Monday, December 20, 2010

Cat Food Commission: Why won’t the damn thing die already?!?!?

Democrats have a real problem with rhetoric. They keep describing "zombie ideas" as though they had the slightest credibility.
People tend to forget that Ronald Reagan often gave ground on policy substance — most notably, he ended up enacting multiple tax increases. But he never wavered on ideas, never backed down from the position that his ideology was right and his opponents were wrong.

President Obama, by contrast, has consistently tried to reach across the aisle by lending cover to right-wing myths.

Unfortunately, one of those myths is that the Cat Food Commission's work has not been rendered completely irrelevant by the big tax break given to people who didn't need it and who won't use it for anything that will help the rest of us.
The idea is to pre-empt an even more draconian set of budget cuts likely to be proposed by the incoming House Budget Committee chairman, Rep. Paul Ryan (R-Wis.)


White House strategists believe this can also give Obama “credit” for getting serious about deficit reduction...

So, in order to "fight" wacko Republican notions that aren't grounded in reality, the President and his people want to preemptively surrender and to simply hand over grandma's Social Security check without so much as a whimper so that they can gain "credit" (Republicans will continue to call him a Socialist in any event) for "solving" something that never was a problem to begin with.

Yeah...gee, what could possibly go wrong with a plan like that?

Update: Jane Hamsher of FireDogLake agrees that our President doesn't appear to know very much about negotiating strategy.

Saturday, December 18, 2010

Krugman explains the housing bubble

From his 16 Dec 2010 piece:
It’s not as if the story of the crisis is particularly obscure. First, there was a widely spread housing bubble, not just in the United States, but in Ireland, Spain, and other countries as well. This bubble was inflated by irresponsible lending, made possible both by bank deregulation and the failure to extend regulation to “shadow banks,” which weren’t covered by traditional regulation but nonetheless engaged in banking activities and created bank-type risks.


In the world according to the G.O.P. commissioners, it’s all the fault of government do-gooders, who used various levers — especially Fannie Mae and Freddie Mac, the government-sponsored loan-guarantee agencies — to promote loans to low-income borrowers. Wall Street — I mean, the private sector — erred only to the extent that it got suckered into going along with this government-created bubble.

It’s hard to overstate how wrongheaded all of this is. For one thing, as I’ve already noted, the housing bubble was international — and Fannie and Freddie weren’t guaranteeing mortgages in Latvia. Nor were they guaranteeing loans in commercial real estate, which also experienced a huge bubble.


Last week, Spencer Bachus, the incoming G.O.P. chairman of the House Financial Services Committee, told The Birmingham News that “in Washington, the view is that the banks are to be regulated, and my view is that Washington and the regulators are there to serve the banks.”

The future, with the Republicans controlling  the House (Which has control of spending) isn't looking so hot. Not only are the Republicans absolutely determined to avoid comprehending how the housing bubble began, they very clearly don't want to do anything to fix it.

Update: Just for the fun of it, here's the Republican explanation.
Bubbles happen. In retrospect, they always seem easy to identify, but as they are building, experts debate whether they exist—and, if so, why.


We will likely never have a complete explanation for why there was a housing bubble, but we have some clues.


For one, investors shared the same mindset as borrowers, enticed by the belief that home prices ould never fall on a national scale.

Yup, it's all very mysterious and no on really knows.

Saturday, December 4, 2010

Unfortunately, a partial win

Conservatives/Republicans/Tea Party folks got a partial win on the Cat Food Commission. As Representative Paul Ryan (R-WI) says:
...the Social Security plan in the deficit-reduction proposal by President Obama's fiscal commission showed there may be room for compromise on the issue between Democrats and Republicans.

“It's not where [Republicans] would go, but it's getting close,” he told BNA Dec. 2.

No, the right wing didn't win entirely, but enough Democrats crossed party lines to make the entire exercise worthwhile from their point of view.

As is pointed out here, the case that our economy is in crisis and thereby needs the drastic solutions presented, is far from convincing. The fearmongering that the Commission's report engages in is wildly irresponsible.

Wednesday, December 1, 2010

Cat Food Commission failure

Cat Food Commission fail!!! The Commission appears to be unable to even get a majority, let alone the supermajority that their charter insists they should get, for their proposal.


The biggest problem, of course, is in getting the elected members onboard.  Republicans don't want to raise taxes at all (The proposal is 2:1 spending cuts to taxation increases) and Democrats don't want to needlessly hurt constituents with unnecessary spending cuts ("Cuts in Social Security will gradually increase poverty and early death among the old. Cuts in the mortgage interest deduction will further drive down home values while hardly affecting those rich enough to pay cash. Killing the Earned Income Tax Credit will reverse a highly effective anti-poverty program for working people." Galbraith)


Naturally, the WaPo is covering up the fact that the Commission is obliged by law to make its proposal today and then cease to exist.


Hang it up, dissolve the Commission, send everyone home.

Friday, November 19, 2010

I take it back

I've stated many times that the Cat Food Commission has to simply cease to exist as it serves no useful purpose. Actually, now that the person who's apparently the sole liberal on the Commission has spoken up, there might be a purpose to allowing it to continue to exist after all. Representative Jan Schakowsky (D-IL) has come up with a plan that's considerably better than the Bowles-Simpson plan ($427 billion in savings by 2015, vs. $250 billion) and it doesn't touch Social Security at all.
She takes over $120 billion in expenditures out of the war-making budget by following the recommendations of Representative Barney Frank's (D-MA) bipartisan Strategic Defense Task Force. In a recommendation that I refer to as "red meat for progressives," She proposes to "Raise $132.2 billion by closing tax subsidies for companies that ship American jobs overseas." She plans to increase collections through "progressive reforms to the estate tax, treating capital gains and dividends as regular income, and enacting a cap and trade proposal that includes protections for lower-income people." Oh, and she also proposes spending $200 billion on another stimulus. As of the one-year anniversary of the stimulus passing through Congress, it was pronounced a qualified success. Essentially, it was good, but it would have been better if it had been larger.
Will the other commissioners take Schakowsky's proposal seriously? I kinda doubt that as I think they're just looking for an excuse to cut down the standard of living of the non-rich, but hey, for purely political "optics," it's far better to support a long shot than to appear to be a completely stubborn rejectionist.

Tuesday, November 16, 2010

The limits if limited government

Excellent piece looks at Louisiana and its attempt to live within tight limits on government expenditures.
 Going beyond the numbers, what was the actual impact of DHH's plan for "doing more with less"? DHH would close eight parish Medicaid offices, reducing by 61 people the number of DHH employees serving Medicaid clients. And it would reduce the number of prescription drugs allowed Medicaid patients. Medicaid currently pays for up to five prescription medications. DHH's proposal, if approved, would reduce that to four. Thus, Louisianians in need of medical services would have to drive farther, wait longer and figure out which drugs they could do without.

Y'see, this is what happens when the philosophy of limited government crashes headlong into the realities of actually governing. Glorious theory gives way to drab reality. Ideas that looked brilliant on paper or that sounded great sitting around a well-furnished conference room table don't look so hot when you're actually trying to govern.

And this poor guy is just absolutely flummoxed when he runs into the very same problem that millions of his fellow citizens are currently facing.  He's very upset that he and his family don't get health care coverage immediately upon his becoming a Congressman. They  have to wait about a month before that kicks in. Of course, he's a far-right wing Congressman who fought against health care for everyone else, so while he has to wait a whole month during which he can get by on his existing coverage, 59 million Americans don't have any coverage at all.

More dishonesty

Again, we have Republicans spreading the lie that to go back to Clinton's income tax rates would adversely affect small businesses. Business income and personal income are accounted for in different ways and we should not consider business income as being the same as personal income. In the piece I've linked to, they explain "pass-through" companies, where yes, business profits are treated as personal income, but not the business income that goes back into the company.

