The Daily Banter Headline Grab. From Reuters:

The U.S. economy could take a big hit from automatic government spending cuts even if Congress only leaves them in place for a month or two.

The cuts were meant to be so painful that they would force Congress to find a more thoughtful way to tighten the budget.

But many analysts assume they will take effect as scheduled, forcing federal offices to furlough some of their 2.8 million workers and trim spending on everything from paper clips to missiles.

It is anyone’s guess, however, how long lawmakers will be able to stomach the economic pain. The duration of the austerity measures will determine the force of the blow to the economy. Some analysts think having the cuts in place for more than a few months could trigger a brief recession.

The Congressional Budget Office said on Tuesday the cuts would translate into $42 billion less in federal spending between the beginning of March and the end of September.

If $6 billion in spending is cut in March – which would be the average decline over a seven-month period – economic growth would be stunted by roughly seven-tenths of a percent in the first quarter, said Omair Sharif, an economist at RBS in Stamford, Connecticut.

“You are going to feel the pain right away,” Sharif said.

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The Daily Banter Headline Grab. From ABC News:

Raising tax rates is “unacceptable” to House Speaker John Boehner as he prepares to open negotiations on the looming “fiscal cliff” with the president and congressional Democrats, he told “World News” anchor Diane Sawyer today in an exclusive interview.

“Raising tax rates is unacceptable,” Boehner, R-Ohio, said in his first broadcast interview since the election Tuesday.

“Frankly, it couldn’t even pass the House. I’m not sure it could pass the Senate.”

That stance could set up a real showdown with the White House given that the president has said he would veto any deal that does not allow tax cuts for the rich to expire. But the speaker said that Republicans would put new tax revenue on the table as leaders work toward a deal.

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Don't you make fun of my brother!

By Bob Cesca: Yes, I get it. Among the children of Barbara and George H.W. Bush, Jeb Bush is considered the “smart and reasonable” one. But that’s sort of like saying, Lotsa’ hammers in that tool box, but this hammer doesn’t hurt as much when you bash it into my skull.

Make no mistake. When challenged, Jeb Bush is capable of being as petty and nearsighted as just about any Republican you can name. He might do it with a smile on his face, but as the famous Shakespeare quote goes (say it with me), “That one may smile, and smile, and be a villain.”

On Meet the Press yesterday, Jeb insisted that President Obama should stop blaming his brother, George W., for the condition of things, “I think it is time for him to move on. I mean — look, the guy was dealt a difficult hand, no question about it. But he’s had three years. His policies have failed, and rather than blame others — which I know we were taught that that was kind of unbecoming over time — you just can’t keep doing that. Maybe offer some fresh new solutions to the problems that we face.”

Totally smart and reasonable, yes?

No way.

This is typical Republican behavior with overtones of the “starve the beast” strategy. Typically, the Republicans set a nasty table filled with disasters, and then, when the new guy comes along, they blame the new guy for their own disasters. When the new guy defends himself by saying the previous guy set a nasty table filled with disasters, people like Jeb Bush and the others bark at the new guy, telling him to stop playing the blame game. It’s a no-win for the new guy.

Specifically, the Bush team rocketed through eight years of unchecked spending on trillion dollar wars, trillion dollar tax cuts, corporate bailouts and continued deregulation — it was responsible for the final measures that precipitated a massive recession that further bloated the deficit and debt. They did all of this knowing full well that when the bill came due, they’d be long gone. And, bonus, if the new guy was a Democrat, Barack Obama, they could just blame the him for the deficit, the debt and the nightmarish economic collapse. Furthermore, the Obama team would become handcuffed and unable to totally resolve the problem due to all of the spending/deficits/debt that occured under the Bush administration, thus sabotaging the Obama policies and agenda. The “starve the beast” strategy.

When the Obama team rightfully points out that, for example, it inherited a $1.2 trillion deficit for fiscal year 2009 based on spending requests from the Bush White House, Republicans either deny the reality of how the budget process works, like hack liar Dinesh D’Sousa did with Cenk Uygur the other day, or they wave their open hands in our faces and say, “Baaaah! Blame game! Bush derangement syndrome! Not listening!”

