Tuesday, May 31, 2011

The GOP's "cut taxes" litany ignores reality

The GOP's knee-jerk response to every problem is "lower taxes."  We hear it over and over and over again. Tax cuts are the cure-all.  And in response to the deficits that their fetish for tax cuts has created, the notion of raising revenue is the only option that is forbidden in this dogmatic agenda. Anything else, no matter how noxious or insane, is "on the table" - which is why we've got proposals like killing Medicare being floated.

The biggest lie in the GOP's "cut taxes" litany is that high taxes are causing unemployment, and that further cutting taxes for wealthy "job creators" is the key to recovery.  But the reality is that effective  tax rates are already the lowest they've been since before the Korean War. 

Bruce Bartlett at New York Times "Economix":
Historically, the term “tax rate” has meant the average or effective tax rate — that is, taxes as a share of income. The broadest measure of the tax rate is total federal revenues divided by the gross domestic product.

By this measure, federal taxes are at their lowest level in more than 60 years. The Congressional Budget Office estimated that federal taxes would consume just 14.8 percent of G.D.P. this year. The last year in which revenues were lower was 1950, according to the Office of Management and Budget.

The postwar annual average is about 18.5 percent of G.D.P. Revenues averaged 18.2 percent of G.D.P. during Ronald Reagan’s administration; the lowest percentage during that administration was 17.3 percent of G.D.P. in 1984.

In short, by the broadest measure of the tax rate, the current level is unusually low and has been for some time. Revenues were 14.9 percent of G.D.P. in both 2009 and 2010.

Yet if one listens to Republicans, one would think that taxes have never been higher, that an excessive tax burden is the most important constraint holding back economic growth and that a big tax cut is exactly what the economy needs to get growing again.

An old-fashioned banker talks straight about the banking sector as a "virtual casino"

Joe Nocera at the New York Times on "The Good Banker":
For nearly 30 years, (Robert G.) Wilmers has run the M&T Bank, based in Buffalo. When he took it over, M&T had $2 billion in assets; today, its assets exceed $68 billion, and it’s one of the most highly regarded regional bank holding companies. It has also been one of the best performing stocks in the Standard & Poor’s 500-stock index; indeed, M&T was one of only two banks in the S.& P. 500 that didn’t cut its dividend during the financial crisis….

Wilmers, it turns out, is that rarest of birds: a banker willing to tell harsh truths about banking. That, for instance, much of the money the big banks earn comes from trading profits “rather than the prudent extension of credit that furthers commerce.”  ...   “It has become a virtual casino,” (according to Wilmers.)  “To me, banks exist for people to keep their liquid income, and also to finance trade and commerce.” Yet the six largest holding companies, which made a combined $75 billion last year, had $56 billion in trading revenues. “If you assume, as I do, that trading revenues go straight to the bottom line, that means that trading, not lending, is how they make most of their money,” he said.

"Them that's got shall get, them that's not shall lose..."

Pat Garofolo at Think Progress has it:
Between 2000 and 2009, American workers experienced a “lost decade,” with incomes falling nearly five percent... Big bank CEO’s, meanwhile, made an average of $19 million per year between 2001 and 2010 (according to) Fortune's Colin Barr... :
Over the past decade the too-big-to-fail banks have showered a staggering $1.15 billion in cash and stock on a changing cast of hard-charging if inept chief executives, according to regulatory filings. That works out to an average paycheck of $19 million a year – this in a decade in which the biggest banks ripped off everyone in sight on their way to very nearly turning the lights out on the U.S. economy...
It’s not only in the banking industry that CEO pay has come roaring back. In 2010, median CEO pay climbed 27 percent. Median CEO compensation last year was $9 million, the highest since 2007, while the average CEO bonus grew by nearly 20 percent. CEOs at America’s largest companies now earn 343 times more than the typical worker. In 1970, the average CEO earned 28 times as much as the typical worker.

This disparity is contributing towards America’s sky-high income inequality, which is currently the worst its been since the 1920s. Currently, the top one percent of households make nearly 25 percent of the total income in the country, after they made less than 10 percent in the 1970s. Between 1980 and 2005, “more than 80 percent of total increase in Americans’ income went to the top 1 percent.”

Prof. Brad DeLong's list of 13 dumb and dishonest notions circulating among politicians and/or journalists

"Maybe we should find jobs in the Beltway."

DeLong's Baker's Dozen of Dumb and Dumber - HERE.

Not surprisingly, GOP Budget Czar Paul Ryan tops the list.

Monday, May 30, 2011

Quote of the week (month? maybe year!)

Paul Krugman:  "(P)olicy makers are sinking into a condition of learned helplessness on the jobs issue: the more they fail to do anything about the problem, the more they convince themselves that there’s nothing they could do."

Read the entire critically important column - "Against Learned Helplessness" - HERE.

The Veterans Administration Hospitals - serving those who have served better and at less cost than for-profit medicine

Projected increases in health care costs are the biggest problem area in long-run predictions of future deficits. It's common knowledge - at least one would hope - that the US has the least efficient and cost-effective health care insurance and delivery system among peer nations.  Although a variety of systems abroad deliver far better results without reverting to "socialized medicine" - England is the prime example of a fully socialized system - we might look to one fully publicly-run example on our own shores that's working very, very well if we want a window into the option of government-provided health care.

The real first flag-raising on Iwo Jima
The Veterans Administration Hospitals are a nationwide network of - literally - fully socialized medicine in the United States. And they are consistently rated the best service centers our health care system has to offer. They spend significantly less money per patient and are rated higher than private hospitals by objective measures in numerous studies.

