Tag: economy

Facts Not Necessary When Discussing Economics

Seth Anderson0 comment

The Wall Street Journal attempts to smear Democratic governance by using the example of Illinois:

A favorite conceit of Democrats is that the U.S. budget and economy would be A-okay if congressional Republicans weren’t able to obstruct President Obama’s agenda. One counter-argument would be the state of Illinois, where one-party Democratic rule has led to a fiscal crisis that’s culminating in political paralysis.

(click here to continue reading Political Diary: Stand-Off in Springfield – WSJ.com.)

…except California is also governed by the Democratic Party, and they seem to be doing ok:

After years of grueling battles over state budget deficits and spending cuts, California has a new challenge on its hands: too much money. An unexpected surplus is fueling an argument over how the state should respond to its turn of good fortune.

(click here to continue reading California’s New Problem – Too Much Money – NYTimes.com.)

Party is less important than the actual politicians making policy, but that doesn’t play to the base, however, so don’t expect Rupert Murdoch’s press to report it. Or this, or this, or this.

If party is important, what about a little historical perspective?

Deficit Chart
Deficit Chart

Bush vs Obama spending
Bush vs Obama spending

This is why Obama can’t make a deal with Republicans

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President Barack Obama is photographed during a presidential portrait sitting for an official photo in the Oval Office, Dec. 6, 2012. (Official White House Photo by Pete Souza)

President Barack Obama is photographed during a presidential portrait sitting for an official photo in the Oval Office, Dec. 6, 2012. (Official White House Photo by Pete Souza)

Earlier today…

This had led to a lot of Republicans fanning out to explain what the president should be offering if he was serious about making a deal. Then, when it turns out that the president did offer those items, there’s more furious hand-waving about how no, actually, this is what the president needs to offer to make a deal. Then, when it turns out he’s offered most of that, too, the hand-waving stops and the truth comes out: Republicans won’t make a deal that includes further taxes, they just want to get the White House to implement their agenda in return for nothing. Luckily for them, most of the time, the conversation doesn’t get that far, and the initial comments that the president needs to “get serious” on entitlements is met with sage nods.

Via:
This is why Obama can’t make a deal with Republicans
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The Republican Plan

Seth Anderson0 comment

Money Doesn't Help
Money Doesn’t Help

For all their talk about social conservatism principles, the main mission of the Republican Party for decade has been simple: lower taxes for the rich folks, and their businesses. There are no other agendas, really, that Conservatives agree upon. The religious stuff, the anti-abortion stance, the destruction of unions, especially teachers unions, all that is secondary.

Jonathan Chait writes:

Part of the confusion is that Republicans have been saying for months that they really just want to stop tax rates from raising. They’re happy — nay, eager — to make the rich pay more taxes by reducing their tax deductions. Certain conservative economists believe this as well. Since Obama is offering to increase revenue in exactly this way, his plan might seem inoffensive to Republicans. Republican economist Martin Feldstein proposed a deduction cap that would raise four times as much revenue as Obama is asking! Ezra Klein can’t understand why Republicans won’t accept a deal to reduce the tax deductions they’ve been calling a pollution of the tax code, especially in return for entitlement cuts.

The answer to this piece of the mystery is clear enough: Republicans in Congress never actually wanted to raise revenue by tax reform. The temporary support for tax reform was just a hand-wavy way of deflecting Obama’s popular campaign plan to expire the Bush tax cuts for the rich. Conservative economists in academia may care about the distinction between marginal tax rates and effective tax rates. But Republicans in Congress just want rich people to pay less, period. I can state this rule confidently because there is literally not a single example since 1990 of any meaningful bloc of Republicans defying it.

What has aided the easy reversion to form, with low taxes for the rich dominating all other considerations, is the pent-up rage and betrayal John Boehner has engendered among his most conservative members. Almost nothing Boehner has done since taking over as speaker has endeared him to his ultras. Every subsequent compromise creates more embitterment, and the last few moves have provoked simmering rage. Conservatives had to swallow a tax hike, and then swallow an increase in the debt ceiling. Boehner has, incredibly, had to promise his members that he will not enter private negotiations with Obama.

(click here to continue reading The Republican Sequestration Plan — Daily Intelligencer.)

How the Pentagon Screws Taxpayers Out of $170 Billion

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On Leave
On Leave

I laugh at the number of times Defense Department spending is discussed during talks of deficits and tax burdens, and slashing the social insurance of our nation. Rarely, if ever, do either party of our political elites want to mention how many dollars are squandered without oversight, feeding the maw of our military…

Americans rarely think about these bases, let alone how much of their tax money—and debt—is going to build and maintain them. For Dal Molin and related construction nearby, including a brigade headquarters, two sets of barracks, a natural-gas-powered energy plant, a hospital, two schools, a fitness center, dining facilities, and a mini-mall, taxpayers are likely to shell out at least half a billion dollars. (All the while, a majority of locals passionately and vocally oppose the new base.)

