I refuse to accept any approach that isn't balanced. I will not ask students or seniors or middle-class families to pay down the entire deficit while people making over $250,000 aren't asked to pay a dime more in taxes.
This was a central question in the election. And on Tuesday, we found out that the majority of Americans agree with my approach.This quote is interesting because it highlights how the mandate of "change we can believe in" from the failed Japanese Model for handling a bank solvency led financial crisis adopted by the Republicans under George Bush to the Swedish Model was never implemented.
It also highlights that President Obama's request to be re-elected to finish the job, adopt the Swedish Model, is now off the table.
President Obama statement assumes that we must continue with the failed Japanese Model and that his mandate isn't to adopt the Swedish Model, end our current financial crisis, lower the deficit and bring the budget closer to balance.
It is the existence of the alternative under the Swedish Model that allows liberals to talk about President Obama's Grand Bargain as nothing less than a Great Betrayal. Why shrink the social programs like Medicare and Social Security when it is not necessary?
How does the Swedish Model lower the deficit and balance the budget?
Regular readers know that under the Japanese Model, bank book capital levels and banker bonuses are protected at all costs. This includes adopting monetary policies like zero interest rates and quantitative easing.
By protecting the banks and banker bonuses, the burden of the excess debt in the financial system is placed on the real economy. As a result, capital that is needed for re-investment and growth in the real economy is swallowed by the black hole of debt service.
This causes the real economy and taxes to shrink while at the same time increasing the cost of government economic stabilization programs.
Compounding this damage to the real economy, monetary policies are crushing demand. When savers cannot earn a return on their assets, they save more to offset the lack of income. When pension funds cannot earn a return on their assets, companies offset this lack of income by decreasing reinvestment and growth in their business.
Simply taking the burden of the excess debt off the real economy and ending damaging monetary policies will result in an economic recovery. This in turn means there will be both more tax revenue and less need for government expenditures on economic stabilization programs or cutting social programs.
Everyone knows that the reason we experienced a financial crisis and the ongoing Japan-style economic slump is because of the banks and the choice to protect the banks and banker bonuses.
Having spent four years placing the burden of the excess debt on the real economy, why isn't President Obama willing to adopt a balanced approach and pursue the Swedish Model as this was the mandate he was elected and re-elected on?
Why isn't President Obama willing to adopt a balanced approach and have the banks absorb upfront all the losses on the excess debt, both private and sovereign, that still exists in the financial system?