"Unemployment? Who Cares?"

Two pieces on the scourge of lingering unemployment from the New York Times "Economix" blog. First, reporter Catherine Rampell:

More bad news on the job market front: the number of jobless workers per job opening stayed flat at 4.7 in May, according to a new report from the Labor Department. That is more than twice the average ratio seen during the boom years that preceded the Great Recession.

Next, addressing the apparent lack of urgency over the desperation of these job-seekers, Nancy Folbre, an economist at the University of Massachusetts-Amherst, wonders why there is so little sense of crisis coming from the Beltway:

High unemployment has become the new normal. Two years after the official end of the recession, the monthly refrain of poor jobs reports showing an unemployment rate stalled at about 9 percent does little to increase any sense of political urgency.

GOP insanity - our ace in the hole?

Another view on the debt ceiling battle from Ezra Klein:

I knew the White House wanted a compromise on the debt ceiling. I just didn't expect them to do quite so much, well, compromising.

Here's what appears to have been in the $4 trillion deal they offered the Republicans: A two-year increase in the Medicare eligibility age. Chained-CPI, which amounts to a $200 billion cut to Social Security benefits. A tax-reform component that would raise $800 billion and preempt the expiration of the Bush tax cuts -- which would mean, for those following along at home, that the deal would only include half as much revenue as the fiscal commission recommended, and when you add the effect of making the Bush tax cuts a permanent part of the code, would net out to a tax cut of more than $3 trillion when compared to current law.

That last bit apparently killed the deal. It But it was actually the biggest concession on the table.

Is Obama Besting Boehner in the Budget Battle?

by Mark McCutchan (cross-post from Winning Progressive):

House Majority Leader John Boehner turned down President Obama’s offer to “go big” on the budget deal – a $4 trillion budget reduction was offered Saturday night in exchange for a rise in the debt ceiling.  I, along with many progressives, was furious with the president for even saying he would put Social Security, Medicare and Medicaid on the negotiating table.  However, upon closer examination of his words, I realized that the president was referring, for example, to savings due to improving Medicare efficiencies and rationalizing health care spending through an Independent Patient Advisory Board, as discussed in a previous Winning Progressive column, rather than making cuts to entitlement benefits.

I now realize Obama knew the GOP would never say “Yes” to a deal that included $1 trillion in removing tax loopholes for corporations and the wealthy, even if it were sweetened with $3 trillion in budget cuts to entitlement programs and some defense expenses. That’s because Boehner’s buddies in the House are bound to a cause higher than their party or their constitutional duty: 235 House Republicans have signed Grover Norquist’s “No Taxes” pledge.  Signees must oppose any new taxes or new tax revenue, or suffer the wrath of Norquist and his group “Americans for Tax Reform”, which would mean a sure political death in today’s conservatives-only GOP.

President Obama has reaped a huge political gain by appearing to go out of his way to maintain the fiscal solvency of the federal government, and the Republicans look like the bad guys again.

Secretary Geithner: "For a lot of people...it's going to feel very hard, harder than anything they've experienced in their lifetime"

Where does it end?

The prospects for a lagging economy look bleak. Spending cuts are on the table in debt ceiling negotiations. State budgets are shrinking and public employees are losing jobs.

And there's another hit to the demand side just around the corner - one that also entails a lot of personal pain in an economic landscape that isn't producing jobs at a significant rate, according to an article in today's New York Times:

An extraordinary amount of personal income is coming directly from the government.

Close to $2 of every $10 that went into Americans’ wallets last year were payments like jobless benefits, food stamps, Social Security and disability, according to an analysis by Moody’s Analytics. In states hit hard by the downturn, like Arizona, Florida, Michigan and Ohio, residents derived even more of their income from the government.

By the end of this year, however, many of those dollars are going to disappear, with the expiration of extended benefits intended to help people cope with the lingering effects of the recession. Moody’s Analytics estimates $37 billion will be drained from the nation’s pocketbooks this year.

In terms of economic impact, that is slightly less than the spending cuts Congress enacted to keep the government financed through September, averting a shutdown.

Unless hiring picks up sharply to compensate, economists fear that the lost income will further crimp consumer spending and act as a drag on a recovery that is still quite fragile. Among the other supports that are slipping away are federal aid to the states, the Federal Reserve’s program to pump money into the economy and the payroll tax cut, scheduled to expire at the end of the year.

"The Worst Time to Slow the Economy"

New York Times' Sunday editorial says it all:

It was not surprising to hear the Republican presidential candidates repeat their tiresome claim that excessive government spending and borrowing were behind Friday’s terrible unemployment report. It was depressing to hear President Obama sound as if he agreed with them.

"The Terrible June Jobs Numbers"

Rortybomb:

The jobs numbers are horrible, worse than anyone had thought they’d turn out to be. 18,000 total jobs created, with a decrease of 39,000 government jobs...

