Tinker to Evans to No Chance
Posted by Charles II on December 9, 2010
The destruction of the United States is not a bug in the Republican plan.
It’s a feature.
Avedon links to a link from Yves at Naked Capitalism which eventually gets to a Reuters opinion piece by James Pethoukokis as well as to a blog post by Bruce Krasting which makes it clear that the Republican plan is to destroy the American economy, leaving it no chance of reviving.
Congressional Republicans appear to be quietly but methodically executing a plan that would a) avoid a federal bailout of spendthrift states and b) cripple public employee unions by pushing cash-strapped states such as California and Illinois to declare bankruptcy. This may be the biggest political battle in Washington, my Capitol Hill sources tell me, of 2011.
That’s why the most intriguing aspect of President Barack Obama’s tax deal with Republicans is what the compromise fails to include — a provision to continue the Build America Bonds program. BABs now account for more than 20 percent of new debt sold by states and local governments thanks to a federal rebate equal to 35 percent of interest costs on the bonds. The subsidy program ends on Dec. 31. And my Reuters colleagues report that a GOP congressional aide said Republicans “have a very firm line on BABS — we are not going to allow them to be included.”…
it’s about more than just openness. Some Republicans hope the shock of the newly revealed debt totals will grease the way towards explicitly permitting states to declare bankruptcy. Indeed, legislation amending federal bankruptcy law is currently being prepared by congressional Republicans. Local municipalities do declare bankruptcy from time to time, most famously California’s Orange County in 1994. But states can’t. Allowing them the same ability to renegotiate obligations could enable them to slash public employees’ lavish benefits, a big factor in their financial woes.
So, basically, the Republican plan consists of turning New Jersey into Ireland, Illinois into Portugal, and California into Spain and use the crisis to steal pension benefits.
That’s pretty bad.
But it gets worse. Krasting links the Bond Buyer, who says:
If the Build America Bond program expires at the end of this year, long-term tax-exempt bonds could lose their latest pillar of support.
BABs represent the most recent valve the municipal market has employed to divert long-term supply from a tax-exempt market whose natural buyers are notoriously averse to long maturities.
and Krasting says :
I’m thinking to myself, “How could they have blundered on this?” They extend the Bush cuts for everyone. They tack on another 120b of deficit spending with a cut in SS taxes. And they throw in another year of unemployment checks. They threw the sink at the economy at the sake of the deficit. But they failed to pass BABs? Knuckle heads. If there is a hiccup that takes a big state out of the market for a spell it will trump the economic benefits of all the new deficit spending. It might do it a few times over.
But it’s actually worse than that. If a state defaults, interest rates for everything go up. Higher interest rates will impact states that are not in deficit, will make houses harder to sell, and will cause corporations to lay off even more people, meaning more unemployment. If you read the comments at Krasting’s site, you’ll realize that the end game of the right is destroying the United States. There are people who think that the only way forward is to force the states and eventually the federal government into bankruptcy.
This is a recipe for disaster, concocted by the party that brought you the Great Depression, doubtless licking its chops at the prospect of blaming a Democratic president for creating the Second Great Depression.
9 Responses to “Tinker to Evans to No Chance”
Sorry, the comment form is closed at this time.