If a pass-through business sells $1 million worth of goods and needs to then turn around and spend $950,000 in order to re-stock, pay employees and pay for things like heat/air conditioning, lights, water, etc., then only $50,000 counts as the owners' personal income. So yes, a dry-cleaning business or a hardware store might make more than $250,000 in a year, but only their profits get taxed and the first $250,000 of profits get taxed at one rate whereas everything over that gets taxed at another. The rest is considered a business expense.

Saturday, November 13, 2010

Deficit reduction - the utter meaninglessness of

Yes, surveys say that people are concerned about reducing the deficit, but a close examination shows that this concern is hugely overstated and very few of those who claim to be concerned about deficits really have much of a clue as to what they're talking about. Where the level of the deficit actually is and how much people express concern about it are not at all correlated. People get concerned about it when politicians make noise about it. Period.

Link to flyer on Cat Food Commission. Two important points made on the flyer: There's really no evidence that the Commission is actually concerned about the deficit and the Commission is really determined to see to it that progressive programs can't be carried out.

Monday, November 8, 2010

Personal taxes versus business taxes

Look, I understand that Bob Shieffer is getting on in years and is now a tired, weak fellow who can no longer think rapidly on his feet, but he got completely rolled by Senate Minority Leader Mitch McConnell here (Note that McConnell is still Minority Leader, the 2010 mid-term election did not result in the Republicans taking over the Senate).

McConnell kept speaking of small businesses and kept indirectly suggesting that small businesses would pay a bigger excise tax, i.e., a tax on things like:

  • Environmental taxes.

  • Communications and air transportation taxes.

  • Fuel taxes.

  • Tax on the first retail sale of heavy trucks, trailers, and tractors.

  • Manufacturers taxes on the sale or use of a variety of different articles

In other words, taxes that have nothing to do with personal income. But the subject of Shieffer's interview was personal income taxes. Shieffer was talking about taxes on the income that people personally make, he was not talking about taxes on the money that a business makes.

Is there an overlap? Are there people who work in a small business who make over $250,000 a year? Yes, but it's a pretty small one. It refers to people like doctors who run small, specialized practices, investment people who don't employ a lot of other people, etc.

A mom-and-pop hardware store that pulls in over $250,000 a year is completely irrelevant to the Shieffer-McConnell discussion as most of that income goes right back into keeping up the inventory. The remainder that goes to the mom & dad team is usually in the $30,000 to $40,000, maybe the $50,000 range. It's only that latter amount that gets counted as personal income because a business takes in all of its money as business income. The owner pays him/herself by taking out a portion of that income and segregating it off as their personal salary. If the business does poorly, the owner doesn't get tot take anything out and hopefully, the owner has it in the business plan that there's enough cash on hand or investments that can be cashed out to keep going until business picks up.


A few months ago, I had a correspondence with a right-winger who earnestly informed me that Republicans were doing a grand job running individual states. Looking at how the governors of Wisconsin and Ohio are against high-speed rail, how the governor of New Jersey is opposed to a second rail tunnel from Manhattan and how Texas is now $25 billion in the hole, I'm not so sure he has a point about that.

Der Spiegel has a piece on the economic decline of America. Especially heartbreaking is the first picture, a large housing complex with only a few houses scattered here and there in it.

Monday, November 1, 2010

David Broder: Insane or Demented?

Nah, it's unfair to blame David Broder as though he were just a lone thinker and was not representative of "The Village" of Washington DC pundits. He should be seen as being a representative of what "The Village" thinks. First, let's look at the rather glaringly obvious solution that Broder so casually rejects:

The nation is suffering simultaneously from high and persistent unemployment, lagging investment, massive public and private debt, and a highly inefficient tax system.

The steps that have been ordered so far in Washington have done nothing more than put the brakes on the runaway decline. They have not spurred new growth.

I'm not so sure that the tax system has anything to do with anything, but if America solves the problem of "high and persistent unemployment," it's likely to be via the solving of the problem of "lagging investments." Debts, of course, will take care of themselves once the other two problems are taken care of.

So what's the problem with more stimulus? That second paragraph sure reads an awful lot to me like there simply wasn't enough of it. To the extent that stimulus was tried, it certainly did indeed work. So why doesn't Broder simply suggest that Republicans are the bad guys here and that Obama needs to step over them in order to fix the economy?  Because that would tramp all over the beloved conventional "wisdom" that all problems stem from a lack of bipartisanship. According to Broder and his "Villager" friends, he simply can't blame one side for any problem and the thought of stepping over an obstructionist political party would promptly cause him to retire to the fainting couch.

Hmm, what to do? What to do? A-ha! That's the answer! War wih Iran! The fact that the US is:

already involved in two wars, have been for close to an entire decade, and during that time have had the lowest economic growth since WWII.

is just one of those...well...annoying problems...that just...tsk...just gets in the way a lot.

What if the US were to start a war with Iran? As the "Baghdad has WMDs" skeptic back before the Iraq War began, Scott Ritter, pointed out back in 2006 that attacking Iran is an absolutely insane idea. It would resemble the Athenian attack on Syracuse in that it would probably result in the annihilation of our army in Iraq.  The Guardian examines Iran's military, anti-US role in Iraq. Relatively little has happened so far, but it's pretty clear that Iran could do a heck of a lot worse to US forces there. So no, Broder has not managed to "square the circle" or to find that edible bowl of porridge that's of course, always in the middle. To suggest attacking Iran demonstrates a mindless bloodlust that would reveal savagery, but is probably more indicative of a very sheltered and privileged life.

In either event, Broder is not the slightest bit concerned about the millions of casualties that would result. Nor, interestingly, does Broder show the slightest concern over his previous, very-strongly-expressed desire for a balanced budget. To suggest a war with Iran as a way to get the economy moving again is to show that Broder thinks Keynes was right. Of course, getting stimulus into the economy via military spending would be an effective strategy, but

If spending on war can provide jobs and lift the economy then so can spending on roads, weatherizing homes, or educating our kids.

Stimulus is stimulus, no matter how it's delivered. Is military spending a good stimulus? Not really. With US military contractors already busy, it's far from clear that opening up yet another front would improve the economy at all. There's also the problem that the US doesn't particularly want to re-start the draft, but counter-recruitment efforts are doing well and there's also no strong desire for regular citizens to sign up for a tour of duty in that area of the world. About the only strong incentive for young people to sign up for the military is the cruddy job market. If that ever improves, there's simply nothing in American culture that suggests an urge to run around the globe improving everybody elses' societies.

Monday, October 25, 2010

Worse set of prorities is hard to imagine

The Obama Administration seems to be convinced that deficit reduction is a worthwhile thing to do and that tax cuts are the only tool left in the bag that they're able to use. Of course, neither course of action is going to win any Republican cooperation. Republicans don't have any interest in cooperating or in governing, so a government shut-down is more or less guaranteed no matter what the administration does. It's just so sad to see our government give up on meaningful policy changes, especially when cooperation and making concessions has proven to be such an utter loser of a strategy.

Heck, Senate Minority Leader Mitch McConnell has admitted flat-out that:
"The single most important thing we want to achieve is for President Obama to be a one-term president."

Cat Food Commission admits irrelevance

So now, as it nears its final months, the Cat Food Commission admits that there's really no reason for it to exist in the first place. By suggesting they might put out separate reports and by, very predictably, suggesting that eliminating tax cuts are off the table, they're making clear what progressive critics have claimed all along. The commission is a complete joke in terms of actually accomplishing anything useful, but might possibly achieve its' less publicized goal of cutting spending on programs that the public likes, but that more elite institutions don't, i.e., Social Security.

Disband the damned commission and send everyone home!!! 

