Study on Stimulus effectiveness & other stories

PDF on effectiveness of the February 2008 Stimulus.

Also, economist Robert Samuelson criticizes Keynesian theories, but interestingly, fails to spell out any alternatives. Also completely fails to explain why, if the American economy was in such dire straits, interest rates on Ten-Year Treasury Bonds are still so low. The "risk premium" should be through the roof if the situation were even half as bad as he suggests.

Again, Boehner is demonstrating that he's the weakest Speaker of the House in living memory.  What's the point of making deals with a guy who can't deliver?

The entertainment industry is strongly pushing a Stop Online Piracy (SOPA) bill. Funny thing, but their profits at this time are absolutely soaring. Are they trying to destroy the Internet for nothing?

Round-up on Occupy Philly that was in control of Dilworth Plaza for a little under two months.

Protest Senator Toomey (Member of Cat Food Commission)

Senator Pat Toomey (R-PA) is a member of Cat Food Commission II and the Progressive Democrats of America will be holding a Brown Bag Lunch Vigil at 2:00 p.m. on Thursday, November 17 at Toomey's Philadelphia office at 1628 John F. Kennedy Boulevard.

I've got a flyer up that gives the same event details and explores just what the Cat Food Commission is all about. Oh, and here's the link to the Paul Krugman piece that connects to the CBO Report that the flyer refers to.

Cat Food Commission II – wasted opportunity

When I read about Senator Max Baucus (D-MT) and, unfortunately, a majority of other Democrats on the “Super-Committee” (Which progressives refer to as “Cat Food Commission II”) offering a radically regressive plan to make $500 billion in Medicare cuts, I read a few more sentences. I saw that, sure, fine, okay, the plan would also ask for $300 billion in stimulus funds, but the result of that would obviously be $200 billion in lost consumer demand as people would either lose work from sickness or would spend money they would otherwise spend on other things. I shot out a few letters to my representatives, but I agree with this piece that says the proposal was a horribly wasted opportunity to make a clear statement to the American people as to what Democrats actually want to do and what Democrats really stand for.

Really? Do Democrats really want to see $2 trillion in spending cuts balanced against only $1 trillion in new taxes? At a time of 9% unemployment?!?! At a time when the Occupy Wall Street movement should have been making it absolutely crystal clear to politicians that the time for austerity measures is long over?!?!!?

How on Earth could Democratic politicians have possibly concluded that Republicans were going to agree to new taxes? What on Earth made them think that anybody in America was so anxious for an agreement that they'd take a slowdown in the economy in return for a wildly uneven agreement that would hurt an already-hurting economy still further?

And remember the outcome of the debt-limit debacle. Speaker of the House John Boehner said he got 98% of what his side wanted out of the deal and, not surprisingly, President Obama's approval rating promptly cratered. That's because he gave up far too much in return for far too little.

Sorry, but Baucus' offer is a major FAIL in every possible way that one can look at it. Fortunately for the American people, Republicans turned up their noses at the offer and refused to even discuss it.

Update: Washington Post puts together an excruciatingly bad front page editorial piece (They pretend it's a news piece) that completely misrepresents the status of Social Security. Piece includes link to mailing list with which to contact media and request correction.

Round-up on Occupy Wall Street

6:14 PM PT: Herman Cain is really frustrated because he doesn't understand what the OWS movement wants. "Do they want the bankers to come downstairs with checks in their hands?" he asks. He's totally bewildered and obviously pissed about it. He wants to know what to do to make them go away. And he can't figure it out. And, of course, that's exactly the point. That's the question the OWS movement wants him to be asking. And eventually the Herman Cains of the world will be forced to figure it out.

Daily Kos covers Republican debate of 18Oct2011

A Huffington Post writer explores just why the Occupy Wall Street (OWS) movement has been so successful. BTW, percentage of those who approve of the Tea Party: 27%, percentage of those who approve of OWS: 54%. Heck, New Yorkers like them by a margin of 67%.

Dissenter at FireDogLake.com contributes another, very typical story about what motivates the OWS movement. My own story on visitng OWS in New York. Our allying of Occupy Philly with Philly Against War. Treasury Secretary' Timothy Geithner's vow to do "more" to help the 99% rings a bit hollow as no one remembers him doing much of anything to begin with. And last Saturday's protests? Wow!!!

Is the Democratic Party close and all buddy-buddy with OWS? Not exactly. Both sides have good reason to keep their distance. The National Review website is convinced that the two are in cahoots anyway. Good round-up of views on Democrats and OWS.

See, here’s a big part of the problem

Jeffrey Immelt, the former head of General Electric, is America's "Jobs Czar." What's the problem with that? Well, first off, corporate executives don't necessarily know anything about creating jobs for regular American citizens. Their whole expertise, from Mitt Romney (Republican presidential candidate) to Rick Scott (Governor of Florida) to Meg Whitman (Spent $160 million to become Governor of California and lost), consists of doing what benefits them and them alone. Perhaps a few cronies can share in the spoils, but their whole ideology revolves around "What's good for General Motors (Or whatever corporation they run) is good for the USA!"

Because the ideology of business holds that whatever is good for them personally is also good for America as a whole, they simply can't see where what's good for them personally ends and when the good the country should take a higher priority. There never was any indication that corporate executives make good politicians. There are of course exceptions, there's nothing about being a corporate executive that automatically makes one unqualified to be a politician or a political appointee, but when Immelt fired one-fifth of GE and made hundreds of times what the average worker at GE made, there's nothing that should give us any confidence that Immelt has the vaguest clue as to what he's doing.

Please let's get off the idea that corporate executives automatically make good politicians. G.W. Bush was the first President to have earned an MBA and look where that got us!

Occupy Wall Street

A running log of events in the Occupy Wall Street movement.

Economist Dean Baker makes an extremely good point about the mocking NY Times piece on the protests:

The NYT used its news section to mock critics of Wall Street. It presented the comments of some of the people protesting Wall Street. While the people quoted in this article do appear to be confused about the role of the financial industry in the economy, the paper would have no difficulty finding articulate critics of the financial industry.

For example, it could present the views of Nobel prize winning economist Joe Stiglitz. Or, it could present the views of Nobel prize winning economist, and NYT columnist, Paul Krugman. Or could interview Simon Johnson, a former chief economist at the International Monetary Fund.

Are lefties doing as much as they can to help the movement?

It's no secret that the protesters on Wall Street are actively being marginalized by the press. Of course, it's also no secret that the protesters themselves are doing an effective job of self-marginalization as well through a lack of focus on media management, goal orientation and message coordination. One of the challenges of the protest movement on the left is resistance to the forms of coordinated discipline that maximize the efficacy of group action.

But this also isn't exactly the fault of the protesters. The reality is that labor orgs, Democratic clubs and central committees and other left-leaning organizations should be putting the full weight of their money, messaging and organaizing capacity into a directly anti-wall street movement. In the absence of that, particularly in New York, the action is left to a ragtag bunch of college kids and disparate activists with little in the way of media skills and organizational experience.

President Obama and the war on the middle class

The war against the middle class has been a relatively silent one until now. For decades, certain corporate interests and their influence peddlers in Washington (both lobbyists and politicians alike) have orchestrated a stealth ambush targeted at the core of American society. By and large, outside of high-information circles, the legislative actions that filled their coffers at the expense of middle class wallets went largely undetected by most Americans.

Obama’s proposal

We got ourselves some vigorous criticism from one of our "usual suspects" and we have ourselves a warning about how Obama intends to pay for the new stimulus (Not at all clear as to why, but President Obama is avoiding using the term "stimulus").

The news about how the debt-ceiling debacle was perceived by the public is that, as a sheer, unmitigated disaster, it ranks a bit below Hurricane Katrina/flooding of New Orleans and just a hair above Iraq's inavsion of Kuwait in 1991. Personally,  I regard that as extremely good news because that means that Obama is likely to avoid that sort of complete collapse/surrender in the upcoming negotiations over how much of his proposal to put into law.

And sure enough, the President is reacting to House Majority Leader Eric Cantor's plea "The message was: either accept my package as it is, or I will take it to the American people. I would say that that’s the wrong approach." by taking his case directly to Cantor's own district, telling citizens to contact Congress and demand quick action.