As a reminder of our ongoing commitment to veterans of our armed forces, for Memorial Day I'm offering a  2007 commentary by Ezra Klein on the VHA:
Over the last decade or two, the VHA system has become a worldwide leader in both the adoption and the invention of health-information technology, and it has leveraged its innovations into quantifiable gains in quality of care. As Harvard's Kennedy School noted when awarding the VHA its prestigious Innovations in American Government prize:
[The] VHA's complete adoption of electronic health records and performance measures have resulted in high-quality, low-cost health care with high patient satisfaction. A recent RAND study found that VHA outperforms all other sectors of American health care across the spectrum of 294 measures of quality in disease prevention and treatment. For six straight years, VHA has led private-sector health care in the independent American Customer Satisfaction Index.
Indeed, the VHA's lead in care quality isn't disputed. A New England Journal of Medicine study from 2003 compared the VHA with fee-for-service Medicare on 11 measures of quality. The VHA came out "significantly better" on every single one. The Annals of Internal Medicine pitted the VHA against an array of managed-care systems to see which offered the best treatment for diabetics. The VHA triumphed in all seven of the tested metrics. The National Committee for Quality Assurance, meanwhile, ranks health plans on 17 different care metrics, from hypertension treatment to adherence to evidence-based treatments. As Phillip Longman, the author of Best Care Anywhere, a book chronicling the VHA's remarkable transformation, explains: "Winning NCQA's seal of approval is the gold standard in the health-care industry. And who do you suppose is the highest ranking health care system? Johns Hopkins? Mayo Clinic? Massachusetts General? Nope. In every single category, the veterans health care system outperforms the highest-rated non-VHA hospitals."

Sunday, May 29, 2011

GOP "Jobs Plan" - Tax Cuts for Dummies?

The Congressional Republicans have offered up - with great fanfare - a jobs plan that has more the characteristics of a children's book than a serious policy proposal. It's a rehash of everything we've ever heard from them before, dumbed down (if one can imagine such a thing) into a menu with tendentious prologue and peppered up with lots of pictures.

Paul Krugman notes, "There’s so little there there that the document — look at it! — has to rely on extra-large type and lots of pointless pictures to bulk it out even to 10 pages."

Nor are Jamielle Bouie, at American Prospect, and  Ezra Klein at Wonkbook impressed.
House Republicans have released their plan for "America's Job Creators," and it's underwhelming, to say the least. Clocking in at a whopping 10 pages, it begins  by indicting Democrats for high unemployment, conveniently ignoring the last four years of extreme economic hardship, and blames "taxation," "regulation," and "government takeovers of the economy" for the current mess. What follows is eight pages of silly art, large text, and "solutions" that amount to the same failed Republican playbook of tax cuts, tax cuts, and more tax cuts.
Klein has more:
Academic books pack about 600 words to a page. Normal books clock in around 400. Large-print books — you know, the ones for kids or the visually impaired — fit about 250. The House GOP’s jobs plan, however, gets about 200 words to a page. The typeface is fit for giants, and the document’s 10 pages are mostly taken up by pictures. It looks like the staffer in charge forgot the assignment was due on Thursday rather than Friday, and so cranked the font up to 24 and began dumping clip art to pad out the plan…

When I asked David Autor, an economist at MIT and a specialist on labor markets, to take a look at the substance, he pronounced it a classic case of “what Larry Summers would call ‘now-more-than-everism.’”

Saturday, May 28, 2011

The Genius of the GOP's "Ryancare" plan to end Medicare and push seniors into private insurance markets

Note the huge difference, not just in doubling of each senior's personal share of costs, but in total spending on health care markets per senior under Medicare vs. "Ryancare."  I'm speechless. Except to note this: anyone who endorses this plan that dramatically drives up total expenditures on an already rapidly-inflating health insurance/delivery system and claims to be a "fiscal conservative" is either a liar with a hidden agenda (privatization at any cost?)  or a moron.  It really is that simple. The non-partisan Congressional Budget Office numbers speak for themselves.

Thanks to the CBPP for another great chart.

A bit of a bright spot in manufacturing and exports?

While the numbers pale in comparison to overall job loss and continuing unemployment, over 200,000 jobs were added over the past year in the manufacturing sector. No administration has been able to match those figures in growth of manufacturing employment since Bill Clinton in 1998.  Here's a chart showing manufacturing job growth since 1997, via The Economist:

Growth in manufacturing jobs, in 1000s (charts jobs added, not totals)

According to the Commerce Department, manufacturing - which has been shrinking in this county over decades - is actually leading the recovery due to growing exports:
"The 200,000 jobs added in the past year have been concentrated in the durable goods sector, whose advance report on shipments and new orders for April will be released this Wednesday.  Exports of durable manufactured goods have jumped 13.1 percent over the year, with exports accounting for roughly 37 percent of the growth in shipments over the past year."
Overall economic news is still very bleak, but an uptick in the anemic manufacturing sector and some significant growth in our exports might well signal structural improvements in an economy that has been bleeding jobs overseas and been wildly imbalanced on the trade front for almost as many years as I can remember.

Friday, May 27, 2011

More Congressional Republicans voted to pass Medicare than voted against it

Obviously a right-wing nut...
Here's an interesting bit of historical trivia in the context of our current political discourse. Although Ronald Reagan - in his role as General Electric toastmaster - famously attacked Medicare as a scheme to "socialize medicine," Republicans were not uniformly against a government-sponsored insurance plan to cover seniors.

Reagan's words sound crazy today, warning that if a Medicare bill passed, "you and I are going to spend our sunset years telling our children and our children's children what it once was like in America when men were free."  Yeah - totally nuts and even Paul Ryan is smart enough not to go there.

But in 1965 when Medicare was actually passed, more House Republicans voted for it than against it. 70 voted yea, while 68 voted nay.  In the Senate the GOP split went in the other direction - 13 yea, 17 nay - but the divide was still close enough to indicate the bi-partisan nature of the bill's passage.

In contrast, with Medicare currently the most cost-effective segment of our admittedly problematic health insurance and delivery system, today's Republicans pushing a scheme to destroy the most efficient piece of the health insurance puzzle signifies the party as a unified front of right-wing extremism with a "cost-effectiveness be damned" privatization obsession - hardly "conservative."

A weak economy staggers along - but is anyone in Washington paying attention?

As the recovery falters and appalling unemployment numbers remain with us, politicians of both parties seem to be focused on some version of debate over the deficit and the long-term future of Medicare.  Defense of Medicare against nutty professor proposals to end it is critical, but it doesn't speak to the crisis at hand.