How much does the United States spend each year occupying the planet with its bases and troops? How much does it spend on its global presence? Forced by Congress to account for its spending overseas, the Pentagon has put that figure at $22.1 billion a year. It turns out that even a conservative estimate of the true costs of garrisoning the globe comes to an annual total of about $170 billion. In fact, it may be considerably higher. Since the onset of “the Global War on Terror” in 2001, the total cost for our garrisoning policies, for our presence abroad, has probably reached $1.8 trillion to $2.1 trillion.

How Much Do We Spend?

By law, the Pentagon must produce an annual ” Overseas Cost Summary” (OCS) putting a price on the military’s activities abroad, from bases to embassies and beyond. This means calculating all the costs of military construction, regular facility repairs, and maintenance, plus the costs of maintaining one million US military and Defense Department personnel and their families abroad—the pay checks, housing, schools, vehicles, equipment, and the transportation of personnel and materials overseas and back, and far, far more.

The latest OCS, for the 2012 fiscal year ending September 30th, documented $22.1 billion in spending, although, at Congress’s direction, this doesn’t include any of the more than $118 billion spent that year on the wars in Afghanistan and elsewhere around the globe.

While $22.1 billion is a considerable sum, representing about as much as the budgets for the Departments of Justice and Agriculture and about half the State Department’s 2012 budget, it contrasts sharply with economist Anita Dancs’s estimate of $250 billion. She included war spending in her total, but even without it, her figure comes to around $140 billion—still $120 billion more than the Pentagon suggests.

Wanting to figure out the real costs of garrisoning the planet myself, for more than three years, as part of a global investigation of bases abroad, I’ve talked to budget experts, current and former Pentagon officials, and base budget officers. Many politely suggested that this was a fool’s errand given the number of bases involved, the complexity of distinguishing overseas from domestic spending, the secrecy of Pentagon budgets, and the “frequently fictional” nature of Pentagon figures. (The Department of Defense remains the only federal agency unable to pass a financial audit.)-PDF

Ever the fool and armed only with the power of searchable PDFs, I nonetheless plunged into the bizarro world of Pentagon accounting, where ledgers are sometimes still handwritten and $1 billion can be a rounding error. I reviewed thousands of pages of budget documents, government and independent reports, and hundreds of line items for everything from shopping malls to military intelligence to postal subsidies. 

(click here to continue reading How the Pentagon Spends $170 Billion | Mother Jones.)

Jimi 1961 Army
Jimi  Hendrix 1961 Army.jpg

If logic were part of the budget negotiations in Washington, the Pentagon would not be able to play such games. Why should taxpayers like you and me subsidize the military contractors who profit from bases in Kosovo? or wherever? If Medicaid and Medicare is on the table, why shouldn’t our insanely over-funded military budget be on the table too?

But don’t for a second think that that’s the end of our garrisoning costs. In addition to spending likely hidden in the nooks and crannies of its budget, there are other irregularities in the Pentagon’s accounting. Costs for 16 countries hosting US bases but left out of the OCS entirely, including Colombia, El Salvador, and Norway, may total more than $350 million. The costs of the military presence in Colombia alone could reach into the tens of millions in the context of more than $8.5 billion in Plan Colombia funding since 2000. The Pentagon also reports costs of less than $5 million each for Yemen, Israel, Uganda, and the Seychelles Islands, which seems unlikely and could add millions more.

When it comes to the general US presence abroad, other costs are too difficult to estimate reliably, including the price of Pentagon offices in the United States, embassies, and other government agencies that support bases and troops overseas. So, too, US training facilities, depots, hospitals, and even cemeteries allow overseas bases to function. Other spending includes currency-exchange costs, attorneys’ fees and damages won in lawsuits against military personnel abroad, short-term “temporary duty assignments,” US-based troops participating in exercises overseas, and perhaps even some of NASA’s military functions, space-based weapons, a percentage of recruiting costs required to staff bases abroad, interest paid on the debt attributable to the past costs of overseas bases, and Veterans Administration costs and other retirement spending for military personnel who served abroad.

Beyond my conservative estimate, the true bill for garrisoning the planet might be closer to $200 billion a year.

(click here to continue reading How the Pentagon Spends $170 Billion | Mother Jones.)

Boehner Counters Obama’s Proposal on Deficit Cuts

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Racketeer Nickel

Racketeer Nickel

Earlier today…

Under the Republican offer, tax revenue would rise by $800 billion over 10 years, through closing loopholes and ending or curtailing deductions and tax credits. Mr. Boehner did not specify on Monday which tax breaks would be curtailed.