Economists are generally happy about the plan and what's really, REALLY cool is that the White House is refusing to make preemptive concessions!

Recommendations for the President

Rep. Michele Bachmann (R-MN) has gone on record, saying that God is displeased at America's spending habits and “we’ve got to rein in the spending.”

 

House Majority Leader Eric Cantor is making noises about attaching spending cut measures to disaster-relief bill.

 

The good news is that Obama's debt-ceiling deal was politically, a catastrophe. 46% to 32%, the public thought it was a lousy deal that would hurt the economy.

 

Obama signed the bill all alone.

 

Absolutely no one wanted to be visually associated with the deal, even though Speaker of the House John Boehner said "We got 98 percent of what we wanted," he said adding that the framework cuts more spending than it raises the debt limit. It also caps future spending to limits in the growth of government.

 

The problem for the President is not that lefty bloggers are critical of him and his performance (They are), but that they're the canaries in the coal mine who are warning him that he's really starting to slip in the estimation of the voters. The President's embrace of austerity was a really bad move that he really needs to pivot away from.

 

My recommendations are two: Obama needs to demand a clean bill for disaster relief. No cuts or the bill gets vetoed. He can't let himself get rolled again by giving in to blackmail as he did in the debt-ceiling deal. Two: He needs to cancel Cat Food Commission II, or as Senator Pat Toomey calls it, the super-committee to cut spending. He can do it by quietly telling all the Democrats on the Commission to simply not show up for meetings, Republicans will then complain, Obama can then come out and say the Commission was a lousy idea to start with and he supports Democrats who stay away from it. He should then stand with the public and say that he's opposed to any further cuts.

 

Failure to do this could very easily result in a President Romney/Perry/Bachmann.

 

Update: Progressive Keynesian economist Dean Baker examines Obama's proposed job creation schemes and finds them most underwhelming. If this is the best he can do, it means he hasn't learned anything and is probably doomed to be a one-term president.

 

Further update: Good! Looks like that's just what he's doing.

Cat Food Commission II

A few days ago (Aug 7th), Representative Allyson Schwartz (D-PA) caught my attention with the statement: "[The debt increase agreement] cuts $2.7 trillion from federal spending over 10 years, protects Medicare and Social Security, and does not harm our economic recovery." I immediately sent her a letter, protesting that any and all cuts to government spending harmed the economy. A Republican/Tea Party Representative sent a letter to the Congressional Budget Office, asking about the effects of cuts on the economy. The CBO's answer was:

"When demand for goods and services falls short of the economy's ability to produce them, as is the case currently, increasing government spending can increase aggregate demand and thereby narrow the gap between the economy's actual and potential levels of output," Elmendorf writes.

The precise details matter. The more robust the economy, the lower the impact. But, according to Elmendorf, "when the Federal Reserve's ability to lower short-run interest rates is constrained because those rates are already near zero, as they are currently, the short-run effects of changes in government spending on output tend to be larger than usual." [emphasis in blog post]

In other words, yes, cutting the budget by anything harms the "economic recovery." Elmendorf adds that cuts "would decrease real (inflation-adjusted) gross national product (GNP) in 2012, 2013, and 2014 by amounts ranging from roughly 0.1 percent to 0.6 percent depending on the year and the assumptions used." In other words, no, there is no "safe" level of cuts that will not harm the recovery.
Of course, this is quite significant given Cat Food Commission II, or in Senator Pat Toomey's (R-PA) words, the "deficit super-panel," which just finished picking its roster of persons to serve on it, is constituted to produce cuts only. Toomey himself says "I'm not interested in some kind of big tax increase; that would be counterproductive."

Senate Minority Leader Mitch McConnell (R., Ky.), who chose Toomey, said his main criterion was finding senators "who are interested in achieving a result that helps to get our nation's fiscal house in order. . . . That means reforming entitlement programs that are the biggest drivers of our debt, and reforming the tax code in a way that makes us more competitive and leads to more American jobs."

So, whether Democrats agree or not, and at least some of them are in agreement with Republicans that there should be spending cuts, but no tax increases, the real problem is the Committee itself:

The super-committee itself is a profoundly conservative and anti-Democratic entity, immune from public pressure and tasked with deciding between two bad choices—a so-called grand bargain that would significantly reduce the social safety net vs. deep across the board cuts at a time of economic peril. The idea of doing anything to stimulate the economy is totally absent from its purview. The scope of the committee itself, rather than who’s on it, is the real problem.

And as to the notion that the Democrats on the Commission are flaming lefties, erm, no.

What does the S&P downgrade of US creditworthiess mean?

A very, very serious math error was allegedly behind the Standard & Poor downgrade of the US credit rating from AAA to AA+. S&P admitted the $2 trillion error, but downgraded US creditworthiness anyway.

A round-up of opinions on the downgrade.
Lots and lots of questions about whether S&P is competent to rate anybody.  Lehman Brothers and AIG were both issuing bonds that S&P rated as AAA only a month before they crashed and burnt.

Very good question by an economist.
"It would have also been worth asking what S&P thinks it means by this downgrade. U.S. government debt is payable in dollars. The U.S. government issues dollars. What does it mean that S&P thinks that at some point the government will not have the dollars needed to pay interest and principle and its outstanding debt. Does S&P think the U.S. government will forget how to print dollars?"

Yee-hah to this!
"...sound fiscal policy must take precedence over ideological hissy fits and constant threats of government shutdowns and partial-shutdowns as petty acts of gamesmanship (see: FAA shutdown, etc.)"

Terrorism and debt

Well, having just finished watched the movie "The Taking of Pelham 1 2 3," I feel it goes pretty well with the drama that was just more-or-less concluded in Washington DC. As in Pelham, this was a hostage crisis, with Republicans threatening the good name and credit rating of the United States. As The Philadelphia Inquirer made clear, the whole episode has left US creditors and allies very troubled. Unfortunately, President Obama seems to have these "Grand Bargain" fantasies where everybody gets something and gives up something and all parties ends up reasonably satisfied. Or perhaps Obama just might be a fan of the old Clintonian trick of "Triangulation," a strategy whereby the President would stand between the left wing of his own party and Republicans and thereby appear to be the centrist, Third-Way "grown-up in the room." It worked for the President, but greatly weakened the Democratic Party as a whole.

As an old peacenik buddy David Gibson puts it (David had a long-time relationship to the group Peace Action, a group that's big in California and that has a significant chapter in New Jersey, but is next to unknown here in Philly), I cheerfully and wholeheartedly agree with him that the “People’s Budget” is a vastly superior alternative to anything that's been discussed by either Obama's "Cat Food Commission" or Representative Paul Ryan's (R-WI) plan "The Path to Prosperity," that was voted on by the Republican-controlled House of Representatives ("No Dems voted for the measure; and only four Republicans jumped ship"). Alas, the People's Budget was considered a minor also-ran that was worth little, if any, attention as far as the national press corps was concerned.

According to NY Times columnist Paul Krugman, the deal reached by President Obama and the Republicans/Tea Partiers is an unmitigated disaster.

Indeed, slashing spending while the economy is depressed won’t even help the budget situation much, and might well make it worse. On one side, interest rates on federal borrowing are currently very low, so spending cuts now will do little to reduce future interest costs. On the other side, making the economy weaker now will also hurt its long-run prospects, which will in turn reduce future revenue. So those demanding spending cuts now are like medieval doctors who treated the sick by bleeding them, and thereby made them even sicker.

As the blogger Digby puts it:

The idea that they are even talking about this at a time of nearly 10% official unemployment with the economy looking like it's going back into recession (if it ever left) makes this debate surreal and bizarre. To cut the safety net and shred discretionary spending in massive numbers at a time like this is mind boggling. That it's happening under a Democratic President and a Democratic Senate is profoundly depressing.

A blogger for the Washington Monthly felt progressives were so down about the results, he rounded up people who saw the deal as something other than a complete disaster, but Daily Kos pours cold water all over his first example. Various people have tried to suggest that the Bush (Now the Obama) tax cuts will be eliminated at the end of 2012, but that appears to be very highly unlikely.

I really wish I could say something positive about the deal, but I'm afraid that Pelham had a much happier ending.