Friday, October 15, 2010

The utter impracticality of Tea Party ideas

Rock, meet hard place! Tea Partiers of South Carolina were convinced, convinced, I tell you!!! that earmarks were really, really, just awful and terrible and no good. That was before South Carolina's Republican leadership was confronted the possibility of getting a deepwater port for ships that would use a widened Panama Canal.

All of the sudden, the deeply-felt principles that "Spending is bad, earmarks are bad, taxes are bad" ran headlong into the fact that a deepwater port could bring lots and lots of money into South Carolina.  And gee, wow, amazingly enough, these principles were suddenly being treated as optional, as a "nice to have" sort of thing and not as a critical, mandatory element of a new economy.

The Tea Party folks are having a bit of trouble reconciling their philosophy with the real world.

Wednesday, October 13, 2010

Clear as mud

Americans are essentially equally divided in their views of the role of the federal government, with one-third tilting toward a preference for a government that actively takes steps to improve the lives of its citizens, one-third preferring a limited government that performs mostly basic functions, and the remainder in the middle.


As the Daily Kos piece that I took this quote from says, this is as "clear as mud." Reading the Gallup piece, the definitions don't get any more specific. Unsurprisingly, opinions form a bell curve, with small numbers at either end and the majority nestled in the middle. This has been a several-decades-old problem with the whole idea of limited government. The Republican/Tea Party candidate for Kentucky Rand Paul and his opponent, Democrat Jack Conway, had a debate on October 2nd. What are Paul's ideas on how to fix the economy? Well, Conway stated that the election was a choice between someone who "has said that he is against the American Disabilities Act, between someone who is going to stand up and protect Medicare and someone who says Medicare needs a $2,000 deductible.” Paul at first defended his view on the Medicare deductible, even though Conway ran a video that quotes a senior citizen saying "That's crazy. I can't afford that." Paul then put out a new ad that "declares that 'Rand Paul doesn't support higher Medicare deductibles for seniors' and accuses Conway of distorting Paul's views."

So, in the battle of ideas, when it came to defining government responsibility concerning how much Medicare patients would pay in out-of-pocket costs and how much the government should pick up, the Republican/Tea Party candidate at first declared that patients should pay for a really big proportion of Medicare costs, but quickly relented and wants to keep deductibles where they are.

So what exactly does it mean when even the Tea Party candidate wants to keep Medicare deductibles where they are? Does it mean that he supports a "government that actively takes steps" or does it mean he supports "limited government"? This is not a new problem. This has been a problem with the whole concept of "limited government" since well before Ronald Reagan became President. 30 years later, the problem hasn't moved a single inch. Everybody, his brother, Aunt Margaret and even little Suzy loves the idea of "limited government," as long as that doesn't mean cuts to his or her favorite program.

Friday, October 1, 2010

See, here’s the problem…

A short video explains in clear terms just what's wrong with today's economy and how to fix it.

Republican Senate candidate and World Wrestling Entertainment CEO Linda McMahon (CT) demonstrates she doesn't have the vaguest clue about how the economy works or, of course, how to even begin fixing it.

Basic problem that the video focuses on is the problem of insufficient consumer demand, which means that capitalists have no reason to invest in new production as there's no indication that any new products will ever get purchased. McMahon wants to give businesspeople veto power over whether to increase the minimum wage or not ("I think we ought to look at all of those issues in terms of what mandates are being placed on businesses and can they afford them. I think we should get input from our business community"). As businesspeople have wanted to lower or eliminate the minimum wage ever since it was instituted, it's clear beyond the slightest shadow of a doubt what the "input from our business community" would be.

Problem is, lowering the minimum wage would be precisely the wrong thing to do at this time! That would have the effect of reducing consumer demand at exactly the time when the economy desperately needs maximum consumer demand to spur more production.

A few months back, a commenter on my local newspaper's message boards said that only businesspeople have the competence to comment on political issues. McMahon is a businessperson, but very clearly, she has absolutely no idea about how economics works. Now, I don't believe businesspeople should be denied a seat at the table where political decisions are made, but no, I very strongly disagree that businesspeople have any special competence at political or economic issues.

Update: McMahon's opponent, Connecticut Attorney General Richard Blumenthal (D) is of course jumping all over McMahon's faux pas, drawing a connection between her history as a businessperson and how she'd run Connecticut: "Linda McMahon laid off ten percent of her workers and takes home $46 million a year so it's no surprise she's thinking about lowering the minimum wage."

Tuesday, September 28, 2010

They’re doing just what I’d do

This reminds me of a Fantastic Four story when the FF is trying to decide what Dr. Doom will do. Reed says with no uncertainty what it is that Doom will do. Johnny asks him how he knows that. "That's what I'd do if I were in his position." Johnny agreed that, yeah okay, that made sense.

Republicans are refusing to join Democrats on the Cat Food Commission and are insisting they will not fulfill their assigned role in the anticipated "grand bargain." They're refusing to raise taxes in response to Democrats cutting expenditures. Democrats can take a "cuts-only" solution or no solution at all. If I were a Republican, I'd do precisely what they're doing. Democrats are highly likely to simply roll over and accept a cuts-only solution.

Fire the damn commission and send everyone home!!!  Just dissolve the whole damned thing and accept that nothing good will ever come out of it!

Monday, September 27, 2010

How the wars in Iraq and Afghanistan affect economy

Good piece in New Deal 2.0 discusses how military spending is indeed stimulative, but it provides the least bang for the buck and how the military's "cost-plus" contracting leads to distortions in how private businesses design their products. Inevitably, these problems bleed over from one division of the company into all the other divisions.

Friday, September 17, 2010

I really liked this line

From C&L:
Pitiful, but typical, and tiresome. If these fools [Republican "Young Guns" Eric Cantor and Kevin McCarthy] knew how to get the "economy back on track" it would have been on track when Bush left office.

Don’t Kill Growth And Jobs In The Name Of Deficit Reduction

The statement on this page, signed by more than 300 economists and major civic leaders, reflects a grave concern that the “austerity economics” being advocated by many politicians in Washington will derail our already weak economic recovery. This statement outlines a progressive approach to reviving the economy and addressing the federal deficit, with the top priority being putting people back to work and investing in the foundational elements of a new economy of broad prosperity.


Update: Slightly different subject, the above post refers to "austerity economics," and I just saw a review of a post which talks about extending the Bush tax cuts for the top 2% of earners in the population. But MMFA refers to a CNNMoney poll which looks at the viewpoints of economists and wow! What a complete and utter frakin' mess! What a marvelous example of how NOT to talk about the viewpoints of a profession!

Thursday, September 2, 2010

Oh, good grief!

What is wrong with the Democratic Party?!?!?! Why can't they stand up for their own professed values? Why are members peeling off from the party to support maintaining Bush's tax cuts for the rich?

I know, I know. The woman asked Will Rogers what organized political party he subscribed to. His response was "Organized? Aw heck no, Ma'am, I'm a Democrat!"

Oh, and Alan Simpson thinks he's found a way to get the money to extend those tax cuts!  Why, we'll just take it out of medical care for veterans! Hey, not a problem! Tax cuts for the rich are SO much more important than medical care for veterans! President Obama is fully supporting the "Cat Food Commission,"  which obviously wants to see your grandparents choosing between various cat chows for their dinner.

I still just don't understand why party members can't just to the line on such a basic issue of Democratic priorities.

Update: At least some folks have the right priorities!  The Congressional Progressive Caucus has said that if the Cat Food Commission report recommends cuts or other changes to Social Security, they will say, you'll lose our support. Ya-a-ayyy!!!!!

Tuesday, August 24, 2010

Competing views

The economist Dean Baker examines a WaPo piece and concludes that the WaPo is in complete agreement with his liberal Keynesian economic theories, but the WaPo doesn't appear to want to admit that.

