How sad is our economic debate these days?

Pretty darned sad.

I'm having a hard time wrapping my head around the state of the debate on this. We now have three separate independent analyses of the Republican proposal, all of which say the same thing: if approved, the GOP plan would hurt the economy and make unemployment worse. We now have two prominent Republican -- one is currently the nation's most powerful GOP official, the other hopes to be -- conceding publicly that the party's spending-cut priorities would force more Americans out of work.

Oh, and the House Majority Leader, Eric Cantor, is convinced, convinced I tell you!, that the stimulus didn't work.

We have Americans demanding action on job creation; we have congressional Republicans deliberately trying to make unemployment worse; and we have a media that prefers to pretend that the deficit matters more than the economy.

Who to blame for housing bubble

Right-wing radio host Heidi Harris claims that the housing bubble was caused by people trying to engage in "social engineering." That is, the "engineers" put everybody in houses even though not everyone could afford to keep paying their mortgages.

First, that suggests that the "social engineers" were incredibly incompetent as there was quite obviously no back-up plan if the homeowners couldn't keep up their payments.

Also, the causes of the housing bubble were pretty clearly more complex than that. Most importantly, the major banks did pretty well out of the collapse of that  bubble. If the bubble was the result of a plot by a particular group of people, it stands to reason that those who benefited by the bubble were most likely the ones behind it.

All of the big four U.S. megabanks—Bank of America, Citigroup, Chase, and Wells Fargo—reported either decreases or very modest increases in their massive profitability during 2010. But this surprisingly weak performance would have been even more disappointing without a pair of accounting maneuvers.

[...]

...traders’ pay is also rebounding into the $200,000-to-$500,000 range, while tens of millions of Americans struggle to keep food on the table.

[...]

... compensation has rocketed back into seven figures in spite of these circumstances.

As another piece puts it:

The Bush and Obama administrations have made an already critically flawed financial system even worse. The result is that the banking industry’s future is bad for banking, terrible for the real economy, horrific for the public—and wonderful for the top executives at the largest banks. This is significantly insane, especially given that over the past 30 years, the savings-and-loan fiasco and other crises provided ample opportunity to learn about those flaws.

If one is looking for villains in the housing bubble, I'd suggest that former homeowners who were foreclosed upon are most likely not the problem.

There is no crisis

Congressman Paul Ryan (R-WI), Chairman of the House Budget Committee, says here that (paraphrasing) "Gee, if we don't get our national debt and entitlements under control, it'll be a disaster and grandma and grandpa and your kids will all starve!" He made similar statements for NPR on February 14th:

You know, that's the thing is this budget is so out of control on spending and taxing that I'm really disappointed in it. I was really hoping that the president would show some reforms that can get our debt under control. Instead, what we have is 1.6 trillion in new tax increases, 8.7 trillion in new spending. He's going to be adding 13 trillion to the debt over the course of his budget. And that to me is very dangerous, because this is accelerating our trajectory toward a debt crisis versus taking on the issue.

The president even appointed a fiscal commission last year to deal with these issues, yet he rejected any of the major reforms recommended in the fiscal commission.

Now keep in mind that just a few months ago, the President agreed to keep the Bush tax cuts in place for those making over $200,000 a year. If there really was some sort of crisis, why are the wealthy being permitted to keep their 2001 windfall? Sorry, but I just don't buy all this talk of crisis. As a liberal Keynesian economist puts it:

Investors are willing to lend the United States trillions of dollars at historically low interest rates. This means that the government is not broke. There is no evidence that it is coming up against any serious spending or borrowing limitation.

It's also worth keeping in mind that Congressman Ryan voted for Medicare Part D and TARP, major budget-busting programs that the Congresses at the time saw no need to make any sort of plan to pay for, so it's obvious that his fiscal sobriety and seriousness is a new-found thing.Oh, and Ryan's attitude towards the protests in his home state over the Governor's draconian plans to deprive state workers of their ability to collectively bargain?

“It’s like Cairo has moved to Madison these days,” he said, adding that “people should be able to express their way, but we’ve got to get this deficit and debt under control in Madison, if we want to have a good business climate and job creation in Wisconsin.”

Natcherly, when I hear that Wisconsin has become like Cairo, I tend to think of that as a good thing! And yes, the "crisis" in Wisconsin was "ginned up." There is no crisis nationally and there's no crisis in Wisconsin, either. Problem is, in terms of tactics, Republicans are just plain running circles around the hapless President and his team and Congressional Democrats.

The problem is that the Republicans want to lay this off on the president so they can have it both ways by saying he didn't do enough [to cut spending] while their shadowy corporate supporters under Citizens United demagogue the cuts to senior citizens, thus insuring they will come out to vote against Obama in huge numbers. The president, on the other hand, needs the GOP to jump off the cliff with him so they can share the blame. What do you suppose the odds of the latter happening are?

Obama seems to be preparing the way for a Grand Bargain, which seems a pretty sure bet to end up being a lose-lose situation, where the President gets hammered no matter what he does.

Republicans substantiate talk about cutting budget

The National Journal shows in great detail just how the Republican-majority 112^th 2011-2012 Congress plans to spend less of the taxpayer's money. Some of the proposed cuts show just how Congress sees cutting the budget as being a strictly one-way street. To Republicans, a cut is a cut is a cut. But it's hard to see how cutting Energy Efficiency and Renewable Energy by $899 million is going to benefit the country. In fact, that sounds to me like the very definition of “false economy.” If one is spending less on “energy efficiency,” then wouldn't one be spending more on energy? Wouldn't spending on efficiency be a better use of dollars than spending on non-renewable fossil fuels? And cutting Fossil Energy Research by $31 million along with Clean Coal Technology by $18 million? I dunno where anybody got the hare-brained notion that cutting spending was a priority that took precedence over the most simple, basic, common-sensical ways to actually benefit the country and make our energy dollars stretch further.

