Medicare is the most cost-effective health insurance program available in the US, period. No - make that an exclamation mark!

Economist Laura D'Andrea Tyson, debunking the unholy alliance of Blue Dog Democratic Senator Ron Wyden and Randian Nihilist Congressman Paul Ryan in their nonsensical proposal to overturn the Medicare system as somehow "saving money" by shifting beneficaries into private markets, explains the cost-effectiveness of Medicare compared to the "competitive" markets of private insurance:

Despite competition and choice in the private insurance system, Medicare spending has grown more slowly than private insurance premiums for comparable coverage for more than 30 years.

From 1970 to 2009, Medicare spending per beneficiary grew by an average of 1 percentage point less each year than comparable private insurance premiums. Between 2000 and 2009, Medicare’s cost advantage was even larger – its spending per beneficiary grew at an average annual rate of 5.1 percent while per-capita premiums for private health insurance plans grew at 7.2 percent, according to the Center on Budget and Policy Priorities.

In inflation-adjusted terms, Medicare spending per beneficiary increased more than 400 percent between 1969 and 2009 while private insurance premiums increased by more than 700 percent.

What explains Medicare’s sustained cost advantage over private insurance? Medicare has much lower administrative costs than private insurance (administrative costs account for about 14 percent of health care spending, or a whopping $360 billion a year).

And Medicare has considerable negotiating leverage with providers as a result of its huge enrollment. Private insurance plans are unable to negotiate payment rates with providers that are as low as Medicare’s rates, even though Medicare’s negotiating authority is tightly limited and often undermined by Congress.

As anyone with a grain of common sense or empirical data understands, the problems within the Medicare system are not related to Medicare's model of social insurance but in the overall inflationary spirals of our unrestrained,  for-profit health care system.  Compared to other advanced economies with high-quality health care - and universal coverage -  the US medical industry is exorbitantly expensive, but with outcomes that are, overall, worse in terms of life expectancy, infant mortality and other key indicators.

"Best Chart of 2011" - Whose Deficits?

Ezra Klein declared this graph, which originated with the New York Times - showing the relative contributions of Presidents BushJr and Obama to the national debt - the best of 2011.  I think he's right, given the nonsense, deliberate disinformation and outright hysteria that's being promoted by the GOP about deficits and the "Euro-socialist" Obama:

Klein: "What’s also important, but not evident, on this chart is that Obama’s major expenses were temporary — the stimulus is over now — while Bush’s were, effectively, recurring. The Bush tax cuts didn’t just lower revenue for 10 years. It’s clear now that they lowered it indefinitely, which means this chart is understating their true cost. Similarly, the Medicare drug benefit is costing money on perpetuity, not just for two or three years. And Boehner, Ryan and others voted for these laws and, in some cases, helped to craft and pass them."

Best Tax Graphs of 2011

Courtesy of Jared Bernstein and The Center on Budget and Policy Priorities:

 

The new nihilism

Peter Laarman at Religion Dispatches:

It still strikes me as odd that no one has taken to calling either Wall Street ethics or far-Right economic beliefs by their right name, which is nihilism. There’s been some prattle in the press about Ayn Rand’s influence, but religiously the problem is so much bigger and deeper than the renewed attention paid to this minor figure. What gives the New Nihilism a certain degree of invisibility is that some of the fiercest functional nihilists claim to be staunch supporters of traditional beliefs and traditional hierarchies. Paul Ryan and Eric Cantor are no more likely to say they don’t really believe in anything than are Brian Moynihan and Lloyd Blankfein. These dudes believe in markets, of course, but they don’t choose to see that the way in which financial markets actually function today — with huge mechanical trades done at lightning speed and at great profit but without any regard to recognizable human values — perfectly expresses a high-order moral nihilism, if not a metaphysical nihilism. I can’t bring back Nietzsche or Heidegger to validate me on this. You just have to take my word for it: nihilism.

"It's cheaper for the U.S. to finance its debt today than it was when we last had surpluses"

The much-hyped hysterics pushing deficit reduction as some "solution" to our woes in the midst of our Great Recession were terrible economics any way you look at it.

That this agenda was rooted as much in the GOP's desire to worsen the economy as their back door to the White House and control of Congress more than any faith in "markets" seems likely given what the actual markets for US debt were telling us as the debate unfolded. Ezra Klein at Wonkbook:

In Washington, 2011 was all about dangers posed by America’s deficits. Republicans said deficit reduction was priority number one. Democrats mostly went along. But in the markets, the story was precisely the opposite. As Daniel Kruger reports in Bloomberg, demand for American debt was stronger in 2011 than in any year since 1995. It's cheaper for the U.S. to finance its debt today than it was when we last had surpluses...

Why I'm supporting the conservative in 2012

E.J. Dionne explains that, in the current political climate, our moderately liberal President Obama is also the only authentically conservative candidate - bent on strengthening our existing modest social compact and preserving the post-New Deal balance of public interest vs. concentrated economic power (and although Dionne doesn't note it, guaranteeing civil rights for all Americans) against the radical reactionary designs of the GOP to dismantle the system, slash government and spread poisonous paranoia:

At a moment when the nation wonders whether politicians can agree on anything, here is something that unites the Republican presidential candidates — and all of them with President Obama: Everyone agrees that the 2012 election will be a turning point involving one of the most momentous choices in U.S. history.

True, candidates (and columnists) regularly cast an impending election as the most important ever. Campaigning last week in Pella, Iowa, Republican Rick Santorum acknowledged as much. But he insisted that this time, the choice really was that fundamental. “The debate,” he said, “is about who we are.”