This political logjam is an indication of just how lacking in seriousness and skewed to the socially nihilistic Right (personified by Ayn Rand fan Paul Ryan) our political discourse has become in a time of real crisis on the jobs front. No one in Washington seems to care about the central issue of getting economic growth on track and putting Americans back to work. David Leonhardt, business and economics writer for the New York Times, sounds the alarm:
The latest economic numbers have not been good. Jobless claims rose last week, the Labor Department said on Thursday…Perhaps the most worrisome number was the one Macroeconomic Advisers released on Wednesday. That firm tries to estimate the growth rate of the current quarter in real time, and it now says annualized second-quarter growth is running at only 2.8 percent, up from 1.8 percent in the first quarter. Not so long ago, the firm’s economists thought second-quarter growth would be almost 4 percent.

An economy that is growing this slowly will not add jobs quickly. For the next couple of months, employment growth could slow from about 230,000 recently to something like 150,000 jobs a month, only slightly faster than normal population growth. That is certainly not fast enough to make a big dent in the still huge number of unemployed people.

Are any policy makers paying attention?

Thursday, May 26, 2011

Do higher taxes kill the economy?

Apparently not.

Taxes in both Denmark and Sweden are considerably higher than they are in the US. Economist Lane Kenworthy has taken an extensive look at factors such as GDP growth over decades, the World Economic Forum's "Competitiveness Index," rates of employment, household income growth, income distribution and government debt and found that Denmark and Sweden perform at least as well if not better by all relevant economic measures. They also have greater life expectancy and greater "life satisfaction."

Most surprisingly, both countries are judged by the Heritage Foundation-Wall Street Journal index to have a level of "economic freedom" essentially the same as the United States (Denmark actually scores better on that one.)  Not surprisingly, both Denmark and Sweden have much lower levels of government debt as percentage of GDP  than we currently have in the United States.

"Taxophobia" appears to be just that at the level of economic argument related to jobs and growth - a fear that can't be explained by rational measure or empirical evidence.  As we all know, there are lots of reasons not to like higher taxes, but the usual arguments about "job-killing" taxes - especially on high earners - put forward as "sound economics" don't add up in the real world.

Check out Kenworthy's piece here - it debunks a lot of "conventional wisdom" about taxation, job growth and productivity.

Wednesday, May 25, 2011

GOP Budget Czar Paul Ryan has trouble telling the truth

Jared Bernstein, former chief economic aide to VP Joe Biden, comments on Congressman Paul Ryan's assertion that ”Our plan is to give seniors the power to deny business to inefficient providers...their plan [Affordable Care Act] is to give government the power to deny care to seniors”:

"What's up with this guy?"
The ACA does nothing of the sort.  It was structured precisely to ensure that the fundamental guarantee of Medicare remained in place.   This link, from Austin Frakt, provides the details.  The punchline is that IPAB—the Independent Payment Advisory Board created by ACA to control cost growth—is explicitly not permitted to “…ration health care, raise costs to beneficiaries, restrict benefits, or modify eligibility criteria.”

So Ryan is wrong.  Full stop.

But there’s more.  Understanding this difference provides a useful insight into how health care reform under the ACA differs from Ryan’s approach.  ACA gets under the hood of the health care delivery system to attempt to control health-care cost growth.  Ryan simply shifts cost growth from the government to seniors.

Once more with feeling: The GOP's "Ryan Plan" RAISES total health care spending for seniors

Peter Orszag, former White House budget director:
Under (the Ryan/GOP budget) proposal, starting in 2022, the government would issue new Medicare beneficiaries a payment that they could use to purchase private insurance. These payments would increase in line with the consumer price index but not with faster-rising health costs. The slower increase in payments would generate large savings (and less risk) for the federal government; indeed, this would be the single most important driver of savings from the Ryan budget plan as a whole.

As the government paid relatively less for Medicare, beneficiaries would bear an increasing share of the cost of their care. It is no great accomplishment, however, merely to shift health expenditures from the federal government to consumers, without doing anything to decrease them in total.

The CBO’s analysis of the Ryan plan confirms that federal expenditures would be reduced, by a lot. By 2030, payments for a typical beneficiary would be more than 20 percent lower than current projections, according to the report, and the beneficiary’s personal costs would increase.

So far, nothing unexpected. On the critical metric of whether the Ryan plan would reduce total health-care costs, though, the CBO conclusion is shocking: The plan would not only fail to decrease health-care costs per beneficiary, it would increase them –- by an astonishingly large amount that grows over time. By 2030, health spending on the typical beneficiary would be more than 40 percent higher under the Ryan plan than under existing Medicare, according to the CBO report.

Medicare and the future of reality-based politics

Musing on blogger Mark Kleiman's justifiably snarky response to the GOP's epic failure to hold Jack Kemp's uber-conservative congressional district in last night's special election - a contest which was essentially a referendum on GOP budget czar Paul Ryan's plan to kill Medicare - UC Berkeley econ prof Brad DeLong goes beyond the easy temptation of triumphalism to consider the broader scope and longer range implications for our toxic, stupid politics:
The Ryan fiscal plan was cruel, stupid, and counterproductive: you do not try to improve health care by destroying Medicare and adopting the RyanCare plan of turning insuring the elderly over to private insurance companies whose first act is to hire more administrators and pay them $250 billion a year to try to screen the Medicare patients who will be expensive to treat out of their policy pool. And the claim that eliminating Medicare and replacing it with RyanCare for the elderly was essentially the same thing as FEHBP (medical insurance) for members of congress is a lie of extraordinary magnitude and cynicism.

And we should not be worrying right now about the cost of Medicare in the 2020s and 2030s. Sufficient unto the day is the evil thereof. And the 9% unemployment of this day is indeed evil. Government right now should be focusing on creating jobs now, not on potential deficits a generation hence--especially as no congress can bind its successors.
But given that we are worrying about the 2020s and 2030s right now, it is a fact that there is a large long-run gap starting about a decade and growing between the 20%-plus of GDP that congress on its current institutional trajectory will tax and the missions that congress has promised the American people that the federal government will assume. And the political lesson of the past two years is now that you win elections by denouncing the other party's plans to control Medicare spending in the long run--whether those plans are smart like the Affordable Care Act or profoundly stupid like the replacement of Medicare by RyanCare for the aged--sitting back, and waiting for the voters to reward you.