The WaPo piece on the slow economy at first agrees with the liberal Keynesians and says: "Many Democrats say the economy needs more stimulus." Yee-hah to that. Very sensible. But then the piece sets up the counter-point: "Business lobbyists and their Republican allies say it needs less regulation and lower taxes." But then they go even further and say: "But here in the heartland of America, senior executives say neither side's assessment fits." So what evidence does the WaPo present to bolster any of the sides?

During the first half of this year, capital expenditures by business have been a bright spot in the economy, growing at more than a 20 percent annual rate. But executives say little of this reflects expanded capacity. They say firms are spending primarily to replace equipment they had held onto longer than usual last year to conserve cash.

Okay, this makes sense given the first two sentences: "Corporate profits are soaring. Companies are sitting on billions of dollars of cash." But hmm, why are business capital expenditures no longer "a bright spot in the economy"?

The piece then runs through the tale of Brook Furniture Rental and how Brooks is reacting to slow consumer demand by investinng much less. Okay, this is in complete accord with what liberal Keynesians are saying. Next, the piece examines attitudes in the "executive class in the Chicago region" and finds them sour and grumpy over the proposed expiration of the Bush tax cuts (That did very little to boost the economy in the first place*) and uncertainty over the Affordable Care Act. Key point?

None of the executives interviewed linked a specific new government initiative with a specific decision to refrain from hiring.

Finally, an interview with the CEO of the Illinois Tool Works concludes

More fiscal stimulus "might help make things a little better for a couple of quarters, but I'm not sure it would get at the underlying economic issue," Speer said.

Soooo, fiscal stimulus is lacking only in that it's not a permanent solution, but in the piece, Speer offers no indication of what the US's long-range financial problems are and thus, no idea is presented as to what the long-range answer might be.

Bottom line of the piece: The liberal Keynesians are absolutely correct and the other two groups "Business lobbyists and their Republican allies" and senior executives in the heartland of America, don't have any ideas to counter those of the liberal Keynesians.

*From a 2002 piece examining the impact of the 2001 tax cut:

...a new study by the President's Council of Economic Advisors, which reportedly shows that the tax cut package passed last year substantially reduced the severity of the recession. It is worth noting that the main stimulative impact of the tax cut that went into effect last year was a $300 per worker income tax rebate. This rebate was put in at the insistence of Congressional Democrats, not the Bush Administration, and was derived from a proposal that came from its Progressive Caucus.

The total cost of the tax cut: $1.35 trillion. Total spent on the $300 and $600 checks: $38 billion. So 2.81% of the 2001 tax cut did the major part of the work in providing the economy with what little stimulus it got. As Paul Krugman points out, the stimulative impact of the Bush tax cuts on employment was awfully minimal. The 2001 tax cut doesn't appear to have affected employment at all and the 2003 tax cut might, possibly, at best, have had a delayed effect.

Friday, August 13, 2010

Just hafta respond to this

Second comment down on a piece in the Inky today.

Posted 08:08 AM, 08/13/2010


As a matter of fact, let me save the LWNJ's some of the trouble. "Sarah Palin is a lunatic".1 "Where were you when Bush was President"? (we were right here protesting deficit spending)2 "Most of the people in the TEA Party want smaller government but they want their Social Security and Medicare, right?" (that they were FORCED INTO BY LAW - NOT VOLUNTARY, and PAID INTO THEIR ENTIRE LIVES and and yes, they want THEIR money back AS PROMISED)3.....did I miss anything? Help me out here LWNJ's4. Oh yeah, I forgot to mention "Cheney started the Iraq War"5 and "Bush is a Nazi"6. "(even though this was off topic) AND "The Republicans are responsible for all US Debt!!!"7 (even though they only controlled the House of Representatives for about 1/3rd of the time since 1921.)8 There. Now even RightWinghypocrite doesn't have to post. I think that about covers it all! Have a blessed Friday the 13th!

1. I left the comment:

Posted 10:52 AM, 08/13/2010


taxmancometh: your analysis is largely correct, but I don't think anyone on the left characterizes Sarah Palin as a lunatic. I think our view is that Rush Limbaugh, Ann Coulter and Sarah Palin all use the term "half-black" to describe the President. Limbaugh and Coulter use the term because they're hard-core racists, but I don't credit Palin with the smarts to know what the term means.

As of 9:00pm, no one had responded to my assertion, even though there were seven other comments afterwards.

2. Sure, okay, I'll take the guy's word for it that he and a few other lone, isolated conservatives protested against "Dear Leader" Bush's excessive spending. Not sure if he has any opinions as to Bush's tax cuts, but the public at the time was pretty underwhelmed. They tepidly supported the cuts, but accurately saw that only the upper income brackets would really benefit from them.  Big problem with the guy's thesis: The Republican Party as a whole and conservatives in general didn't have an articulated problem with Bush's excessive spending. Certain individuals may be able to claim they opposed that spending, but they can't point to any actual political movement of any significance that agreed with them at the time. Progressives just don't really care about "excess" spending and a Kaiser Family Foundation study of Medicare Part D didn't uncover any strenuous opposition, even though it found a pretty strong feeling that the program was duplicative and unnecessary. A blogger suggests that the Medicare Part D program eventually became popular because it was a "no pain, all gain" program, but even then it took two years for the public to warm to it.

3. Hmm, okay. People want promised benefits from programs they've paid into. Just like if I paid into a 50-year Missile Defense program (I count the period between the 1973 ABM Treaty and Reagan's 1984 revival, called "Star Wars" as an "on-spec" period) with my taxes, I'm going to be annoyed that this program still hasn't produced tangible results after a half-century of working on it! Heck, that strikes me as just plain thievery by a bunch of swindlers!

4. LWNJ refers to Left Wing Nut Jobs.

5. Not quite sure I'd agree with that. The Iraq War started because A. The Bush Administration as a whole wanted Iraqi's oil, B. Democrats were frantically calculating whether Iraq really had WMDs and decided they'd beter play it safe and assume that Iraq was indeed a deadly threat to the US and C. Our press corps was utterly broken and completely failed to fulfill its' proper function. That's why the Alternative Media, then with technological progress, the Left Blogosphere, or as it's known today, the Netroots, was born.

6. Nah, calling Bush a Nazi improperly glamourizes him. That's like saying Bush communicates directly with the Devil. I prefer to think of Bush as bragging of all of his evil misdeeds to a minor subordinate of the Devil. In response, the suburdinate passes on the Devil's "Attaboy!"

7. That's an entirely accurate evaluation and the blame traces back to Ronald Reagan, who

promised something arithmetically impossible: to increase military spending, cut taxes, and balance the budget. He kept the first two promises, delivering the largest peacetime military build-up in American history, and cutting taxes massively, mostly for upper-income households.

The extra spending the current President has engaged in and the reduced tax receipts that constitute Obama's extra additions to the deficit are a direct result of the near-depression that began in late 2007. But if there's an economic crisis today, it comes from the deficit scolds who insist on balancing the budget at the expense of jobs for those who need them.

8. They controlled it for the last six years of Clinton's term and the first six years of Bush's term. Clinton was interested in lowering the deficit and so the deficit went down. Bush couldn't have cared less and so the deficit exploded. With conservative "Blue Dog" Democrats and the Republicans together constituting a majority and the Presidency and its veto pen in Bush's hands from 2007 to 2009, which party had the majority in Congress just wasn't a terribly relevant measurement.

Oh, and my response to the piece is:

The Tea Party represents something new? Hardly. The Tea Party is a group of the old Bush dead-enders with a few extra hangers-ons and people like the Log-Cabin Republicans included, i.e., people who don't understand that the Republican Party loathes them. The group was pulled together by astro-turf organizations as an anti-Democratic Party group, so while it's entirely correct to say that racial hatred was never the primary motivation behind the Tea Party, it's also entirely correct to refuse to recognize the Tea Party as a genuinely grassroots phenomenon.
It's all very fine and well for Tea Party members to say that they believe in small, limited, cheap government, but from Ronald Reagan on, no one in the Republican Party has ever explicitly disagreed with this. They just never actually carried out anything along those lines. Is there even the slightest chance that a Tea Party in power will do so? No. They'll just run headlong into the same problems that the Republican Party has long since been aware of.

