Thursday, June 30, 2011

"Obama and the Democrats are fighting to get what the Republicans and the right-wing economic think tanks originally proposed they should do, and the GOP just keeps walking the goalposts to the right"

 We are truly screwed.

The Democrats are seeking to impose the conservative approach to deficit reduction, while the GOP has chosen to simply take the terrorist route and threaten to blow up the economy unless anti-tax zealot Grover Norquist - to whom the Republicans have literally pledged allegiance as maximal leader in their anti-tax cult - gains victory in his "drown the US government in a bathtub" jihad.

It appears that no one - save perhaps Bernie Sanders - is pushing for a balanced fiscal approach that actually makes economic sense in the context of deep recession and a jobs crisis. 

Mike Konczak at "Rortybomb" has this depressing insight into the depths - and rather pathetic ironies -  of the present impasse:

Republicans Reject the Republican Offer on Deficit Cutting Mix, or Democrats Propose the (Rightwing) AEI Plan on Tax Increases vs Spending Cuts


"When taxpayers hear a bank chief complaining, it’s worth keeping in mind that his 10-figure paycheck is largely coming courtesy of us"

 Jesse Eisinger, of ProPublica, writing in the NYT's "Dealbook":
The most pronounced development in banking today is that executives have become bolder as their business has gotten worse.

The economy is clearly weaker than expected, and housing prices are falling throughout the land, eroding bank asset values. Yet regulators are on their heels in Washington as bankers and their lobbyists push back against the postcrisis regulations, even publicly condemning the new rules.

In a well-covered exchange, Jamie Dimon, JPMorgan Chase’s chief executive, challenged Ben S. Bernanke, the Federal Reserve chairman, about the costs and benefits of the Dodd-Frank rules. More attention has been paid to the banker’s audacity, but the response of the world’s most powerful banking regulator was more troubling. Mr. Bernanke scraped and bowed in apology without mentioning the staggering costs of the crisis the banks led us into.

So this is a good occasion to step way back to understand just how good the banks have it today.

The federal government, in ways explicit and implicit, profoundly subsidizes and shelters the banking industry. True since the 1930s, it is much more so today. And that makes Mr. Dimon no capitalist colossus astride the Isle of Manhattan, but one of the great welfare queens in America.

Wednesday, June 29, 2011

"Could Obama just ignore the debt ceiling?"

Catherine Rampell at NYT's Economix:
In the ongoing debate over raising the debt ceiling, one option has not had much prominence: whether the Obama administration could ignore it altogether, and just spend the money it owes anyway. Would that be legal?
Matthew Zeitlin at The New Republic spoke with a few political scientists, budget wonks and constitutional scholars who argue that it would be.  An excerpt:

"Health Care Law Ruled Constitutional (Again)"

Jun 29, 2011 | By ThinkProgress War Room

Decision Day: Federal Appeals Court Upholds the Affordable Care Act

In exciting (and hugely important) news that broke earlier this afternoon, the Sixth Circuit Court of Appeals upheld the health care law, including the key individual responsibility provision that requires everyone to purchase health insurance, as constitutional. Here’s the rundown of everything you need to know to talk about this at dinner tonight.

Home on the range...

Reuters - Dateline: Cheyenne, Wyoming.
At a single address in this sleepy city of 60,000 people, more than 2,000 companies are registered. The building, 2710 Thomes Avenue, isn't a shimmering skyscraper filled with A-list corporations. It's a 1,700-square-foot brick house with a manicured lawn, a few blocks from the State Capitol.

Neighbors say they see little activity there besides regular mail deliveries and a woman who steps outside for smoke breaks. Inside, however, the walls of the main room are covered floor to ceiling with numbered mailboxes labeled as corporate "suites." A bulky copy machine sits in the kitchen. In the living room, a woman in a headset answers calls and sorts bushels of mail.

A Reuters investigation has found the house at 2710 Thomes Avenue serves as a little Cayman Island on the Great Plains. It is the headquarters for Wyoming Corporate Services, a business-incorporation specialist that establishes firms which can be used as "shell" companies, paper entities able to hide assets.

Tuesday, June 28, 2011

Mr. President...

Bernie makes the case on the budget "deal".



Complete transcript of Senator Sanders' 90 minute speech HERE.

Via Balloon Juice

Dire stakes

I hope Paul Krugman is being hyperbolic. I fear he's not:

Debt Limit Stakes

So, here’s where we are on the debt limit discussions: Democrats have agreed to large spending cuts, but are holding out for doing something about
a rule that lets businesses value their inventory at less than they bought it for in order to lower their tax burden, a loophole that lets hedge-fund managers count their income as capital gains and pay a 15 percent marginal tax rate, the tax treatment of private jets, oil and gas subsidies, and a limit on itemized deductions for the wealthy.
And Republicans walked out.
Think about it. There’s a significant chance that failing to raise the debt limit could provoke a renewed financial crisis — and Republicans would rather take that chance than allow a reduction in tax breaks on corporate jets.
What this says to me is that Obama cannot, must not, concede here. If he does, he’s signaling that the GOP can extract even the most outrageous demands; he’s setting himself up for endless blackmail. A line has to be drawn somewhere; it should have been drawn last fall; but to concede now would effectively mean the end of the presidency.

