Bernanke’s confirmation, quite properly, is in trouble

Federal Reserve Chairman Ben Bernanke's confirmation is in trouble, and rightly so. Seems the Chairman prioritizes inflation-fighting above tackling a 10% unemployment rate. In his own words, he pointed out that "...the longer-run inflation expectations of households and businesses have remained very stable over recent years," in other words, inflation's really not a problem. It's not that Bernanke thinks there's nothing he can do, it's that there's nothing he thinks he should do. It's not a matter of can't, it's a matter of won't. As long as the problem was just the historical matter of how he handled the housing bubble, he was probably okay for a second term. Now, however, there are serious doubts about his suitability to continue in the job.

Fun with numbers - an economics dispute

This letter was posted on the Inky's letters page:

That was some plan

So, former Alaska Gov. Sarah Palin believed her selection as Sen. John McCain's running mate was "God's plan" (as revealed by a McCain political strategist). Perhaps it was the plan to illustrate her simple intellect, the inability to grasp the root causes of international conflicts, or offer workable solutions to domestic problems that allowed for a crushing presidential defeat.

All of the cute winks, "gotchas," and other homespun homilies added up to a failed plan, be it God's or the McCain campaign's.

Gene Muccolini
Eastampton Twp.
gnmucc@aol.com
In response to which:

Thoughtful&concernedvoter

Wow. Gene Muccolini probably thinks BHO is more qualified to be President than Sarah Palin was to be Vice-President. What arrogance. Perhaps Muccolini has been asleep for the past year. Obama makes idiotic utternaces, bows before foreign leaders, engages in so-called "smart diplomacy" that has yielded nothing, not made the US any stronger or more secure from terrorism, and has engaged in a domestic policy agenda that has tripled the deficit and crushed job-creation prospects. What a wasted LTE, Gino.

[Yeah, I love the title this guy gives himself. Gee, full of ourselves much?!?!]

Fro 75

Hey Gene, why don't you challenge Mrs. Palin to a debate? I am sure with your highly superior intellect you would clean her clock. I feel much more secure knowing that you and the president have such a firm grasp on complex situatiuons and workable solutions. What a numbskull...

A fellow progressive and then I responded to their response thusly:

Lori T.

Fro 75 - no one has to debate Palin, she was cut to shreds already by Katie Couric. Even the people in charge of "advising" her have come forward to talk about what an idiot she is...and she bailed on her Governorship, so that shows how dedicated she is as well. You have the right to disagree with others but calling others names is a low-brow way to get your point across. There is no doubt in my mind that Clarence Thomas was and is a total womanizer - my opinion. Do you think education level or what school you attend has anything to do with being a morally bereft person? If you equate those two, then no person who went to a GOOD school would ever break the law or cheat on their spouse. I don't need a doctorate to be a decent, moral person.

rich2506

TCV and Fro 75 might wish to watch the video of Glenn Beck's interview of Sarah Palin. Dude, even BECK thought her answer to his "What's your favorite Founding Father?" was hopelessly sophomoric. Sorry, but Palin's opinion as to economics, that tax cuts are the magical answer to all problems, puts her in my estimation as a complete lightweight, hopelessly unsuited to ever be anything more than a Fox News personality.

[This can be seen here]

Well, the right-wingers didn't take too kindly to my comment on Palin's economic knowledge:

RonaReagan

Hey rich2506 seems like you're questiong the effectiveness of tax cuts while calling Palin a lightweight. Maybe you should research the impact of the 2003 tax cuts on government revenues. Hint: revenues increased significantly. Hard to believe, but it looks like Sarah knows something you don't.

Thoughtful&concernedvoter

Rich - if you want to debate the impact of tax cuts read what Christina Romer (one of BHO's key economists) wrote on the subject before she joined the Administration. She wrote that they had a higher multiplier effect than gov't spending.

I made a response much earlier, but it didn't post. This later one posted fine:

rich2506

Christina Romers paper is interesting, but she's speaking of tax cuts minus any counter-cyclical effect, i.e., it's irrelevant to our discussion here as countering the cycle is what Obama's economic policies have been all about. Forbes http://bit.ly/6OJ7V4 points out that the effect of different policies is $0.99 for every dollar of tax cuts versus $1.57 for every dollar of spending, meaning the economy loses a penny for every dollar in tax cuts and gains 57 cents for every dollar in spending. Not only did Bush's tax cuts not pay for themselves, they cost America $2.11 trillion in lost tax revenue http://bit.ly/qll37. Paul Krugman tracked Bush's tax cuts and the unemployment numbers http://bit.ly/8koXm5. Guess what? Yup, there was absolutely no correlation. The tax cuts did zip to help the economy.

