European Austerity - Wrong Diagnosis & Wrong Medicine

Former Treasury Secretary & Harvard-based charmer Larry Summers explains why austerity schemes give him a headache - read his entire piece at the Financial Times HERE:

Unfortunately, Europe has misdiagnosed its problems and set the wrong strategic course. Outside Greece, which represents only 2 per cent of the eurozone, profligacy is not the root cause of problems. Spain and Ireland stood out for their low ratios of debt to gross domestic product five years ago with ratios well below Germany. Italy had a high debt ratio but a very favourable deficit position. Europe’s problem countries are in trouble because the financial crisis under way since 2008 has damaged their financial systems and led to a collapse in growth. High deficits are much more a symptom than a cause of their problems.

Treating symptoms rather than causes is usually a good way to make a patient worse. So it is in Europe. Its financial problems stem from lack of growth...

Stiglitz: "We're in the 5th year of crisis and we haven't solved it."

Nobel Prize-winning economist Joseph Stiglitz on academic economists and the current economic crisis:

Joe Stiglitz at Occupy Wall Street

Academic economists played a big role in causing the crisis. Their models were overly simplified, distorted, and left out the most important aspects. Those faulty models then encouraged policy-makers to believe that the markets would solve all the problems. 

Before the crisis, if I had been a narrow-minded economist, I would have been very pleased to see that academics had a big impact on policy. But unfortunately that was bad for the world. After the crisis, you would have hoped that the academic profession had changed and that policy-making had changed with it and would become more skeptical and cautious. You would have expected that after all the wrong predictions of the past, politics would have demanded from academics a rethinking of their theories. I am broadly disappointed on all accounts...

Within academia, those who believed in free markets before the crisis still do so today. A few people have shifted, and I want to give credit to them for saying: “We were wrong. We underestimated this or that aspect of our models.” But for the most part, the response was different. Believers in the free market have not revised their beliefs...

If my forecast about the consequences of austerity is correct, you will see a new round of protest movements. We had a crisis in 2008. We are now in the fifth year of crisis, and we haven’t solved it. There’s not even a light at the end of the tunnel. When we come to that conclusion, the discourse will change...

Foreclosures on the rise

HousingWire:

More than half of U.S. major cities showed an increase in foreclosures since the end of last year, according to RealtyTrac.

Mortgage servicers put a freeze on the process in 2010 to correct affidavit problems and resolve investigations from federal regulators and the state attorneys general. A $25 billion settlement approved in March brought new standards and relief requirements for struggling homeowners.

As servicers adjusted, foreclosures began to increase in different areas of the country during the first quarter.

Filings increased in 26 of 50 largest cities, led by Pittsburgh, where foreclosures jumped 49% from the previous three months.

Heather McGhee of Demos Talks With Bill Moyers on Student Debt

Via truthout

Breakin' Down Student Loan Interest Rates

Jimmy Fallon and a friend, 'splain it:

Why does the GOP lie so much? Because when they tell the truth, it doesn't go well...

Hispanic radio talk show host, Fernando Espuelas:  "(T)here’s some analysis now that is being published talking about the Bush years being the slowest period of job creation since those statistics were created. Is this a different program or is this that program just updated?"
 
Alexandra Franceschi, Spokeswoman for the Republican National Committee: "I think it’s that program, just updated."

"No End in Sight" to Unemployment

James Surowiecki at The New Yorker:

The talk in Washington these days is all about budget deficits, tax rates, and the “fiscal crisis” that supposedly looms in our near future. But this chatter has eclipsed a much more pressing crisis here and now: almost thirteen million Americans are still unemployed. Though the job market has shown some signs of life in recent months, the latest figures on new jobs and on unemployment-insurance claims have been decidedly unimpressive. We are stuck with an unemployment rate three points higher than the postwar average, and the percentage of working adult Americans is as low as it’s been in almost thirty years. What’s most troubling is that so much of this unemployment is long-term. Forty per cent of the unemployed have been without a job for six months or more—a much higher rate than in any recession since the Second World War—and the average length of unemployment is about forty weeks, a number that has changed very little since 2010. The economic recovery has now lasted nearly three years, but for millions of Americans it hasn’t yet begun. 

Being unemployed is even more disastrous for individuals than you’d expect. Aside from the obvious harm—poverty, difficulty paying off debts—it seems to directly affect people’s health, particularly that of older workers. A study by the economists Till von Wachter and Daniel Sullivan found that among experienced male workers who lost their jobs during the 1981-82 recession mortality rates soared in the year after the layoffs. And the effects of unemployment linger. Many studies have shown that the lifetime earnings of workers who become unemployed during a recession are permanently reduced, and von Wachter and Sullivan found that mortality rates among laid-off workers were much higher than average even twenty years afterward.