The dangers of playing politics with the debt ceiling

Jared Bernstein, former chief economic advisor for Vice President Biden:
Does underscoring the sense of urgency simply give strength to dark forces who are trying to leverage the threat of default for their political gains? Perhaps so, but the other way lies madness.
We’ve got to talk truth about the stakes here because they’re so high...

(W)hy do interest rates remain low?  Why are investors in ten-year US treasury bonds accepting 2.93% interest today instead of insisting on a big rate premium the way bond investors in, oh, I don’t know…GREECE are??

Because they assume we’ll get our act together and raise the debt ceiling well in advance of Aug 2.  That’s the date when the Treasury will have exhausted their ability to move money around to cover their obligations while staying under the debt limit.

But what if that assumption should weaken?

Sunday, June 26, 2011

"The federal budget deficit is a distraction"

So says Robert H. Frank, an economics professor at the Johnson Graduate School of Management at Cornell University, writing in today's New York Times:
It’s important, yes, and must be addressed. But by a wide margin, it’s not the nation’s most pressing economic problem. That would be the widespread and persistent joblessness that has plagued the labor market since the Great Recession began in 2008.

Almost 14 million people — 9.1 percent of the labor force — were officially counted as unemployed last month. But that’s just the tip of the iceberg. There were almost 9 million part-time workers who wanted, but couldn’t find, full-time jobs; 28 million in jobs they would have quit under normal conditions; and an additional 2.2 million who wanted work but couldn’t find any and dropped out of the labor force.

If the economy could generate jobs at the median wage for even half of these people, national income would grow by more than 10 times the total interest cost of the 2011 deficit (which was less than $40 billion). So anyone who says that reducing the deficit is more urgent than reducing unemployment is saying, in effect, that we should burn hundreds of billions of dollars worth of goods and services in a national bonfire.

Saturday, June 25, 2011

Taxes are lower than ever - so why are taxes "off the table" for Eric Cantor and his ideological confreres?

Paul Krugman has this regarding the tax side of any debt ceiling deal:
(Republicans) are willing to risk the good faith and credit of the federal government, rather than accept so much as a single penny of tax increases as part of a deal.

Given all that, it seems almost redundant to mention that federal tax receipts as a percentage of GDP are near a historic low:

      Federal receipts as % of GDP
 
So why are we seeing what appears to be childish behavior on the part of Eric Cantor and his fellow GOP legislators in the context of critical "negotiations" over the debt ceiling as they refuse any effort to increase revenues rather than just taking an axe to critical programs like Medicare and Social Security?  Krugman answers that burning question in our "quote of the day":
(T)he GOP never cared about the deficit — not a bit. It has always been nothing but a club with which to beat down opposition to an ideological goal, namely the dissolution of the welfare state. They’re not interested, at all, in a genuine deficit-reduction deal if it does not serve that goal.

Friday, June 24, 2011

" A strange time for a deficit panic"


Mathew Yglesias at "Think Progress" makes the case against Deficit Hysteria by looking at the rather starkly low interest rates on government borrowing instruments:
Deficits can impede economic growth. No borrower is safer than the government. So when the government wants to borrow a lot of money and investors start charging it a high interest rate, the borrowing costs for everyone else go up. This “crowds out” lots of potentially useful economic activity. A business expansion that’s profitable at a 5 percent interest rate may be far too risky to invest in at a 7 percent interest rate. But as you can see here on the right, the interests rates being charged by the market to lend money to the US government are low and falling...

Note that 10-year interest rates were never below 3 percent at any point during the Johnson, Nixon, Ford, Carter, Reagan, Bush, Clinton, or W. Bush administrations. So why is this on the agenda now?
So why is there a "deficit panic" when the impact of deficits on federal borrowing vs. availability of low-interest investment capital is nil?  And how does cutting the deficit - especially with an emphasis on cutting spending to balance the budget  - produce economic growth and jobs ?   Of course it doesn't.
"BoehnerCare"
"(Attacking deficits and cutting spending) wouldn't square with the way we normally think about economic activity in a depressed economy," (according to) Andrew Samwick, a former chief economist on President Bush's Council of Economic Advisers... When the economy suffers from a lack of demand, as it does now, Samwick explained, most economists think increasing spending is the more effective way to generate that demand and get things moving again.
Why has the opposite view begun to take hold?

