Monday, June 27, 2011

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.

Thursday, June 23, 2011

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.


Monday, June 13, 2011

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.


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.


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.


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.

Tuesday, June 7, 2011

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.

Thursday, June 2, 2011

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.




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.