Speaking not far away, in Mount Pleasant, Newt Gingrich went even further, and was more specific. “This is the most important election since 1860,” he said, “because there’s such a dramatic difference between the best food-stamp president in history and the best paycheck candidate.” Thus did Gingrich combine historic sweep with a cheap and inaccurate attack. Nonetheless, it says a great deal that Gingrich chose to reach all the way back to the election that helped spark the Civil War.

At long last, have they no sense of decency?

Mitt Romney was on the same page in a speech in Bedford, N.H. “This is an election not to replace a president but to save a vision of America,” he declared. “It’s a choice between two destinies.” Sounding just like Santorum, he urged voters to ask: “Who are we as Americans, and what kind of America do we want for our children?”

Obama could not agree more. “This is not just another political debate,” the president said in his theme-setting speech in Osawatomie, Kan., earlier this month. “This is a make-or-break moment for the middle class, and for all those who are fighting to get into the middle class.”

On this one, Santorum, Gingrich, Romney and Obama all have it right. For the first time since Barry Goldwater made the effort in 1964, the Republican Party is taking a run at overturning the consensus that has governed U.S. political life since the Progressive era.

The Radical Anti-Environmental Republican Agenda

Paul Krugman on "Springtime for Toxics":

Here’s what I wanted for Christmas: something that would make us both healthier and richer. And since I was just making a wish, why not ask that Americans get smarter, too?

Surprise: I got my wish, in the form of new Environmental Protection Agency standards on mercury and air toxics for power plants. These rules are long overdue: we were supposed to start regulating mercury more than 20 years ago. But the rules are finally here, and will deliver huge benefits at only modest cost.

So, naturally, Republicans are furious. But before I get to the politics, let’s talk about what a good thing the E.P.A. just did.

As far as I can tell, even opponents of environmental regulation admit that mercury is nasty stuff. It’s a potent neurotoxicant…

"The Big Lie"

More debunking of the fraudulent "Fannie and Freddie caused the mortgage meltdown" line coming out of Amerian Enterprise Institute and other desperate right-wing noisemakers, by Joe Nocera HERE.

The 10 worst economic ideas of 2011

Jeff Madrick at Roosevelt Institute:

Let’s hope the New Year brings some new ideas, because this year’s couldn’t have been much worse — or more widespread.
 
I was at an Occupy Wall Street demonstration this weekend and many clergy addressed the group. One nun told the crowd it was Christmas season and that it was time for something new to be born in America.

Top ten from the dumb and dumber...

It was a nice thought, and I hope that the “something new” is good sense, because it has been a year in which some of the worst economic ideas ever have gained support and are being applied around the world. So here’s my list of the 10 worst economic ideas of 2011:

1. Taxes should be more regressive.

At the top of the list for sheer scandalous insensitivity are Herman Cain’s and New Gingrich’s tax plans for America. Cain and Gingrich are both flat tax advocates. Cain proposes “9-9-9″ — a 9 percent sales tax, 9 percent income tax, and 9 percent corporate tax. He would also eliminate most deductions. Would this raise more or less money? The romantic conservatives claim the lower income tax rate would mean more growth. Never mind that the evidence to support that claim has been found profoundly lacking time and again.

The Payroll Tax Cut Extension - GOP holds recovery hostage

Be careful where you point your gun...

Economist Mark Thoma on what is at stake with the payroll tax and unemployment insurance extensions, which the GOP is determined either to halt or to hold hostage by linking to unrelated legislation that the President has vowed to veto: 

Congress has not been able to agree on extending the payroll tax cut, and as it stands, payroll taxes will increase in January. What impact will this gridlock have on the economy? What about the expiration of unemployment benefits, another effect of the failure to produce legislation on the payroll tax cut?

The payroll tax cut amounts to around $1,000 per year for the typical household, which adds up to a around $120 billion per year in additional purchasing power for the total workforce. If the payroll tax cut is not extended when Congress reconvenes, losing that much purchasing power would make an already slow recovery even slower...

"No, Conservatives, the Bush Recession Did Not Alleviate Economic Inequality"

Winning Progressive takes on some recent right-wing push-back and misdirection as the issue of income inequality gains resonance with the American public:

Showing how out of touch they are with everyday Americans, conservatives have latched

onto the news that the share of national income taken in by the top 1% fell from 23% in 2007 to “only” 17% in 2009 to contend that the focus of Occupy Wall Street and others on economic inequality is somehow misguided.  For example, in a post titled “The 1% Ain’t What It Used To Be,” conservative blogger Megan McCardle responded that “we don’t want to spend years focused on income inequality, only to learn that the financial crisis fixed it for us.”  Conservative economics professor Steven Kaplan of the University of Chicago business school echoed such doubts and actually offered a defense of inequality, stating in the New York Times that:

“It’s very interesting that [inequality] has become such a big topic now when the numbers are back to where they were in the 1990s,” said Steven Kaplan, an economist at the University of Chicago’s business school. “People didn’t seem to be complaining about it then.”

Pointing to the recent declines at the top, Mr. Kaplan argues the Occupy protesters have accused the wrong villain by focusing on inequality, which he called an inevitable byproduct of growth. “If you want to reduce inequality, all you need to do is put the economy in a recession,” he said. “If you want the economy to do well, as all of us do, then you’ll get more inequality.”

Kaplan’s effort to link growth and economic inequality as inherently related is historically incorrect.  For example, from 1950 to 1980, the share of income taken by the top 1% remained below 12% in all but one year, and was below 10% in 13 of those years.  During that same time period, the US economy experience virtually uninterrupted growth.  When the economy dipped in the early 1980s, the share of income taken by the top 1% increased.  While it is true that most recessions lead to a decline in the share of income for the top 1%, the historical record does not support the contention that economic inequality is the inevitable byproduct of growth.  In addition, while some level of inequality may be necessary for economic growth, elevated levels of inequality – such as those in the US today - actually stunt economic growth.