So there was a statement from a later comment that "The message of the Tea Party movement is: free people and free markets, Constitutional rule of law, first principles, spending restraint, limited government. This life-affirming, traditional message resonates with the vast majority of Americans."

I and other progressives agree with the commenter as to the value of the "Constitutional rule of law," but as to "free markets, ... spending restraint, limited government"? Nah. Buncha worthless conservative/libertarian nonsense.

Friday, July 30, 2010

The other side of the question

I previously showed that deficits are really far more a political problem than they are or ever were an economic problem. Certainly, they're not something to try and achieve. In the long run, it's better for the economy if income and payments roughly match, but deficits are not and never were the problem that conservatives have made them out to be.

How about the other side of the coin? What happens when governments fail to spend enough? Arizona  is the model Grover Norquist-inspired state, where those in charge of the government strive mightily to lower the tax burden on their citizens. How's that workin' out for them? Not well, actually. Not well at all.

Relative to the size of the Arizona economy, state government general fund revenue has fallen significantly since 1995, likely reaching a historical low in the near term. Expenditures also have declined relative to the size of the economy. Spending increases beyond the needs of a growing state are not a cause of the current deficit or the long-term structural deficit.

Okay, so Arizona must have made spending cuts to match their smaller resource base, right? Wel-l-l-...

These revenue cuts were not matched by spending cuts of a commensurate size because of the increasing population-driven demands for public services and infrastructure, such as education and public safety.


"Could we cut our way out [of our budget crisis] mathematically? Anything is possible, but for practical purposes it can't be done, unless you want to start releasing prisoners, shutting down universities, and eliminating extracurricular activities at schools. We've already has a $2 billion haircut over the past two years. Try another $2 billion and see what the state looks like."

Even worse:

Hardest hit was the Department of Water Resources, whose budget and workforce was slashed by more than half. The statewide planning division, responsible for helping secure future water supplies, was reduced to just two people and funding was eliminated for remote sensors that can alert communities to flood threats.

This is what they call going beyond cutting the fat, this is cutting into the muscle, heck it's cutting into the bone of the state. This is cutting a dire necessity that could very easily end up costing lives. And...

First, unlike much of the private sector, demand does not decline for most public-sector services during a recession. In some government programs, demand rises.

This is an extremely important point. The idea of "everyone tighten your belts" or "do more with less" is just wildly impractical. During a recession, it's time for deficit spending, not for cutting expenditures. The Grover Norquist idea of shrinking government down smaller and smaller is a pleasant fantasy for those who think about government in entirely abstract terms. For those of us who live in the real world, the idea is completely insane.

Update: Further commentary on the cat food commission. Pete Peterson is such a charming fellow [/snark]

Wednesday, July 21, 2010

Progressive views on the economy

Good piece from Salon shows how progressives think about the economy and goes into how conservatives think about it and the distinctions.

A few years ago, I think it was Ms. Magazine that said there is the private sector, there is the government and there are non-profits. Which one do you use for which task? Well, it depends. Some sectors are better at performing certain tasks than others are. Michael Lind adds in utilities. He defines a utility as something that operates more or less as a private enterprise does, but it's regulated so that the public doesn't have to deal with constant votality. Electric power is regulated because consumers and businesses simply don't have the time and the energy to deal with constant price fluctuations and to bargain and haggle for the best electric rate of the day.  Sure, society as a whole might pay a bit less for electric power per year, but we have better uses for our time and energy than to squander it on such trivial savings.

He also brings up the same point about health care that I've heard many progressives bring up as well. A patient who is suffering from an immediate medical problem such as a heart attack is simply in no shape to go online and research which hospitals offer the best heart attack care. It's simply not practical to leave that up to the free market. Regular check-ups are perhaps an exception, but regular check-ups are a positive social good that are well worth the extra expense of providing, so that doesn't really fall under what's best handled by free enterprise either.

Monday, July 19, 2010

James K. Galbraith & the cat food commission

Statement to the Commission on Deficit Reduction

James K. Galbraith, Lloyd M. Bentsen, jr., Chair in Government/Business Relations, Lyndon B. Johnson School of Public Affairs, The University of Texas at Austin
June 30, 2010

One of Galbraith's early statements is:
Your proceedings are clouded by illegitimacy.

And it just gets better from there!  Galbraith delivers a very eloquent, learned and judicious lecture upon the illegitimacy of the "cat food commission" (They want to see your grandparents living on cat food). Worth reading in its' entirety.

Saturday, July 17, 2010

Why we’re in the state we’re in

New Yorker piece on Larry Summers tells us that the initial figure for the stimulus bill was $1.2 trillion. As we know, the Obama Administration "negotiated with itself":
And then [White House Chief of Staff] Rahm Emanuel said to me, “Geez, do you really think we can afford to come in with a package that big, isn’t it going to scare people?” I said, “Rahm, you will need that shock value so that people understand just how serious this problem is.” They wanted to hold it to less than $1 trillion. Then [Pennsylvania Senator Arlen] Specter and the two crown princesses from Maine [Sens. Olympia Snowe and Susan Collins] took it down to less than $800 billion.

The final figure was $778 billion. As Atrios says:
 The stimulus 'debate' was so absurd, with dirty fucking hippies saying what needed to happen and Very Serious People objecting not because of any actual reason, but on basic aesthetic grounds. "OOoh, that just sounds so big, can't we make it smaller?"

What are the political consequences of the failure to get a big enough stimulus package through?  The Democratic National Committee is assuring Democrats that this November won't be as bad as the 1994 elections. Not exactly a confidence-builder and not something that was inevitable. It's tempting to blame Rahm Emanuel, of course, but someone hired him and someone keeps him on the job. The buck stops with the President.

Update: Vice President Joe Biden argues that the stimulus package was as big as it realistically could have been and that the Administration simply couldn't have gotten any more. Not so sure about that. President Obama might have been able to exert some pressure by calling out Republican obstructionists and by making it clear to the American people just who was standing in the way of the economic health of America. Of course, that would have put the kibosh on any pretense of bipartisanship, as though that would have been any sort of loss!

Further update: Booman sez "Aw, quit yer bitchin'! The Obama team did the best they could under very por circumstances." Booman makes some good points, but I'm still not convinced that's all they could have done.

Thursday, July 8, 2010


I generally don't have much use for the WaPo columnist David Broder, but I like these two paragraphs:
The terrible irony in all this? More and more people are seeing that what this agonizing situation requires is a limited and temporary measure to pump more life into the economy and create jobs, along with a serious commitment to impose real spending discipline and hold down deficits in the long term -- exactly what a five-year budget resolution could provide.

Gregg and Conrad agree that such a resolution could "unleash huge energy back into the economy," because corporations are hoarding $1.8 trillion in their treasuries and consumers are sitting on billions more.

 I would have worded this differently. I would have said "We need to get our economy out of the ditch NOW and worry about deficits later." But this is a very good start and I especially appreciate Broder's pointing out the $1.8 trillion sitting around in money markets and not being put to productive use. That big bundle of money sitting around gathering dust is important because it means that givig money to already-wealthy people (i.e., "Return the Money to the People!") will do absolutely nothing but build up those idle accounts still further.