Updates:  Y'know, it's always nice when people wake up to a realization (AFL-CIO also chimes in), but it's kind of annoying when they realize something after close of business, like a few minutes after 5:00pm, after most everyone has left for the day.
Senate Minority Leader Mitch McConnell has absolutely, positively no intention whatsoever of turning to the jobs issue. Why Obama thinks we've settled the spending issue and can now turn to jobs, I just don't know.
Very disturbing photo, of the President signing the debt bill all by himself. Neither Republicans nor Democrats want to be associated with this bill.

Status of the debt ceiling fight

Not a whole lot of good news to pass on. As Time puts it, the Tea Party fringe of the Republican/right-wing movement has now broken off from the Establishment big-finance Republicans and is running wild, without any clue as to how the economy actually works. Heck, not many people in the American establishment generally, appear to have any clue about how economics works!

A major problem is that right-wingers don't really seem to understand how representative democracy is supposed to work and are giving up vastly too much authority to groups that demand pledges. A representative democracy is one where one chooses a representative based on basic compatibility with ones own viewpoints and then give the representative some latitude to negotiate bargains. President Obama expressed this basic point of view but, according to progressives at least, went much, MUCH too far towards pleasing the other political party. Unfortunately, the President appeared to reinforce this view that he's far more a Blue Dog Democrat (as opposed to a Progressive Democrat, which a lot of people thought they were electing in 2008). Good video commentary on that last piece

Is there hope? Actually, there is.
Grover Norquist demanded that Republican Congresspeople sign a "No new taxes! EVER!" pledge, but appeared to grant dispensation to break that pledge before hastily taking it back. Still, it's a very positive sign to see that at least some people are at least open to discussing tossing the Bush tax cuts into the wastebasket.

It was also very good to see the Inky (The Philadelphia Inquirer) recognize that the Republican Party appears to be more and more fanatical and separated from reality, though they ultimately wimped out and accused Republicans of "pandering to their right-wing base" instead of being Tea Partiers themselves.
Don't know. We certainly hope the President does the right thing. Let's just hope he has to take a better approach than the one he's been taking up until now.

Update: Interesting piece by Megan McArdle. McArdle is well to the right of me, politically (If, on a scale of 10, I count as a 2, McArdle is about an 8), but she brings up a debate that's at least as old as Reagan's 1980 campaign for the presidency. I was 20 years old at that time and going to college in Washington DC, so the debate may very well have been a good deal older, but that's when I became aware of it. McArdle has taken the very same position that I subscribed to back then. Essentially, that position is "Okay, so ya wanna cut the budget, eh? Okay, fine. What, exactly, do ya wanna cut?" Reagan himself solved that problem by using the "magic asterisk" and "rosy scenario" along with a few other sleight-of-hand tricks, but essentially, the problem has remained  what it was back during the 1980 campaign, that is, no one really knows. Republicans know they want the budget to be smaller, but they're pretty fuzzy when it comes to specifics.

The President’s wishful-thinking approach

Once again, the President tries to move in two different directions at once. He's trying to adopt two wildly contradictory approaches with his strategy on the debt "crisis." What really amazes me is to hear statements like this:

You know, if you care about making investments in our kids and making investments in our infrastructure and making investments in basic research then you should want our fiscal house in order so that every time we propose a new initiative, somebody doesn’t just throw up their hands and say more big spending, more government.

But Republicans and to some extent, Blue Dog Democrats, oppose the New Deal and Great Society programs, period! They oppose these programs root and branch! Cutting these programs down to size is not going to satisfy them. Giving them a half a loaf is just going to whet their appetite for grabbing the whole loaf. Republicans want these programs destroyed, completely, absolutely and without anything left standing. They're not the slightest bit interested in "splitting the difference" or in reaching some sort of reasonable compromise.

My recommendation is that we make the needed investments, period! Heck, even the right-wing NY Times columnist David Brooks recognizes that "The fiscal crisis is driven largely by health care costs." The US spends about twice as much on health care per person than what every other advanced society does, yet the results are mediocre, in the middle and unspectacular. Yes, it would be marvelous to produce an even better health care system than what Obama managed to pass in 2010, but it's actually even easier than that. There are ways in which American health care can be globalized and made to compete with other countries in ways that would lower America's per-person costs. What does it mean that health care costs are the primary driver of deficits? It means that cutting grandma's Social Security check and reducing grandpa's Medicare reimbursement will do absolutely nothing to put our "fiscal house in order."

Progressives managed to come up with a comprehensive plan that, unlike both the Representative Paul Ryan plan and the "Cat Food Commission" (Actually, the Simpson-Bowles Deficit Commission) plan, actually "gets the budget into primary balance by 2015." Do Republicans/Blue Dogs like the plan? Of course not. They absolutely hate the plan because it preserves the New Deal and Great Society programs. Our President appears to want to please everybody, but maybe that simply isn't possible.

As the FireDogLake piece says:

This “get it off the table” strategy was behind the 2002 Iraq war resolution, actually. Getting Iraq off the table would lead to a focus on the economy and a victory for Democrats in the midterms. It didn’t work out that way. It never does.

Blue Dog Democrats, and I'm including Obama in that group, appear to be extremely bad at judging what their opponents will do.  Obama wasted week after week talking with Senator Olympia Snowe (R-ME) about the ACA, trying to find areas on which they could agree. Sure, it would have been preferable to have gotten the votes of more than just the Senate's 59 (Later 60 when Al Franken was approved as the Senator from Minnesota, but that went back down to 59 when Senator Ted Kennedy (D-MA) died) Democrats and the two Independents who were in the Democratic Caucus. But ultimately, Snowe decided not to vote for the ACA, thereby wasting many valuable weeks during which other things could have gotten done.

Would anyone have known or cared that the ACA was passed using the filibuster-proof reconciliation process? Considering how many times G.W. Bush used it (To pass, among other things, the Bush tax cuts of 2001 and 2003) Republicans would likely have made a stink about it, but that's an "inside baseball" kind of thing where very few people are up to speed enough on the details to really care one way or another.

The essential political problem here is a rhetorical one, one of the political language that's being used to describe the situation, not one of real facts. Keynesianism is not dead or disproven or discredited, it's just that the President has not mounted a full-throated defense of it. He's permitted Republicans to define political reality and to set the parameters of what is and isn't politically possible. This was a completely incoherent and thoroughly confused statement when it was made back in February, but it's pretty obvious that the thinking of the Obama Administration hasn't improved at all:

"Well, Sam, I would point you to our logic, to the president's logic, which is that we need to live within our means. We need to reduce spending. We need to demonstrate our seriousness about that, but we also need to invest where it's essential. And we feel that we need to be careful about cuts so that we don't threaten the recovery, that we don't threaten growth, that we don't threaten our national security. But we obviously agree with others that spending cuts are necessary."

The obvious problem here is that ANY cuts to government spending are bad and counter-productive! If there were any harmless and necessary cuts, no one had identified them back in February and no one has identified them today.

Update: The President also engages in a false equivalence:

"Let's be honest. Neither party in this town is blameless," he said in his weekly address. "Both have talked this problem to death without doing enough about it. That's what drives people nuts about Washington."

Daily Kos responds:

Wrong. There is one party that is to blame for the debt and the deficit: The Republican Party. From 1981-2011, this deficit problem emerged. Twenty of those years were under Republican rule, and the 10 years of Democratic rule produced a net surplus. Democrats balanced the budget. Republicans ruined it. No, Mr. President. There is not blame on both sides. There is blame on one side.

Debt negotiations

Ga-a-ahhh!!!!! Some statements from the President just drive me absolutely crazy! They were made in response to Speaker Boehner's question to him that:

"After embarking on a record spending binge that left us deeper in debt, where are the jobs?"

Okay, first off, House Minority Leader Nancy Pelosi was talking about the Republican Speaker's failure to put up any jobs-creation bills after being the Speaker for 163 days (That was on 16 June), so yeah, where are the jobs, Mr. Speaker?!?!?!?! Money bills begin in the House, after all.