Another $600 billion in deficit reduction would come from changes to federal health care programs like Medicare, Medicaid and the president’s health care law. Cuts to other programs that are not under the purview of annual Congressional spending bills — so-called mandatory programs — would total $300 billion. And discretionary programs, already cut by nearly $1 trillion through last year’s Budget Control Act, would be reduced by another $300 billion.

Via:
Boehner Counters Obama’s Proposal on Deficit Cuts – NYTimes.com
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The Morning Plum: No more false equivalence. Both sides are not equally to blame

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tapeworm diet

Earlier today…

There is an actual set of facts here (re fiscal cliff). They are central to understanding the current situation, and belong in every account of what is going wrong:
1) Democrats have offered a comprehensive proposal that meaningfully details the tax hikes they would like to see and contains substantial deficit reduction, but Republican leaders have not offered a comprehensive proposal that meaningfully details the spending cuts they would like to see. And what Republicans have proposed — such as it is — doesn’t contain nearly as much in deficit reduction as the Dem plan does.

2) Many experts believe that substantial deficit reduction simply requires Republicans to drop their opposition to raising tax rates on the rich.

Via:
The Morning Plum: No more false equivalence. Both sides are not equally to blame. – The Plum Line – The Washington Post
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A Minimum Tax for the Wealthy and the 2012 Fiscal Cliff

Seth Anderson0 comment

Million Dollar Quartets
Million Dollar Quartets

Warren Buffett’s Op Ed begins:

SUPPOSE that an investor you admire and trust comes to you with an investment idea. “This is a good one,” he says enthusiastically. “I’m in it, and I think you should be, too.”

Would your reply possibly be this? “Well, it all depends on what my tax rate will be on the gain you’re saying we’re going to make. If the taxes are too high, I would rather leave the money in my savings account, earning a quarter of 1 percent.” Only in Grover Norquist’s imagination does such a response exist.

Between 1951 and 1954, when the capital gains rate was 25 percent and marginal rates on dividends reached 91 percent in extreme cases, I sold securities and did pretty well. In the years from 1956 to 1969, the top marginal rate fell modestly, but was still a lofty 70 percent — and the tax rate on capital gains inched up to 27.5 percent. I was managing funds for investors then. Never did anyone mention taxes as a reason to forgo an investment opportunity that I offered.

(click here to continue reading A Minimum Tax for the Wealthy – NYTimes.com.)

Forget-me-not Social Security
Forget-me-not Social Security

And of course, he’s right, but logic has been banned from the modern conservative party. Historical perspective as well, apparently, unless Regan is involved. At least President Obama has said that Social Security is off the table, in the short term at least. Just waiting for Defense spending to join the deficit party – we could halve our military spending every year for the next ten, and still spend more than any other country on the planet. Even the Democrats never seem to mention slicing defense spending as part of the Grand Bargain.

In a speech at the Center for American Progress on Tuesday, Sen. Dick Durbin (D-Ill.) , urged progressives to be open to Medicare and Medicaid reforms as part of long-term deficit talks.

But he also said both entitlement programs, along with Social Security, should be off the table during fiscal cliff negotiations.

“Progressives should be willing to talk about ways to ensure the long-term viability of Social Security, Medicare and Medicaid, but those conversations should not be part of a plan to avert the fiscal cliff,” Durbin said in his remarks.

“I think the point we tried to make in the campaign was the Paul Ryan approach [turning Medicare into a quasi-voucher program] we think threatens the existence of these programs and the services they provide,” Durbin told reporters later in the day. “That’s unacceptable. There has to be a better, more positive approach that saves money and at the end of the day, is going to keep these programs alive.”

Sen. Jeanne Shaheen (D-N.H.) agreed with Durbin that Social Security should be off the table, noting that it has not contributed to the debt.

(click here to continue reading For Fiscal Cliff Talks, Medicare Reform Still On Table For Senate Democrats.)

Greg Sargent adds:

Now this is encouraging. I’m told that representatives of major unions and progressive groups met privately this morning with senior Obama administration officials at the White House — and were pleased with what they heard.

Things can always change at a moment’s notice. But attendees at this meeting came away convinced — for now — that the White House firmly believes it has the leverage in the fiscal cliff talks, and has no intention of budging on the demand for higher tax rates from the rich or on other core priorities.

Indeed, one person at the meeting — which included people from the AFLCIO, AFSCME, SEIU, MoveOn and others — came away convinced that the White House would ultimately prove willing to go over the fiscal cliff if necessary, rather than give ground on core demands, though this is not by any means a desired option and isn’t being discussed as a strategic possibility.