But it’s an empirical fact that the current deficits and debt are a direct result of Bush era policies. It’s an empirical fact that in spite of what ought to be done about the recession and recovery — massive government spending over and above the March 2009 stimulus — the Obama White House has actually presided over the lowest year-over-year increase in government spending of any modern president going all the way back to Eisenhower. The Obama White House has also presided over an (inexplicable) reduction in government employees, while Bush 43 and other presidents were responsible for considerable increases in public sector jobs. The deficit under President Obama has slowly been reduced following the massive deficit he inherited in 2009, and every spending bill he signs is required to be fully paid-for due to “paygo” rules he authorized.

Meanwhile, contrary to the myths floating around in both conservative and liberal circles, this president made history by, yes, rescuing the world economy from a second Great Depression. I’ve written this many times before, but it can’t be stated often enough or with enough emphasis. He rescued the economy from a second Great Depression that could have crushed U.S. and other western nations. Since his policies took effect, the GDP is growing again. The Dow has nearly doubled. The economy is creating jobs. And, ultimately, we’re all still kicking around in a relatively stable nation (compared to what could have happened under, say, John McCain and Sarah Palin).

So when the Republicans shout and screech and their eyes bug out of their tiny heads about the deficit, the debt and “failed policies,” it’s perfectly reasonable and understandable that the president would want to correct the record. Jeb Bush, in particular, seems to think the unmitigated shithole that President Obama inherited can and should’ve been resolved in three years. It’s just that easy to — POOF! — obliterate record deficits, debt and economic disasters, especially when those three things can’t necessarily happen at the same time. You can’t cut the deficit to zero in a slow growth recovery following the deepest recession since Depression. As for the debt, the only president who cut the debt in the last 30 years was Bill Clinton, and it was during an incredible economic boom. Nevertheless, how else is President Obama supposed to respond to these charges? Should he accept the blame for something that’s not his fault? Not a chance. And should he accept the blame for not entirely rolling back the deficits and debt, not to mention the status of the economy, to 1999 in three years even though it took 10 years to get here? That’s a totally unrealistic and unfair expectation.

But the Republicans aren’t fair players. They’re liars and superficial marketing gurus who can come up with zingers that fit conveniently onto bumper stickers, but they’re nowhere near capable of debating empirical reality and accepting rational explanations for our current state of affairs.

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Romney needs a talking-to from Fred Rogers.

By Bob Cesca: It wouldn’t be a presidential election year if the Republican nominee didn’t threaten to cut funding to several “liberal” institutions that rely upon federal money: Amtrak, PBS, the National Endowment for the Arts and the National Endowment for the Humanities. Yesterday, Mitt Romney did exactly that.

Like Medicare and Social Security, Republicans have been trying to kill PBS since the Nixon administration. You might have seen the inspiring Senate address by Fred Rogers in defense of PBS programming. Take some time to watch it and come back.

Okay, so we can only wish that Mr. Rogers was alive today to speak the same words to Mitt Romney. Of course the speech would probably fall upon deaf ears and Romney would likely begin to eat Mr. Rogers’ medicine for fuel — because robots are strong.

Nevertheless, the annual subsidy for PBS is only $444 million. The total federal budget for 2011 was $3.5 trillion. So cutting PBS entirely would create a whopping .01% savings. Good job, President Romney. You’re a budget wizard! Let’s say there’s some public outcry (and there will be) and Romney decides to only cut the PBS budget in half. Wow! A huge .006% savings!

If we cut all of the programs Romney named, the government would save around $2 billion. That’s a savings of .05%. Again, it’s an almost nonexistent reduction in the budget, but Romney and the Republicans make it seem as if these are massive, blood-sucking drains on the budget. They’re clearly not.

Obviously the point isn’t to save money. The point is to kill PBS, which the Republicans have always hated because it actually educates the public without the taint of paid advertising. Without advertising, the content is devoid of corporate influence, whether it’s news, entertainment or children’s programming. Republicans would prefer that the public remains uneducated — unless the educators are corporate charter schools and the Glenn Beck University. If voters are less educated, they’re less likely to catch all of the lies and bumper-sticker superficiality that’s become the centerpiece of the Republican Party.