"Is high public debt harmful for economic growth?"

 VOX:

It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.
-- Mark Twain

Do high levels of public debt reduce economic growth? This is an important policy question. A positive answer would imply that, even if effective in the short-run, expansionary fiscal policies that increase the debt-to-GDP ratio may reduce long-run growth, and thus partly (or fully) negate the positive effects of the fiscal stimulus.

Most policymakers do seem to think that debt reduces growth. This view is in line with the results of a growing empirical literature which shows that there is a negative correlation between public debt and economic growth, and finds that this correlation becomes particularly strong when public debt approaches 100% of GDP (Reinhart and Rogoff 2010a, 2010b; Kumar and Woo 2010; Cecchetti et al. 2011).

Debt and Growth - What Causes What?

The Case Against Lehman Brothers

Very interesting 60 Minutes piece on the Lehman Brothers downfall:

  Via Economist's View

The virtues of expansionary monetary policy

Professor Krugman, at his NYT blog:

These past few years have been lean times in many respects — but they’ve been boom years for agonizingly dumb, pound-your-head-on-the-table economic fallacies. The latest fad — illustrated by this piece in today’s WSJ — is that expansionary monetary policy is a giveaway to banks and plutocrats generally. Indeed, that WSJ screed actually claims that the whole 1 versus 99 thing should really be about reining in or maybe abolishing the Fed. And unfortunately, some good people... have bought into at least some version of this story.

What’s wrong with the idea that running the printing presses is a giveaway to plutocrats? Let me count the ways.

Happy Tax Day!

From American Prospect and Demos:

1. The government has collected less in taxes as a proportion of the economy in the past three years than it has in any three-year period since World War II, and tax rates are at historic lows.

2. One out of three multi-millionaires pays a lower percentage of their income in taxes than the vast majority of people making $60,000 a year.

3. Chairman Paul Ryan’s budget proposal, which has been praised by Governor Romney, would deliver benefits to people with incomes over $1 million that are 10 times greater than the benefits to those earning $40,000 or less.

The Buffet Rule filibustered by GOP's Senate minority

Mitt declares his stay-at-home wife Ann "lackng the dignity of work"

"Big news week" for FOX, GOP hacks and a desperate Romney campaign boils down to a Hypocrites' Kerfuffle. Up w/ Chris Hayes has it:

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

Europe's Disastrous Austerity Strategy

 Paul Krugman expresses deep, deep misgivings about Europe's chances to avert even worse economic calamity:

Just a few months ago I was feeling some hope about Europe. You may recall that late last fall Europe appeared to be on the verge of financial meltdown; but the European Central Bank, Europe’s counterpart to the Fed, came to the Continent’s rescue. It offered Europe’s banks open-ended credit lines as long as they put up the bonds of European governments as collateral; this directly supported the banks and indirectly supported the governments, and put an end to the panic. 

The question then was whether this brave and effective action would be the start of a broader rethink, whether European leaders would use the breathing space the bank had created to reconsider the policies that brought matters to a head in the first place. 

But they didn’t. Instead, they doubled down on their failed policies and ideas. And it’s getting harder and harder to believe that anything will get them to change course. 

The "War" Party

 

     (Nick Anderson @ Houston Chronicle)

Occupy Wall Street (1765 Edition)

Letter to the New York Gazette, 1765 that shows the "We Are the 99%" Movement to be as American as apple pie:

"Some Individuals of our Countrymen, by the Smiles of Providence or some other Means, are enabled to roll in their four–wheel'd Carriages, and can support the Expence of good Houses, rich Furniture, and Luxurious Living. But, is it equitable that 99, or rather 999 should suffer for the Extravagance or Grandeur of one? Especially when it is consider’d, that Men frequently owe their Wealth to the Impoverishment of their Neighbours."

Pres. Obama makes Wall Street's "enemies list" - Good for him!

 Bill Moyers and Michael Winship @ Salon:

Benjamin Franklin, who used his many talents to become a wealthy man, famously said that the only things certain in life are death and taxes.  But if you’re a corporate CEO in America today, even they can be put on the back burner – death held at bay by the best medical care money can buy and the latest in surgical and life extension techniques, taxes conveniently shunted aside courtesy of loopholes, overseas investment and governments that conveniently look the other way.