…“They remain in the same place: They expect taxes to go up on the wealthy and to protect Medicare and Medicaid benefits,” the attendee added. “They feel confident that they don’t have to compromise.”

White House officials also signaled in the meeting that they are going to insist that Republicans agree to resolve the need to raise the debt ceiling as part of the fiscal talks — and won’t abide a separate fight over it, attendees said. Also key: Attendees got the impression the White House does not view this looming debt ceiling battle in the same terms as the 2011 fight, where Republicans had the leverage.

(click here to continue reading Reasons to be encouraged about fiscal cliff’s endgame – The Plum Line – The Washington Post.)

For the Sake of Security
For the Sake of Security

David Dayen:

Sen. Dick Durbin (D-IL), who has almost become the liaison to the left for cuts to federal health care programs in the grand bargain, gave a speech today at the Center for American Progress that included a couple important points:

• Durbin sequenced the provisions of the deal, saying that Republicans would have to build the framework on taxes, which includes an increase in the top marginal rates, before any Democrat will even begin to talk about social insurance programs. This seems like a hardline stance, but it just mirrors the dominant conversation, which has focused on taxes to the exclusion of practically everything else.

• Though Durbin has sought to bring rank-and-file Democrats along on a grand bargain that would include cuts to those social insurance programs, he set out some red lines. In addition to rejecting the privatization of Medicare or Social Security and the block granting of Medicaid – a common tactic to reject the extreme view to provide space for more modest but still damaging cuts – Durbin took Social Security almost entirely off the table. This matches White House Press Secretary Jay Carney’s statements yesterday. It does appear that’s been filed away for the time being.

In addition, Durbin said, regarding spending cuts on anti-poverty social programs, “Let me be clear: Those cuts will not happen.” And he sought to line up with the Administration’s viewpoint that any changes to Medicare and Medicaid can happen without cuts to benefits, through payment reforms or provider cuts. This would “strengthen” those programs through the reform, he said. He also wanted to exempt infrastructure spending fully from any cuts.

(click here to continue reading Durbin Outlines Democratic Approach on Grand Bargain | FDL News Desk.)

Spare Change
Spare Change

Brian Beutler:

Democratic leaders, frustrated by the GOP’s unwillingness to reckon with the need to raise taxes, are publicly airing the hard-bargaining demands they’re bringing to budget negotiations with Republicans.

The Senate’s top two Democrats, in separate remarks Tuesday, each said that Congress could avoid looming across-the-board tax increases and spending cuts if House Republicans agree to freeze all the Bush tax rates except those benefitting top earners. If that were accompanied by an increase in the debt limit, and the creation of a separate track for reforming the tax code and social safety net programs in 2013, the near-term austerity problem will be solved, and lawmakers can call it a day.

In other words, Senate Democrats are staking out the position that entitlement reform should not be on the table in fiscal cliff negotiations.

“If we fail to reach an agreement, the average middle-class family will see their taxes go up by $2,200 a year,” said Senate Majority Leader Harry Reid (D-NV) told reporters at his weekly press availability. “As I’ve indicated, the Senate has already reacted to stop that and the House is one vote away from making that a reality for many millions of Americans who are middle class.”

(click here to continue reading Top Democrats Drive Hard Bargiain In Budget Talks | TPMDC.)

Fed Sees Action if Growth Doesn’t Pick Up Soon

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Federal Reserve Bank of Chicago
Federal Reserve Bank of Chicago

Every time I read about the sweet deal the Fed gives banks, I get mad. Corporate welfare is rarely the right answer, but the Fed and its relationship to banks continues unabated.

Another option is a change in the Fed’s public communication about its plans. Since January the Fed has been saying it doesn’t expect to raise short-term interest rates until late 2014. The Fed could change its policy statement in September to move that date into 2015. Such pronouncements about the expected path of short-term rates tend to reduce long- and medium-term interest rates. The Fed thinks this supports near-term spending and investment.

Officials also are looking at changing the interest rate paid on money banks deposit at the Fed. This interest on reserves is now 0.25%. Some critics say the Fed shouldn’t be paying banks even this small amount for money that they choose not to lend.

Fed officials haven’t been very enthusiastic about this idea. Some officials think the benefits of reducing the rate would be small, and some worry cutting the rate could disrupt short-term money markets. Still, officials might choose to reduce the rate in combination with other moves in an effort to give the economy a little extra lift. The European Central Bank cut its bank deposit rate to zero earlier this month.

The Fed could also try to push its benchmark interest rate, the federal funds rate, a little lower. Since late 2008, it has targeted a range for the rate between zero and 0.25%. It could narrow that range closer to zero.