"Tax inequality"

An interesting, innovative idea for tax policy to stem the rising tide of income inequality, from law professors Aaron Edlin and Ian Ayres, HERE.

"There Goes the Neighborhood..."

60 Minutes on the neighborhood-destroying impact of the foreclosure crisis:

Krugman on GOP Monetary Madness

Ron Paul's crank Gold Buggery is the new GOP "mainstream."  Paul Krugman describes the descent into madness:

Mr. Paul identifies himself as a believer in “Austrian” economics — a doctrine that it goes without saying rejects John Maynard Keynes but is almost equally vehement in rejecting the ideas of Milton Friedman. For Austrians see “fiat money,” money that is just printed without being backed by gold, as the root of all economic evil, which means that they fiercely oppose the kind of monetary expansion Friedman claimed could have prevented the Great Depression — and which was actually carried out by Ben Bernanke this time around.

O.K., a brief digression: the Federal Reserve doesn’t actually print money (the Treasury does that). But the Fed does control the “monetary base,” the sum of bank reserves and currency in circulation. So when people talk about Mr. Bernanke printing money, what they really mean is that the Fed expanded the monetary base.

And there has, indeed, been a huge expansion of the monetary base. After Lehman Brothers fell, the Fed began lending large sums to banks as well as buying a wide range of other assets, in a (successful) attempt to stabilize financial markets, in the process adding large amounts to bank reserves. In the fall of 2010, the Fed began another round of purchases, in a less successful attempt to boost economic growth. The combined effect of these actions was that the monetary base more than tripled in size.

Austrians, and for that matter many right-leaning economists, were sure about what would happen as a result: There would be devastating inflation. One popular Austrian commentator who has advised Mr. Paul, Peter Schiff, even warned (on Glenn Beck’s TV show) of the possibility of Zimbabwe-style hyperinflation in the near future.

So here we are, three years later. How’s it going? Inflation has fluctuated, but, at the end of the day, consumer prices have risen just 4.5 percent, meaning an average annual inflation rate of only 1.5 percent. Who could have predicted that printing so much money would cause so little inflation? Well, I could. And did. And so did others who understood the Keynesian economics Mr. Paul reviles. But Mr. Paul’s supporters continue to claim, somehow, that he has been right about everything.

The GOP candidates' plan to wreck the economy

Tim Dickinson at Rolling Stone on the GOP "Crazy":

The Little Rascals

While threatening to slash the safety net for millions of Americans, the GOP candidates are also committed to a brutal austerity program that would tip the nation back into recession – if not a full-scale depression. The proposal in question is a constitutional amendment that would require the federal government to pass a balanced budget each year.

According to Macroeconomic Advisers, a top economic forecaster, balancing the budget in 2012 alone would throw 15 million Americans out of work, double unemployment to 18 percent and contract the U.S. economy by 17 percent. Going forward, the government would be barred from borrowing money during hard times to provide unemployment benefits, food stamps and other essential aid to those in need. As a result, the analysts report, "recessions would be deeper and longer." Even in times of plenty, a balanced-budget amendment would "retard economic growth" by increasing economic uncertainty – which Republicans have repeatedly blamed as the root of the current lackluster recovery.

Read Dickinson's complete "The GOP's Crackpot Agenda" HERE.

The roots and the depth of the Great Recession

World-class economist Joseph Stiglitz has an essential essay in Vanity Fair, in which he uses new research and insights into the causes of the Great Depression to suggest that we need a fundamental rethinking of how to tackle the current crisis:

The trauma we’re experiencing right now resembles the trauma we experienced 80 years ago, during the Great Depression, and it has been brought on by an analogous set of circumstances. Then, as now, we faced a breakdown of the banking system. But then, as now, the breakdown of the banking system was in part a consequence of deeper problems. Even if we correctly respond to the trauma—the failures of the financial sector—it will take a decade or more to achieve full recovery. Under the best of conditions, we will endure a Long Slump. If we respond incorrectly, as we have been, the Long Slump will last even longer, and the parallel with the Depression will take on a tragic new dimension.

Until now, the Depression was the last time in American history that unemployment exceeded 8 percent four years after the onset of recession. And never in the last 60 years has economic output been barely greater, four years after a recession, than it was before the recession started. The percentage of the civilian population at work has fallen by twice as much as in any post-World War II downturn. Not surprisingly, economists have begun to reflect on the similarities and differences between our Long Slump and the Great Depression. Extracting the right lessons is not easy.

Stiglitz' analysis and conclusions are too important to simply excerpt or summarize. Read his entire piece HERE.

The awfulness cont. - Newt's tax plan

Unfortunately we have to review the noxious stuff that spews forth from Newt Gingrich. Robert Reich has the latest here:

Newt Gingrich has done it again. With his new tax plan he has raised the bar from irresponsibility to recklessness.

Every dollar estimate I’m about to share with you comes from the independent, non-partisan Tax Policy Center – a group whose estimates are used by almost everyone in Washington regardless of political persuasion.

First off, Newt’s plan increases the federal budget deficit by about $850 billion – in a single year!

"Do as I say, not as I do..."

James Suroweicki on the default double-standard for mortgage-holders and corporations:

We normally say that a company “went bankrupt,” implying that it had no choice. But when, recently, American Airlines filed for bankruptcy, it did so deliberately. The airline had four billion dollars in the bank and could have kept paying its bills. But it has been losing money for a while, and its board decided that it was foolish to keep throwing good money after bad. Declaring bankruptcy will trim American’s debt load and allow it to break its union contracts, so that it can slim down and cut costs.