Is the Fed able to identify housing bubbles?

Paul Krugman brings up a very troubling point. The Federal Reserve apparently doesn't have the theoretical tools needed to have identified the housing bubble. Krugman explains the distinction between "Flatland" and the "Zoned Zone," showing that one type of land use was vulnerable to bubbles and the other wasn't. He produces a chart comparing Los Angeles (A Zoned Zone because it has no room to expand, therefore a rise in demand for houses leads only to higher prices) and Atlanta (Flatland because it can just keep expanding in response to increased demand for housing) and demonstrates that Los Angeles had a bubble that began in late 2001 and started collapsing in early 2007. The Fed Chairman Ben Bernanke was using charts that didn't recognize any distinction between Flatland and the Zoned Zone, therefore, he was incapable of recognizing either that a bubble had formed or that it was collapsing.

So I dunno, seems Dean Baker's constant amazement that no one appears to have recognized the housing bubble may have some reason for it other than just incomprehensible, blind stupidity. Not that "We were using the wrong chart" is much of an excuse for losing several trillion dollars in housing wealth.

Krugman also shows another chart demonstrating that those who blame Fannie/Freddie/Community Reinvestment for the housing bubble or those blaming general predatory lending are both missing the larger picture. The housing bubble was a broad-based phenomenon.

Bernanke’s award as Time’s Man of the Year

Time Magazine honors Federal Reserve Chairman Ben Bernanke as their "Person of the Year." Is the honor deserved? No, says the Washington Posts Binyam Applebaum and David Cho. Treasury official and current FDIC Chair Sheila Bair noticed serious problems as early as 2001 and tried to get subprime lenders to adopt a code of best practices, Freddie Mac stopped purchasing certain securities in 2002, the Greenlining Institute warned in 2004 that lenders were being unscrupulous and Federal Reserve Board Governor Edward Gramlich warned in 2005 that lending practices were unsatisfactory.

Did Bernanke do anything in response to these warnings? No. Bernanke sat around, twiddling his thumbs and complaining that people had been warning of disaster since 1979. Bernanke does not deserve a second term and should not be re-appointed to one.

Keep in mind that, because of Bernanke's dereliction of duty in allowing the housing bubble to continue as long as it did, the US lost $6 trillion in housing wealth, which has cost the US $500 billion in annual income.

Bernanke failed to see the bubble in the first place. He felt that the Fed should not concern itself with asset bubbles, or call the attention of financial markets or the public to these bubbles by using its regulatory power to rein in lending, or explicitly using interest rates to target a bubble.

Also,

The Fed has directly lent more than $2 trillion to financial and non-financial institutions in the last two years. It has guaranteed trillions more.

The US needs to audit the Fed and to restrict it from its far-too-independent role.

Leaving the base behind

President Obama is just going way too far afield, making way too many concessions to right-wingers in the Democratic Party Caucus.

And speaking of going too far afield and leaving folks behind, Rush Limbaugh is convinced that America was  prosperous under Reagan and both the elder Bush and the younger Bush! Actually, income inequality took a serious jump upwards in the mid-1980s and got even worse under the younger Bush and when one asks the "Reagan Question," i.e., "Are you better off now than you were [before this last guy took office]?" The answer for the younger Bush is a resounding NO!

The urgent priorities

With the recession coming to an end, Democrats need to get their priorities in order. As I've stated over and over already, deficit reduction has to take last place. The deficit hawks need to siddown and shuddup. The nation desperately needs a large-scale jobs program and it needs one now!!! Will such a program make a serious difference in the unemployment rate by next November? Probably not, but if the public doesn't get the impression that the Democrats are putting a 110% effort into job creation, that could leave a political opening for the teabagging right wingers to make gains at the expense of Democrats. That would truly be a tragedy!

As to the idea that Obama could take money from TARP (Unspent money plus money paid back equals a large bucket of available cash) for job creation. Would it help? Eh, six of one, half-dozen of the other.  Go ahead and do it if it's politically easier, but money is money.

Recession appears to be coming to an end

Thankfully, the employment graph for the "Great Recession" appears to be at last curving upward!!! Do we owe the Republican Party any thanks whatsoever? No.

According to Digby:

And in the meantime you have the deficit fetishists taking the opportunity to pimp debt as the cause of the economic crisis and shock doctrine their way into the destruction of entitlements. They are doing that by conflating the short term need for stimulus etc with the Wall Street bailouts and the deficit. And now they think that those are the things that caused the recession. Now, whether the Democratic congress will allow the deficit scolds to push through a cat food commission is unknown, although there's plenty of reason to believe that the political establishment sees this as a "go to China" moment that needs to be done under a Democratic president.

Couple of good questions about taxes and who should pay them.