(click here to continue reading Fed Sees Action if Growth Doesn’t Pick Up Soon – WSJ.com.)

Here’s why I get mad: the Fed lends corporate banks money at basically zero percent interest, no strings attached. Apparently, this happens in Europe as well. The banks in turn loan a percentage of that money out, at varying interest rates, 4.5% on a mortgage if you are a good credit risk, or 18% if you have a credit card that you’ve missed the payment deadline a few times. The rest they keep. Why is this acceptable? Since when did you vote on who your bank’s CEO will be?

How Does the State Respond?
How Does the State Respond?

I consider Ron Paul a crank on many, many topics, but I agree with him wholeheartedly on his repeated insistence that the Fed should be audited.

Federal Reserve Transparency Act of 2011 – Directs the Comptroller General to complete, before the end of 2012, an audit of the Board of Governors of the Federal Reserve System and of the federal reserve banks, followed by a detailed report to Congress.

Repeals specified limitations on such an audit.

(click here to continue reading Bill Summary & Status – 112th Congress (2011 – 2012) – H.R.459 – All Information – THOMAS (Library of Congress).)

Why should the Fed policy be more hidden than that of every other branch, department and division of the government?

The Austerity Agenda Is Really About Cutting Social Programs

Seth Anderson2 Comments

Mini Bank In Fine Style
Mini Bank In Fine Style

Dr. Paul Krugman notes the inherent ridiculousness of the oft-repeated cliché about family budgets being similar to government budgets…

And all these conversations followed the same arc: They began with a bad metaphor and ended with the revelation of ulterior motives.

The bad metaphor — which you’ve surely heard many times — equates the debt problems of a national economy with the debt problems of an individual family. A family that has run up too much debt, the story goes, must tighten its belt. So if Britain, as a whole, has run up too much debt — which it has, although it’s mostly private rather than public debt — shouldn’t it do the same? What’s wrong with this comparison?

The answer is that an economy is not like an indebted family. Our debt is mostly money we owe to each other; even more important, our income mostly comes from selling things to each other. Your spending is my income, and my spending is your income.

So what happens if everyone simultaneously slashes spending in an attempt to pay down debt? The answer is that everyone’s income falls — my income falls because you’re spending less, and your income falls because I’m spending less. And, as our incomes plunge, our debt problem gets worse, not better.

This isn’t a new insight. The great American economist Irving Fisher explained it all the way back in 1933, summarizing what he called “debt deflation” with the pithy slogan “the more the debtors pay, the more they owe.” Recent events, above all the austerity death spiral in Europe, have dramatically illustrated the truth of Fisher’s insight.

And there’s a clear moral to this story: When the private sector is frantically trying to pay down debt, the public sector should do the opposite, spending when the private sector can’t or won’t. By all means, let’s balance our budget once the economy has recovered — but not now. The boom, not the slump, is the right time for austerity.

As I said, this isn’t a new insight. So why have so many politicians insisted on pursuing austerity in slump? And why won’t they change course even as experience confirms the lessons of theory and history?

(click here to continue reading The Austerity Agenda – NYTimes.com.)

Politicians, and their banker masters, want to seize the opportunity to dismantle social programs, or even better privatize them.

Easy Useless Economics

Seth Anderson0 comment

dismissals
dismissals

Paul Krugman muses on the dismal science a bit, and the dismal scientists known as structural economists

So what’s with the obsessive push to declare our problems “structural”? And, yes, I mean obsessive. Economists have been debating this issue for several years, and the structuralistas won’t take no for an answer, no matter how much contrary evidence is presented.

The answer, I’d suggest, lies in the way claims that our problems are deep and structural offer an excuse for not acting, for doing nothing to alleviate the plight of the unemployed.

Of course, structuralistas say they are not making excuses. They say that their real point is that we should focus not on quick fixes but on the long run — although it’s usually far from clear what, exactly, the long-run policy is supposed to be, other than the fact that it involves inflicting pain on workers and the poor.

Anyway, John Maynard Keynes had these peoples’ number more than 80 years ago. “But this long run,” he wrote, “is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the sea is flat again.”

I would only add that inventing reasons not to do anything about current unemployment isn’t just cruel and wasteful, it’s bad long-run policy, too. For there is growing evidence that the corrosive effects of high unemployment will cast a shadow over the economy for many years to come. Every time some self-important politician or pundit starts going on about how deficits are a burden on the next generation, remember that the biggest problem facing young Americans today isn’t the future burden of debt — a burden, by the way, that premature spending cuts probably make worse, not better. It is, rather, the lack of jobs, which is preventing many graduates from getting started on their working lives.