Monday, May 23, 2011

The GOP in Wonderland (Updated)

Jacob Weisberg at Slate asks the rude question, "Are Republicans Losing Their Grip on Reality?":
Prepping for the GOP primaries?
Moments like this point to a growing asymmetry in our politics. One party, the Democrats, suffers from the usual range of institutional blind spots, historical foibles, and constituency-driven evasions. The other, the Republicans, has moved to a mental Shangri-La, where unwanted problems (climate change, the need to pay the costs of running the government) can be wished away, prejudice trumps fact (Obama might just be Kenyan-born or a Muslim), expertise is evidence of error, and reality itself comes to be regarded as some kind of elitist plot.

Like the White Queen in her youth, the contemporary Republican politician must be capable of believing as many as six impossible things before breakfast. Foremost among these is the claim that it is possible to balance the federal budget without raising taxes. Most Republican politicians are intelligent enough to understand that with federal revenues at 14.4 percent of GDP and expenditures at 25.3 percent, it is, in fact, impossible to close the fiscal gap with spending cuts alone. But GOP candidates acknowledge this reality at their peril. Grover Norquist, the right-wing lobbyist and former collaborator of Jack Abramoff's, has appointed himself chief enforcer of the party's anti-tax catechism. If Republican candidates won't sign his no-new-taxes pledge, Norquist and fellow inquisitors at the Club for Growth threaten them with excommunication, social death, and the punishment of being "primaried" by a well-funded conservative challenger.

Sunday, May 22, 2011

Clinging to the "strong dollar"

Now that she's no longer part of the Official Beltway gaggle, former White House economic advisor Christina Romer offers some straight talk on the "strong dollar" dogmatics:
"Won't you be my Teddy Bear?"
In November 2008, I was sharing a cab in Chicago with Larry Summers, the former Treasury secretary and a fellow economic adviser to the president-elect. To help prepare me for the interviews and the hearings to come, Larry graciously asked me questions and critiqued my answers.

When he asked about the exchange rate for the dollar, I began: “The exchange rate is a price much like any other price, and is determined by market forces.”

“Wrong!” Larry boomed. “The exchange rate is the purview of the Treasury. The United States is in favor of a strong dollar.”

For the record, my initial answer was much more reasonable. Our exchange rate is just a price — the price of the dollar in terms of other currencies. It is not controlled by anyone. And a high price for the dollar, which is what we mean by a strong dollar, is not always desirable.

Saturday, May 21, 2011

Gas and energy prices too high? Well, they're actually a lot higher than you think

David Leonhardt at the New York Times quotes Michael Greenstone and Adam Looney, economists at The Hamilton Project on the costs of American energy policy. They argue in a new study:
… our energy choices are based on the visible costs that appear on utility bills and at the gas pump. This system masks the social costs arising from those energy choices, including shorter lives, higher health care expenses, a changing climate, and weakened national security.
 Leonhardt further comments:
Mr. Greenstone and Mr. Looney estimate that a coal plant must spend 3.2 cents to produce a kilowatt hour of electricity (and consumers then pay slightly more than this). This price appears to be a bargain, the economists write, but the true costs (of our carbon energy) — once health costs, military costs and the like are taken into account — are more than twice as high: 8.8 cents per kilowatt hour.
Real costs of current energy consumption must be factored into any strategy for funding research and creating viable markets for green energy.  When people complain about things like gas prices at the pump, they're not even close to understanding the actual costs involved in our energy markets.

Friday, May 20, 2011

From "deficits don't matter" to "defaults don't matter"

Conservative David Frum on the state of his party:
We’ve evolved in the space of a decade from “deficits don’t matter” to “defaults don’t matter.”
It seems flabbergasting that a conservative party could arrive at this destination.

Yet the new mood exemplifies the trend we have seen over the past three decades, whereby one after another the “rules of the game” have been discarded...

And now even the debts and obligations of the United States become a tool of politics.

Everybody seems to assume that the rules will be reasserted before the game gets too dangerous. Maybe. Let’s hope. But one year’s outrageous innovation has a bad habit of becoming next year’s new normal.

Thursday, May 19, 2011

The graph that gives the lie to GOP arguments about the economic impact of tax increases vs. tax cuts

It's no secret that job growth and GDP growth were strong in the years after President Clinton increased taxes to curb deficits and get the government on sounder fiscal footing,  and that George W. Bush presided over a remarkably weak economy after making tax cuts the centerpiece of his economic program.  But that doesn't stop Republicans from spinning fantastical tales of the inevitable and terrible consequences of even modest tax increases to curb long-term deficits.

The truth is that tax cuts are ideology - rather than pragmatic policy - in GOP circles and have the aura of creationism for religious fundamentalists.  I don't really care what religious fundamentalists believe happened millions, or in their view thousands, of years ago - as long as they don't try to sell it as "science" in the schools.  But for contemporary "conservatives" posing as "deficit hawks" to make arguments about tax cuts that are based solely on a belief system, rather than what we know - at least in terms of co-relation - about our economy and fiscal trajectory over the past 20 years is a signal of just how un-serious they are about fiscal sanity and balancing budgets. 

An irrational, counter-factual article of faith - rooted in the disastrous "Starve the Beast" anti-government ideology - drives one of our political parties.  And driven by that dogma, they're willing to drive the country off a cliff.

Via Ezra Klein, Wonkbook.

Wednesday, May 18, 2011

Jobs? Who cares?

Although polling shows the public is much more concerned about unemployment than deficits, the mainstream press has dutifully fallen into line with the GOP's Beltway-driven deficit-hysterics agenda in their coverage of the issues.

From Derek Thompson at The Atlantic:
Articles mentioning unemployment have plummeted nearly 70 percent since last summer, while articles mentioning the deficit have doubled over the same time, according to a National Journal report.

Is this pernicious Beltway loopism? Maybe. But more likely it's the inevitable result of an election that punished stimulus-happy Democrats and opened the doors wide for Republicans who promised to focus with maniacal intensity on the deficit. The 2010 election reshaped Congress, the Congress reshaped the jobs-and-deficit debate, and press coverage shifted to the deficit.