Thursday, June 23, 2011

"Defict reduction" is a cover for more "Starve the Beast" tax-cuts and attacks on health care reform

Ezra Klein at Wonkbook, clarifies the agenda underlying much of the fiscal debate, pointing out that under the revenue/spending scenario deemed by current law - with the Bush tax cuts due to expire unless revived by new legislation - "We'll only have giant deficits if Congress wants giant deficits":
If Congress lets the Bush tax cuts expire or offsets their extension, implements the Affordable Care Act as scheduled and makes or offset the Medicare cuts prescribed by the 1997 Balanced Budget Act — which (the Congressional Budget Office) calls the “extended baseline scenario” — the national debt will be totally manageable.
If Congress passes laws extending the Bush tax cuts without offsetting the cost, repealing the Affordable Care Act and its cost controls and protecting doctors from Medicare cuts without making up the savings elsewhere — the “alternative fiscal scenario” — the national debt will be totally out of control:

Wednesday, June 22, 2011

The Dangerous Fantasy of Targeting "Deficit Reduction" for Economic Growth

The Great Deficit Hype took a couple of hits in recent days. Tragically, it's not likely that anyone in the Beltway is listening, the priority of deficit reduction has taken such a tenacious hold.

But even in the apparent absence of  rational policy possibilities, it's worth paying attention to some saner voices - and from relatively stodgy circles. 

Professor of economics and and former vice-chairman of the Federal Reserve, Alan Blinder, had this warning in the Wall Street Journal (via Economist's View) :
"The Myth of Job-Killing Spending" ...  House Speaker John Boehner and other Republicans regularly rail against "job-killing government spending." ... Using the same illogic, employment should soar if we made massive cuts in public spending—as some are advocating right now.
Acting on such a belief would imperil a still-shaky economy that is not generating nearly enough jobs. So let's ask: How, exactly, could more government spending "kill jobs"? ...

The Great Republican Tax Lie

Reagan economic advisor Bruce Bartlett, interviewed by Lawrence O'Donnell, on the Big Republican Lie that "tax cuts pay for themselves":


Tuesday, June 21, 2011

Why has no one gone to jail for the fraud and excess that brought the world economy to the brink, robbed millions of their savings and cost more millions jobs?

Woody Guthrie: "Some men rob you with a fountain pen..."


In receiving the Academy Award for his excellent documentary, Inside Job, on the 2008 financial meltdown that still haunts our broken economy, director Charles Ferguson brought a bit of cold water to the Oscar ceremonies last February:

“Forgive me, I must start by pointing out that three years after our horrific financial crisis caused by financial fraud, not a single financial executive has gone to jail, and that’s wrong.”

Ferguson raised an important question. At least part of the answer is addressed in the context of an extensive New Yorker article by George Packer on the prosecution of the Wall Street insider trading case against Raj Rajaratnam, head of Galleon hedge fund, which isn't directly related to the 2008 crisis.  The relevant sections from Packer's piece that speak to the lingering question raised by Ferguson and his documentary's investigation into the larger crisis follow:

Monday, June 20, 2011

Sunday, June 19, 2011

"David Brooks sure reads a lot of books"

David Brooks wrote another of those "David Brooks columns" on Friday. Citing a recent book on the financial crisis, he targets Fannie Mae as "a cancer that helped spread risky behavior and low standards across the housing industry."  Brooks notes portentiously, "We all know what happened next."

Yes, Fannie Mae and Freddie Mac are examples of government agencies that acted irresponsibly and were co-opted by the financial industry. And, yes, "we all know" there was a financial crisis in 2008 triggered by the mortgage meltdown.

Brooks, who has read a lot of books.
But the notion - or even implication - that Fannie Mae was the "cancer" underlying the industry's "risky behavior and low standards" is a right-wing talking point that is so misleading and misdirected that it constitutes a Big Lie. It's provenance - desperation on the part of the right to blame government rather than markets for the greatest market failure in recent memory - is no mystery.  "Conservatives" need to  implicate government rather than under-regulation and and the voracious market velocity of the industry itself.

Dean Baker at Center for Economic and Policy Research responded definitively to Brooks:

Saturday, June 18, 2011

More on the dangers inherent in "austerity" - pushing deficit reduction as policy priority when a damaged economy is still deep in the dumps


As if it wasn't apparent to anyone other than hard-core ideologues - and politicians who should know better running scared - the evidence increases that deficit mania in a recession is little more than a recipe for making things even worse.

John Cassidy at The New Yorker, offers his perspective on the evidence from Britain that an agenda of austerity - i.e. spending cuts and fixation on short-term deficit reduction - is  utterly wrong-headed in a deep recession:
With all the talk of a possible double-dip recession in the U.S. economy—here’s my own little contribution—it’s surprising (and somewhat scandalous) that more attention isn’t being paid to what is happening in Britain, where a second economic downturn began last fall and shows few signs of relenting.

About a year ago, with the British economy seemingly recovering fairly well from the financial crisis of 2008, David Cameron’s Conservative-Liberal coalition embarked on a vigorous policy of deficit reduction, raising taxes and cutting government spending in an effort to balance the budget by 2015. How this experiment in pre-Keynesian economic policy turns out obviously has important implications for the fiscal debate on this side of the Atlantic.