Second, someone ran a chart of spending year-to-year increases going back to John F. Kennedy. Yes, Clinton had relatively small increases during his two terms of 3.1% and 3.48% respectively, but Obama's increase of 6.71% is quite similar to George W. Bush's increases of 6.41% and 6.82%. BTW, Ronald Reagan had increases of 9.62% and 5.79% and Lyndon Johnson led the way with 10.79%. It's far from clear that Obama oversaw a "record spending binge," especially when one considers that Obama added the war spending to the normal budget. He didn't try to keep war spending sequestered off from the rest of government spending.

As to the President's infuriating statements:

And over the last 15 months, we've actually seen two million jobs created in the private sector.  And so we're each month seeing growth in jobs,  But when you've got a 8 million dollar -- 8-million-job hole and you're only filling it 100,000-200,000 jobs at a time each month, obviously that's way too long for a lot of folks who are still out of work.

[snip]

It's estimated that we have about $2 trillion worth of infrastructure that needs to be rebuilt.  Roads, bridges, sewer lines, water mains; our air traffic control system doesn't make sense.  We don't have the kind of electric grid that's smart, meaning it doesn't waste a lot of energy in transmission.  Our broadband system is slower than a lot of other countries.

For us to move forward on a major infrastructure initiative where we're putting people to work right now -- including construction workers who were disproportionately unemployed when the housing bubble went bust -- to put them to work rebuilding America at a time when interest rates are very low, contractors are looking for work, and the need is there, that is something that could make a huge, positive impact on the economy overall.  And it's an example of making an investment now that ends up having huge payoffs down the road.

Now, my objection is not to the accuracy of any of this, but goes to the President's priorities. Why on Earth is the President concentrating on deficit reduction at this point in time when there are so many obvious needs that need to be tackled now?!?!?!!
I strongly agree with this piece, which says Obama is destroying the Democratic "brand." Obama clearly wants trillions of dollars in cuts, taken out of programs that help less wealthy Americans. AARP and the very wealthy, strongly anti-Social Security Pete Peterson are of course, on the same page along with him. All three use "clever" euphemisms to disguise the fact that they want to impoverish the non-rich. And yeah, I'm completely on the same page with this statement:

Now if you think that this is something the President is doing because it’s the only way to get Republican cooperation you can stop reading here, because we’re going to disagree.  From the moment he took the White House, the President has wanted to cut Social Security benefits.  David Brooks reported that three administration officials called him to say Obama “is extremely committed to entitlement reform and is plotting politically feasible ways to reduce Social Security as well as health spending” in March of 2009.  You can only live in denial for so long and still lay claim to being tethered to reality.

It's been apparent for quite awhile that the President is holding his own arm behind his back and chuckling while he complains about his arm being twisted by those terrible Republicans. That's not to say Republicans haven't completely swallowed the Tea Party Kool-Aid and aren't the flaming maniacs that they're accused of being. I'm just saying it's hard to say who's really representing the American people here.

What we’re watching is the death of the Democratic Party.  Or, at least the Democratic Party as most of us have known it.  The one that has taken its identity in the modern era from FDR and the New Deal, from Keynsianism and the social safety net.  Despite any of its other shortcomings (and they are myriad), the Democratic Party has stood as a symbol for commitment to these principles.

AARP makes a pretty good statement here, but I'm bothered by the inclusion of one word (emphasized):

"AARP is strongly opposed to any deficit reduction proposal that makes harmful cuts to vital Social Security and Medicare benefits," Rand said.

I'd have much preferred that word not have been in there at all. There's a big potential difference between "harmful cuts" and just plain "cuts." There's no demonstrated need to make any cuts whatsoever.

Looks like at least some of the House Progressives are standing firm. We need to encourage them to keep it up.

The gist of [Pelosi's] remarks: "Members of her caucus won't vote for a grand bargain to raise the debt limit and reduce future deficits if the final deal includes cuts to Medicare and Social Security benefits—and that means it probably won't pass."

Fortunately, no deal has been reached as of yet, but Sunday (10 July) is the next day for negotiations.

Way behind the curve

Very little and very late. The Democratic leadership finally wakes up to the need for more economic stimulus. Sure would have been nice if they had never taken their eyes off of the ball, but it's good to see that they've finally realized that their political future depends on getting the economy working again.

By the way, the plan to get corporations to bring their profits back home needs lots and LOTS of work! Not a good plan at the moment, though the idea is a good one. I remember reading that Enron had been keeping offshore accounts and thinking "Offshore accounts? Isn't that what, like, drug dealers and terrorists do? Why in the bloody heck is an American company keeping offshore accounts?" The piece indicates that a lot of these offshore profits that companies wish to repatriate are from profits made from doing business overseas, but I wouldn't be at all surprised to learn that Enron-style money movements were also involved.

Good piece on how President Obama relates to his liberal base voters.  The President has leaned heavily towards trying to "reach across the aisle" and to find common cause with Republicans (Pretty much the whole raison d'etre for Blue Dog Democrats to exists in the first place) but, y'know, it really would help his case for doing that if he had been successful in peeling off any Republican votes for his policies. As it is, he'd be much better off by taking hard-line progressive stances.

Good news

House Majority Leader Eric Cantor has quit the deficit talks that are being presided over by Vice-President Joe Biden. His reason?

That said, each side came into these talks with certain orders, and as it stands the Democrats continue to insist that any deal must include tax increases. There is not support in the House for a tax increase...

Absolutely, positively out of the question! It would be far better for Democrats to simply say “Hey, well, we tried” and to simply leave the talks than to agree to take an increase in taxes off the table. To agree to Cantor's demand is absolutely unacceptable.

Minority Leader Nancy Pelosi is correct - "Yes, we do want to remove tax subsidies from big oil, we want to remove tax breaks from corporations that send jobs overseas. That list goes on." The piece suggests in its title that Pelosi used the word “tantrum,” to describe the Majority Leader's pulling out of the talk, but doesn't quote her directly saying that.

Problem is, many progressives have suspected all along that President Obama has wanted steep budget cuts and now, some die-hard Obama supporters are agreeing. The Cat Food Commission, after all, was what one terms an “unforced error.” It wasn't something that Obama had to do, it was clearly something he wanted to do. Unfortunately, Cantor refers to “trillions in spending cuts,” which sounds an awful lot like Obama wants to seriously shred the safety net.

Further evidence that people in the administration are being dense on purpose is Federal Reserve Chairman Ben Bernanke's statements on the economy:

Fed Chairman Ben Bernanke told reporters Wednesday that the central bank had been caught off guard by recent signs of deterioration in the economy. And he said the troubles could continue into next year.

"We don't have a precise read on why this slower pace of growth is persisting," Bernanke said. He said the weak housing market and problems in the banking system might be "more persistent than we thought."

Good heavens! Has this man been living under a rock for the past year?!?!?! What is so surprising about seeing Republicans hacking and slashing away at the Federal budget, followed by the news that there's been a rise in unemployment?!?! I can't imagine where this guy gets the idea that a further weakening in the economy could possibly have been a surprise to anybody.

 

About bloody time, it is!

So, after serving for a little less than two years as Obama's Director of the White House National Economic Council, Larry Summers, back at Harvard University as a professor, has now suddenly realized that the Nobel Prize-winning Paul Krugman, the economist Dean Baker, the FireDogLake blogger Scarecrow and many, many others, were right all along!

He fills his piece with such "No $%#@ Sherlock" pearls of wisdom as:

Beyond the lack of jobs and incomes, an economy producing below its potential for a prolonged interval sacrifices its future.

[snip]

After bubbles burst there is no pent-up desire to invest. Instead there is a glut of capital caused by overinvestment during the period of confidence — vacant houses, malls without tenants and factories without customers.

[snip]

It is false economy to defer infrastructure maintenance and replacement when 10-year interest rates are below 3 percent and construction unemployment approaches 20 percent.

[snip]

The greatest threat to the nation’s creditworthiness is a sustained period of slow growth that, as in southern Europe, causes debt-to-GDP ratios to soar.

I mean, hey, don't get me wrong, this is all wonderful stuff. It's very belated on his part, but it's very good to see that Summers is aware that without serious action by the Federal Government to boost spending:

...we might well be looking at the possibility of a double-dip recession. Substantial withdrawal of fiscal support for demand at the end of 2011 would be premature.