Meanwhile, remember how we have 9 percent unemployment? It's true. We have 9 percent unemployment, according to the most conservative definition of unemployment, and tens of millions of Americans are stuck on the outside of the job market looking in.
 Here's the chart, showing press coverage tracking the concerns of Washington over those of Main Street:

Tuesday, May 17, 2011

Poor Paul Ryan

Quote of the day: 
Remember, as far as the political world is concerned, Paul Ryan is the best Republicans have to offer. He’s not some random back-bencher; he’s the GOP’s go-to guy on fiscal issues.
And yet, Ryan’s agenda is basically an arithmetic-challenged fraud, and he apparently has no idea what the “the drivers of our debt” are.
 Read Steve Benen's piece on the latest fantastical assertions from Mr. Ryan HERE.

The best economists money can buy

Illustration from Paul Krugman's "How Did Economists Get It So Wrong?"

According to Nancy Folbre, an economics professor at U Mass-Amherst writing for The New York Times "Economix" blog, her profession is being gamed by right-wing money men who are buying influence within universities to validate their political agenda:
If you don’t like what economics professors like me are saying, go hire your own. Of course, if they’re on your payroll, no one will be surprised if they agree with you, so it’s best to hire them indirectly, through a tied donation to a university.

Frustrated that so few students are reading your favorite book about the virtues of free enterprise? Offer highly respected universities money to make it required reading.
As Catherine Rampell pointed out in Economix last week, conservative foundations founded by Charles Koch and John Allison have actively pursued such strategies.

Monday, May 16, 2011

Kenyan Socialist President to GOP "Fiscal Conservatives" on the dangers of not raising the debt limit

What would Reagan do?
“The full consequences of a default – or even the serious prospect of default – by the United States are impossible to predict and awesome to contemplate. Denigration of the full faith and credit of the United States would have substantial effects on the domestic financial markets and the value of the dollar.”

Oh wait a minute. That was Ronald Reagan telling Congress what was at stake back in 1983.

Via Steve Benen/Washington Monthly.

Sing it again Woody: "Some people rob you with a six-gun..."

"Some rob you with a fountain pen!"

Shahien Nasiripour at Huffington Post:
Woody Guthrie sings at McSorley's, NYC


"Federal Audits Accuse Five Biggest Mortgage Firms Of Defrauding Taxpayers"


Read the whole thing, HERE.

Tax cut kool-aid

Our favorite conservative economist, Bruce Bartlett, explains the fraud that is GOP fiscal policy and suggests it's starting to unravel:
The flavor of GOP fiscal policies.
Republicans have a problem. The American people are concerned about the budget deficit and know enough basic arithmetic to understand that it can result from higher spending or lower revenues. Republicans, however, insist that taxes must not be increased by a single penny; indeed, they argue that the government doesn’t even have a deficit problem, just a spending problem. Therefore, the only deficit reduction measures they will consider in the Republican-controlled House of Representatives are spending cuts. So certain are Republicans that tax cuts have no impact on the deficit that they included another $3 trillion worth in the budget they passed on April 15.

Democrats all know that the Republican position is ridiculous, that the Bush tax cuts have added some $2 trillion to the national debt and constitute the largest component of projected deficits going forward. These facts are documented in recent reports from the Congressional Budget Office, Pew Charitable Trusts, and the Center on Budget and Policy Priorities. They show that simply allowing all the Bush tax cuts to expire on schedule next year would be sufficient, by itself, to stabilize the debt-to-GDP ratio.

Unfortunately, Democrats have been oddly reluctant to explain the truth about the deficit. They seem paralyzed by fear that they will be attacked by Republicans for being tax increasers. Consequently, the Republican mantra that spending must be slashed, even if it means effectively abolishing Medicare, and any tax increase, no matter how small, will destroy the economy is just about the only budget option voters ever hear.

Big Spender

The hypocrisy of the GOP on deficit issues is manifest - most especially given their "Starve the Beast" tax-cut ideology over 30 years that deliberately underfunded government in order to create the kind of "deficit crisis" that they are currently using in their arsenal of shameless demagogy to kill government programs.  What is often less apparent is their big-spending hypocrisy.

Newt and the Mistress Missus
Current Presidential aspirant Newt Gingrich - who has unleashed the "big spender" attack on President Obama (actually one of his least obnoxious assertions about the President, but let's leave the pure nutso stuff like "Kenyan Socialist" out of this, if only to control my blood pressure) - is a case in point. Think Progress has the goods on this disingenuous character, whose combination of grotesque pretensions, egomania and lack of self-awareness rival perhaps only Donald Trump's in the GOP's "Presidential" over-stuffed Clown Car of wannabe candidates:
(A)s Speaker of the House of Representatives in the 1990′s, he himself was one of the most avid big spenders in the entire country, using government cash to enrich his district and lift it up to being one of the wealthiest in the country.
During his tenure in Congress, Gingrich represented large portions of Cobb County, Georgia. Cobb was a mostly-white district and largely suburban — completely different from the crude stereotypes Gingrich and others used to blast the welfare state, which were generally portrayed as minority-heavy urban environments. At the same time Gingrich was working with President Bill Clinton to cut back on spending for programs for the poorest Americans, Gingrich made Cobb one of the most subsidized districts in the entire country.
A 1996 article from New York Magazine notes this:
[Gingrich] represents Cobb County, a prosperous jurisdiction that ranks third among suburban counties in federal dollars returned per resident. According to the Atlanta Journal-Constitution, the federal government spent $4.4 billion in Cobb County in 1994, some $10,000 per resident, or nearly twice as much per capita as it spent in New York City.

Saturday, May 14, 2011

Krugman and Klein on the ugly politics of the debt ceiling

Paul Krugman explains at his NYTs blog just what the fight over the debt ceiling means, in direct effects but more importantly in political terms, which mostly signal just how extremist the allegedly "conservative" faction in our governing system has become and how the most basic measures to ensure stability are nothing but partisan politics for the GOP:
The direct effects of hitting the ceiling would be bad enough — sharp cutbacks in spending, which would undermine essential services, not to mention derail the economy. It’s not clear to me whether there would be some wiggle room through the accumulation of arrears — say, not actually paying workers and contractors but promising to make it up when sanity returns. But it would be ugly indeed.

What might make it even worse would be indirect effects, of two kinds.