Tuesday, July 6, 2010

David Brooks does liberal economists a favor

Conservative NY Times columnist David Brooks does a favor for what he terms "Demand Side theorists" by setting out a clear argument (Personally, I rather like his term of "Demand Side theorists" because progressive arguments against conservative drug and immigration policies have long focused on the demand side of the equation). Someone recently got me all flummoxed by making the argument that John M. Keynes came out against high wages as a stimulus. That made no sense to me at all, but as I had no idea where that statement came from or was based on, I couldn't really argue against it. So what Brooks did was to provide an antidote to the following problem:

Not long ago, Brad DeLong was wondering how is it we have lost the debate between stimulus to deal with a stalled economy and 15 million unemployed versus deficit hysteria and advocates of inflicting further pain on the jobless and budget strangled states.

The first screaming, blaring, blatant problem with Brooks' column is:

But all schools of economic thought have taken their lumps over the past few years.

Incorrect. There were indeed many economists who failed to see an $8 trillion housing bubble, but the Demand Side theorists (Paul Krugman, Dean Baker, the afore-mentioned Brad DeLong and many others) got it entirely right and have absolutely nothing to apologize for or to be humble about.

The Demand Siders don’t have a good explanation for the past two years.

Dean Baker responds:

Hmmm, is that right? Seems to me that we have a very simple theory to explain the past two years. There was a huge bubble in housing that burst beginning in 2006. This led to a plunge in residential construction that cost the economy more than $500 billion in annual demand. In addition, the loss of $6 trillion in housing wealth, coupled with the loss of around $7 trillion in stock wealth, has cost the economy more than $500 billion in annual consumption demand.

Brooks again:

But it is certainly true that the fiscal spigots have been wide open. The U.S. and most other countries have run up huge, historic deficits. And while this has helped save public-sector jobs, we certainly haven’t seen much private-sector job growth.

Essentially, Baker's argument is that the stimulus has worked precisely as the demand side theorists predicted it would, there just hasn't been enough of it. Brooks then argues that the current deficit is historically burdensome and unsustainable. Erm, not so much (Baker again):

Even after a decade of accumulating debt at a rapid pace, the U.S. would still face a lower debt burden than countries like Italy do today. Italy is currently able to borrow in financial markets at very low interest rates. Projections for 2020 show that the debt burden of the United States would still be less than half of the current debt burden of Japan, which still pays less than 2.0 percent interest on its long-term debt.

Brooks then argues:

Higher deficits will make them [entrepreneurs in Racine and Yakima] more insecure and more risk-averse, not less.

This is an old argument and it's never been a very good one. Problem is, the deficit has always been a very highly fuzzy, abstract argument. President Reagan constantly talked about the bad, evil, awful, no good deficit, but he had absolutely zero qualms about pushing it up through the roof when he thought that a gold-plated hunk of useless junk like SDI/Missile Defense needed to be built. No conservatives or Republicans objected, just as there were no discernible objections to G.W. Bush's extravagant spending on things like Medicare Part D and massive tax cuts for the wealthy because deficits are just too vague and abstract a problem for anyone to really grasp. A Purdue University study of budgetary deficits and Turkey's economic situation shows that the connection is actually quite weak, suggesting that deficits are a far greater political problem than they ever were an economic one.

Finally Brooks asks:

Are you sure your theorists are right and theirs are wrong?

To which Krugman responds:

Yes, I am. It’s called looking at the evidence. I’ve looked hard at the arguments the Pain Caucus is making, the evidence that supposedly supports their case — and there’s no there there.

Krugman has still further thoughts on economic stimulus involving the enormous amounts of cash that businesses are saving in money markets ($1.84 trillion), but not investing in ventures that would create employment. As someone commented: "Poor David is not just confused, he’s way out of his weight class."

Friday, July 2, 2010

Very, very bad news

Speaker Pelosi has produced a budget resolution that endorses a cut of $7 billion from the Obama Administration's plans, without specifying any way of doing that. Far worse is that they've delegated the job of detailing the cuts to the catfood commission. The plan was approved by all of the Republican Congresspeople and 38 Democrats. Their major motivation?
The enforcement resolution is being used instead of a full-fledged budget resolution because rank-and-file Democrats did not want to vote for a budget resolution that would show large deficits, particularly in an election year marked by worries about the nation’s fiscal solvency. [emphasis added]

And cowardice wins out again, meaning with the latest employment figures and the refusal of Congress to spend appropriately, we seem to be on the way to a double-dip recession.

Monday, June 28, 2010

Good News!!!!

The Deficit Commissions, meeting in 19 cities achieve a TOTAL FAIL!!! Woo hoo! Participants did not buy the premise that excessive spending on the non-rich was the problem, they instead concentrated on the very real and very serious problems of over-spending on a bloated military and corporations paying too little in taxes.

Bravo for the common sense of the American people!!!

Monday, June 21, 2010

Thomas Sowell & Franklin D. Roosevelt

I got into a dispute with right-wingers on the online comments section in the letters page of the Inky. They suggested I read a few pieces and then I would be enlightened as to their viewpoint. I gave them a snarky reply because I remembered the author of the first piece getting a very derisive reception from the lefty blogs, but agreed to read the articles with an open mind.

The first problem I found in reading Thomas Sowell's "A Mind-Changing Page" is his citation of employment figures:

Although the big stock-market crash occurred in October 1929, unemployment never reached double digits in any of the 12 months after that crash. Unemployment peaked at 9 percent, two months after the stock market crashed — and then began drifting generally downward over the next six months, falling to 6.3 percent by June 1930.

I agree with Sowell's assertion that the stock market crash of 1929 was merely the single dramatic event that people focus on. It was not, by itself, the event that really changed the course of history. But I was very interested to see how agreed-upon facts are treated very differently. Here is the picture of the 1930s in the statistics provided by Steve Kangas in
"The Great Depression: Its Causes and Cure."

The GNP falls 9.4 percent from the year before. The unemployment rate climbs from 3.2 to 8.7 percent.

The GNP falls another 8.5 percent; unemployment rises to 15.9 percent.! Unemployment was 6.3% in June 1930 but was at 8.7% by December! If 1929 unemployment was at 9%, the year began with 3.2% unemployment, hit 6.3% by June and 8.7% by December, that doesn't sound like a stable economy that was "gradually drifting downward," that sounds like an economy that was wildly jumping about!

A look at US Government statistics
Nonfarm Employment, Hours, and Earnings by Industry

YearEmployees (1,000s)

This chart shows around two million people losing their jobs in 1930. By the way, this chart, with the years 1938 to 1940, backs up the frequent liberal Keynesian charge that by taking the government's "foot off the gas," i.e., by not spending lots of government money, thereby engaging in good Keynesian stimulative economics, the US fell back into recession. Employment made gains from 1932 to 1937, then fell sharply and didn't regain their former height until 1940.

What I find very interesting though, is that Sowell never mentions GNP, which is something Kangas takes very seriously as a way to measure the US's economic health. Kangas notes a few things about the US economy in 1929 that Sowell doesn't pay attention to:

  • Backlog of business inventories grows three times larger than the year before. Public consumption markedly down.

  • Freight carloads and manufacturing fall.

  • Automobile sales decline by a third in the nine months before the crash.

  • Construction down $2 billion since 1926.

  • Recession begins in August, two months before the stock market crash. During this two month period, production will decline at an annual rate of 20 percent, wholesale prices at 7.5 percent, and personal income at 5 percent.

This is a picture showing that the US economy was in very serious trouble well before the stock market crash. Kangas ends off 1929 by noting:

  • Stock market crash begins October 24. Investors call October 29 "Black Tuesday." Losses for the month will total $16 billion, an astronomical sum in those days.

Kangas' picture of 1932 is one of cascading disaster. The picture that Sowell paints of the remainder of the 30s is:

Within six months after this government intervention, unemployment shot up into double digits — and stayed in double digits in every month throughout the entire remainder of the 1930s, as the Roosevelt administration expanded federal intervention far beyond what Hoover had started.

If more government regulation of business is the magic answer that so many seem to think it is, the whole history of the 1930s should have been different. An economic study in Out of Work.