So far, the results aren’t looking very favorable.

"The Banking Miracle"

Joe Nocera, writing in today's New York Times, has a fascinating piece on the history - and the effectiveness - of the Glass-Steagall act regulating banking. Glass-Steagall, which established the Federal Deposit Insurance Corporation and separated retail banks from the financial speculation of Wall Street investment banks, was passed in 1933 - June 16 to be exact.

Glass-Steagall's wall of separation between financial speculation and banks holding customer deposits was repealed by the Gramm-Leach-Bliley Act of 1999.  Critics including Elizabeth Warren, Nouriel Roubini and Paul Volcker have suggested that the repeal contributed significantly to the financial crisis of 2008 and want to see such regulations re-implemented.

Read Nocera's piece HERE - a very useful history lesson.

Friday, June 17, 2011

On the critical need to raise the debt ceiling

"This country now possesses the strongest credit 
in the world. 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 on the value of the dollar in exchange markets. The Nation can ill afford to allow such a result. The risks, the costs, the disruptions, and the incalculable damage lead me to but one conclusion: the Senate must pass this legislation before the Congress adjourns."

Ronald Reagan, November 16, 1983 in a letter to the Senate majority leader.

Thursday, June 16, 2011

Craziest GOP campaign promise to date?

A long primary season begins in ToonTown.
I'm going to stick my neck out regarding the GOP primary candidates. In a field where you have pizza mogul Herman Cain complaining about President Obama growing up in Kenya and Michele Bachmann...uh...opening her mouth on just about anything, the suggestion that one among them has reached Peak Crazy is risky. But even given the tough Republican competition this election cycle for audacious ignorance and outrageous idiocy, Tim Pawlenty's tax cut proposal is going to be hard to beat. And the insanity aside, he's clearly got a lock in the key GOP category of cynical service to the economic elite:

Wednesday, June 15, 2011

Pushing spending cuts will kill a fragile recovery

Please don't "compromise" on a machete...
Deficit hysteria - pushed by a "Tea Partyized" GOP that refuses to take responsibility for creating the long-term deficits with their tax cut dogmas over three decades - has poisoned the debate over a responsible economic agenda.

The Republicans refuse to even discuss anything other than deep cuts in spending, killing government programs including Medicare and - of course - more across-the-board tax cuts benefiting the economic elite.  This is a recipe for disaster. Arguably it's a politically calculated strategy to target Obama for an economic crisis triggered under Bush by prolonging recession and unemployment.  Whether it's driven by pure cynicism or willful ignorance, we don't have to hypothesize the result - the evidence is in from overseas on the most likely outcome.

David Dayen, writing at American Prospect, has an excellent piece that looks at the apparent bi-partisan buy-in to deficit hysterics - under the gun of GOP/Tea Party fanaticism - and how it threatens to kill jobs. He notes that the austerity/spending cuts agenda hasn't worked in England and there's no reason to believe it can work here.  The danger of austerity when consumer demand is already in the dumps is a double-dip recession. As Dayen frames it, "I Ruined the Economy and All I Got Were These Lousy Tax Cuts":

Tuesday, June 14, 2011

The vicious cycle

Former Labor Secretary Robert Reich:
We’re in a vicious cycle in which lower wages and net job losses and high debt are causing consumers to cut their spending — which is causing businesses to cut back on hiring and reduce pay. There’s no way out of this morass without bold leadership from Washington to rekindle consumer demand.

If the Democrats remain silent, the vacuum will be filled by the Republican snake oil of federal spending cuts and cut taxes on big corporations and the wealthy. Democrats — starting with the President — must have the courage and conviction to tell the nation the recovery is stalling, and what must be done.

In which I agree with a guy who says what he should have been saying when it really mattered...

Larry Summers at Financial Times:

Econ-advisor-in-chief in 2009 -"Sssshhhh!"
(W)e should recognize that it is a false economy to defer infrastructure maintenance and replacement, and take advantage of a moment when 10 year interest rates are below 3 per cent and construction unemployment approaches 20 per cent to expand infrastructure investment...

We averted Depression in 2008/2009 by acting decisively. Now we can avert a lost decade by recognising economic reality.

Monday, June 13, 2011

Focus on jobs, not deficits, Mr. President!

E.J. Dionne on the political gridlock over the economy and where the President needs to take the "national conversation":
Republicans have no interest in moving the nation’s debate toward investments in job creation because they gain twice over from keeping Washington mired in discussions on the deficit. It’s a brute fact that Republicans benefit if the economy stays sluggish. And despite their role in ballooning the deficit during the Bush years, they will always outbid Democrats on spending cuts.

So is there any way out for those looking to Washington? The recent disappointing jobs numbers have at least had the salutary effect of reminding Democrats that they cannot agree to anything that further slows the recovery. “The first principle has to be ‘do no harm,’ ” said Rep. Chris Van Hollen of Maryland, a key House Democratic negotiator in the deficit talks. “There is a danger of making things worse if you adopt very deep cuts in the short term.”...

