"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:

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.

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.

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:

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":

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.

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.

"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.

"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.)

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:

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.).

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:

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."

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).

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.

"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.

On the GOPers who claim "We didn't create this mess!"

Titanic noted the GOP congressman who told Tres. Secy. Geithner "We didn't create this mess!" during the recent White House meeting over raising the debt ceiling.  James Kwak at Baseline Scenario has this reaction:

The frightening thing is, he probably believes it. When people hold certain ideological beliefs strongly enough, no amount of facts will get in their way. If you believe that the current deficit is the result of excessive government spending (passed by Democrats, even though they only controlled Congress and the White House for four out of the past thirty years*), no pile of charts will be big enough to convince you otherwise — just like if you believe that tax cuts increase tax revenues, that the deficit has produced high interest rates, or that Barack Obama was born on Mars, no amount of evidence will convince you otherwise.

This is just fine if you are my daughter, who is four years old — although, actually, she admits it when she makes a mess (and helps clean it up). But if you are a legislator in the most powerful country in the world –and the one whose debt is the definitionally risk-free asset against which the yield of every other financial asset in the entire world is measured — it’s not good enough.

Terrible job news

From the Financial Times (UK):
       
          US jobs data escalate fears of double dip

The US economy added just 54,000 new jobs in May, confirming fears that the recovery has hit a soft patch as the unemployment rate ticked up to 9.1 per cent.

Non-farm payrolls rose far less than the 165,000 that economists polled by Bloomberg had expected and were well below the average 220,000 gain in the previous three months, the US labour department said.

The unemployment rate rose by a tenth of a point from 9 per cent in April, disappointing hopes that it would fall back to 8.9 per cent, but the increase was due to an expanding labour pool as more Americans searched for jobs. Out of a workforce of 153.7 million, 13.9 million people are unemployed.

"Are you talkin' to me?"

"I got some bad ideas in my head!"

During yesterday's dismal White House budget meeting, Paul Ryan complained to the President about the "demagogy" of describing as  "vouchers" Ryan's plan to end Medicare in favor of...uh...vouchers. 

Then there was this zinger.

"We didn't create this mess," a Republican Congressman reportedly told Treasury Secretary Tim Geithner

Ryan's whining aside, on the larger issue of who created "this mess" - of course, they did.  The Republicans advocated for the policies and/or oversaw the calamities generating the red ink that's scaring voters.

"We didn't create this mess - blame Obama!" (or Medicare) are the Big Lies of the GOP's phony deficit hysteria and a shameless evasion of responsibility.

Jobs and 2012

The New York Times has an extensive piece up today headlining that job numbers are key to President Obama's re-election.  It's sobering, to say the least. No President since Franklin Roosevelt has won another term with unemployment as high as it is today and no doubt will be next year - a historical trend that the President must overcome to keep his own job.  The central question is really will Americans believe in November 2012 that the President has done not just some of the right things to fight unemployment but all that he could.

Politics are what they are in today's climate - and have become particularly toxic and stagnant since the huge mid-term loss of Congress by the Democrats. I understand the limitations of "should" versus "could."  But, as a supporter of the President, I have to ask myself whether jobs have really been the central focus of the administration. Has everything been proposed that actually might have had a chance of passage when the Democrats controlled Congress - or that was at least worth more of a fight? And even if every proposal obviously couldn't get passed, isn't putting forward a clear policy to attack unemployment also good politics?

If an Obama supporter such as myself is not sure that attacking lingering unemployment has been at the top of the White House's economic agenda, the President has a problem. (Of course, as it happens, the Democrats have their perennial Ace in the Hole for 2012 - the GOP's lack of credible alternatives and remarkable ability to over-reach in their anti-government radicalism.  Will this blowback carry the Democrats through 2012?  Some days I think the radicalization and extremism of the GOP is all the Democrats, as a disparate coalition from Blue Dogs to Progressives, have got holding them together.)

According to the story quoted below, there is nothing of substance currently on the table - the Fed has reverted to a "priority" of fighting inflation, although core inflation (price increases not reflective of volatile shifts in global oil and agricultural  commodities markets but related to inflationary wage pressures and "too much money") is virtually non-existent.

And the White House appears to have reverted to tinkering with corporate taxes in concert with the GOP, to "restoring business confidence" - whatever that means - and promoting exports to China. That's it.

Putting Americans back to work is the central issue of 2012, and the weak record of the past several years is not reasssuring. The story this Times article tells should become a clarion call for Democrats and the White House moving forward:

Roughly 9 percent of Americans who want to go to work cannot find an employer. Companies are firing fewer people, but hiring remains anemic. And the vast majority of economic forecasters, including the president’s own advisers, predict only modest progress by November 2012.

The latest job numbers, due Friday, are expected to provide new cause for concern. Other indicators suggest the pace of growth is flagging...

But the grim reality of widespread unemployment is drawing little response from Washington.

"A Needless Housing Collapse"

Here's an antidote to the notion that has been aggressively pushed by such sources as the Wall Street Journal's op-ed page and  CNBC's Larry Kudlow that the mortgage crisis was the fault of borrowers and the government, rather than primarily a market failure and eventual collapse triggered by private lending agents who found ways to make short-term profits from aggressively pushing bad loans. The article also shows a promising policy moving forward for borrowers who are in trouble.

From Alyssa Katz at Think Progress:

John Smith's four-bedroom house stands tall on Cleveland's East Side, its tidy cream siding and green lawn oblivious to the devastation that has scarred the surrounding neighborhood. It is everything thousands of foreclosed homes in the area are not: occupied, intact, and still an asset to the family that lives in it. Smith purchased the home in 2005 through a nonprofit dedicated to repopulating the city with working- and middle-class homeowners. But Smith's investment was one of a few drops in a bucket with no bottom: The census tract he lives in, with about 600 homes, has seen more than 200 foreclosure sales in the past 15 years. "We know the inner city is the inner city, and it's no big surprise to us," Smith says. But even he is stunned at the level of devastation around him. "Whole neighborhoods are almost totally down."

The Smith family has come close to the precipice. In 2008, Smith, then 38, lost his job as a financial analyst for a bank and had trouble paying his mortgage. His credit-card debt shot into six figures. When his lender initiated foreclosure proceedings that December, the notice was a month late because the bank did not have the correct address on file for its own borrower.

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.

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."

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.
 
Bouie:

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.’”

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.