First, US government debt plays a special role in the financial system: T-bills are the universal safe asset, the ultimate collateral. That’s why, during moments of financial stress, the interest rate on T-bills has actually gone negative. Make that safe asset suddenly unsafe, and it might cause vast disruption.

Second — and I don’t think this is getting enough attention — failure to raise the debt limit could act as a terrible signal about the US political system.
When you look at the US fiscal position in terms of what we’re capable of as a nation, it’s not a big problem. Never mind those big numbers you hear about implicit liabilities; we have a big economy, too. So modest tax increases and reasonable efforts to limit health care costs could bring our long-run finances into line.

But all this depends on our having the political will and cohesion to do what’s necessary. What if it turns out that we’re a banana republic, with crazy extremists having so much blocking power that we can’t get our house in order?

Friday, May 13, 2011

Democratic budget proposal

The Hill has a piece up suggesting that Democrats are including a "millionaires' surtax" of 3% in their budget proposal.  A start...read it HERE.

Thursday, May 12, 2011

Tax cut voodoo...

Once more with feeling:  Current and projected deficits are primarily the result of Republican tax cut dogmas that they cling to like a religion and push on the public like patent medicine, even in the face of all evidence that they have failed as fiscal  policy. Returning to rational taxation by, as a first step, letting the Bush tax cuts expire is the best path to restoring balance in federal budgets.  More tax cuts, as proposed by the GOP in their budget proposals, are an utter fraud as "fiscal conservatism" and benefit no one but the economic elite.

From the Center on Budget and Policy Priorities:

Who needs Medicare?  We've got magic tax cuts!
Some lawmakers, pundits, and others continue to say that President George W. Bush’s policies did not drive the projected federal deficits of the coming decade — that, instead, it was the policies of President Obama and Congress in 2009 and 2010. But, the fact remains: the economic downturn, President Bush’s tax cuts and the wars in Afghanistan and Iraq explain virtually the entire deficit over the next ten years...

The deficit for fiscal year 2009 — which began more than three months before President Obama’s inauguration — was $1.4 trillion and, at 10 percent of Gross Domestic Product (GDP), the largest deficit relative to the economy since the end of World War II. At $1.3 trillion and nearly 9 percent of GDP, the deficit in 2010 was only slightly lower. If current policies remain in place, deficits will likely resemble those figures in 2011 and hover near $1 trillion a year for the next decade…

The key question is: where do we go from here? It’s too late to undo the damage caused by the tax cuts and wars over the last decade, which have left us with a large overhang of debt. (In fact, that debt legacy — and the resulting interest costs — are a key reason, along with an aging population and rising health-care costs, that it’s unrealistic and ill-advised to restrict total federal spending to the average outlay levels that prevailed over the 1970-2008 period, as some have proposed.) But it’s feasible to enact measures now — to take effect once the economy has recovered more fully — that would put the budget on a sustainable path without jeopardizing the economic recovery.

Wednesday, May 11, 2011

I'm not an economist, but...

This argument from Brad DeLong regarding the value of a bit of inflation under current circumstances strikes me as sensible:
The Inflation Equation: Creditors vs. Debtors
My great uncle Phil from Marblehead Massachusetts used to talk about a question on a sailing safety examination he once took: "What should you do if you are caught on a lee shore in a hurricane?" The correct answer was: "You never get caught on a lee shore in a hurricane!" The answer to the question of what you should do when conventional monetary policy is tapped out and you are at the zero interest rate nominal bound is that you should never get in such a situation in the first place.
How can you minimize the chances that an economy gets caught at the zero nominal bound where short-term Treasury bonds and cash are perfect substitutes and conventional open-market operations have no effects? The obvious answer is to have a little bit of inflation in the system: not enough to derange the price mechanism, but enough to elevate nominal interest rates in normal times, so that monetary policy has plenty of elbow room to take the steps it needs to take to create macroeconomic stability when recession threatens. We want "creeping inflation."
How much creeping inflation do we want? We used to think that about 2% per year was enough. But in the past generation major economies have twice gotten themselves stranded on the rocks of the zero nominal bound while pursuing 2% per year inflation targets. First Japan in the 1990s, and now the United States today, have found themselves on the lee shore in the hurricane.
That strongly suggests to me that a 2% per year inflation target is too low. Two macroeconomic disasters in two decades is too many.

Tuesday, May 10, 2011

Frederich Hayek - another damned socialist?

"If you haven't read Atlas Shrugged, read this..."
Frederich Hayek is one of the patron saints of anti-government types who posit the "free market" as solution to any and every problem.  He is considered the Anti-Keynes in the history of 20th century economic thought.

As measure of Hayek's contemporary place in our political discourse, the government-hating nutcase Glenn Beck is credited for ramping up Hayek's Amazon ratings to #1 simply by devoting several shows to some FOXified version of the dead Austrian's economic theories - although this factoid is hardly fair to Hayek himself in it's implications of raving anti-intellectualism and lack of even the most modest aspirations to analytical integrity.

But from recovering neo-conservative Francis Fukayama, who reviewed "The Constitution of Liberty," one of Hayek's major works, for the New York Times Book Review over the weekend, we get this footnote to Hayek's insistent case for the superiority of markets:
It may...surprise some of Hayek’s new followers to learn that “The Constitution of Liberty” argues that the government may need to provide health insurance and even make it ­compulsory .
Surprise?  My sense of the current aggressive ignorance and emotional discombobulation among the Tea Party, Hyper-Foxoid right-wing is that if Glenn Beck and his minions got wind of that rather stunning "caveat" to Hyek's anti-government case, he'd add Hayek to his list of folks out to destroy America!

Monday, May 9, 2011

Quote of the Day

"The fact is that what we’re experiencing right now is a top-down disaster. The policies that got us into this mess weren’t responses to public demand. They were, with few exceptions, policies championed by small groups of influential people — in many cases, the same people now lecturing the rest of us on the need to get serious. And by trying to shift the blame to the general populace, elites are ducking some much-needed reflection on their own catastrophic mistakes..."

Paul Krugman in his NYT column today - "The Unwisdom of Elites." Read the whole piece HERE.

The cost of killing Medicare...