But there is another player in all this. The broad feeling among congressional Democrats — a sentiment that moves toward impatience when it’s expressed off the record — is that President Obama needs to engineer a turn in the national conversation. Brown, for example, strongly defends Obama’s auto rescue and is happy the president is talking more about manufacturing lately. Yet he adds: “The president has got to get this discussion more on jobs and less on the budget.”

Controlling health care costs: The Democrats have a plan and Paul Ryan, GOP Budget Czar, doesn't

Ezra Klein at WaPo's "Wonkbook," on controlling health care costs:

(T)he reality is that Democrats have a plan and Ryan doesn’t. But the perception, at this point, is just the opposite.

At the heart of Ryan’s budget are policies tying the federal government’s contribution to Medicare and Medicaid to the rate of inflation — which is far, far slower than costs in the health-care sector typically grow. He achieves those caps through cost shifting. For Medicaid, the states have to figure out how to save the money, and for Medicare, seniors will now be purchasing their own insurance plans and, in their new role as consumers, have to figure out how to save the money. It won’t work, and because it won’t work, Ryan’s savings will not materialize.

Sunday, June 12, 2011

"We don't have a Medicare problem, we have a health care cost problem"

Paul Krugman makes the essential (and often deliberately obfuscated) point that is central to any discussion of Medicare and health care costs:
Medicare actually does a better job of controlling costs than private insurers — not remotely good enough, but better.
If you look at Medicare in isolation, the cost rise looks terrible, because it is:
Source.
But it looks a bit different if you look at private insurance, too:
 
If Medicare costs had risen as fast as private insurance premiums, it would cost around 40 percent more than it does. If private insurers had done as well as Medicare at controlling costs, insurance would be a lot cheaper.
It’s a mystery why anyone claims that shifting more people into private insurance is a good idea. Actually, no, it isn’t a mystery; it’s an outrage.
The most significant fact about Medicare is not that it's too costly,  but that it saves Americans a lot of money.

Throwing seniors - of all people - back into the private insurance market would mean vastly greater % of GDP eaten up by health care costs. Or sick people simply going without care.

Neither option is acceptable.  Except perhaps to privatization fanatics and "free-market" ideologues like Congressman Paul Ryan (who admits to being inspired to go into politics by Ayn Rand, who conjured sociopathic narcissism into a pop philosophy that drives much of the libertarian movement.)

Clinging to the theory...

Dean Baker compares the faith-based economics of "deficit reduction" to creationism:
Sometimes, it can be fun to get inside a crazy worldview to ask how it deals with contradictory evidence. For example, how do creationists reconcile their view that all plants and animals were created in their current form around 10,000 years ago, with fossil evidence of life forms dating back hundreds of millions of years?

In this vein, it's worth asking how the proponents of deficit reduction think that lower deficits will lead to increased growth and job creation in an economy mired in a severe slump? There is not an easy answer.

There is a standard "econ 101" story about how reducing deficits can boost the economy. The theory goes that if the government reduces its deficit, and therefore borrows less, it will reduce interest rates. Lower interest rates will, in turn, give firms incentive to invest more.

Lower interest rates should also cause the dollar to decline, since it will make US government bonds and other dollar assets less attractive to foreign investors. If the dollar falls in value, then our goods will be more competitive on world markets. This will cause us to import less and export more, thereby creating jobs.

However, is this what the deficit hawks believe will happen now? The interest rate on 10-year Treasury bonds is already down to 3.0%. Assuming a 2% inflation rate, this translates into a real rate of about 1%. How much lower do the deficit hawks think interest rates will fall if we were to sharply cut the deficit? Furthermore, how much more investment do they think we can induce even if we got a large reduction (for example, 0.5 percentage point) in real interest rates?
Do they think that this sort of decline in interest rates will send the dollar tumbling and thereby improve our trade balance? Against which currencies will a lower interest rate cause the dollar to fall sharply?
Neither of these stories really passes the laugh test. At best, we may hope to see modestly lower interest rates if cutting the budget deficit slows growth further. But there is no reason to expect any future decline to have any more impact than the recent decline in the 10-year Treasury rate from 3.6% in the winter to near 3.0% present this month.

There is another story that the deficit hawks occasionally push. This one says that if we lay off workers in the public sector, that will increase employment in the private sector. The story here is, presumably, that mass layoffs of public sector workers will depress the wages of workers further, thereby making it more profitable for employers to hire them. There's a simple problem in this picture. In order for wages to actually fall, the additional employment in the private sector must not be as large as the job loss in the public sector.

Saturday, June 11, 2011

"The Sickness Beneath the Slump"

Economist Robert Shiller of Yale offers some thoughts - and data - on the roots of the financial crisis, the long-term effects on consumer spending, "rational market expectations" and a major failure of his profession in recent decades:
THE origins of the current economic crisis can be traced to a particular kind of social epidemic: a speculative bubble that generated pervasive optimism and complacency. That epidemic has run its course. But we are now living with the malaise it caused.