American wasn’t stigmatized for the move. Instead, analysts hailed it as “very smart.” It is now generally accepted that when it’s economically irrational for a company to keep paying its debts it will try to renegotiate them or, failing that, default. For creditors, that’s just the price of business. But when it comes to another set of borrowers the norms are very different. The bursting of the housing bubble has left millions of homeowners across the country owing more than their homes are worth. In some areas, well over half of mortgages are underwater, many so deeply that people owe forty or fifty per cent more than the value of their homes. In other words, a good percentage of Americans are in much the same position as American Airlines: they can still pay their debts, but doing so is like setting a pile of money on fire every month.

These people have no hope of ever making a return on their investment in their homes. So for many of them the rational solution would be a “strategic default”—walking away from the mortgage and letting the bank take the house. Yet the vast majority of underwater borrowers keep faithfully paying their mortgages; studies suggest that perhaps only a quarter of all foreclosures are strategic. Given how much housing prices have fallen, the question is why more people aren’t just walking away.

Tales of Income Inequality

Think Progress:

Income inequality in the U.S. is currently the highest its been since the 1920s, with the 400 richest Americans (who are all billionaires) having as much wealth as the bottom 50 percent of Americans combined. And as it turns out, just one wealthy family has managed to amass a fortune equal to that of the combined net worth of the bottom 30 percent of Americans — the Waltons, heirs to the Walmart fortune...

The Foreclosure Crisis

Chris Hayes on the foreclosure "tsunami" and appropriate response:

Visit msnbc.com for breaking news, world news, and news about the economy

More true facts - the empirical evidence suggests that cutting top marginal tax rates on the rich increases non-productive income inequality rather than economic growth

 Dan Buecke at Bloomberg:

This should get Grover Norquist up off the couch: a paper by a prominent team of economists says the tax rate for top U.S. earners could be hiked to 83 percent without hurting anyone but the “mega rich.” And in what’s sure to add gasoline to the income-inequality debate, they suggest pay increases for the wealthiest few reflect mostly “rent seeking” — econo-speak for unshackled greed — rather than executive-suite productivity improvements.

Thomas Piketty of the Paris School of Economics, Emmanuel Saez of Berkeley and Stefanie Stantcheva of MIT reach those conclusions after disputing that tax cuts in several countries since the 1970s had any real impact on per-capita GDP growth. As they say in their less wonky summary (hat tip to 3 Quarks Daily)... “countries that made large cuts in top tax rates such as the United Kingdom or the United States have not grown significantly faster than countries that did not, such as Germany or Denmark.”

What does show a strong correlation is falling tax rates and the share of pre-tax income held by the top 1 percent — doubled in the U.S., to more than 20 percent, over the past 40 years.  (emphasis added)

True facts - "A larger welfare state can mean a lower deficit"

Robert Samuelson

Ezra Klein debunks the stunning ignorance of "his colleague" - the modestly endowed Washington Post business writer Robert Samuelson (no relation to noted economist Paul Samuelson) - who true to form spouts the tired and untrue "conventional wisdom" regarding Eurozone troubles being rooted in social spending as % of GDP  and the European model of a robust welfare state:

Speaking of things that the European crisis is not about (debt and deficits), while I was in Germany, my colleague Robert Samuelson wrote that “Europe’s turmoil is more than a currency crisis and was inevitable, in some form, even if the euro had never been created. It’s ultimately a crisis of the welfare state, which has grown too large to be easily supported economically.”

I don’t think that quite works. Take Germany. They have a pretty big welfare state: pensions, health care, paid vacations, unemployment benefits equal to two-thirds of one’s income. Indeed, the Organization for Economic Cooperation and Development keeps track of social spending — unemployment, old-age pensions, health care, etc — as a percentage of GDP. In 2007, Germany spent 25.2 percent of their GDP on such things. Greece spent 21.3 percent on social policies. Yet Greece is in crisis, and Germany is fine.

To bring this across the Atlantic, you could argue that the United States’s debt burden is the product of an insufficiently large welfare state — at least with regard to health care.

"The Wrong Fix" for the Eurozone

Harold Myerson at The American Prospect:

(T)he deal that German Chancellor Angela Merkel and French President Nicolas Sarkozy struck to save the Eurozone will inflict years of austerity on European nations that are already mired in depression. Spain, for instance, has an unemployment rate of about 20 percent and a youth unemployment rate that is approaching a mind-boggling 50 percent. It needs a massive Keynesian jolt to its economy, not budgetary constraints that will condemn it to a decade or quarter-century of penury...

(T)he Merkel-Sarokzy solution was based on a misdiagnosis of Europe’s woes. Some of Europe’s current basket cases were actually running budget surpluses in the years before the Lehman meltdown. Ireland and Spain weren’t overspending at all—but the banks and investors speculating on their housing markets most certainly were. When their banks went under, their economies collapsed, driving their unemployment rates, and their budget deficits, sky-high. If Ireland and Spain could do it over again, they’d have adopted far tighter bank regulations—something that the Merkel-Sarkozy deal doesn’t call for...

Why we can't have nice things...

Between 2008 and 2010, 30 large corporations spent more on lobbying Washington than they spent on taxes.  Details here, via ThinkProgress. 

General Electric, of course, tops the list.

