Real Time With Bill Maher: Counterpoints (9/28/13)

We got a great episode tonight. The panel was very strong and many substantive issues were addressed. But there's a lot of spin, misconceptions, and rhetoric to clear up. I'm anticipating this to be a long post, so let's dig in.

Bill Maher: The Republicans are holding the government hostage, are they not?

Robert Reich: Extortion would be a better term. The GOP wants to end the government.

The government is not being held hostage. And the GOP doesn't want to end government. The media is doing a disservice to the public by portraying one possible outcome of the debt ceiling negotiations as a shutdown of the government. The government isn't going to shut down if the debt ceiling doesn't get lifted.

The continuing resolutions that have funded the Federal government for the past 7 years stipulate that the Federal government has to spend a specific amount of money for a specific amount of purposes. Last year, it amounted to spending 3.5 trillion dollars. The debt ceiling fight is crucial because the Federal government is operating under a structural deficit, which means that the current tax code is unable to raise enough money to pay for the government's spending. That means the Federal government has to borrow money from the public to make up the shortfall.

Last year, the government was able to collect 2.5 trillion dollars worth of tax revenue. It had to borrow 1 trillion dollars from the public (individuals, corporations, foreign governments) to fund the rest. If it can't borrow, then the Federal government simply goes into triage mode. This year, our projected deficit is going to be around 800 billion dollars. So for every week that the government doesn't raise the debt ceiling, it's going to have to reduce payments made to its obligations.

That means haircuts to Social Security checks, government employee pay and benefits reimbursements, reductions in funding and grant money doled out by various agencies, etc. It will certainly shut down non-essential parts of the Federal government (park services, museums, etc) and severely curtail the operational effectiveness of the parts that are still working. That doesn't mean ending the government.

It is inevitable that deal will get hammered out and the debt ceiling will be raised within the next 30 days or so. When Social Security checks start bouncing, every elected representative in Congress will get millions of angry calls from old people, the demographic most likely to vote, and they'll fold like a house of cards. Nobody is being taken hostage. The GOP isn't extorting the country by playing brinksmanship.

Bill Maher: How can the GOP, which considers itself the stewards of the economy and the ally of the private sector, engage in all these actions that cause markets to freak out?

Short term pain, long term gain is the answer to this question. Markets always move up and down in reaction to this or that. But if the Republicans can hammer out a budget deal that puts the Federal government on firmer fiscal ground in the future, the economy will be in a better place.

Robert Reich: The President has reduced the debt in half, the fastest it's ever happened. The last deficit was just 3% of GDP. The deficit is not the problem.

Matt Welch: We don't have a deficit problem, but we do have a debt problem.

This is the sort of inside ball and statistical bullshittery that makes regular people tune out of politics. Reich is correct in the fact that the current deficit isn't a problem. But Welch is correct that we still have a debt problem. Deficits add to the debt. And even though our deficit is shrinking quickly year-over-year (reflecting a combination of tax hikes, the budget sequestration, and an improved economy), the debt we've already accumulated is the highest it's been in 50 years.

The cost to service all our debt varies year to year based on interest rates set by the Federal Reserve. In a low rate environment, it doesn't cost much. Last year, net interest payments made on 11 trillion dollars worth of net public debt amounted to 220 billion dollars, or 2%. As a percentage of the Federal budget, it was just 6.2%. But when interest rates rise, the Federal government is going to have to pay a much larger amount to service the debt. If effective rates rise to 5% (the historical average), payments jump up to 15% of the budget.

The government is trying to thread the needle by timing the economy. If it fails, times are going to get a lot tougher.

Monica Mehta: It doesn't matter whether it's Bush or Obama in the White House. Both parties are only capable of governing by ideology and not by consensus.

Bill Maher: It's a bit naive to think that either party could govern by consensus.

It's funny that they say that, because the government is running mostly by consensus. The current budget/debt fight is over 200 billion dollars in the 3.6-3.8 trillion dollar range. That means the Republicans and Democrats agree on 95% of the Federal government's agenda. Because a deal will be reached before anything serious happens, a neutral observer would remark that the Democrats and Republicans are very similar to each other in practical terms.

Modern day politics revolve around blowing up the smallest differences between the parties and then getting the electorate in a rah rah mentality to get them to the voting booth. Although there are definite and substantial differences in each party's ideal America, government is not about operating based on what the ideal should be. It's about operating based on what the reality is on the ground right now.

Big sweeping changes only really happen when there is a consensus. And right now, the American people aren't in the mood for either party's ideal America. They want what what they currently have. And that's exactly what they're getting.

Bill Maher: I don't understand why people who aren't in the 1% vote Republican.

Low taxes are always popular, even if it benefits rich people more than others. And some people aren't as concerned about keeping score. But that's overly simplistic. The real answer is most people have an instinctual understanding that it isn't the next politician's agenda that helps them out the most. The number one predictor of economic success in America is who your parents are, not whether you live in a red state or a blue state or if you vote Democratic or Republican. It's simply who your parents are and whether they were educated professionals or not.

In any given individual's life, their lot is basically predetermined. The delta between a Republican government and a Democratic government is not going to change that. So that means people will vote based on very stupid reasons. Because, let's face it, the government essentially runs itself and the politicians are simply a different class of celebrity. That's why Texans will vote for an entertaining firebrand like Ted Cruz and why Democrats like Bernie Sanders. They're entertaining and they are harmless.

Reich: Median household income is down, the middle class is getting screwed. And all this is happening because we're getting away from what we had in the 3 decades after WWII: high taxes on the rich and a unionized workforce.

We also had a country that was over 85% white, more religious, more likely to be married, had more kids, were more racist and homophobic, didn't have cell phones or computers, women in the workplace was frowned upon, and everybody drove either GM, Ford, or Chrysler barring the occasional oddball/poor person who drove AMC.

None of that has anything to do with the supposed golden age of the American economy. WWII left every other developed economy in ruins, which means that labor had a lot more bargaining power in the marketplace. Gas, in a gasoline powered economy, was also much cheaper. And the country accumulated a vast amount of savings as a result of the forced savings programs enacted during wartime which then facilitated a massive consumer spending boom.

We are never going to go back to the era where an unskilled laborer had a good chance of getting a job that could support a nuclear family on his own. And no other country today can boast of that state of affairs. It doesn't exist in either Europe or Japan and it certainly doesn't exist in emerging markets.