News accounts of the economic crisis rarely put it in these terms. They tend to focus on distinct short-term developments or on the roles of prominent people like Federal Reserve governors, members of Congress or Wall Street financiers. These stories grab attention and may be supported by some of the economic statistics that the government and private institutions collect.

But the economic situation is primarily driven by hard-to-quantify sociological factors that play out over many years.

The uptick in the unemployment rate, to 9.1 percent from 8.8 percent two months earlier and the drop in stock prices over the last month have attracted notice, yet in a sense they are symptoms of a deeper economic sickness.

Tim Pawlenty confuses "belief in the American people" with his foolish fantasies of tax cut pixie dust

One of the more desperate candidates for the GOP's presidential nomination, former Minnesota Governor Tim Pawlenty, has doubled down on the party's Tax Cuts Uber Alles dogma and equated his crank faith-based economic strategy with belief in America.

Actually he's "tripled down" on massive tax giveaways structured to further enrich the economic elite:

According to Bloomberg/Businessweek:

Pawlenty’s $11.6 trillion tax-cut plan, which reduces rates on income, capital gains, interest, estates and dividends, is almost three times larger than the proposals endorsed by House Republicans...Almost half of the benefits would flow to taxpayers in the top 1 percent of income distribution, or those earning more than $593,011 in 2013...

Pawlenty...said 5 percent annual average economic growth would help make up the revenue gap... (S)uch growth would be driven by the tax plan as well as by spending cuts, regulatory overhaul and monetary policy changes that Pawlenty is proposing.
So we're getting a version of the "tax cuts pay for themselves" mantra on steroids.  Paul Krugman, NYT's columnist and Nobel Prize-winning economist at Princeton, looks at Pawlenty's "plan" and the promise - 5% economic growth driven by massive reductions in taxes:
Tim Pawlenty — who has turned out to be a much bigger fool than I or, I think, anyone imagined — replies to criticism of his claim that he can get 10 years of GDP growth at 5 percent:
Obama’s economic team doesn’t have a plan, so their spokespeople attack ours. The idea that they don’t believe in the American people enough to say that we can grow the economy at 5% GDP really says everything. You have to wonder if in fact Obama’s grand plan is that we don’t grow at all — and if so — he and the central planners are doing a great job of that.
Well, here are 10-year growth rates starting with 1929-39:
   
Bureau of Economic Analysis Data here.
Except for the big jump from the depths of the Great Depression to the height of World War II, we have never had a decade of growth at 5%.
What’s also notable in this figure is the invisibility of all the supposed economic miracles we hear about. Saint Reagan was supposed to have revitalized the economy; can’t see it here. All you can really see is that the 60s were very good, and the recent slump has been very, very bad.
At least we can thank Pawlenty for erasing any doubts that he's one of the biggest fools out there - even by GOP presidential aspirant standards (or lack of them.)

Friday, June 10, 2011

Dreaming of Unicorns - when folks on the Right get "philosophical" about the issues

Ezra Klein wrote an excellent piece that examines the care-effective results delivered at low cost by the Veteran's Health Administration hospitals.  He references the column David Brooks recently published on the difference between Republican and Democratic approaches to the health care problem with this insight:
One way of thinking of health-care reform is, as David Brooks put it in his Tuesday column, that it presents “a basic philosophical choice.” I disagree. I think it’s a policy question.
Various models present us with substantial evidence of the benefits and drawbacks to the different choices we can make. Unfortunately, those models don’t present us with substantial evidence as to the benefits of the choices we would like to make. And that’s when we get philosophical.
Brooks gets "philosophical" in discussing health care reform because the empirical evidence doesn't back up his private market biases.  That's largely where the GOP is coming from these days.  Ideology and wishful thinking trumps reality-based problem solving.

Read Klein's entire column on the VHA below - "When socialism works in America" - it's a breath of fresh air in a stale and increasingly dishonest debate between pragmatic policy choices and promises of unicorns that exist in a land of dreams:

Thursday, June 9, 2011

The dangerous politics of the debt ceiling

The Financial Times' conservative columnist Clive Crook warns:
Tea Party true believers may be salivating at the prospect of the coming Battle of the Debt Ceiling, but the GOP’s leaders are dreading it. Shutting down the government is a button they dare not press – not if they retain the least grip on reality. They did it once before, during the Clinton administration, and were slammed: the shutdown rescued the Clinton presidency. To do it in 2011, with the economy laid low and financial markets still twitchy, would be the limit of irresponsibility. It would be betting the recovery to make a point. This time, political annihilation might follow, and the party would deserve it.

The fraud and fallacies of "Ryancare"

Jared Bernstein, former chief economic advisor to Joe Biden, offers this critical commentary on a Paul Ryan Youtube touting the GOP's plan to kill Medicare:
The basic flaw is that Ryan and his video pretend that the R’s Medicare plan gives consumers the power to negotiate directly with health care providers, who can thus use their voucher-driven bargaining clout to hold down prices.  But, in fact, that’s not how his plan works at all.  Under his plan, seniors get to negotiate with insurance companies, not service providers (doctors, hospitals, etc.).