Uh, news for Professor Summers, the US IS looking at a possible double-dip recession and that's been crystal clear ever since this month's job numbers came out. Why has jobs growth slowed down? Well, the Republicans and the Tea Party people (Often one and the same) have been on an absolute crusade about cutting the federal budget. When the economy needs spending to recover and the Obama Administration acquiesces in spending cuts, the result of depressed job creation shouldn't have been the slightest bit surprising.

The real problem is that all of this has been absolutely crystal clear for over two years and Summers was in a position in the Obama Administration where he could have had a positive effect on the situation. Summers suggests that "withdrawal of fiscal support" would be a bad thing, i.e., that pivoting too early from job creation to tacklng the budget deficit would be an unwise move. True, but back in early 2010, when the "Cat Food Commission" (Officially termed the "Simpson-Bowles Deficit Commission," we refer to cat food because Alan Simpson and Chester Bowles made it very clear that they wanted federal spending to be reduced so much that they'd soon see our senior citizens scrounging dumpsters for food and considering cat food to be a delicacy) was established as a way to cut citizen benefits without anybody's clear fingerprints showing up too much, well, that  would have been a nice time for Summers to have had these epiphanies.

Politically, the Obama Administration has long since pivoted from job creation to deficit reduction. They gave the initiative to the Republicans and Tea Party people a long time ago. Frankly, if I were them, I wouldn't worry about consistency. I'd simply pivot back to job creation. I'd keep the explanations minimal as the press corps is unlikely to press them for explanations and consistency anyway. Doing that would require institutional memory and some grasp of economic theory in the first place. Summers' proposed solutions are very weak and small-bore, but they point in the right direction. Right now, the very best thing the Obama Administration could do would be to take Summers' very recent revelation and to run with it.

Austan Goolsbee retires

With a double-dip recession looming and an administration that doesn't appear to have any problem with wildly counter-productive austerity measures, a White House economist who appeared to really understand America's economic problems and how to fix them realizes that his advice is unappreciated and not being considered, so he's out the door. This is, of course, the absolutely worst possible time to start agreeing with the deficit hysterics as long-term unemployment is now officially worse than it was during the Great Depression.

This right after the Nobel Prize-winning economist Peter Diamond threw in the towel and returned to M.I.T after waiting since April 2010 to be confirmed for a Federal Reserve post. Republicans are fighting hard to ensure that America has no competent economists in any leadership positions.

Parsing our traditional media reporter

I saw this WaPo piece courtesy of Dean Baker's Beat the Press blog and the illogic was so extreme I couldn't even get past the first few paragraphs of the fictional exchange between “Barack” and “Paul” (Gee, I wonder who those two names could be representing? /snark)

 

Paul: Okay, you guys won the first round. Congratulations on that New York House seat. But “Medicare as we know it” can’t continue.

 

Okay, “Paul” admits that, yes indeed, the New York District 26 election was all about Ryan's plan to do away with Medicare. Can Medicare “as we know it” continue? Well, health care as we know it certainly can't continue. President Obama made that quite clear In the speech that kicked off the push to get the Affordable Care Act passed.

 

But the problem that plagues the health care system is not just a problem for the uninsured. Those who do have insurance have never had less security and stability than they do today. More and more Americans worry that if you move, lose your job, or change your job, you'll lose your health insurance too. More and more Americans pay their premiums, only to discover that their insurance company has dropped their coverage when they get sick, or won't pay the full cost of care. It happens every day.

 

[snip]

 

Then there's the problem of rising cost. We spend one and a half times more per person on health care than any other country, but we aren't any healthier for it. This is one of the reasons that insurance premiums have gone up three times faster than wages. It's why so many employers -- especially small businesses -- are forcing their employees to pay more for insurance, or are dropping their coverage entirely.

 

So, it's not like anybody back in mid-2009 disputed that American health care was (and still is) quite a mess.

 

Seniors now have little incentive to control costs, and providers, paid by the procedure, have every reason to ramp them up.

 

Uh, wait a sec, how does “We spend one and a half times more per person on health care than any other country” square with the idea that private, for-profit health care insurance companies are just throwing money at the problem of health care, seemingly without a care in the world? I thought conservatives, Republicans and right-wingers have been claiming for decades that it's government that spends wildly and freely and doesn't really care about costs. Let's look at another paragraph from Obama's speech:

 

One man from Illinois lost his coverage in the middle of chemotherapy because his insurer found that he hadn't reported gallstones that he didn't even know about. They delayed his treatment, and he died because of it. Another woman from Texas was about to get a double mastectomy when her insurance company canceled her policy because she forgot to declare a case of acne. By the time she had her insurance reinstated, her breast cancer had more than doubled in size. That is heart-breaking, it is wrong, and no one should be treated that way in the United States of America.

 

Notice that Obama is citing cases from private, for-profit health care insurance companies. He's not talking about government agencies. Where on Earth does “Paul” get the odd notion that American seniors are driving up costs via unreasonable demands when other countries with government (i.e., not for-profit) health care have done a much better job of restraining costs? That doesn't sound like any private capitalist institution I've ever heard of. The important point to remember here is that Medicare administrative costs are about a fifth of private health insurance costs (The study by the Council for Affordable Health Insurance calculates administrative costs for Medicare as being 3.3% of total expenses, private health care costs are at 16.7%). Medicare is not the problem when we're discussing the state of our health care system.

 

Medicare costs were 8.5 percent of the federal budget in 1990 — they’ll be 17.4 percent by 2020.

 

I have no reason to doubt this, but the problem is far bigger than just Medicare.

 

Barack: The current system can’t go on. I wouldn’t say this publicly, but my party’s wrong to pretend it can.

 

Umm, see the above. No one on either side of the aisle disagreed with Obama's position that health care was a mess and had to be reformed. I haven't the vaguest clue as to where the WaPo reporter is getting this from. Now, if this was a piece from a random blogger, the problem here would apply to just that one person. But this is a traditional media piece and these people pride themselves on having editors and research assistants and fact-checkers. An oversight like this isn't just the fault of one person, it's the fault of a whole group of people. This merits extra condemnation on our part.

 

Still, your approach goes way too far. Seniors would get help to buy private insurance but would pay a lot more than they do now.

And over time, because the vouchers rise only with inflation, not with medical costs, beneficiaries would have to pay even more. They’re not going to be able to afford it, not with median incomes of less than $21,000. And why should they? You’re forced to make deep cuts in Medicare because you won’t agree to raise taxes and that’s the only other way to get to balance.

This sounds entirely accurate to me.

Paul: Look, I could maybe support higher taxes as part of an overall deal.

That's a nice idea in theory, but there's no evidence that Republicans are willing to raise taxes for any reason. Remember, the whole idea popularized by President Reagan and today pushed very strongly by Grover Norquist is “Starve the beast.” “The beast” being the parts of the government budget that serve the people of the middle and working classes, the government programs that do not directly support the military-industrial complex. So does “Paul” really mean to say “I just can’t admit that” or is he not “admitting” it because he has no intention of ever doing so? Sorry, I can't go along with the WaPo reporter's mind-reading here and refuse to credit “Paul” with the realism necessary to agree to raise taxes.

On costs, my plan gives extra subsidies to the poorest, sickest and oldest seniors. If those aren’t big enough, we could talk.

No. Again, this is a combination of wishful thinking and mind-reading. Ryan simply put out a plan wherein costs would keep up with inflation, not with medical costs and medical costs are increasing a good deal faster than inflation. As Baker points out:

And the comparison of the cost of the Ryan plan to the existing Medicare plan is not a hypothetical. The additional $34 trillion cost that CBO projected for buying Medicare equivalent policies is based on the actual history with Medicare Plus Choice and Medicare Advantage. How many times must this experiment be repeated before its results are accepted?

Ryan has not withdrawn any elements of his plan upon being informed that the cost would be an additional $34 trillion. This idea that he would be flexible and reasonable and would negotiate parts of his plan is sheer wishful thinking.

One statement “Barack” makes strikes me as very true.

Otherwise, costs just get shifted elsewhere.