Meanwhile, what sorts of subsidies do Republicans support? Corporate welfare, for one. The very liberal Wall Street Journal reported that corporate subsidies cost the taxpayer $92 billion in 2006 and might have climbed to $200 billion including the bailouts and so forth. But let’s take the $92 billion number. $70 billion of that sum is tied up in tax breaks and direct government handouts to oil and gas companies. That’s 35 times the federal budget for all of the programs Romney named yesterday. Whereas PBS struggles to remain on the air, supplementing its budgets with public donations during lean economic times, Big Oil is turning in record profits.

In 2010, BP, Royal Dutch Shell, ConocoPhillips, Chevron and ExxonMobil received $2 billion in subsidies — the same amount that’s paid to PBS, Amtrack and the others. But those corporations earned $137 billion in total combined profits that year. Pure profit. 75% higher profits than the previous year and a total of $1 trillion in profits in the previous ten years.

Yeah, that seems fair.

In 2011, the House Republicans, including Mitt Romney’s running mate, voted in lockstep against eliminating the subsidies for Big Oil. Every Republican voted no. The Senate Republicans voted the same way this year. For some reasons, these corporations with their record profits are in desperate need of federal cash. You know, because government shouldn’t interfere in the free market.

During the same remarks, Mitt Romney repeated that he would repeal Obamacare and, thus, increasing federal spending on Medicare by over $700 billion. Along with this repeal, Romney would roll back an array of new benefits for seniors. Romney would force many seniors to pay for more than $2000 per year in prescription drugs — out-of-pocket — when the donut hole is re-opened. He would make seniors pay deductibles, coinsurance or cash out-of-pocket for preventative medicine (or go without it entirely). He would restore the waste, fraud and abuse that’s causing Medicare to creep closer to insolvency, as well as the inefficient and over-priced care offered by private insurance policies that are financed via Medicare Advantage.

What the hell is wrong with Mitt Romney and the Republicans? Seriously, these policies and agendas are so twisted and upside-down and backwards, it’s impossible to know where they stand on anything. This is what happens when a campaign and a party stands for the exact opposite of the president’s record. They’re in favor of subsidizing corporations, but against regulating them. They vote for policies that created the current deficit and debt, like the Bush tax cuts and the Bush wars, but then demonize the other party for the deficit and debt. They support privatizing Medicare while lumping on an additional $700 billion in unnecessary spending to the program, but then complain that the system is going bankrupt.

It’s an utterly incomprehensible and incoherent party. Yet around half the country supports them. Perhaps half the country should’ve spent more time watching PBS. They might’ve learned something.

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Mitt Romney has made attacking Obama’s stimulus package a central theme of his campaign. A proponent of austerity, Romney now claims that only tax cuts for the rich and reduced government spending can save the economy. However, interviews he did while George Bush was in office are now surfacing showing a completely different Romney with a completely different economic philosophy. A couple of quotes that could come back and haunt the Republican presidential candidate:

On the spending front, infrastructure projects should be a high priority. But because infrastructure projects involve engineering, environmental studies, permitting and contracting, they can take a long time to actually boost the economy. Spending to refurbish and modernize our military equipment is urgently needed, and it has a more immediate impact on the economy. A great deal of our armament was damaged or lost in the Middle East, and the rest is long overdue for maintenance…..

We should also invest to free us from our dependence on foreign oil, not by playing venture capitalist, but by funding basic research in renewables, material science, combustion, nuclear reprocessing, and the like. During the 2008 campaign, virtually every candidate agreed on the need for an “Apollo-like mission” to achieve energy independence. Now is the time to start.

No doubt Romney will continue to lie his way out of this, but it’s great cannon fodder for Obama as his portrayal of Romney as an out of touch flip flopper looks more and more accurate.

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By Ben Cohen: Yesterday, I went on Abby Martin’s new show on the RT network to talk about the failure of austerity economics in Europe, and why the US must not follow the same route. Check it out below:

I discuss Paul Ryan’s plan for the economy in the segment, and I urge everyone to go and check it out. It’s extremely dangerous and if enacted, would cause untold damage to the US economy. Firstly, the numbers don’t actually add up, but even if they did, it would create a decade of recession and economic stagnation. We’re watching it play out in Europe, and the US could go the same way if Ryan’s plan sees the light of day. The main aim behind the plan is, of course, to severely cut government spending across the board. Writes Ryan:

Our budget, which we call The Path to Prosperity, is very different [to the President's]. For starters, it cuts $6.2 trillion in spending from the president’s budget over the next 10 years, reduces the debt as a percentage of the economy, and puts the nation on a path to actually pay off our national debt. Our proposal brings federal spending to below 20% of gross domestic product (GDP), consistent with the postwar average, and reduces deficits by $4.4 trillion.