Where are those Tea Party protestors now?

Congressman George Miller has released a report by the Center for Economic and Policy Research that found a 54-year-old today would need $182,000 in additional savings at retirement just to pay for the cost of maintaining full health coverage to age 84 under the Congressional GOP's plan to eliminate Medicare.

Sunday, May 8, 2011

April job growth - still treading water

Economist Mark Thoma at Moneywatch:
Recovery isn't reaching the long-term unemployed
The (Labor Department's April) jobs numbers are out...and they show the unemployment rate increasing to 9.0 percent, and the creation of 244,000 new jobs (the private sector added 268,000 will government jobs fell by 24,000 — the net figure of 244,000 was better than many analysts expected). This does add jobs over and above the 100,000-150,000 needed each month to keep up with population growth. But remembering that we have millions and millions of people out of work, at this rate it will take more than five years to get back to full employment (job growth during the recoveries from previous recessions was much stronger than this).

Saturday, May 7, 2011

There's not much else to say...

If you missed this, here's Paul Krugman on the absolute lack of seriousness governing our economic agenda debates:
D.C. economic discourse is saturated with fear: fear of a debt crisis, of runaway inflation, of a disastrous plunge in the dollar. Scare stories are very much on politicians’ minds.
Yet none of these scare stories reflect anything that is actually happening, or is likely to happen. And while the threats are imaginary, fear of these imaginary threats has real consequences: an absence of any action to deal with the real crisis, the suffering now being experienced by millions of jobless Americans and their families...
Do the scare-mongers even believe their own stories? Maybe not...the politicians most given to apocalyptic rhetoric about the deficit are also utterly opposed to any tax increase; they argue that debt is destroying America, but they’d rather let that happen than accept even a dime of higher taxes. Yet the inconsistency and probable insincerity of their fear-mongering hasn’t stopped it from having a huge effect on policy debate...
Which brings me back to the destructive effect of focusing on invisible monsters. For the clear and present danger to the American economy isn’t what some people imagine might happen one of these days, it’s what is actually happening now.
Unemployment isn’t just blighting the lives of millions, it’s undermining America’s future. The longer this goes on, the more workers will find it impossible ever to return to employment, the more young people will find their prospects destroyed because they can’t find a decent starting job. It may not create excited chatter on cable TV, but the unemployment crisis is real, and it’s eating away at our society...

Friday, May 6, 2011

The Austerity Agenda: Governments creating even greater disaster

Via Dan O at Beautiful Horizons, we have this New Deal 2.0 piece by Marshall Auerback of the Roosevelt Institute, focusing on the global economic downturn made worse by fiscal austerity politics. The evidence that an agenda targeting deficit spending as the "problem" - when economic growth is sluggish and unemployment still hangs just below double digits - actually digs economies deeper in the hole of recession is increasingly apparent in the experience from austerity regimes in Europe, where countries like Ireland are in the grip of deflation with no end in sight.

Here at home, the GOP is pushing austerity politics like patent medicine, but far too many Democrats - including the White House - are also buying in, proposing policies that merely dilute a deficit-centered agenda or tweak it at the margins, rather than providing a compelling counter-narrative based not simply on ideology or partisan politics, but on the evidence from abroad. One hopes that we might learn from the picture Auerback lays out, but I'm not very optimistic. Meanwhile, as Auerback notes, "Governments across the globe are headed for a disaster entirely of their own making":
Though capital markets remain strong, the global economic backdrop continues to deteriorate as fiscal retrenchment takes hold. Commodity markets have rallied in tandem with the fall in the dollar even though there are signs that growth in the emerging world is slowing. Japan’s economy is in the soup, the U.S. economy has failed to pick up as many thought (with a mere 2% growth rate expected to be released for Q1 shortly), and the European economy is overdue for its own slowdown. The U.S. stock market has also rallied despite the threat of a very high gasoline price, disappointing economic growth data, and a fairly mixed earnings picture.

The new theme in the market seems to be that the Fed, unlike other central banks, will stick with super easy money policies, hence the tendency to push the weak dollar, rising equity prices, and soaring commodity prices. But the news that real GDP growth has fallen sharply in the first three months of 2011 is evidence that the current policy mix, with its emphasis on public spending cuts, is not working. If gasoline prices spike as high as they did in June 2008, they will further weaken an already feeble economy. Consumers did not show up at Walmart at the end of the month because they ran out of money. House prices are still falling.

At the same time, the political debate is focused on the public debt limit, which expires in a few weeks. Conservatives are once again threatening not to extend this limit, even though no less a figure than Warren Buffett has said the failure to do so would be the “most asinine act” the U.S. Congress has ever committed.

The evidence of an increasingly imploding euro zone (which continues to embrace fiscal austerity with the zeal of a religious fanatic) does not seem to have shifted the debate much in this country. Many European governments are facing a fiscal crisis due to their failure to advance public purpose and raise the funds needed to maintain existing programs. Only the interventions of the ECB are saving the whole system from total meltdown, but the underlying solvency problem for the individual member states is getting worse as the days go by. The Euro bosses are failing, and with any luck, so is political resistance to rational economic policy.

Thursday, May 5, 2011

Jobs, jobs, jobs

Today the government announces April job numbers, but the figures are not likely to be good.  From the Wall Street Journal's "Real Time Economics" blog:
(T)he recent modest job increases prolong the time until payrolls return to where they were before the recession hit.

Indeed, at a monthly increase of 200,000, it would take three years from now until payrolls reached their pre-recession level of 138.0 million...

The U.S. economy grew at a modest 1.8% rate in the first quarter. The April data suggest the second quarter did not kick off with much momentum.

Among the more worrisome yellow lights were the fall in factory production and the steep drop in new orders among non-manufacturers...

Of course, weaker job markets will feed into the headwinds against demand. Consumers cannot boost their spending by an appreciable pace unless their incomes also grow.
Who in Washington believes putting people back to work is the #1 issue facing the country?  Based on the "substance" of current economic debates, it doesn't seem like very many.