Precisely! The whole idea of the Ryan plan is to simply shift costs from those most able to pay them (The government, large insurance companies) to seniors, people who are just getting by on Social Security and savings and pensions and who really don't have the spare cash to just toss into “the game.” Having “skin the game” is a rilly kewl-sounding phrase, but seniors spent their lives contributing to a system that they then expected would be there for them when they got to the point of really needing it. I saw a survey many years ago that said our maximum earning years are between 45 and 52. After that, memory and energy take a hit and our capacity for work begins to decline. It is cruel beyond any human decency to expect any typical baby boomer (Somebody born in 1947 would be 64 now) to suddenly have to deal with radical changes to their health care system. As I pointed out above, a person of that age will be living from hand to mouth with very little cushion to deal with radical changes. Such people simply don't have the resources to go out onto the market and negotiate whole new deals for themselves.

Rich Lowry asks: “Where are the jobs?”

Rich Lowry is the fellow who wrote the piece for National Review entitled "We're Winning [in Iraq]," but he wrote it back in 2005 when the US was most certainly not winning.  Lowry writes a basically decent piece today that takes the Republican Party to task for forgetting about jobs. Lowry gives far too much credit to the Republican Party for being sincere in their desire to fix Medicare's long-range difficulties ("If political life were fair, they’d be rewarded for their farsightedness") but is absolutely correct is saying that:

If you are worried about the security of your job, if your personal income is stagnant, if the value of your home is still declining, and if you are paying more for food and fuel, the perilous state of a government program circa 2024 that you know, one way or the other, will never be permitted to go bankrupt is not a subject of proverbial kitchen-table conversation.

Unfortunately for the Republicans, Lowry is also correct when he says:

Retreat on Medicare isn’t an option now. Like Cortes in Mexico, Republicans have disabled their ships behind them.

I strongly endorse Lowry's prescription here:

Deficit reduction should only be an element of a program for renewing the economy, which directly impacts people’s lives and also makes controlling the debt marginally easier. By a rough back-of-the-envelope calculation, every 1 percent of economic growth above the assumptions of the Congressional Budget Office knocks $2 trillion from the debt over the next 10 years.

My only revision to Lowry's suggestion is that deficit reduction should be placed entirely on the back burner and that the government should concentrate entirely on economic growth. Any serious attempts to cut the budget should wait until the country is prosperous and citizens have plenty of jobs and our infrastructure is well on the way to getting fixed and America is well on the way to replacing fossil fuels with renewable energy. In other words, deficit reduction is not an "element" of economic recovery. Deficit reduction is a luxury we can't afford for the next half-decade, at least.

The real problem I have with Lowry's piece is in the next-to-last paragraph:

House Republicans just released a growth plan. Sen. Rob Portman of Ohio has been evangelizing for a growth agenda since his election last year. The elements are familiar — cutting taxes and reforming the tax code, reining in regulation, increasing energy production, passing free-trade agreements. It doesn’t have much chance of getting signed into law, but neither does Ryan’s Medicare plan.

This plan has the slight problem of having absolutely nothing to do with economic growth. G.W. Bush cut taxes back in 2001 and 2003 and growth has been anemic ever since. Not sure what "reforming the tax code" means, but it sounds like allowing the rich to keep even more of what they already have and preventing the government from making use of the money that's sitting around in money market accounts and not going to much use. "[I]ncreasing energy production" sounds good, but I suspect it's just code for "drill, baby, drill," i.e., let's use up our energy resources even faster without attempting to find  any replacement sources. Free-trade agreements simply allow corporations to outsource jobs to other countries and thus are in direct opposition to getting the economy at home moving. It means more pay for those who are already wealthy, but it's far from clear that the non-rich will benefit in any way. Please note that with the passage of NAFTA (Activated back in 1994), the share of income from the five quintiles was

Year	Share of aggregate income
	Lowest fifth	Second fifth	Third fifth	Fourth fifth	Highest fifth	Top 5 percent

1994 (24)

4.2

10.0

15.7

23.3

46.9

20.1

2001

4.2

9.7

15.4

22.9

47.7

21.0

2009 (36)

3.9

9.4

15.3

23.2

48.2

20.7

This is not simply the result of NAFTA, but of a whole series of political decisions to move money to the higher tax brackets and away from those who are making less to begin with.  No, Senator Portman doesn't want economic growth, he just wants to continue the movemen of money upwards and to use up natural resources to the long-range detriment of the entire planet.

Lowry's piece is essentially a good one, but his proposed plan for growth is a complete FAIL!

Ryan plan rebuked in special election

Kathleen Courtney Hochul, the Erie County clerk and longtime Democratic figure who defied political experts who had given her little chance of success, ground out a stunning and surprisingly comfortable victory Tuesday in the special election for the House seat in the predominantly Republican 26th Congressional District.

Hochul defeated Republican Jane L. Corwin, a Clarence assemblywoman, 47 percent to 43 percent, with 97 percent of election districts reporting, while the Tea Party’s Jack Davis mustered only 9 percent in his fourth try for the seat. Ian L. Murphy of the Green Party recorded 1 percent, while overall turnout was about 25 percent.

The results marked a stunning defeat for the GOP in a contest that garnered intense national attention as the first competitive race following the Republican takeover of the House in last November’s elections. And as a jubilant Hochul took the stage at her headquarters at the UAW Hall in Amherst at about 10:30 p.m., she reminded supporters about the core of her campaign — controversial proposals by the GOP to revamp Medicare.

This tells us two things. First, Rep. Paul Ryan’s (R-WI) plan to toss granny onto the tender mercies of the marketplace with nothing more than a voucher that she can purchase insurance with, a voucher that will decrease in value over time, was a really lousy idea that should never have been proposed. Second, for the zillionoth and 23^rd time, Howard Dean’s 50-State Strategy is confirmed. It always was the better way to go and it proved itself once again. Even though Hochel didn’t have any reasonable chance to win her contest just a few short months ago, the Republican overreach gave her an opening and, because she already had an organization on the ground and ready to go, she was ready to take advantage of the opportunity.

Democrats should work hard to exploit this victory. They should drop all talk of a “Grand Bargain” between themselves and Republicans (I’ve very strongly urged the progressive Senator Dick Durbin (D-IL) to simply drop his membership in the “Gang of Six” and to just toss all of those plans into the recycling bin) and should adopt Minority Leader Nancy Pelosi’s plan to simply stand behind Social Security, Medicare and Medicaid and to just plain support all three of them unconditionally. There’s absolutely no call for reducing the federal budget to where Republicans would like to take it.

Update: Rather jarring to see a word here that really doesn’t belong in President Obama’s message of congratulations: “Kathy and I both believe that we need to create jobs, grow our economy, and reduce the deficit in order to outcompete other nations and win the future.” (Emphasis added).

What in the heck does reducing the deficit have to do with anything?!?!?!? The deficit is a purely technical problem that nobody would ever notice or be aware of were it not for deficit scolds nagging the country about it all the time. Jobs and growing the economy are serious and meaningful issues that have a direct impact on people’s lives. Those first two goals are often in conflict with the goal of reducing the deficit.

There’s not the slightest question as to where Democrats should stand when it comes to a conflict between the two goals Democrats should stand firmly and forthrightly in favor of jobs and growth. The deficit should be handled, it’s not a good thing to have a big deficit, but that’s a very distant second priority.

Minority Leader Nancy Pelosi rips Republican budget

Ooh! That's gotta hurt! Pelosi points out, quite correctly, how the Republican budget both hurts seniors and benefits wealthy supporters.

Update: Derek Thompson from the Atlantic defends the media's overlooking job-creation as a deficit-reduction strategy by saying "Nobody's talking about it." well, perhaps Republicans aren't talking about it, but the blanket term "no one" obviously doesn't include Democrats, who have been talking about job creation quite a bit.

The effects of state taxes

At the same time that NPR concludes that “Y'know, raising state taxes on the rich does not cause them to flee to lower-tax states,” Texas decides, in the middle of a fiscal crisis, to do without $1.4 million annually by giving a tax break to people buying yachts!

Now, I can kind of understand Texas' decision on the grounds of economic stimulus, but this decision only applies to the ultra-wealthy. It means nothing to Joe or Jane regular-person. There are no stimulus measures that apply to non-millionaires. And yes, the NPR study appears to me to be entirely sensible. It concludes that wealthy people tend to have strong ties to the community as they tend to have established businesses with long-time customers and employees and tend to be involved in other community activities (The e-e-evil Koch brothers also give money to an impressive list of decent and worthwhile recipients), so no, wealthy people are not likely to up and leave because the state takes a bit more of their money than they did the year before.