Obama in Osawatomie - the matter of Kansas and renewing populism

Today President Obama went on the offensive in Osawatomie, Kansas. His speech struck some welcome populist chords.  Osawatomie is a historic town - best known to historians for the Battle of Osawatomie, which in 1856 was an early skirmish in what eventually became the Civil War.  In the "Bloody Kansas" warfare over the eventual fate of the territory as a "free state",  pro-slavery forces attacked the town - being defended by the radical abolitionist John Brown - and burned it to the ground.

In 1910 progressive Republican Theodore Roosevelt gave a notable speech in Osawatomie, focusing on the dangers of economic concentration and the corruption of politics by corporate money. TR's "money quote":

At many stages in the advance of humanity, this conflict between the men who possess more than they have earned and the men who have earned more than they possess is the central condition of progress. In our day it appears as the struggle of freemen to gain and hold the right of self-government as against the special interests, who twist the methods of free government into machinery for defeating the popular will. At every stage, and under all circumstances, the essence of the struggle is to equalize opportunity, destroy privilege, and give to the life and citizenship of every individual the highest possible value both to himself and to the commonwealth. 

Here's President Obama's message from Osawatomie, which reclaimed some of Teddy Roosevelt's populist narrative:

(F)or most Americans, the basic bargain that made this country great has eroded. Long before the recession hit, hard work stopped paying off for too many people. Fewer and fewer of the folks who contributed to the success of our economy actually benefitted from that success. Those at the very top grew wealthier from their incomes and investments than ever before. But everyone else struggled with costs that were growing and paychecks that weren’t – and too many families found themselves racking up more and more debt just to keep up.

The "Job Creator"

The LA Times unpacks the "Mitt" Myth of Willard M. Romney as an entrepreneurial business man comitted to "job creation":

Shortly after Mitt Romney resigned from Bain Capital in 1999 to run the Olympics in Salt Lake City, potential investors received a prospectus touting the extraordinary profits earned by the private equity firm that Romney controlled for 15 years.

During that time, Boston-based Bain acquired more than 115 companies, according to the prospectus. Bain's estimated annual returns were more than five times that of the Dow Jones Industrial Average in the same period.

Now a front-runner for the Republican presidential nomination, Romney says his Bain experience shows he knows how to create jobs. He often cites Bain's investment in a little-known office supply store called Staples, which now employs more than 90,000 worldwide.

But a closer examination of the prospectus paints a different picture of Bain's operation. Under Romney's leadership, Bain became one of the nation's top leveraged-buyout firms, helping lead a trend in which companies were acquired using debt often pledged against their own assets or earnings.

Newt Gingrich - a man utterly dishonest and corrupt, driven by ignorance, shamelessness and unfettered self-regard

New York Times columnist Charles Blow examines the latest iteration of Newt Gingrich's awfulness:

"I am now a famous person. I represent real power."

Newt Gingrich has reached a new low, and that is hard for him to do.

Nearly two weeks after claiming that child labor laws are “truly stupid” and implying that poor children should be put to work as janitors in their schools, he now claims that poor children don’t understand work unless they’re doing something illegal.

On Thursday, at a campaign stop in Iowa, the former House speaker said, “Start with the following two facts: Really poor children in really poor neighborhoods have no habits of working and have nobody around them who works. So they literally have no habit of showing up on Monday. They have no habit of staying all day. They have no habit of ‘I do this and you give me cash’ unless it’s illegal.” (His second “fact” was that every first generational person he knew started work early.)

This statement isn’t only cruel and, broadly speaking, incorrect, it’s mind-numbingly tone-deaf at a time when poverty is rising in this country. He comes across as a callous Dickensian character in his attitude toward America’s most vulnerable — our poor children. This is the kind of statement that shines light on the soul of a man and shows how dark it is.

Unemployment statistics - how good is the news?

University of Oregon economist Mark Thoma digs beneath the surface numbers indicating a drop in "official" unemployment HERE.

The Euro: Can the center hold?

Economist Austin Goolsbee, who recently left the administration to return to teaching at Univ. of Chicago, doesn't believe the Eurozone can hold together...and he explains succinctly why it was a bad idea in the first place. Goolsbee's interview with Ezra Klein is worth a read in it's entirety - a concise picture of some of the central problems in this confusing and complex picture. HERE.

A voice from the "1%" explains a fundamental economic reality: The rich are not the "job creators."

Venture capitalist Nick Hanauer - who helped launch Amazon.com among other technology start-ups - ventures beneath the simplistic rhetoric and calculated misconceptions about job creation and rational tax policy in this op-ed from Bloomberg:

It is a tenet of American economic beliefs, and an article of faith for Republicans that is seldom contested by Democrats: If taxes are raised on the rich, job creation will stop.

Trouble is, sometimes the things that we know to be true are dead wrong. For the larger part of human history, for example, people were sure that the sun circles the Earth and that we are at the center of the universe. It doesn’t, and we aren’t. The conventional wisdom that the rich and businesses are our nation’s “job creators” is every bit as false.

I’m a very rich person. As an entrepreneur and venture capitalist, I’ve started or helped get off the ground dozens of companies in industries including manufacturing, retail, medical services, the Internet and software. I founded the Internet media company aQuantive Inc., which was acquired by Microsoft Corp. (MSFT) in 2007 for $6.4 billion. I was also the first non-family investor in Amazon.com Inc. (AMZN)

Even so, I’ve never been a “job creator.” I can start a business based on a great idea, and initially hire dozens or hundreds of people. But if no one can afford to buy what I have to sell, my business will soon fail and all those jobs will evaporate.

"A Banker Speaks, With Regret"

Great Nick Kristoff column HERE in which a former CHASE mortgage manager reflects on the practices that brought the global economy near collapse. A couple of money quotes:

(W)hen mortgages were securitized and sold off to investors, he said, senior bankers turned a blind eye to shortcuts.