Problem: The chart that Kangas shows us at the bottom of his piece:

TaxFederalGNP Unemp.
YearReceiptsSpending Growth Rate

shows steady improvement from the depth of the Depression when Franklin D. Roosevelt took over (1933) until 1936. Sowell appears to agree with the basic facts presented here, but I don't believe Sowell agrees with the general picture at all.

Was the crisis properly handled by keeping labor's bargaining power limited and by essentially waiting it out and not undertaking vigorous government action? I don't think so. Sowell states:

The very fact that we still remember the stock market crash of 1929 is remarkable, since there was a similar stock-market crash in 1987 that most people have long since forgotten.

What was the difference between these two stock-market crashes? The 1929 stock-market crash was followed by the most catastrophic depression in American history, with as many as one-fourth of all American workers being unemployed. The 1987 stock-market crash was followed by two decades of economic growth with low unemployment.

But the two stock market crashes make for an apples & oranges comparison. As Kangas points out, the American economy was undergoing very real and very serious crises. The 1929 stock market crash was just one of many events that indicated America's economy was suffering a general systems failure. I was in my late 20s in 1987 and decided to change jobs. I made an appointment with an employment company and was to show up, but then the '87 crash occurred and they told me "Well, er, you can show up, but..." (I didn't bother). In other words, there was no general economic crisis in 1987 as there was in 1929 as the employment company was looking forward to having me come in right up until that date. Reagan's hands-off policy worked because '87 was a regular old downturn.

The  hands-off policy that was being advocated by "literally a thousand economists" in 1929 was a political non-starter and very poor economic advice because 1929 was fundamentally different from 1987 and from economic downturns that had come before. Yes, under some circumstances, a hands-off policy is a sensible course of action, but in 1929, the problem was a loss of consumer demand caused by money being concentrated into far too few hands. America is approaching a similar point of concentration today, meaning that the next economic crisis should probably be handled in a Hooverian/Rooseveltian manner.

In a UCLA study, one of the authors of the cited study declares:

"High wages and high prices in an economic slump run contrary to everything we know about market forces in economic downturns," Ohanian said. "As we've seen in the past several years, salaries and prices fall when unemployment is high. By artificially inflating both, the New Deal policies short-circuited the market's self-correcting forces."

"Self-correcting forces" are all very fine and well when a country faces a standard, normal economic downturn, but when the problem is that of the society's economy is collapsing, it's not a very good policy at all. Getting high wages to workers in the midst of a critical lack of consumer demand was an eminently sensible policy. Ohanian is correct for when times are normal and for when the economic downturn is a regular one. For the Depression, the UCLA study is useless.

Update: One of the people I was discussing this issue with referred me to a piece that defends the concept of keeping government out of the economy to the maximum extent possible. When the piece referred to Ludwig von Mises and stated:

Total bank deposits more than doubled between January 1914, when the Fed opened its doors, and January 1920. Such artificial credit creation sets the boom–bust cycle in motion.

I recognized the theory I was arguing against. I wrote a piece in April 2009 that tore apart the libertarian theory that Federal Reserve interest rates had anything to do with economic booms & busts.

Friday, June 18, 2010

We need to make a stink about this

The "Catfood Commission" will be in Philadelphia on June 26th.

AmericaSpeaks national town meeting on "Our Budget, Our Economy." Hundreds from the Delaware Valley will join with participants from 17 communities across the country for a national conversation about the fiscal choices we face...

Y'see many people look at Charles Dickens' portrait of London and Paris in the 1700s and 1800s and say "Heavens! What an  awful time!" But the way the members of the "Catfood Commission" think when they read Dickens is "*Sigh*, those were the days!" The commmission, founded by billionaire Pete Peterson, wants to return America back to the days before Social Security was initiated, back to the days when old people lived on catfood because they couldn't afford anything better. To the commission, having a society without a middle class, having a society of poor people that's administered by the very wealthy, is the natural order of things, the "way it should be."

The commission is not directly responsible for the watering down of the second stimulus bill (The bill was to contain $50 billion in money to assist economic recovery, but got $25 billion cut out of it and STILL failed a cloture vote), but it most certainly is part of the same movement to defeat any stimulus measure and push America into a "double-dip recession" as this will fulfill Rush Limbaugh's vision of "I want him [President Obama] to fail." Keep in mind that the Bush tax cuts really and truly need to expire in order to combat the deficit, but as Limbaugh put it in the Fox News piece I linked to

If he [Obama] does not eliminate the Bush tax cuts, I would call that success. So yes, I would hope he would succeed if he acts like Reagan, but if he's going to do FDR, if he's going to do the new, new deal all over which we will call here the raw deal, why would I want him to succeed?

There's simply no arguing that Limbaugh is the head of the Republican Party or that, at the very least, his vision and theirs are one.  The commission is part and parcel of the Republican movement to make Obama's presidency fail. We must call people's attention to the commission BEFORE it publishes its' conclusions.

Paul Krugman has commented frequently on deficit-hysteria

I've written frequently on that same topic and on the Catfood Commission

I ask the liberals, the leftists and the progressives of Philadelphia and the region to take a stand on this! We need to fight to rescue our economy from the Catfood Commission and the deficit scolds who look back upon the days of Charles Dickens with nostalgia and longing!

Update: Very good piece on how the traditional press corps deals with the catfood commission.  For some strange, peculiar reason, the press corps seems to think that the catfood commission is not being ideological! That they're just sorta doing what anyone would do! I wonder what the color of the sky is in their universe?

Thursday, June 17, 2010

Legislative proposals for UFPJ-DVN to support

Witness for Peace has recommended that the Trade Reform, Accountability and Employment (TRADE) HR 3012 be passed. It is an anti-NAFTA type of bill and it's very much in line with progressive principles. The PDF describing the bill is here. Personally, my primary argument against NAFTA and similar treaties/agreements is that they unfairly privilege the very upper crust, the top 5% of income-earners at the expense of everybody else.

I had previously recommend Representative Alan Grayson's (D-FL) "Audit the Fed" bill, but that's already passed.

Saturday, June 12, 2010

Hoo Boy!

In an entirely predictable move, the "catfood commission" (Their obvious goal is to reduce all of our senior citizens to eating catfood) has proposed that America should consider maybe perhaps defaulting on government debt:

But many budget experts question whether supporting the existing benefit structure should be a cash-strapped nation's first priority.

In other words "Hey, we've got $2.6 trillion saved up that is guaranteed to keep Social Security paying full benefits until 2044. Surely, there must be something better for us to do with all that wonderful cash!" I mean hey, if America is "cash-strapped," well heck, why do we want to spend all that glorious money on mere *ugh* Social Security recipients? One might also consider, of course, that for America to default on its debts and to declare that it's an unreliabl payer of its debts would not be a very intelligent idea.

One of the really obvious ways to reduce the deficit is for health care to get truly fixed. The public option would have helped even more than the Affordable Care Act does in its current configuration. Another way is to fix immigration, as America has "...12 million people working in this country and not maximizing their contributions to the economy” by being undocumented and therefore, outside the income tax rolls (They pay sales taxes and Socal Security, Medicare, etc.), though of course, that consideration has to be balanced off by the fact that they don't use quite as many services, either. Heck, getting rid of the IMF would be a great way to start fixing the financial picture of the US as it relates to the rest of the world.

At the top of the list of villains in this story is the IMF. Its ineptitude managed to reverse the fundamental flows of capital in the world economy. In normal times capital is supposed to flow from wealthy countries with large amounts of capital, like the United States and the European countries, to the developing countries who need capital to fuel their development. Due to the failure of the IMF to establish a workable system of international finance, the flows went in the opposite direction in a huge way. The world's poor were sending their capital to the United States because the IMF gave them little choice.