So all this talk about structural unemployment isn’t about facing up to our real problems; it’s about avoiding them, and taking the easy, useless way out. And it’s time for it to stop.

(click here to continue reading Easy Useless Economics – NYTimes.com.)

I vowed I was going to stop making drive-by posts1 like these, but here’s the quandary. I know next to nothing about economics and even economic history, so I can’t dispute or amplify what Dr. Krugman asserts. However, I like his turn of phrase, and his reasoning sounds plausible. Maybe in the future, I’ll be able to use this post as a footnote to a different post?

What do I know about partying or anything else?

Footnotes:
  1. posts where I don’t add much to the discussion [↩]

Jobs, Jobs and Cars

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Chrysler Royal
Chrysler Royal

Paul Krugman writes, in response to the lame Mitch Daniels response to the 2012 State of the Union speech:

Why does Apple manufacture abroad, and especially in China? As the article explained, it’s not just about low wages. China also derives big advantages from the fact that so much of the supply chain is already there. A former Apple executive explained: “You need a thousand rubber gaskets? That’s the factory next door. You need a million screws? That factory is a block away.”

This is familiar territory to students of economic geography (corrected link, PDF): the advantages of industrial clusters — in which producers, specialized suppliers, and workers huddle together to their mutual benefit — have been a running theme since the 19th century.

And Chinese manufacturing isn’t the only conspicuous example of these advantages in the modern world. Germany remains a highly successful exporter even with workers who cost, on average, $44 an hour — much more than the average cost of American workers. And this success has a lot to do with the support its small and medium-sized companies — the famed Mittelstand — provide to each other via shared suppliers and the maintenance of a skilled work force.

The point is that successful companies — or, at any rate, companies that make a large contribution to a nation’s economy — don’t exist in isolation. Prosperity depends on the synergy between companies, on the cluster, not the individual entrepreneur.

But the current Republican worldview has no room for such considerations. From the G.O.P.’s perspective, it’s all about the heroic entrepreneur, the John Galt, I mean Steve Jobs-type “job creator” who showers benefits on the rest of us and who must, of course, be rewarded with tax rates lower than those paid by many middle-class workers.

And this vision helps explain why Republicans were so furiously opposed to the single most successful policy initiative of recent years: the auto industry bailout.

The case for this bailout — which Mr. Daniels has denounced as “crony capitalism” — rested crucially on the notion that the survival of any one firm in the industry depended on the survival of the broader industry “ecology” created by the cluster of producers and suppliers in America’s industrial heartland. If G.M. and Chrysler had been allowed to go under, they would probably have taken much of the supply chain with them — and Ford would have gone the same way.

Fortunately, the Obama administration didn’t let that happen, and the unemployment rate in Michigan, which hit 14.1 percent as the bailout was going into effect, is now down to a still-terrible-but-much-better 9.3 percent. And the details aside, much of Mr. Obama’s State of the Union address can be read as an attempt to apply the lessons of that success more broadly.

(click here to continue reading Jobs, Jobs and Cars – NYTimes.com.)

 

Plutocrats Running Scared

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Curvaceous
Curvaceous

Dr. Paul Krugman has a point:

But listening to the reliable defenders of the wealthy, you’d think that Ms. Warren was the second coming of Leon Trotsky. George Will declared that she has a “collectivist agenda,” that she believes that “individualism is a chimera.” And Rush Limbaugh called her “a parasite who hates her host. Willing to destroy the host while she sucks the life out of it.”

What’s going on here? The answer, surely, is that Wall Street’s Masters of the Universe realize, deep down, how morally indefensible their position is. They’re not John Galt; they’re not even Steve Jobs. They’re people who got rich by peddling complex financial schemes that, far from delivering clear benefits to the American people, helped push us into a crisis whose aftereffects continue to blight the lives of tens of millions of their fellow citizens.

Yet they have paid no price. Their institutions were bailed out by taxpayers, with few strings attached. They continue to benefit from explicit and implicit federal guarantees — basically, they’re still in a game of heads they win, tails taxpayers lose. And they benefit from tax loopholes that in many cases have people with multimillion-dollar incomes paying lower rates than middle-class families.

This special treatment can’t bear close scrutiny — and therefore, as they see it, there must be no close scrutiny. Anyone who points out the obvious, no matter how calmly and moderately, must be demonized and driven from the stage. In fact, the more reasonable and moderate a critic sounds, the more urgently he or she must be demonized, hence the frantic sliming of Elizabeth Warren.

So who’s really being un-American here? Not the protesters, who are simply trying to get their voices heard. No, the real extremists here are America’s oligarchs, who want to suppress any criticism of the sources of their wealth.

 

(click here to continue reading Panic of the Plutocrats – NYTimes.com.)