“The bigwigs of the corporations knew this, but they figured we’re going to make billions out of it, so who cares? The government is going to bail us out. And the problem loans will be out of here...”

"Some account executives earned a commission seven times higher from subprime loans, rather than prime mortgages. So they looked for less savvy borrowers — those with less education, without previous mortgage experience, or without fluent English — and nudged them toward subprime loans.

These less savvy borrowers were disproportionately blacks and Latinos...and they ended up paying a higher rate so that they were more likely to lose their homes. Senior executives seemed aware of this racial mismatch... and frantically tried to cover it up...

(W)hat is scandalous is the basic unfairness of what has transpired. The federal government rescued highly paid bankers from their reckless decisions. It protected bank shareholders and creditors. But it mostly turned a cold shoulder to some of the most vulnerable and least sophisticated people in America. Last year alone, banks seized more than one million homes...

My daughter and I are reading Steinbeck’s “Grapes of Wrath” aloud to each other, and those Depression-era injustices seem so familiar today. That’s why the Occupy movement resonates so deeply: When the federal government goes all-out to rescue errant bankers, and stiffs homeowners, that’s not just bad economics. It’s also wrong.

Read Kristoff's entire NYTs column. It's a rare admission from an industry insider on the shame - or perhaps better put, shamelessness - of the financial sector that still controls the central levers of our economy and is currently making unprecedented profits while the country continues to suffer from what they have wrought.

"Newt Gingrich and the destruction of Congressional expertise"

Bruce Bartlett takes on some Gingrichian nonsense - rooted,  as are most of Newt's manifest sins, in his egomaniacal grandiosity - HERE.

The failure of mainstream economics

University of Massachusetts economics professor Nancy Folbre at Economix discusses the limitations of her profession:

The Occupy Wall Street movement, displaced from some key geographic locations, now enjoys a small but significant encampment among economists.

Concerns about the impact of growing economic inequality fit neatly into a larger critique of mainstream economic theory and its deep faith in the efficiency of markets.

Many unbelievers (including me) insist that we inhabit a global capitalist system rather than an efficient market. Willingness to use the C-word (capitalism) often signals concerns about a concentration of economic power that unfairly limits individual choices, undermines political democracy, generates financial and ecological crises and limits access to alternative economic ideas.

We can’t address these concerns effectively without a wider discussion of them.

Seventy Harvard students dramatized dissatisfaction with the economics profession when they walked out of Prof. Gregory Mankiw’s introductory economics class on Nov. 2, protesting, in an open letter to their instructor, that the course “espouses a specific — and limited — view of economics that we believe perpetuates problematic and inefficient systems of economic inequality in our society today.” (Professor Mankiw, a periodic contributor to the Economic View column in the Sunday Business section of The New York Times, discussed the protest in an interview with National Public Radio.)

The event prompted online discussion of conservative bias in introductory economics textbooks, including an anti-Mankiw blog set up by Daniel MacDonald, a graduate student in my own department. Prof. John Davis of the University of Amsterdam and Marquette University posted a video arguing that economic researchers, like fish, engage in herd behavior in order to minimize individual risk...

Obama as "big spender" is right-wing fantasy

Paul Krugman debunks "the claim that Obama has presided over a vast expansion of government — a claim backed not by describing any specific programs, but by pointing to the share of federal spending in GDP."  As Krugman shows, an alleged huge growth of government spending under Obama is nothing more than the inevitable result of a serious, lingering depressed economy in which increasing numbers of citizens are forced into safety-net programs and GDP growth has plummeted:

Indeed, federal spending rose from 19.6% of GDP in 2007 to 23.8% in 2010 (it was briefly 25 in 2009, but that was a number distorted by the financial bailouts). So there has been a roughly 4 points of GDP rise in the spending share. What’s that about?

Well, part of the answer is that the ratio is up because the denominator is down. According to CBO estimates, in fiscal 2010 the economy operated about 7 percent below potential. This means that even if what the government was doing hadn’t changed, the federal spending share of GDP would have risen by 1.4 percentage points.

Then, look inside the budget data (pdf), specifically at Table E-10. You’ll see a surge in spending on “income security”; that’s basically unemployment insurance, food stamps, and similar items. In other words, spending on safety-net programs is up because the economy is depressed, and more people are falling into the safety net.

WCBBD?

"What Could Ben Bernanke Do?"

"I can't blame Occupy Wall St..."

UC Berkeley economist Brad DeLong puts himself in Ben Bernanke's shoes and comes up with a Fed strategy to...uh, maybe...help pull the country out of a deep ditch. Given that the Federal Reserve has autonomous power,  monetary policy is still feasible in the near term while every other path is "gridlocked" by dysfunctional and/or corrupted politics. Wonky but worthwhile suggestive commentary on a crucial piece of the economic puzzle:

(T)he Federal Reserve might be able to spark a real economic recovery by…

1. Announcing that it is going to keep short-term Treasury interest rates low not just as long as the economy is depressed but even afterwards when the economy has recovered and when it would normally be raising interest rates: that it is going to keep short-term Treasury interest rates low until it generates an inflationary boom, and that you had better start building capacity now to serve your customers during that inflationary boom or your competitors will do so and take your profits.

2. Not just announcing but actually bailing-in the taxpayers of the United States of America as the risk-bearing partners of American financial institutions: with the taxpayers as their risk-bearings partners, financial institutions that were previously tapped-out on their risk-bearing capacity will now have the ability and the incentive to make more loans at more attractive terms to more potentially-expanding businesses.