 

They want to cut State and Local Law Enforcement Assistance by $256 million. Gee, now there's a grand idea! Camden, NJ, has “the second worst crime rate of an American city, but also they're $26.5 million in the red.”

 

The mayor of crime-ridden Camden, New Jersey, has announced layoffs of nearly half of the city's police force and close to a third of its fire department.

One hundred sixty-eight police officers and 67 firefighters were laid off Tuesday, as officials struggle to close a $26.5 million budget gap through a series of belt-tightening measures, Mayor Dana Redd told reporters.

 

Gee, cutting assistance to local law enforcement when local law enforcement is already cutting back is such an awesome, swell idea! I mean, what could possibly go wrong?

Legal Services Corporation to be cut by $75 million, the Food Safety and Inspection Services by $53 million (For the FY10 budget) and the EPA by $1.6 billion. These are all easily predictable cuts for a Republican Congress to make as they are, after all, Republicans. Therefore, these are pro-rich and pro-business actions that rescue businesspeople against anything that might reduce their profits.

Job Training Programs take a $2 billion whack. High Speed Rail gets hit for $1 billion, the FAA Next Gen gets sliced by $234 million and Amtrak takes a hit of $224 million. Again, these strike me as false economies. How are ya gonna run an economy effectively when people can't get training? When we're already falling behind Europe and Japan in high-speed rail travel? Do we really want America to remain as dependent on air travel as it is when we're also so worried about security on flights that “porno scanners” (Which are not difficult to defeat) and body groping are issues that have caused all sorts of hate and discontent with air travelers?

 

Now, these cuts, Community Health Centers by $1.3 billion, Maternal and Child Health Block Grants $210 million, Family Planning by $327 million, Poison Control Centers by $27 million, Center for Disease Control $755 million, National Institute for Health by $1 billion and Substance Abuse and Mental Health Services by $96 million, strike me as especially obtuse and counter-productive. The 112^th Congress is especially and energetically against abortion rights. In theory, Republicans argue, they're not anti-women, they're just against “killing babies.” But by cutting the budget for poison control, they are killing babies! Obviously, old people may have problems with poisons, but it's especially the very young that are most likely to end up accidentally getting poison in their bodies. How on Earth is it “pro-baby” to cut poison control? Cutting the budget for maternal health is “pro-baby”?!?!!? Huh? As Daily Kos puts it:

 

...with these cuts, we once again see that those strong feelings Republicans' profess to have for life stops at the delivery room door ... assuming you can afford to go to the hospital, of course.

 

Pandagon has a typically cuts-to-the-bone comment on abortion as seen by the involved man and woman:

 

Because there are just a lot of men out there who really need to believe they made the baby by having an orgasm, and that no one should credit the person who gained weight, contributed a quarter of her daily nutrients for 9 months, threw up a lot, saw her feet change size, and then pushed an 8 pound human out of her genitals while suffering massive pain.  Because if you admit that bitches can pull that stunt off, you might have to admit that they’re good at other things, too.

 

Pandagon also has some worthwhile commentary on Lila Rose and her video “sting” of Planned Parenthood (That didn't sting very much as it didn't actually reveal any illegal conduct, though they did snag an idiot employee who “coached them to lie about the age of the girls’ sex partners.”).

 

Make no mistake: Lila Rose is out to make sure that low income and young women are deprived access to decent health care, including and especially contraception and cancer screening, both of which are the majority of Planned Parenthood’s work.

 

And when you remember that Lila Rose is getting all sorts of support from both elected Republicans and Fox News, it becomes pretty clear where they stand in regards to women's health.

 

And in their final wrap-up, we see that:

 

As things now stand, the budget deficit will be $1.500 trillion for this fiscal year. If the GOP has their way, it will be $1.477 trillion. That's a cut of merely 1.5% . Despite everything the GOP is going after, our budget deficit will be 98.5% of what it would have been otherwise -- virtually unchanged. In other words, the only thing they didn't slash was the budget deficit.

 

Bottom line is that cutting the budget to get a smaller, leaner government is a grand idea in theory. In actual fact, when the rubber hits the road and real, actual, on the ground decisions are called for, it's an awful idea.

 

Uh, guys? It’s been tried.

Been there. Done that. Britain already tried what Republicans are now suggesting America do.

The economic stimulus, which under the previous Labour government had stayed and reversed the recession, was withdrawn. And the policy course that Republicans insist is the single route to prosperity in the U.S. — massive public spending cuts — was afforded a proof of theory across the Atlantic. Conservatives there enacted exactly what Republicans propose here.

How'd that work for y'all? Erm, well, uh, under the Liberal Democrats, growth had been 1.1% in their last quarter. The Conservatives

promptly set about chopping budgets and government at a fragile point in the recovery. Growth fell to .7 percent — and then in the last quarter of 2010, the economy went negative, shrinking by .5 percent.

and

Britain now faces the threat of stagflation as prices rise along with unemployment — which Labour's stimulus kept at or below 8 percent even in the depths of the downturn.

So, the answer is "very, very poorly."  Not only did growth fall and unemployment increase, but inflation went up!

Yeah, I remember "stagflation," that was a 1970s problem that Paul Volcker solved by raising interest rates so high they choked off growth for awhile. It was a high price to pay, but it worked and essentially, inflation hasn't been a problem since. For Republicans to try the "Volcker cure" now would be a complete waste as the "cure" certainly wouldn't have any psotitive effect on inflation, nor is it clear what other positive effects might be achieved.