Wednesday, June 8, 2011

Ten years ago - George W. Bush launches his pre-emptive attack on budget surplus...

Lest we forget, it's been a full decade since George W. Bush went on the offensive against the threat to our nation of the Democrats' weapons of fiscal responsibility.  From an AP report shortly after George W. Bush entered the White House in 2001:
Mission Accomplished -June 7, 2001
(AP)  President Bush said Saturday that the most important number in the budget he sends to Congress next week is the $5.6 trillion surplus it projects over the next 10 years.

That huge projected surplus provides the underpinning of all the administration's tax-cut and spending plans, Mr. Bush said in his recorded weekly radio address.

"A surplus in tax revenue, after all, means that taxpayers have been overcharged," the president said. "And usually when you've been overcharged, you expect to get something back." The surplus figure "counts more than any other" in the budget, he said.

Democrats cautioned that surpluses projected over so long a period can turn into elusive fool's gold. And they continued to insist that as it stands the Bush tax-cut plan unfairly favors the wealthy over those of more modest means.

Deep thinker David Brooks fails to tell the truth about health care costs

In his Monday New York Times column titled - apparently without irony - "Where Wisdom Lives",  David Brooks discussed health care systems and the future cost-effectiveness of Medicare, posing Democrats as believing in "top down centralized planning" while Republicans favor "the decentralized discovery system of the market."

Brooks characterizes the Republican Ryancare alternative dishonestly because he doesn't mention that the CBO has projected costs - out-of-pocket and aggregate - as skyrocketing under the scheme to end Medicare in favor of capped vouchers:
Republicans point out that Medicare has tried to control costs centrally for decades with terrible results. They argue that a decentralized process of trial and error will work better, as long as the underlying incentives are right. They suggest replacing the fee-for-service with a premium support system. Seniors would select from a menu of insurance plans. Their consumer choices would drive a continual, bottom-up process of innovation. Providers could use local knowledge to meet specific circumstances.
Of course, Medicare as it stands is the most cost-effective piece of our health insurance puzzle.  It's been more successful - as a "volume buyer" negotiating prices - at controlling costs "centrally" than the multiplicity of private insurers have been.  Based on Medicare's current performance versus private insurers the CBO has rated and projected the difference in future cost of privatized Ryancare over Medicare, and it doesn't look good for Brook's "consumer choices" system. (See chart at right.)

And that's leaving aside any questions about the proposition that seniors - nearly all with pre-existing conditions, most with deep concerns about allocating out-of-pocket expenses within the limitations of a fixed and likely very modest income, and inevitably facing increased physical and mental frailty as they age -  would be more interested in ongoing participation in a "continual bottom up process of innovation" rather than security and systemic integrity - the "known" over a "process of discovery."

But Brooks truly goes off the deep end with this allegation:

Tuesday, June 7, 2011

Asymmetric warfare

Ezra Klein, at "Wonkbook", on the deficit debate:

(W)e’re not having a balanced argument over the deficit. We’re having an asymmetric argument over deficit reduction. Republicans see the deficit as an opportunity to push for dramatic and permanent changes to the state — including some that would technically increase the deficit... 
As for the Obama administration, they’re proposing a much more modest package that doesn’t use the deficit to push for long-term priorities, and in fact looks like a slightly more conservative version of the Simpson-Bowles report. It’s fallen to liberal think tanks to promote plans that see the deficit as an opportunity to push for major progressive policy changes. But without the support of the White House, those plans aren’t going to get very far...
In the end, Ryan’s plan has made a deal a lot harder than it would’ve been if the two parties had decided to do negotiations first and come out with a final plan together. But from the perspective of Republicans, it’s probably made a good deal a lot likelier. 
"A slightly more conservative version of the Simpson-Bowles report" is being negotiated versus GOP Budget Czar Ryan's anti-government radicalism.  The Republicans - despite the deep unpopularity of their "plan" that includes killing Medicare - couldn't ask for a playing field tilted much farther to the right. Whatever compromise comes of this can't be good. Except, as Klein notes, "from the perspective of the Republicans."

Monday, June 6, 2011

Is the most popular person in Washington also the most hated?

James Surowiecki, at The New Yorker, on Elizabeth Warren:

Elizabeth Warren may well be the most popular person in Washington.
When she was head of the Congressional Oversight Panel on TARP, her willingness to go after Wall Street, the Treasury Department, and the Fed made her a liberal icon. And her folksy, Midwestern air and her ability to express complex financial issues in simple language turned her into an unlikely media superstar.
Warren is now working to set up the Consumer Financial Protection Bureau, a new government agency inspired by her own work on consumer credit, and in the past couple of weeks almost a quarter of a million people have signed an online petition asking President Obama to nominate her as the official boss of the agency.
Yet Warren may also be the most hated person in Washington.