The perils of "too big to fail"

 Simon Johnson - former chief economist for the International Monetary Fund -  at NYTs "Economix" on the implications and perils of "too big to fail."  (One question as food for thought - if, as Johnson notes, banks are financed mostly by debt rather than equity, why are these institutions so beholden to stockholders, who aren't putting up much stake in the project relative to their ability to profit and the unprecedented "security" of their limited investment because of "too big to fail" ?):

In an interview with The New York Times in July, Sheila Bair, the departing chairwoman of the Federal Deposit Insurance Corporation, said of her experience over the last few years: “They would say, ‘You have to do this, or the system will go down.’ If I heard that once, I heard it a thousand times.”

No responsible official wants the entire financial system to crash; this would be incredibly disruptive to all Americans and potentially lead to a worldwide depression. Knowing this, many people who want bailouts on generous terms use “contagion fear” as part of their sales pitch.

How are we to know if a particular event, like deciding not to bail out a big bank, will lead to contagion that spreads to other financial markets? Contagion is the key issue.

"We are the 99.9%"

Paul Krugman suggests that the 99% "Big Tent" is actually a bit too small. It's the .1% - yes,  the one-tenth of one-percent, - who are the truly serious  malefactors in our contemporary economy and greatest beneficiaries in the income-inequality story. So, apparently,  we have extreme income inequality even at the upper end of extreme income inequality. Krugman's not exactly pulling out the violin to play a lament for the lower 90% of the top 1%, but his point amplifies the general case regarding what's happened in our economy:   

"(T)he 99 percent slogan aims too low. A large fraction of the top 1 percent’s gains have actually gone to an even smaller group, the top 0.1 percent — the richest one-thousandth of the population...

(W)ho are the 0.1 percent? Very few of them are Steve Jobs-type innovators; most of them are corporate bigwigs and financial wheeler-dealers. One recent analysis found that 43 percent of the super-elite are executives at nonfinancial companies, 18 percent are in finance and another 12 percent are lawyers or in real estate. And these are not, to put it mildly, professions in which there is a clear relationship between someone’s income and his economic contribution.

Executive pay, which has skyrocketed over the past generation, is famously set by boards of directors appointed by the very people whose pay they determine; poorly performing C.E.O.’s still get lavish paychecks, and even failed and fired executives often receive millions as they go out the door.

Meanwhile, the economic crisis showed that much of the apparent value created by modern finance was a mirage. As the Bank of England’s director for financial stability recently put it, seemingly high returns before the crisis simply reflected increased risk-taking — risk that was mostly borne not by the wheeler-dealers themselves but either by naïve investors or by taxpayers, who ended up holding the bag when it all went wrong. And as he waspishly noted, “If risk-making were a value-adding activity, Russian roulette players would contribute disproportionately to global welfare.”

Read the whole piece HERE at NYT.

The curse of long-term unemployment

Michael Hirsh on "the left-behinds":

In recent months, Federal Reserve Board Chairman Ben Bernanke and President Obama have sounded increasingly urgent alarms about the staggering number of long-term unemployed. And they are right to do so: 42.4 percent of the nation’s 13.9 million unemployed workers have been out of a job for more than six months.

That’s by far the highest share of long-term unemployed since the government started keeping records a half-century ago. Expert after expert now warns that the longer a person goes jobless, the greater the atrophy in skills and ambition, and the more likely that person is to drop out of the workforce entirely.

What Bernanke and others rarely mention, though, is that this trend has been building for at least three decades. The share of left-behinds has generally ratcheted up with every economic downturn since the early 1980s. And today, even two years after the Great Recession technically ended in June 2009, the number of long-term jobless has continued to climb to record levels. It shot up from 29.3 percent of total unemployed workers in June 2009 and peaked at 44.6 percent as recently as September.

Washington, dominated by a free-market consensus ever since President Reagan’s era, has ignored that 30-year pattern. Partly as a result, reams of data show that America’s middle class has been shrinking.

Among the few who has long second-guessed the Washington mind-set is Frank Levy, an economist at the Massachusetts Institute of Technology who coauthored a much-cited 2007 paper concluding that labor began losing the fight to capital in the late 1970s.

“I’m not sure how much better we could have done in preserving the middle class,” he says. “But I know that, with a few exceptions like the earned income tax credit, we didn’t really try.”

Read Hirsch's complete piece at The National Journal on the roots and growth of long-term unemployment, a curse which has hollowed out the country's middle-class.

The State of The Union: Insanely Intransigent Republicans, Too-Eager-to-Compromise Democrats and Repetitively Moronic Journalists

Dean Baker at Center for Economic and Policy Research - "Super Committee Democrats Insist on Not Giving Republicans Everything":

In much of the media it is the rule that both parties are equally to blame regardless of what the facts of the situation are. Hence the lead sentence in the (Washington) Post's article on the supercommittee's deadlock tells readers:

"Congressional negotiators made a yet another push Friday to carve $1.2 trillion in savings from the federal debt, but remained stuck in their entrenched positions on tax policy even as the clock was running down on their efforts to reach a deal."

It would be interesting to know how the Post decided that the Democrats have an entrenched position. They have offered dozens of plans, many of which would not involve having the rates return to their pre-Bush level, as is specified in current law. By contrast, the Republicans have consistently put forward proposals that would keep the taxes on the wealthy at their current level or lower them further.

Even though the Democrats have shown every willingness to cave, the Post refuses to give them credit for it.