A Jobs Program In America

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Restorative Harmony
Restorative Harmony

If only our politicians were as brave and bold as Franklin Roosevelt…I wouldn’t hold my breath

Bob Herbert writes:

Politicians have given little more than lip service to this terrible turn of events. If there was but one message that I would try to get through to the nation’s leadership, it is that we cannot begin to get the United States back on track until we begin to put our people back to work.

And there is so much work to be done. Start with the crying need to rebuild the nation’s aging, deteriorating infrastructure – its bridges and highways, airports and air traffic control systems, its sewer and wastewater treatment facilities, the electrical grid, inland waterways, public transportation systems, levees and floodwalls and ports and dams, and on and on. Lawrence Summers, until recently President Obama’s top economic adviser, has pointed out that 75 percent of America’s public schools have structural deficiencies. Twelve percent of the nation’s bridges have been rated structurally deficient and another 15 percent are functionally obsolete.

Three to four trillion dollars worth of improvements will be needed over the next decade just to bring the infrastructure into a reasonable state of repair. Meanwhile, we’ve got legions of unemployed construction workers, manufacturing workers, engineers and others who are ready and eager to step into the breach, to take on jobs ranging from infrastructure maintenance and repair to infrastructure design and new construction. It shouldn’t require a genius to put together those two gigantic pieces of America’s economic puzzle – infrastructure and unemployment.

Yes, it would be expensive. But the money spent  would be an investment designed to bring about a stronger, more stable economic environment. Putting people to work bolsters the economy and the newly-employed workers begin paying taxes again. Improving the infrastructure would make American industry much more competitive overall, and would spawn new industries. Creation of a national infrastructure bank that would use government funds to leverage additional investments from the private sector to finance projects of national importance would lead to extraordinary longterm benefits.

But even rebuilding the infrastructure is not enough. The employment crisis facing the U.S. is enormous and is taking a particularly harsh toll on the less well-educated members of the society. We need to take our cue from Franklin Roosevelt who understood during the Depression that nothing short of a federal jobs program was essential. The two-pronged goal was to alleviate the suffering of the unemployed and, as the workers began spending their wages, improve the economy.

Roosevelt put millions of Americans to work, including artists, writers, photographers and musicians. It was an unprecedented undertaking, and it worked.

(click here to continue reading HOME – PolicyShop.)

Broken History

Broken History

and meanwhile, the GOP’s prescription for creating jobs is laughable. Laughable if this wasn’t my country we are talking about. But we are discussing the US, so the joke isn’t very funny.

The Republicans think these things will be useful: destroying unions, more free trade agreements, lowering business taxes even lower, repealing EPA and other regulations, and cutting the minimum wage. If you think any of these policy ideas are going to jump-start our anemic economy, I have a beautiful bridge in Brooklyn to sell you.

Sarah Jaffe reports at Alternet:

Washington, nearly a year after the 2010 election that was supposedly all about jobs, finally seems to have woken up to the fact that the economy is still in the dumps and Americans are sort of angry about it. Make that very angry. And with Republicans in charge of at least part of Congress as well as many state governments, they know they’re about to take some of the blame for the continuing lack of any policy ideas on job creation–recent polls show only 24 percent of the country approves of how they’re doing their jobs. Not to mention the GOP primary field is loaded with contenders claiming they have the magic solution to the jobs problem.

So what is this masterful GOP jobs agenda? You won’t be shocked to hear that it’s more of the same—more deregulation, more tax cuts, more whining about deficits. “House Republicans are planning votes for almost every week this fall in an effort to repeal environmental and labor requirements on business that they say have hampered job growth,” says the Washington Post. But since you’re about to be hearing these same ideas, with minor variations, over and over again, we thought we’d count down the five worst ideas, and arm you with some reasons why they’re so very bad.

Chronic Underemployment Is A Problem

Seth Anderson0 comment

Continental Illinois Bank Building
Continental Illinois Bank Building

How is the US ever going to get out of its economic doldrums when the attention of politicians and the media is so focused on Wall Street and whether the Dow Jones Industrial Average goes down a few points?

Paul Krugman discusses:

Consider one crucial measure, the ratio of employment to population. In June 2007, around 63 percent of adults were employed. In June 2009, the official end of the recession, that number was down to 59.4. As of June 2011, two years into the alleged recovery, the number was: 58.2.

These may sound like dry statistics, but they reflect a truly terrible reality. Not only are vast numbers of Americans unemployed or underemployed, for the first time since the Great Depression many American workers are facing the prospect of very-long-term — maybe permanent — unemployment. Among other things, the rise in long-term unemployment will reduce future government revenues, so we’re not even acting sensibly in purely fiscal terms. But, more important, it’s a human catastrophe.