Wednesday, May 4, 2011

"A Mission Not Yet Accomplished"

David Leonhardt, economics reporter at the New York Times, reflects on the implications of weak recovery, market "optimism" and Congressional deficit-mania conspiring to slow growth of new jobs - and makes two modest, pragmatic suggestions that would be "no-brainers" in a saner political environment not rife with demagogues, ideologues and a GOP leadership whose admitted top priority is weakening the President for 2012:
"Work wanted!"
It’s obviously been a good week for the Obama administration. But it comes at a dangerous time, for both the administration and the economy. The excitement over tracking down Osama bin Laden could end up making the president and his advisers less panicked over the state of the economy. And they should be a little panicked.

For the second straight year, the recovery seems to be at risk of stalling. The economy grew at an annual rate of only 1.8 percent last quarter — eerily similar to the 1.7 percent growth last spring, just when job growth started slowing down...

Dr. Atul Gawande: IPAB Is Needed To Establish "Rules Of The Road" To Move Towards Better System

Think Progress' "Wonk Room":
On Friday, during an event at the Center for American Progress, Dr. Atul Gawande defended the Independent Payment Advisory Board (IPAB) — a 15 member commission formed by the Affordable Care Act that is tasked with controlling health care costs. The board has come under Republican criticism for “rationing” health care to seniors since President Obama announced his intention to expand its functions as a means of lowering health care spending. During his town halls in Wisconsin for instance, Rep. Paul Ryan (R-WI) repeatedly characterized the board as a “rationing” body that would restrict coverage and benefits to current seniors.
But Gawande — a doctor and prize-winning author — argued that while competition is important to reducing health spending, the government should establish a body to ensure that “what we are driving towards are better quality and lower costs“:

Tuesday, May 3, 2011

A weak, jobless recovery?

Jobs are at the heart of economic recovery if it's going to be meaningful in repairing the damage that's been done across the social spectrum by deep, lingering recession. So what is the outlook for the long-term unemployed?  Not good, according to Nancy Folbre, economics professor at University of Massachusetts-Amherst, writing at New York TImes "Economix":
Once upon a time, economic recovery led to expanded employment of the United States population. Not anymore. The percentage of adults employed has declined sharply during the last two recessions and failed to increase much in their aftermath.
(T)he employment-to-population rate remains at about 58 percent, about the same as in December 2009 and far lower than the peak of 65 percent achieved before the 2001 recession...

(M)ore than 45 percent of those unemployed in January reported they had been looking for jobs for 27 or more weeks. Many other workers in this situation simply give up and stop looking for paid employment – and thus are not counted as unemployed...

(M)ajor multinational corporations cut their employment in the United States by 2.9 million during the 2000s while increasing employment overseas by 2.4 million.

This is a big change from the 1990s, when those corporations added 4.4 million jobs in the United States and 2.7 million abroad...

Globalization weakens the link between economic recovery, increased profits and job creation in the United States...

Monday, May 2, 2011

Our real deficit problem…and why the President's Independent Patient's Advisory Board is the most serious proposal on the table to address it

James Suroweicki, who authors the New Yorker's  "Financial Page," wrote recently that "strange as it may sound, the federal government does not have a spending problem per se."  This assertion may seem crazy in the context of current deficit hysterics, but it's true.  Rather than a deficit problem, Suroweicki continues, what we have is "a health-care problem."
The cost of most budget items typically rises at a reasonable rate, if at all, but the cost of Medicare, Medicaid, and the tax subsidy for employer-provided insurance has been rising much faster than everything else…
Liberal economist Paul Krugman concurs:
We have to do something about health care costs, which means that we have to find a way to start saying no. In particular, given continuing medical innovation, we can’t maintain a system in which Medicare essentially pays for anything a doctor recommends. And that’s especially true when that blank-check approach is combined with a system that gives doctors and hospitals — who aren’t saints — a strong financial incentive to engage in excessive care.
In a study entitled "Keeping Heatlh Care Afloat", Princeton economist Uwe Reinhardt cites several studies that show where a large part of the excess cost in America's health care system has been going:
(I)n 1990 Americans used $390 less in real medical resources per person than Germans did, but spent $737 more on higher prices, $360 more on administration, and $256 more on other forms of overhead…in 1999 the U.S. system consumed $1,059 per person in administrative costs, compared with just $307 in Canada…from 1969 to 1999 the fraction of the total health care labor force accounted for by administrative workers grew 18 to 27 percent in the United States, but only from 16 to 19 percent in Canada.

Sunday, May 1, 2011

"Serious" magical thinking - 30 years on...

Paul Krugman blogging at NYT on the GOP "Ryan's Private Savings" budget plan:
The Heritage Foundation Tax Trick!
(T)here is, as some of us have tried to point out, a huge magic asterisk in the revenue projections: Ryan calls for $3 trillion in tax cuts, but insists that his plan will be revenue-neutral, because they will do something unspecified to broaden the tax base. Ryan and his colleagues have stonewalled all inquiries about what that something might be.

The best guess has to be that there is no there there — that if they ever get to the point of making this an actual plan, they’ll invoke the wonderful “dynamic” effects of lower taxes on rich people to fill that $3 trillion gap...

Once again, let us wonder at the way this plan has been treated by the commentariat. A guy says, “I care deeply about the deficit!” And then he releases a plan that depends on finding $3 trillion over the next decade from some unspecified source — oh, and he comes from a party that has a 30-year track record of promising to reduce the budget deficit but actually increasing it.

And everyone takes him seriously!

5.5 Million Americans unemployed and not recieving benefits

University of Oregon economist Mark Thoma at his "Economist's View" blog:

The WSJ's number of the week: "5.5 million: Americans unemployed and not receiving benefits":
Number of the Week: Millions Set to Lose Unemployment Benefits, by Mark Whitehouse, WSJ: ...The country’s unemployment rolls are shrinking... As of mid-March, about 8.5 million people were receiving some kind of unemployment payments, down from 11.5 million a year earlier...
To some extent, the shrinkage reflects a desirable reality: Some people are leaving the unemployment rolls because they’re finding jobs. The number of employed in March was up nearly 1 million from a year earlier...
Many Americans, though, are simply running out of time. As of March, about 14 million people were unemployed... At the time..., about 8.5 million were receiving some kind of unemployment payments... That leaves about 5.5 million people unemployed without benefits, up 1.4 million from a year earlier. ...