Scarily, Ryan has also built in a mechanism to subsidize the health insurance industry even further with funds from Medicare – another step towards the complete dissolution of government run health insurance:

This budget’s reforms will protect health and retirement security. This starts with saving Medicare. The open-ended, blank-check nature of the Medicare subsidy threatens the solvency of this critical program and creates inexcusable levels of waste. This budget takes action where others have ducked. But because government should not force people to reorganize their lives, its reforms will not affect those in or near retirement in any way.

Starting in 2022, new Medicare beneficiaries will be enrolled in the same kind of health-care program that members of Congress enjoy. Future Medicare recipients will be able to choose a plan that works best for them from a list of guaranteed coverage options. This is not a voucher program but rather a premium-support model. A Medicare premium-support payment would be paid, by Medicare, to the plan chosen by the beneficiary, subsidizing its cost.

Anyone who reads the Ryan’s ‘Path to Prosperity’ plan should be extremely alarmed. Just as George W. Bush’s ‘Clean Skies’ initiative actively damaged the skies, Paul Ryan’s ‘Path to Prosperity’ actively damages prosperity. Romney has signed his name to it and should he win in November, you can bet it will be the centerpiece of his plan for the American economy. It’s a bleak vision for the future and one that cannot be allowed to win.

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US economic growth slowed to an annualised pace of 2.2% in the first quarter of the year, from 3% in the final three months of last year.

The figure was below economists’ estimates of 2.5% and is equivalent to quarter-on-quarter growth of 0.5%.

The US Commerce Department said businesses had cut back on investment, depressing gross domestic product (GDP).

However, a pick-up in the car market supported the growth figure.

Although the headline figure was weaker than had been hoped for, a key driving force in the fourth quarter had been stockpiling by US firms.

This time, demand from consumers was stronger.

Consumer spending, which accounts for about 70% of the US economy, grew by a 2.9% annual rate, the fastest pace since the fourth quarter of 2010.

Motor vehicle sales rose at 2.1% in the fourth quarter, the fastest rate in four years.

Home construction rose at its fastest pace since the second quarter of 2010, boosted by the warmer weather.

There was worse news on business spending, which fell for the first time since the fourth quarter of 2009 and government spending, particularly defence spending, fell back too.

It dropped by 2.1%, a sharp about turn from growth of 5.2% in the fourth quarter.

Read more at the BBC…

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Paul Krugman outlines why the debt ceiling deal being proposed in Washington may temporarily save the economy from the abyss, but won't do anything to address the deep structural problems that have seen years of economic stagnation:

We currently have a deeply depressed economy. We will almost certainly continue to have a depressed economy all through next year. And we will probably have a depressed economy through 2013 as well, if not beyond.

The worst thing you can do in these circumstances is slash government spending, since that will depress the economy even further. Pay no attention to those who invoke the confidence fairy, claiming that tough action on the budget will reassure businesses and consumers, leading them to spend more. It doesn’t work that way, a fact confirmed by many studies of the historical record.

Indeed, slashing spending while the economy is depressed won’t even help the budget situation much, and might well make it worse.

Although the details of the deal have yet to be released, it is widely understood that the Republicans have essentially gotten exactly what they wanted while Obama has managed to retain nothing from his original position. Unfortunately, it's a classic Obama negotiation – start from the center, expect the Republicans to be reasonable, lose everything you initially wanted, then pass Right Wing legislation that you now own and won't work.

The fact is that the debt ceiling debate should never have happened – Obama should have made it a 'hands off' topic from the get go rather than engage with the Republicans who have held the country hostage to its ridiculous demands. As a consequence, the Republicans have now learnt to use massive threats to get what they want – and it has worked.

It is hard to pin too much of the blame on Obama. He has an enormously difficult job and must deal with an opposition party so completely insane that he cannot have rational conversation. But he does keep making the same mistake of allowing them to frame the debate on their terms  – a strategic flaw that is allowing them to control legislation without actually governing.

The debt deal further ties Obama's political fate to the economy.

If it fails, so does his Presidency.

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