And why should we be surprised at this catastrophe? Where was growth supposed to come from? Consumers, still burdened by the debt that they ran up during the housing bubble, aren’t ready to spend. Businesses see no reason to expand given the lack of consumer demand. And thanks to that deficit obsession, government, which could and should be supporting the economy in its time of need, has been pulling back.

(click here to continue reading The Wrong Worries – NYTimes.com.)

The government can borrow money for basically nothing (interest rates were less than 1% this week1), so why don’t we invest in our crumbling infrastructure and put people to work? Sewers, bridges, energy grids, public transit and commuter rail, even highways if we must, but do something productive!

Sidewalks Never Sleep
Sidewalks Never Sleep

More Krugman:

To turn this disaster around, a lot of people are going to have to admit, to themselves at least, that they’ve been wrong and need to change their priorities, right away.

Of course, some players won’t change. Republicans won’t stop screaming about the deficit because they weren’t sincere in the first place: Their deficit hawkery was a club with which to beat their political opponents, nothing more — as became obvious whenever any rise in taxes on the rich was suggested. And they’re not going to give up that club.

But the policy disaster of the past two years wasn’t just the result of G.O.P. obstructionism, which wouldn’t have been so effective if the policy elite — including at least some senior figures in the Obama administration — hadn’t agreed that deficit reduction, not job creation, should be our main priority. Nor should we let Ben Bernanke and his colleagues off the hook: The Fed has by no means done all it could, partly because it was more concerned with hypothetical inflation than with real unemployment, partly because it let itself be intimidated by the Ron Paul types.

Something needs to happen, and soon, before we’re all living in cardboard boxes, or afraid to walk down the street because some hungry fellow is going to rob you for your pennies so he can eat

Footnotes:
  1. I thought I heard Paul Krugman say 0.25% on Keith Olbermann’s show, but I’m not positive [↩]

Boehner House GOP Is Delusional

Seth Anderson0 comment

A Monster Maker an Eye
A Monster Maker an Eye

The Republicans won’t be happy until the US turns into a sister economy to Somalia, Afghanistan, North Korea or Yemen. You know, free reign for businesses, zero social spending, except to make sure religious zealots are in charge of bedrooms, while our national infrastructure totters on collapse. Here’s more proof:

To secure enough votes from his own members for his plan, Speaker Boehner is amending it to basically turn it into Cut, Cap, and Balance Lite.

Here’s the key new provision that is apparently going to win enough GOP votes to pass the bill:

The debt ceiling would be raised immediately but not by enough to get the government through next year. To get the second debt ceiling increase, House Republicans want a balanced budget constitutional amendment to pass both chambers first and be referred to the states.

(click here to continue reading Practically Delusional | Talking Points Memo.)

Circumstantial Evidence - Panatomic X
Circumstantial Evidence – Panatomic X

and from the NYT:

House Republicans muscled through a revised debt limit plan without a single Democratic vote on Friday night and headed toward a confrontation with the Senate, where Democrats were anxiously awaiting the newly passed measure so they could reject it. President Obama has also threatened to veto it.

About 24 hours after the first Republican proposal backed by Speaker John A. Boehner stalled, the House voted 218 to 210 to approve a plan that would increase the federal debt ceiling in two stages, with the second installment of $1.6 trillion contingent on Congressional approval of a Constitutional amendment requiring a balanced federal budget. The Constitutional amendment provision was added to attract conservatives who balked Thursday.

 

(click here to continue reading House Passes Boehner’s New Debt Plan – NYTimes.com.)

Dirty politics sullies all involved

Dirty politics sullies all involved

So a Balanced Budget constitutional ammendment? Really? And what are the odds such a beast would pass into law? And how quickly? I did a little quickie research using Wikipedia and and a time and date calculator. The fastest amendment I found to pass was the 21st, which repealed the 18th Amendment (Prohibition). Even this took 289 days.

Others (I didn’t check all)

Bill of Rights: 533 days

13 Amendment (Emancipation): 608 days

16th Amendment (allows Congress to collect income tax, still in dispute by some zealots): 1,325 days

18th Amendment (Prohibition): 534 days

You get the idea – the GOP wants our economy to remain in a tailspin until at least the 2012 election, because political calculations trump governing the country.

and the Senate isn’t going along with this fake plan so quickly in any case:

The Senate has killed the latest effort by the House to raise the government’s borrowing cap.

Democrats and several Republicans killed the GOP measure by a 59-41 vote Friday night, just minutes after it arrived from the House. Democrats opposed the measure because it would require another painful debt-limit debate early next year.

(click here to continue reading Senate kills House debt limit bill – Chicago Sun-Times.)