"An Economic Bill of Rights"

Excerpt from President Franklin Delano Roosevelt's January 11, 1944 message to the Congress of the United States on the State of the Union:

It is our duty now to begin to lay the plans and determine the strategy for the winning of a lasting peace and the establishment of an American standard of living higher than ever before known. We cannot be content, no matter how high that general standard of living may be, if some fraction of our people—whether it be one-third or one-fifth or one-tenth—is ill-fed, ill-clothed, ill-housed, and insecure. This Republic had its beginning, and grew to its present strength, under the protection of certain inalienable political rights—among them the right of free speech, free press, free worship, trial by jury, freedom from unreasonable searches and seizures. They were our rights to life and liberty.

"Failure is good"

Krugman debunks the Super-Committee:

It’s a bird! It’s a plane! It’s a complete turkey! It’s the supercommittee!

By next Wednesday, the so-called supercommittee, a bipartisan group of legislators, is supposed to reach an agreement on how to reduce future deficits. Barring an evil miracle — I’ll explain the evil part later — the committee will fail to meet that deadline.

If this news surprises you, you haven’t been paying attention. If it depresses you, cheer up: In this case, failure is good.

Budget Challenge

This is a new "budget challenge" from Pew Charitable Trust that allows you to adjust the various potential spending and revenue factors and come up with your own one-person "SuperCommittee" solution.  I have not played with this version yet, but found a similiar calculator from the New York Times revealed that these issues are not as insoluble as various "serious people" and politicians would have you think.  A lot of the discourse is thinly veiled ideology. Check it out HERE.

Newt gives "shameless" a bad name

Timothy Egan at New York Times documents the stench:

"I am now a famous person. I represent real power.”

As a young graduate student pursuing an advanced degree in modern European history, Newt Gingrich wrote a dissertation titled “Belgian Education Policy in the Congo: 1945-1960.” Thereafter, in the course of writing 23 books, the scholar-politician pontificated on many subjects, from the pope to a “pouting sex kitten,” who appears for a quick romp in a novel about the Civil War.

None of his work had anything to do with the home lending practices that would help to destroy the American economy. So why would Freddie Mac pay $300,000 to Professor Gingrich in 2006 – just as the troubled mortgage lender was facing calls on Capitol Hill for increased regulation?

Turns out, that was just small change in the overall sweetheart deal that no historian but Gingrich could ever get. Bloomberg News reported this week that Gingrich made between $1.6 million and $1.8 million for giving additional “advice” to Freddie Mac. When I asked about the amount, a Freddie Mac spokesman refused to comment, but officials at the agency who are familiar with the contracts confirmed the numbers reported by Bloomberg.

This is not just another Gingrich laugher, up there with his revolving Tiffany’s account or his multiple personal hypocrisies. This story encapsulates why Washington is broken and how the powerful protect and enrich themselves, unanchored to basic principles.

YOU CANNOT EVICT AN IDEA WHOSE TIME HAS COME

Via ThinkProgress

The safety net amidst the Great Recession

[Via CBPP & Economist´s View]

Wonkblog on the Eurocrisis

This doesn't explain the Eurocrisis, but it helps explain areas of potential impact on the US economy - the worst of which, in the apparently still dense jungle of finance, seem still unknown.  Brad Plumer at Wonkblog:

With the crisis in Europe still raging, analysts are frantically trying to game out what a euro zone implosion would mean for the United States. Yesterday, the Federal Reserve Bank of San Francisco put out a research note pegging the odds of a U.S. economic contraction in early 2012 at “greater than 50%,” noting that a European sovereign debt default (Greece, say) would very likely plunge us into recession.

Part of the reason for that is that Europe is one of our major trading partners — accounting for about one-fifth of U.S. exports. Over at Real Time Economics, Josh Mitchell put together a handy chart, using Wells Fargo data, showing which states export the most goods to Europe, and hence would get hit hardest by a Europe slump:


Utah’s gold exports, South Carolina’s auto exports, and West Virginia’s coal exports are potentially at greatest risk. The one sliver of good news is that, as Wells Fargo notes, most states have major trade flows primarily with countries like the United Kingdom, France, the Netherlands and Germany, rather than the most fragile countries like Greece and Italy and Spain. So it’s tough to say, exactly, how a slowdown overseas would play out here.

Meanwhile, the bigger, scarier unknown is whether financial mayhem in Europe could wreak havoc on U.S. banks.

Oldie but goodie

The New Yorker's James Suroweicki argues Republicans should go back to merely being corporate lapdogs and - at the least - abandon "The Crazy" because their extreme ideology is bad for business...HERE.

The Rove Slime Machine Targets Warren

Simon Johnson:

Karl Rove’s Crossroads GPS group has launched the first attack ad against Elizabeth Warren, presumably because she is now running hard for the Senate in Massachusetts.  This ad is not a big surprise, but the line that Mr. Rove takes could well backfire.

The ad states, “we need jobs, not radical theories and protests,” so we can break the argument down into three separate parts.

First, who destroyed more than 8 million jobs in the United States – and plunged us into the deepest and longest lasting recession since the 1930s?  Surely this was not Ms. Warren, who was just a law school professor, in the run-up to 2008.

Mr. Rove is opening the blame game and this is going to go badly for his presumed supporters – the largest banks on Wall Street that took excessive risks, paid their top people well, and then blew themselves up at great cost to the American taxpayer.  By all means, let us have a conversation about jobs and the history of job losses in the United States; “too big to fail” banks do not look good in this context.



Second, what exactly is the radical theory here?  Ms. Warren’s point has been that we regulate the safety of toasters but not financial products.  Basic consumer protection is, of course, still resisted strongly by the less reputable parts of the financial sector.  But honestly, what well-run and honest firm fears sensible product standards, which is exactly what the Consumer Financial Protection Bureau is working on establishing?