Normally, the wealthy countries send capital out to the poorer parts of the globe, capitalists make investments and then bring the profits back to their home country. By supporting IMF policies, the US is making itself poorer by making speculation more profitable than actually making useful things for people to purchase. Senate candidate Carly Fiorina defends her "right-shoring" or sending American jobs overseas. This practice may be fine for the company's top layer of management and for stockholders, but the working men and women who toil for those companies are less than enthusiastic about the practice.

There are many, many choices available to the US that would improve our financial picture. Canceling the Bush tax cuts of 2001 and 2003 would be a great start as just about our entire current deficit can be traced to just those actions. A speculation tax, that would "slow the churning of stocks and financial instruments on Wall Street" would also be a great way to raise money. By charging a "quarter-percent tax on stock trades, and a commensurate rate tax on other instruments, [it] could raise more than $100 billion a year." Simply putting more Americans to work through the spending of money by the government, i.e., by extending the stimulus bill of February 2009, a bill that Republicans keep insisting they hate, but gee, wow, amazingly enough, every time the stimulus money is used for a project that benefits their state, they're right there claiming credit for a bill they opposed and didn't vote for. Representative Barney Frank (D-MA) has put forth a proposal that the Pentagon cut spending by around a trillion dollars over the next decade as the Pentagon is currently spending huge amounts of money on seriously wasteful items.

Arbitrarily reducing Social Security obligations to our citizens is not only a very, very bad idea as that would call into question the creditworthiness of the United States of America, but it would also be a grossly ineffective method of fixing the economy. There are many, many better ways to go about doing that.

Update (14Jun): Have to agree, it sure is nice that the  Obama Administration is finally starting to see the light and that they're now seeking $50 billion in further stimulus funds. Of course, it would have have been far nicer to have discovered this bit of wisdom a year and a half ago. Instead, they allowed the "moderate" Senators (Lieberman, Collins, Specter) to chop out around $100 billion from the stimulus bill so that they could crow about what pragmatic, sensible, frugal moderates they were.

Wednesday, June 9, 2010

If true, this would be AWESOMELY good news!!!

Just as Monica Lewinsky getting caught saved Social Security, so it looks like Republican opposition to tax increases may derail the deficit commisssion. Oh man!!! I hope it's true!!!! Woo hoo!! That would be the GREATEST news!!!

Saturday, June 5, 2010

John Boehner, Speaker of the House?

He certainly intends to become just that in a few months time. Representative Boehner (R-OH) would very much like for the Republican Party to win control of the House, whereupon he would become Speaker. Problem:
This, of course, is the same man who was absolutely certain that the Clinton economic plan would be a massive failure, was completely convinced that Bush's economic policies would produce extraordinary prosperity, and just knew beyond a doubt that the recovery efforts that have produced 2.8 million jobs so far would hurt the economy.

I tremble for my country.

Monday, May 31, 2010

The deficit scolds strike

What really amazes me about this piece on federal budgetary deficits is that it's written entirely from the hysterical deficit scold's point of view. The writer is careful to quote two Republicans and two Democrats, but it never seems to occur to him to quote any economists.

Why is the deficit a problem now? Well, Republicans are "...stirr[ing] up their core voters and [are making] inroads with independents by accusing Democrats of profligacy..." and "Facing a rank-and-file revolt, Democratic leaders began trimming the measure...". I can understand why Republicans would be making inroads with deficit fear-mongering among their own membership and among uninformed independents, but I can't imagine why the Democratic rank-and-file would have a problem with deficits, unless they were being fed a steady diet of baseless fear-mongering. The author doesn't appear to feel the need to quote anybody on the Democratic side, either a rank-and-file member or someone who might know what the rank-and-file actually thought.

If we observe another member of the NY Times' writing staff, Paul Krugman, an economist who, unlike many other people, saw the housing bubble, his views on the deficit worries of Congress are not at all in agreement with that of the deficit scolds. Sure would be nice if the NY Times used what it supposes are the natural advantage that traditional media has over bloggers, i.e., editors. An editor with some competence and ability would have been able to take a broader view than the writer could and could have said "Gee, maybe we ought to account for what the economists think and not just rely on the hysterical deficit scolds." Krugman is amazed and flabbergasted (As am I) that "inflicting economic pain has become the accepted thing" and states that the danger of a double-dip recession (A wiping out of all of the fragile gains made so far) is very real.

This fear of the deficit is having immediate, real, and very destructive effects.

Deficit hawk Democrats forced the excising of two health care-related programs – a subsidy for the jobless to keep them on the insurance of their former employer, and increased funding for state Medicaid programs so they can keep up with increased demand during a time of mass unemployment – because they feared the price tag and the cost to the deficit in the short term.


Adding further injury, the proposal from Tom Harkin and George Miller to spend $23 billion dollars keeping teachers employed looks dead and buried, for the same reasons that the COBRA subsidy and state aid for Medicaid went by the wayside. State budget shortfalls could cost up to 900,000 jobs this year alone.

Economist Dean Baker adds:

The plans by the deficit hawks seem likely to trim $30 billion in unemployment benefits and aid to the states from the bill. Using the methodology in the Romer-Bernstein paper put out by the Obama administration to promote its stimulus package, the cuts will reduce GDP by approximately $50 billion. This will correspond to a job loss of more than 300,000 people. It is irresponsible to report on plans to reduce deficits without noting their likely impact on the economy.

What could account for such hysterical, baseless fears? Krugman says:

The answer, as best I can make it out, is that the organization [The O.E.C.D.] believes that we must worry about the chance that markets might start expecting inflation, even though they shouldn’t and currently don’t: We must guard against “the possibility that longer-term inflation expectations could become unanchored in the O.E.C.D. economies, contrary to what is assumed in the central projection.”

My own guess is that the billionaire deficit scold Pete Peterson and his deficit commission that couldn't win enough votes in the Senate, but was established by President Obama's Executive Order anyway, is the real culprit here.

The commission, which began meeting on Tuesday, has been barraged with letters demanding that it conduct all of its meetings – including those held by subgroups of the 18 commissioners – out in the open. One came from Michigan Rep. John Conyers and 15 other Democratic House members, another from House Republican minority leader John Boehner of Ohio. The third was signed by 77 social service organizations ranging from the NAACP to Vietnam Veterans of America.

What are they so worried about?

That's an extremely good question. One shouldn't need secret, closed-door meetings for a commission whose business was legitimate and whose goal was an honorable and legitimate one. Unfortunately:

...the White House appears to be using a self-described "independent, non-partisan" group, called America Speaks to carry out what appears to be an "astro-turf" campaign to simulate public discussion of these issues. Heads up, folks. They announce on their website:

On June 26, 2010, thousands of Americans, in hundreds of locations across the United States and online, will weigh-in on strategies to ensure a strong economic recovery and a sustainable fiscal future.

Sounds like a cool, grassroots, online democracy kind of project - until you read further and find one of their big funders: the Peter G. Peterson Foundation.

Just as with the Tea Party, progressives aren't faced with just fear and panic. We're facing fear and panic backed by the deep pockets of corporate astro-turf operators. How will the commission go about making its case?

Obama’s deficit commission will be participating in a 20-city electronic town hall meeting, put together by an organization called America Speaks. It is financed by Peterson, along with the MacArthur Foundation and Kellogg Foundation. This is a truly unusual event because it marks the first time a presidential commission’s activities are financed by a private group that has long been lobbying the government on the very subjects the commission is supposed to “study.”

As has been pointed out, Obama seems to be awfully comfortable dealing with the big money people in industry and finance. His statement upon learning that BP didn't have a working plan to deal with undersea catastrophes was:

Where I was wrong was in my belief that the oil companies had their act together when it came to worst-case scenarios.

Let's hope he's not similarly misguided when it comes to the financial security of regular Americans.


Oh, and a piece from firedoglake on what the wars in Iraq and Afghanistan are costing the US as a nation.