In a story headlined, “For Big Companies, Life Is Good,” the Wall Street Journal reports that big American companies have emerged from the deepest recession since World War II more profitable than ever: flush with cash, less burdened by debt, and with a greater share of the country’s income. But, the paper notes, “Many of the 1.1 million jobs the big companies added since 2007 were outside the U.S. So, too, was much of the $1.2 trillion added to corporate treasuries.”

To add to this embarrassment of riches, the consumer group Citizens for Tax Justice reports that more than two dozen major corporations  — including GE, Boeing, Mattel and Verizon — paid no federal taxes between 2008 and 2011. They got a corporate tax break that was broadly supported by Republicans and Democrats alike.

Corporate taxes today are at a 40-year-low — even as the executive suites at big corporations have become throne rooms where the crown jewels wind up in the personal vault of the CEO.

Then look at this report in The New York Times: Last year, among the 100 best-paid CEOs, the median income was more than 14 million, compared with the average annual American salary of $45,230. Combined, this happy hundred executives pulled down more than two billion dollars.

What’s more, according to the Times “… these CEO’s might seem like pikers. Top hedge fund managers collectively earned $14.4 billion last year.”  No wonder some of them are fighting to kill a provision in the recent Dodd-Frank reform law that would require disclosing the ratio of CEO pay to the median pay of their employees. One never wishes to upset the help, you know. It can lead to unrest.

That’s Wall Street — the metaphorical bestiary of the financial universe.  But there’s nothing metaphorical about the earnings of hedge fund tigers, private equity lions, and the top dogs at those big banks that were bailed out by tax dollars after they helped chase our economy off a cliff.

So what do these big moneyed nabobs have to complain about? Why are they whining about reform? And why are they funneling cash to super PACs aimed at bringing down Barack Obama, who many of them supported four years ago?

"Helping the Poor is Now Apparently Anti-Bible"

Kevin Drum @ Mother Jones questions the priorities of best-selling gasbag Rev. Rick, as the Purpose Driven One bats down a ridiculous straw man while not-so-faintly echoing a GOP talking point:

"Dogs? Yes, but no Jews!"

Rick Warren — he of Saddleback megachurch and Purpose Driven Life fame — is in the news again. He was on ABC's This Week...and Jake Tapper asked him what he thought about President Obama's suggestion that God tells us to care for those less fortunate than ourselves:

Well certainly the Bible says we are to care about the poor....But there's a fundamental question on the meaning of "fairness." Does fairness mean everybody makes the same amount of money? Or does fairness mean everybody gets the opportunity to make the same amount of money? I do not believe in wealth redistribution, I believe in wealth creation.

The only way to get people out of poverty is J-O-B-S. Create jobs. To create wealth, not to subsidize wealth. When you subsidize people, you create the dependency. You — you rob them of dignity.

More Ginned Up Hysterics About a Fake "Entitlement Crisis"

Dean Baker takes the Washington Post's truly awful business columnist Robert Samuelson (no relation to economist Paul Samuelson) to the woodshed for what can only be construed as either profound ignorance, deliberate deceptions or some disturbing combination of the two:

Deep Thinker!

Today's column by Robert Samuelson tries to tell us that Franklin Roosevelt would be appalled by the current state of the Social Security program. Of course, he produces not a single iota of evidence to support this position, although it is very clear that Samuelson doesn't like Social Security.

Samuelson begins by telling us that:

 "It [Social Security] has become what was then called 'the dole' and is now known as 'welfare.' This forgotten history clarifies why America’s budget problems are so intractable."

He later adds:

"Millions of Americans believe (falsely) that their payroll taxes have been segregated to pay for their benefits and that, therefore, they 'earned' these benefits. To reduce them would be to take something that is rightfully theirs."

On closer examination...

Of course Samuelson is 100 percent wrong here. Payroll taxes have been segregated. That is the point of the Social Security trust fund and the Social Security trustees report. These institutions would make no sense if the funds were not segregated.

Samuelson is welcome to not like the way in which the funds were segregated, in the same way that I don't like the Yankees, but that doesn't change the fact that the Yankees have a very good baseball team. Since its beginnings, the government has maintained a separate Social Security account. Under the law, no money can be paid out in Social Security benefits unless the Trust Fund has the money to pay for them.

In this sense, the funds are absolutely segregated. Samuelson doesn't like this, but why should any of the rest of us care? The rest of the piece shows the same dishonesty and lack of respect for facts.