Behind the GOP facade - "deficits don't matter"

Grover Norquist and John Boehner
"Lapsed Republican" Bruce Bartlett, commenting to the Washington Post on the power of the extremist  right-wing anti-tax "enforcer," Grover Norquist, who has extracted a pledge never to raise taxes from  all but 13 of the 288 GOP elected reprsentatives in DC:
(E)ven though tax increases may be justified economically, they are never justified politically if you’re a Republican...it’s been Republican dogma that deficits don’t matter and the only thing that matters for the economy is cutting taxes.

"Winning the Future" - A slogan or an agenda?

Noting the dismal jobs picture that just came out - a 54,000 net jobs gain  in May when we need at least five times that each month just to keep the hole from getting deeper - Robert Kuttner at American Prospect sounds the alarm and offers a strategy. According to Kuttner, with the economy still sputtering and no end in sight, a massive infrastructure investment program is the surest path out of the Great Recession:
Winning the Future!  Are we?
(W)hat the economy needs to fully recover is a massive -- and I mean massive -- infrastructure and jobs program financed by surtaxes on wealthy individuals and on windfall financial-sector profits, including taxes on profits from short-term financial trades. We could also get upwards of $200 billion a year from tax enforcement, mainly on trans-national evasion used by America's wealthiest. Some of the funds for this program could also come from winding down the gratuitous wars we're currently engaged in. And some could even come from a modest increase in short-term deficits.
The order of magnitude of the public investment program should be at least half a trillion dollars a year, for at least five years, and more if that doesn't solve the problem. We would not hesitate to spend this kind of money and levy surtaxes if America found itself in a serious war. It was the economic side-effects of the massive WWII program of tax, borrow, and invest that finally pulled America out of the Great Depression -- and powered the postwar boom.

Real wage growth over the past decade was lower than during the Great Depression



Investor's Business Daily:

The increase in total private-sector wages, adjusted for inflation, from the start of 2001 has fallen far short of any 10-year period since World War II, according to Commerce Department data. In fact, if the data are to be believed, economywide wage gains have even lagged those in the decade of the Great Depression (adjusted for deflation).

Sunday, June 5, 2011

Average length of unemployment is at an all-time high

Catherine Rampell at NYT's Economix: The average unemployed person in America has been looking for work for 39.7 weeks, or more than nine months. That is the longest average unemployment spell since the Labor Department started keeping track in 1948:

"Republicans Are Intentionally Driving Our Economy Into a Ditch"

Winning Progressive:
In his Friday New York Times column entitled “The Mistake of 2010,” Paul Krugman cogently explained how the conservatives’ obsession with invisible bond vigilantes, fearmongering about non-existent inflation, and overwrought sky-is-falling rhetoric about deficits are serving to distract us from the real problems facing our country – joblessness and poor economic growth. 
Professor Krugman described how the conservatives’ focus is wrongheaded and threatens to repeat in 2011 the mistake of 1937, when President Roosevelt temporarily sidetracked the recovery from the Great Depression by instituting austerity measures designed to curb inflation, rather than continuing to use government spending to create jobs:
As the stimulus has faded out, so have hopes of strong economic recovery. Yes, there has been some job creation — but at a pace barely keeping up with population growth. The percentage of American adults with jobs, which plunged between 2007 and 2009, has barely budged since then. And the latest numbers suggest that even this modest, inadequate job growth is sputtering out.
So (in 2010) we have already repeated a version of the mistake of 1937, withdrawing fiscal support much too early and perpetuating high unemployment.
Yet worse things may soon happen.

Saturday, June 4, 2011

"This is why the United States is doomed"

Andrew Leonard at Salon:
The Hill reports the House Republican response to Friday morning's distressing jobs report.

House Republicans pinned the blame for Friday's disappointing jobs report squarely on the White House, saying the Obama administration's "over-taxing, over-regulating and over-spending" has stifled economic growth.
"One look at the jobs report should be enough to show the White House it's time to get serious about cutting spending and dealing with our ailing economy," Speaker John Boehner (R-Ohio) said.
How many blatant untruths can a Republican speaker of the House stuff into one sentence? Quite a few!

"When I use a word," Humpty Dumpty said in rather a scornful tone, "it means just what I choose it to mean -- neither more nor less."

Greg Sargent at WaPo:
The battle over whether it’s true that the Republican plan (to replace single-payer medical insurance for seniors with capped vouchers in the private market) would “end Medicare” is about to play out in a critical way in New Hampshire.
The National Republican Congressional Committee, which oversees House races for the GOP, has written a sharply-worded letter demanding that a New Hampshire TV station yank an ad making that claim.
Whether the ad gets taken down could help set a precedent for whether other stations will air Dem TV ads making this argument, which is expected to be a central message for Dems in the 2012 elections.
Atrios:
When We Replace The Marines With A Pizza, We Will Call The Pizza The Marines.