Do state taxes affect whether or not they move into a state to begin with? Not really, as rich people move to where the customers are. If people are moving to California to take part in the Gold Rush, hey, someone's got to sell them the pans, picks and shovels they'll need to do their gold retrieval!

And what is the cause of Texas' fiscal crisis? As we're seeing with lots of other states (Specifically, California and the 1978 Proposition 13), the real problem is under-taxation. The wealthy aren't paying nearly enough to cover the state bills.

A not-unexpected reaction

Unfortunately, there's nothing surprising about the fact that Republicans have now convinced the nation that the deficit, and not the lack of jobs, which is in turn due to lack of consumer demand, which is in turn due to the collapse of the housing bubble, is the real problem and that it must be fixed NOW!!!

 

The suggested solution, of course, is to cut government spending. Never mind that the government spends money because it is trying to meet real and serious needs. The battle cry is “We must cut spending!” The British elected a new Parliament recently, which set about “hammer and tongs” to cut Britain's budget. How did that work out for them? Not well at all. Britain's GDP showed a 0.5% contraction as opposed to any sort of growth.

 

 

“The Chancellor needs to get his head out of the sand. He doesn't seem to understand that without jobs and growth you can't get the deficit down. The slower growth, higher unemployment and higher inflation we now see under George Osborne means he is now set to borrow £46 billion more than he was planning to. That's a vicious circle and makes no economic sense at all.

 

“Families know that cutting too far and too fast is hurting, but now we know it’s not working either. George Osborne can't keep making excuses – it's not the wrong kind of snow that's to blame, it's the wrong kind of policies. He needs to think again before it's too late.”

Is it a good idea to reduce the deficit in any event? Actually, it isn't. The US is seriously behind in getting our infrastructure fixed and up-to-date. Missouri just had to evacuate 1000 people from threatened areas because the levees in the town of Poplar Bluffs failed in four separate places. Nothing surprising about this failure. The levees were rated as “unacceptable” back in 2008 by the US Army Corps of Engineers. Why did this particular levee fail? The community simply couldn't afford to keep it up. The US as a whole needs to spend about $50 billion in order to get all the levees back into shape (The US has 881 counties or 28% of the total number of all counties, that have flood control systems). Of course, people have been moving into areas that are protected by levees, so the longer levees go unmaintained, the more US citizens that are put at risk. In all, the US needs to spend about $2.2 trillion in order to meet all of our infrastructure needs. Curing the deficit by getting spending down is a very bad idea as our infrastructure will then be permitted to deteriorate still further.

Can the Democrats make the case for more federal spending? Well yes, but President Obama's support for the “Cat Food Commission” (i.e., the Deficit Commission) directly contradicts the idea that the deficit is meaningless compared to getting Americans back to work. Essentially, Democrats would have to contradict pretty much everything that the party has been saying about the deficit for the past two years in order to convince Americans that jobs should be our number one priority.

Update: From Daily Kos Pundit Round-up

"Note in the [Stafford Act chart] that it's the Governor, who asks FEMA, who asks the President to declare a Federal disaster or emergency so as to free up funds and relief that through the National Response Framework can be delivered to the states. ..."

The federal response is intiiated by the state, and complexity and speed are inversely related. The wider the area affected, the slower the response will be (because supplies and infrastructure needs to come from farther away.) So let's talk about cutting the budget, shall we? Especially for FEMA. (see GOP's Continuing Resolution Cuts Funding for National Weather Service, FEMA.)  Brilliant idea.

A review of “Path to Prosperity”

Representative Paul Ryan's (R-WI) economic agenda

 

 

Only recently, millions of American families saw their dreams destroyed in a

financial disaster caused by misguided policies, perverse incentives, and irresponsible leadership. This crisis squandered the nation’s savings and crippled its economy.

 

Path to Prosperity PDF p. 10

 

 

Ryan makes it clear in the next paragraph that he blames “the last Congress ” for America's economic problems. Nevertheless, he's right. America's economic problems have everything to do with “misguided” government policies. The government under President George W. Bush was informed by liberal economists as early as 2002 that there was a housing bubble and that the collapse of that bubble would have bad effects on the economy. Both of the Chairmen of the Federal Reserve, Alan Greenspan and Ben Bernanke, were looked up to as economic authorities and both of them miserably failed to even take notice of the housing bubble until after it had burst in late 2007, costing the economy several trillion dollars in lost consumer demand.

 

 

At a time when the free-market foundations of the American economy were in desperate need of

restoration and repair, the last Congress took actions that further undermined them. The President and his party’s leaders embarked on a stimulus spending spree that added hundreds of billions of dollars to the debt, yet failed to deliver on its promises to create jobs.

 

 

Hmm, well, first off, the “free market foundations” of America's economy were and are in perfectly good shape. It was consumer demand that had fallen off a cliff due to there being so many people losing value in their homes (For most of them, that was their main investment that they were going to sell off in order to retire in comfort), in addition, millions of Americans were thrown out of work. The “stimulus spending spree” was an absolutely critical necessity in order to get consumer demand back up. It only fell short on that goal because President Obama wanted to get his stimulus bill through without annoying and aggravating Congresspeople and Senators too much and therefore, he didn't force a good bill through. One of his economic advisers wanted a $1.2 trillion stimulus, but by “negotiating with himself,” Obama finally settled for only $787 billion and far too much of that was in the form of tax breaks as opposed to straight-out spending.

 

 

Acute economic hardship was exploited to enact unprecedented expansions of government power.

 

This did not sit well with the American people. Citizens stood up and demanded that their leaders reacquaint themselves with America’s founding ideals of liberty, limited government, and equality under the rule of law.

 

 

Government influence on the economy certainly expanded greatly, but it's far from clear that President Obama “exploited” economic hardship in order to expand the government. No one has shown that Obama took any power that wasn't needed in order to get the economy back on track. The “Tea Party” that citizens were allegedly spontaneously joining in order to protest the actions that the allegedly greedy, grasping government was taking, was and is an astroturf organization bankrolled by billionaires (Notably, the Koch brothers) in order to protect the economic interests of the top 1% of income-earners.

 

 

In recent years, both political parties have squandered the public’s trust.

 

 

I certainly agree that the Republican Party has done so. Not sure how Democrats have done so except by giving in too often and by surrendering the initiative in the war of ideas to the other side. We've seen a spontaneous uprising in Wisconsin due to the overreach of the Governor there, but the Obama Administration, although they've quietly helped Wisconsin citizens, has generally kept a low profile and has not vigorously exploited the situation there at all.

 

 

The American people ended a unified Republican majority in 2006, just as they ended a unified Democratic majority last fall. Americans reject leaders who focus on the pursuit of power at the expense of principle.

 

 

Not sure I agree as to why either Republicans lost power or as to why Democrats did. Seems to me in both cases that voters were punishing parties that failed to fulfill their mandates. Republicans led America into two grinding, inconclusive wars and chalked up a disastrous economic performance, Democrats failed to either end those wars or to get America's economy back on track. I don't see much evidence that voters were reacting to a failure to follow “principles.”

 

 

But a government that loses its sovereignty to its bondholders cannot long guarantee its people’s prosperity – or secure their freedom.

 

 

Ah yes, Paul Krugman refers to this theory as the “bond vigilantes,” suggesting dark figures waiting in the alley with switchblades and baseball bats, ready to pounce on Presidents who fail to follow sound economic principles. As the US trades with the world in its own currency and does not carry on trade in Rubles or Euros or the Yuan, there is absolutely zero danger that bondholders will someday take over the government or force it to take any action the government does not wish to take. The US is not Greece and is not subject to the pressures that the Greeks are subject to.

 

 

A government that buries the next generation under an avalanche of debt cannot claim the moral high ground in the world.

 

 

Having lots of debt is certainly not a good thing and America was certainly on the right path when President Clinton left office, as the national debt was lower and diminishing. Has that national debt become unreasonable or unsustainable? If it were, one would think that bondholders would be insisting on high interest rates or they wouldn't buy our bonds. They aren't, interest rates are low by historical standards, so it's not at all clear what the problem is. Does debt have anything to do with the “moral high ground”? With the national debt being entirely sustainable, it's hard to see much of a connection between debt and morality.