This is nuts...

"Federal money for the primary training program for dislocated workers is 18 percent lower in today’s dollars than it was in 2006, even though there are six million more people looking for work now. Funds used to provide basic job search services, like guidance on résumés and coaching for interviews, have fallen by 13 percent."

"Welfare Limits Left Poor Adrift as Recession Hit"

 Jason DeParle at NYTs:

Perhaps no law in the past generation has drawn more praise than the drive to “end welfare as we know it,” which joined the late-’90s economic boom to send caseloads plunging, employment rates rising and officials of both parties hailing the virtues of tough love.

But the distress of the last four years has added a cautionary postscript: much as overlooked critics of the restrictions once warned, a program that built its reputation when times were good offered little help when jobs disappeared. Despite the worst economy in decades, the cash welfare rolls have barely budged.

Faced with flat federal financing and rising need, Arizona is one of 16 states that have cut their welfare caseloads further since the start of the recession — in its case, by half. Even as it turned away the needy, Arizona spent most of its federal welfare dollars on other programs, using permissive rules to plug state budget gaps.

The poor people who were dropped from cash assistance here, mostly single mothers, talk with surprising openness about the desperate, and sometimes illegal, ways they make ends meet. They have sold food stamps, sold blood, skipped meals, shoplifted, doubled up with friends, scavenged trash bins for bottles and cans and returned to relationships with violent partners — all with children in tow.

Esmeralda Murillo, a 21-year-old mother of two, lost her welfare check, landed in a shelter and then returned to a boyfriend whose violent temper had driven her away. “You don’t know who to turn to,” she said.

The GOP's "Ryan Budget" - cynicism in service to the 1%

Willard M. Romney:

I'm very supportive of the Ryan budget plan. It's a bold and exciting effort on his part and on the part of the Republicans...I applaud it. It's an excellent piece of work and very much needed.

Paul Krugman:

You can learn everything you need to know (about the Ryan/GOP budget) by understanding two numbers: $4.6 trillion and 14 million. Of these, $4.6 trillion is the size of the mystery meat in the budget. Ryan proposes tax cuts that would cost $4.6 trillion over the next decade relative to current policy — that is, relative even to making the Bush tax cuts permanent — but claims that his plan is revenue neutral, because he would make up the revenue loss by closing loopholes. For example, he would … well, actually, he refuses to name a single example of a loophole he wants to close.

So the budget is a fraud. No, it’s not “imperfect”, it’s not a bit shaky on the numbers; it’s completely based on almost $5 trillion dollars of alleged revenue that are pure fabrication.

On the other side, 14 million is the minimum number of people who would lose health insurance due to Medicaid cuts — the Urban Institute, working off the very similar plan Ryan unveiled last year, puts it at between 14 and 27 million people losing Medicaid.

That’s a lot of people — and a lot of suffering. And again, bear in mind that none of this would be done to reduce the deficit — it would be done to make room for those $4.6 trillion in tax cuts, and in particular a tax cut of $240,000 a year to the average member of the one percent..

99% Blues

"Thinly veiled Social Darwinism"

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

President Obama on the GOP's "Ryan Budget":

In this country, broad-based prosperity has never trickled down from the success of a wealthy few.  It has always come from the success of a strong and growing middle class.

That’s how a generation who went to college on the G.I. Bill, including my grandfather, helped build the most prosperous economy the world has ever known.  That’s why a CEO like Henry Ford made it his mission to pay his workers enough so they could buy the cars that they made.  That’s why research has shown that countries with less inequality tend to have stronger and steadier economic growth over the long run.

And yet, for much of the last century, we have been having the same argument with folks who keep peddling some version of trickle-down economics.  They keep telling us that if we’d convert more of our investments in education and research and health care into tax cuts -- especially for the wealthy -- our economy will grow stronger.  They keep telling us that if we’d just strip away more regulations, and let businesses pollute more and treat workers and consumers with impunity, that somehow we’d all be better off.  We’re told that when the wealthy become even wealthier, and corporations are allowed to maximize their profits by whatever means necessary, it’s good for America, and that their success will automatically translate into more jobs and prosperity for everybody else.  That’s the theory.

Now, the problem for advocates of this theory is that we’ve tried their approach -- on a massive scale.  The results of their experiment are there for all to see.

