Deutsche Bank found. They worry that if it happened today the federal government would “not be able to stave off a government shutdown (or possible suspension of bond payments) for long.”
The precarious budget situation

Conservatives’ call for a debt ceiling freeze looks even more senseless when one considers that our economy is struggling to recover from a severe recession. Because economic growth remains anemic, tax receipts are flat after falling sharply, which makes it particularly difficult to balance the budget. Refusing to raise the debt ceiling would essentially force the federal government to balance the budget immediately, at a time of cyclically low revenues. While this may sound appealing to deficit hawks and deficit peacocks alike, it would actually have catastrophic consequences, both in the short term and the long term.

A $1.3 trillion deficit is projected for FY 2011, on a total budget of $3.8 trillion. If we assume that the Obama administration did not want to default on the national debt, and thus continued to make interest payments on outstanding U.S. Treasury obligations ($244 billion), then being forced to balance the budget next year would mean cutting over 40 percent of all other expenditures.

But some federal spending is more important than others, right? Let’s assume that we keep certain “sacrosanct” programs whole, not cutting Social Security ($728 billion), defense spending during a time of war ($701 billion), Medicare ($507 billion), Medicaid ($262 billion), and benefits for military veterans ($126.5 billion). If we did that and then eliminated spending on all other government programs, we would still be looking at a small deficit. Yet such a move would mean no FBI, no Department of Justice, no Homeland Security, no border security, no education funding, no unemployment insurance, no school lunches, no national parks, no food stamps, no student loan funding, no air transportation safety, no drug enforcement, no food and drug safety, etc. etc. etc., ad nauseum.

Such severe expenditure cuts would be devastating in two ways. First, they would eviscerate the basic services and protections offered by our federal government, leaving our country in perilous danger from a myriad of threats and many of its most vulnerable citizens without a safety net. Americans would be vulnerable to increased crime, drugs, terrorism, food safety, and air traffic safety, to name just a few. And these spending cuts would slash the social obligations we have promised to military veterans, the elderly, and students, among others. Such large spending cuts couldn’t simply be confined to nonessential services. They would cut to the very core of the protections and core benefits provided by the federal government.

Second, these large spending cuts would increase unemployment and severely dampen economic growth, destroying any prospects of a sustained economic recovery. The resulting job loses and the steep cuts to unemployment insurance, food stamps, and other federal safety net expenditures would create a reverse “multiplier effect” that would cause a large dip in economic growth.
The precarious state of the global financial markets

The conservative pledge to freeze the debt ceiling would also lead to some fairly momentous problems in the world’s financial markets. Following the financial crisis of 2008-2009, which exposed problems with many private financial instruments that were previously thought to be safe, such as money market funds and AAA-rated asset-backed securities, investors sought safe haven by investing in sovereign debt. Unfortunately, sovereign debt crises in Greece and Ireland have caused significant uncertainty in European financial markets, and as a result, investors have flocked to the perceived safety of sovereign debt issued by the United States, which has never defaulted in its history.

A freeze on the debt ceiling could erode confidence in U.S. Treasury bonds in a number of ways, creating further and wider panic in financial markets. First, by causing a disruption in the issuance of Treasury debt, as happened in 1995-96, a freeze would cause investors to seek alternative financial investments, even perhaps causing a run on Treasurys. Such a run would cause the cost of U.S. debt to soar, putting even more stress on our budget, and the resulting enormous capital flows would likely be highly destabilizing to global financial markets, potentially creating more asset bubbles and busts throughout the world.

Second, the massive withdrawal of public spending that would occur would cause significant concern among institutional investors worldwide that the U.S. would swiftly enter a second, very deep, recession, raising concerns about the ability of the United States to repay its debt. Finally, the sheer recklessness of a debt freeze during these tenuous times would signal to already nervous investors that there was a significant amount of political risk, which could cause them to shy away from investing in the United States generally.

Taken together, these factors would almost certainly result in a significant increase in the interest rates we currently pay on our national debt, currently just above 2.5 percent for a 10-year Treasury note. If in the near term these rates moved even to 5.9 percent, the long-term rate predicted by the Congressional Budget Office, then our interest payments would increase by more than double, to nearly $600 billion a year. These rates could climb even higher, if investors began to price in a “default risk” into Treasurys—something that reckless actions by Congress could potentially spark—thus greatly exacerbating our budget problems.

The U.S. dollar, of course, is the world’s reserve currency in large part because of the depth and liquidity of the U.S. Treasury bond market. If this market is severely disrupted, and investors lost confidence in U.S. Treasurys, then it is unclear where nervous investors might go next. A sharp and swift move by investors out of U.S. Treasury bonds could be highly destabilizing, straining the already delicate global economy.

Imagine, for example, if investors moved from sovereign debt into commodities, most of which are priced and traded in dollars. This could have the catastrophic impact of weakening the world’s largest economies while also raising the prices of the basic inputs (such as metals or food) that are necessary for economic growth.

In short, a freeze on the debt ceiling would cause our interest payments to spike, making our budget situation even more problematic, while potentially triggering greater global instability—perhaps even a global economic depression.

The very idea of a federal debt freeze among the radical right in our country, while they continue to ignore responsible deficit reduction measures and continue to focus on the wrong policy solutions, exemplifies their obstinacy as much as their short-sightedness. A freeze on the debt ceiling, or shutting down the federal government will not reduce the federal budget deficit and will in fact increase it over the long run by tipping the global economy into depression. Voters may assume that conservative candidates will not live up to their pledge of recklessness once they understand the consequences. This is a risky gamble, particularly given the precedent already set by conservatives in 1995.

Who will suffer from Republican's insane economic priorities - Not House leader John Boehner (R-OH) or Senate Minority Leader Mitch McConnell (R-KY) they both make around $195k per year and they both have wealthy elitist friends on the wing-nut welfare circuit..