 

 

This Path to Prosperity draws upon solutions from across the political spectrum and builds upon the important work of the President’s bipartisan Commission on Fiscal Responsibility and Reform.

 

 

%$#@&!!! The damned “Cat Food Commission” is what Ryan's referring to. The Commission that failed to fulfill its mandate and issued a report anyway, despite not having the appropriate number of votes in favor of its recommendations. Senator Dick Durbin (D-IL) disgraced himself by voting in favor of its recommendations, even though he knew full well that the proposed plan was an awful one. He piteously mewled that he needed to maintain some credibility in order to be “part of the conversation.” Representative Jan Schakowsky (D-IL) distinguished herself by refusing to vote for its recommendations because she recognized what an awful mess those recommendations were. Interestingly, Ryan was also part of the Cat Food Commission (It was called that because the Commission would obviously like to see grandma and grandpa living in a four-story walk-up with broken windows and no heat, eating cat food for their dinner) and refused to vote for its recommendations because the Commission wanted to raise taxes as part of its approach to “fixing” the economy.

 

 

While American families have been tightening their belts, these agencies have been the beneficiaries of a major spending spree over the last two years. Since January of 2009, there has been a 24 percent increase in this slice of the pie – a number that jumps to 84 percent when stimulus funds are included.

 

 

Here's a familiar conservative/Republican/right-wing complaint. Why can't government be run like a family and stay within its budget? Well, one reason is that modern families don't stay within their budgets, either. When a family wished to have a carriage for their horses to pull, that was a sufficiently cheap investment that the family could afford to wait until they had the full cost in hand and then go to the carriage-maker to custom-manufacture a carriage just for them. When the automobile arrived on the scene, they quickly became too expensive to pay for outright and so, consumer credit was born. When homes were hand-built using local materials, there was no need for consumer credit. When small city houses and especially when suburbs, were born and families didn't have the money to purchase them outright, again, consumer credit was developed to meet that need. Governments run debt/deficits for precisely the same reason. If the US wants to fight a war overseas, say in Afghanistan or Iraq or wants to establish, say, Medicare Part D or wants to give tax breaks to millionaires and billionaires and corporations, it sells bonds and covers the cost that way. Yes, it would be nice to cover everything via taxes and during several years under President Clinton, everything was. But when the country has a severe economic problem, such as with the collapse of the housing bubble, it's entirely sensible for the government to run an even bigger deficit to cover all of the things (Schools, hospitals, transportation infrastructure, etc) that would otherwise have to stop working.

 

 

As illustrated in Figure 1, autopilot spending accounted for around 60 percent of all federal spending in 2010. Congress does not regularly debate, annually appropriate or properly scrutinize this category of spending. If an individual meets legal eligibility requirements for these government programs, he or she automatically receives – or “is legally entitled” – to the benefit. This category includes food stamps, unemployment benefits, and farm subsidies – programs that are frequently referred to as “entitlement programs.”

 

 

It's not at all clear why, if a recipient of an entitlement program is legally entitled (I don't put that phrase in scare quotes because it's not clear why Ryan uses quote marks in the first place) to a government benefit, that the program under which the benefit is distributed is not also “properly scrutinized.” Why would a benefit that a citizen was legally entitled to not be considered properly awarded to the citizen? If Congress has written the eligibility requirements so that citizens have too easy a time getting benefits, then that's a problem to be tackled in the legislative process. That's a fight over details, not over principles.

 

 

But Americans will not be able to rely on these programs for much longer unless Congress repairs and reforms them. Social Security, Medicare and Medicaid all face structural problems that are driving them – and the country – into bankruptcy.

 

 

Well, Medicare and Medicaid face great problems because of four of what the Kaiser Family Foundation calls “cost drivers.” They include Technology and Prescription drugs, Chronic disease (Longer life spans means more diseases in total), Aging of the population and the Administrative costs that come along with the extensive use of private industry in health matters. All of these drivers are outside of the design of the programs. There are no problems that are traceable solely to the way in which these programs are designed. As Ryan's own chart on p. 16 shows, Social Security is not a problem at all and should not be included on this list.

 

 

Ryan's chart on page 14 is correct. There are far fewer workers today supporting far many more retirees than when the Social Security program was enacted. But what has also increased is worker productivity. The average worker of today produces far more value than the worker of yesterday did. There is no “massive shift of earnings away from younger families ” that Ryan asserts there is.

 

 

Ryan considers it a major problem that the Affordable Care Act puts “even more of the health sector under government control. ” This isn't a problem at all because the private, capitalist sector does a very poor job of managing health care in the first place. That's because buying a car is essentially different from buying an operation to fix a heart valve. Say a woman decides to get her breasts enlarged. That's a straight, capitalist, comparison-shopping experience. She looks at the different models, decides what it is she can afford and arranges for the operation. Now, say that her enlarged breasts start leaking into her chest and putting her health at risk. It wasn't her choice to have to deal with that kind of problem, so she doesn't necessarily have the money to pay to fix the problem. She can't engage in any comparison-shopping because she needs the problem fixed right away. It's wildly unrealistic to expect her to focus on details like the expertise of the different doctors when her health is deteriorating. In the first instance, our hypothetical person is a customer. She had plenty of time to research the various issues connected to her purchase and collected all the money needed before she contacted the doctor who would do the operation. In the second, she's a patient who's dealing with a problem she had no reason to expect and that she hasn't prepared for in any way. It's simply not valid to compare fixing health problems to any sort of shopping experience as the two experiences are not at all alike. Regardless of how much money Medicare/Medicaid may or may not waste, forcing citizens to use a comparison-shopping model is not an answer and never will be.

 

 

This next sentence is from p. 24, where Ryan discusses his Reform Agenda.

 

 

Government spending on domestic departments and agencies has grown too much, too fast over the past decade, with much of the money going to programs and projects the nation can do without.

 

 

This is a problem that goes all the way back (At least as far as I can remember, I was In college when Ronald Reagan won the Presidency) to Reagan's 1980 campaign. He put out the general proposition that government spending should be cut. Okay, fine. He got general agreement on that score. Then came the hard question. What, exactly, to cut? On that, he managed to find lots of small cuts during his first year in office, then he had picked all the “low-hanging fruit” and then had to start really looking. For the past 30 years, conservatives have been looking and they've found very little that 1. Americans can agree on and that 2. Would make a serious difference. It's like saying “Let's establish a toxic waste dump.” Okay, fine, people can easily agree on the need to do that. Where do y'all wanna put it? Ah, there's where decision-making gets difficult and complicated. If any program were one that “ the nation [could] do without,” then it's difficult to see how that program was established in the first place. Obviously, any program that's been running for awhile and that disburses money or things of monetary value to constituents is going to be considered vital and irreplaceable, if only to the constituents that directly benefit from it. Those constituents are likely to be generously distributing campaign money to politicians, which makes their desires very important for those politicians to keep in mind.

 

 

Ending corporate welfare:

 

 

Y'know what? I'll believe it when I see it. Don't get me wrong, I think ending corporate welfare is a great idea, but when a Republican actually does any such thing, I'll be happy to stand up and cheer. I just don't foresee ever having to do any such thing.

 

 

Boosting American energy resources:

 

 

The Continental United States reached “Peak Oil” back during the 1970s. That means we already extracted half of all the oil that we'll ever extract around 40 years ago. When does the world as a whole hit Peak Oil? Many sources say we're already there. No, if the US is going to become self-sufficient in energy, it'll have to be through the development of alternative, renewable energy. “Drill, baby, drill” was a cute campaign slogan, but it's not a realistic answer for America's energy needs.

 

 

Sorry, but the highly respected economist Paul Krugman weighed in on Ryan's proposals and has found them severely wanting. Also, as Media Matters points out here, Ryan is not exactly some sort of guru or expert that we should expect anything amazing out of. He went along with every budget-busting, unworkable, worthless economic program that President G.W. Bush proposed. There's absolutely no reason to think that anything he produces is going to be worth examining, let alone enacting.