A Rightist Ideological Coup Under Cover of "Conservatism"

E. J. Dionne on the prevalence of far-right extremism among today's "conservatives" and the moral duty of self-annointed "centrists":

A brief look at history suggests how far to the right both the Republican Party and contemporary conservatism have moved. Today’s conservatives almost never invoke one of our most successful Republican presidents, Dwight D. Eisenhower, who gave us, among other things, federally guaranteed student loans and championed the interstate highway system.

Even more revealing is what Robert A. Taft, the leader of the conservative forces who opposed Eisenhower’s nomination in 1952, had to say about government’s role in American life. “If the free enterprise system does not do its best to prevent hardship and poverty,” the Ohio Republican senator said in a 1945 speech, “it will find itself superseded by a less progressive system which does.” He urged Congress to “undertake to put a floor under essential things, to give all a minimum standard of decent living, and to all children a fair opportunity to get a start in life.”

Who can doubt that today’s right would declare his day’s Mr. Republican and Mr. Conservative a socialist redistributionist?

If our nation’s voters want to move government policy far to the right, they are entirely free to do so. But those who regard themselves as centrist have a moral obligation to make clear what the stakes are in the current debate. If supposed moderates refuse to call out the new conservatism for the radical creed it has become, their timidity will make them complicit in an intellectual coup they could have prevented.

"There’s very little the federal government has done over the past 150 years...that the House Republicans approve of"

James Suroweicki at The New Yorker:

"...the worst of times."

Last week, when House Republicans passed Paul Ryan’s budget resolution, Ryan, the Budget Committee chairman, said that Congress had a “moral obligation” to get the country’s finances under control, and that the vote was a necessary response to a looming “debt-driven crisis.” What he didn’t mention was that it was also a vote to gut the federal government...

It’s a profoundly radical document, its proposals skewed by ideological biases. Raising taxes, of course, is out of bounds. The same goes for using federal power to hold down Medicare costs, which will be the key driver of future budget deficits. Instead, House Republicans would cut spending on almost everything else the government does. According to an analysis by the Congressional Budget Office, the Ryan plan would, by 2050, reduce federal spending to its lowest point, as a percentage of G.D.P., since 1951. And since an aging population, with rising health-care costs, means that a hefty chunk of government spending will be going to retirement and health-care benefits, hitting Ryan’s target would require drastically shrinking everything else.

Mr. Krugman respectfully disagrees with the House Republicans

"Do I really have to swallow this stuff?"

"The most fraudulent budget in American history...mystery meat...pink slime... House Republicans have just demonstrated, as clearly as anyone could wish, that they are neither (responsible nor honest.)"

Ouch!

Read Nobel Economist and Times columnist Paul Krugman's complete evisceration of the GOP/Ryan Budget HERE.

"Reaganism" wouldn't pass muster in today's extremist GOP right

A Cardboard Reagan for the Ages

Reagan-era conservative legal officials are shocked at the "judicial activist" mindset of the Supreme Court's right-wing in health-care mandate case, reminding us once again that the actual Regan adminstration would garner contempt from today's hard-core right-wing that dominates the Republican Party.

David Savage at LA Times:

When the incoming Chief Justice John G. Roberts Jr. came before the Senate for confirmation seven years ago, President Reagan's solicitor general gave him a warm endorsement as a "careful, modest" judge.

"He's not a man on a mission," Harvard Law professor Charles Fried testified, adding that Roberts was not likely "to embark on constitutional adventures."

But two years ago, the Roberts-led Supreme Court struck down the federal and state laws that for a century had barred corporations and unions from pouring money into election campaigns.

And last week, the court's conservatives, including Roberts, suggested they may well strike down President Obama's healthcare law as unconstitutional. If so, it would be the first time since 1936 that the Supreme Court voided a major federal regulatory law.

"Wall Street's Risky Business"

Great segment from "Up w/ Chris Hayes" on the degenerate culture
of the upper echelons of "our" financial sector:

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

"How to Prevent a Financial Overdose"

 Gretchen Morgenson at NYT:

THE Food and Drug Administration vets new drugs before they reach the market. But imagine if there were a Wall Street version of the F.D.A. — an agency that examined new financial instruments and ensured that they were safe and benefited society, not just bankers.

How different our economy might look today, given the damage done by complex instruments during the financial crisis.

And yet, four years after the collapse of Bear Stearns, regulation of these products remains a battleground. As federal officials struggle to write rules required by the Dodd-Frank law, some in Congress are trying to circumvent them. Last week, for instance, the House Financial Services Committee approved a bill that would let big financial institutions with foreign subsidiaries conduct trades that evade rules intended to make the vast market in derivatives more transparent.