Bad numbers, bad news...we need a sense of urgency about something other than deficits. Now.

Where is "Middle America" on the issue of cuts vs. taxes?

What's up in Cleveland?

Folks steeped in stereotypes of the Midwest might be surprised by this. The political reality is that a broad spectrum of voters support raising taxes on high earners and oppose cutting so-called "entitlements" as paths to deficit reduction.

Poll of swing state "likely voters" by Public Policy Polling (commissioned by MoveOn, DFA, Credo and Bold Progressives):


TAXING THE WEALTHY

QUESTION: In order to reduce the national debt, would you support or oppose raising taxes on those with incomes over $150,000 a year?
Ohio	66% support	31% oppose
Missouri	58% support	36% oppose
Montana	62% support	34% oppose
Minnesota	67% support	30% oppose

QUESTION: In order to reduce the national debt, would you support or oppose raising taxes on those with incomes over $250,000 a year?
Ohio	72% support	26% oppose
Missouri	67% support	30% oppose
Montana	69% support	28% oppose
Minnesota	71% support	27% oppose

QUESTION: In order to reduce the national debt, would you support or oppose raising taxes on those with incomes over $1,000,000 a year?
Ohio	78% support	21% oppose
Missouri	76% support	22% oppose
Montana	77% support	21% oppose
Minnesota	79% support	19% oppose

QUESTION: Would you support or oppose a proposal that said personal income above $1,000,000 would be taxed at 45%, income above $20,000,000 dollars would be taxed at 47%, and income above $1,000,000,000 would be taxed at 49%?
Ohio	62% support	29% oppose
Missouri	56% support	30% oppose
Montana	56% support	33% oppose
Minnesota	61% support	29% oppose

CUTTING SOCIAL SECURITY, MEDICARE, AND MEDICAID

QUESTION: In order to reduce the national debt, would you support or oppose cutting spending on Social Security, which is the retirement program for the elderly?
Ohio	16% support	80% oppose
Missouri	17% support	76% oppose
Montana	20% support	76% oppose
Minnesota	23% support	72% oppose

QUESTION: In order to reduce the national debt, would you support or oppose cutting spending on Medicare, which is the government health insurance program for the elderly?
Ohio	20% support	76% oppose
Missouri	19% support	77% oppose
Montana	24% support	71% oppose
Minnesota	26% support	69% oppose

QUESTION: In order to reduce the national debt, would you support or oppose cutting spending on Medicaid, which is the government health insurance program for the poor, disabled, and children?
Ohio	33% support	61% oppose
Missouri	32% support	63% oppose
Montana	36% support	59% oppose
Minnesota	33% support	62% oppose

 Polling done in late April and early May. Via Winning Progressive

Worried about the "balance"

Jonathan Cohn at The New Republic:

Obama has talked frequently about the need for both parties to make painful decisions (in the debt ceiling showdown) that hurt their constituencies or require compromising core values... But only one party seems to making those painful decisions right now – and, come to think of it, only one party has been making those decisions for quite a while.

Is the GOP completely crazy?

 Or just crazy like a Fox?

Ezra Klein:

GOP's Roger "Fox" Ailes

There are two ways to read the current stalemate in the debt-ceiling negotiations. There’s David Brooks’s take, which is that watching Republicans pass up “the deal of the century” should leave conservatives convinced there’s something wrong with the GOP.

But you can also read it the opposite way: Democrats control the White House and the Senate, Obama is the most popular national political figure, a balanced approach to deficit reduction outpolls plans made entirely of spending cuts, and yet Democrats are still offering recalcitrant Republicans the deal of the century rather than taking to the ramparts. What’s wrong with them?

(Look at previous) deficit-reduction deals passed by Presidents Ronald Reagan, George H.W. Bush and Bill Clinton.

As you can see on the graph, in each case, taxes were at least a third of the total, and in Reagan’s case, his massive tax cuts were followed by deficit-reduction deals that actually relied on tax increases. Today, tea party conservatives would be begging Sen. Jim DeMint to primary the Gipper.

Enough to make you cry?

Speaker Boehner emotes

"When Congressional Republicans claim that the reason for their recalcitrance in budget negotiations is concern for the welfare of ordinary Americans, look more closely. Do we really want to close down the American government and risk another global financial crisis to protect the tax bills of billionaires"

Nick Kristoff explains - HERE - the "carried interest loophole" that the GOP is adamantly protecting with it's "No Taxes" tantrum, as they hold the country hostage over the deficit and debt ceiling. "Carried interest" allows billionaires - and by billionaires I mean guys who make billion$ ANNUALLY - to pay taxes on their income at less than half the established upper marginal rate.  Check out Kristoff's entire column.

Recovery for corporations - the hallowed "supply side" is doing just fine

Even the Wall Street Journal reported the "supply side economics free lunch" of tax cuts as a means of increasing government revenues effectively dead back in 2003.  After George W. Bush cut taxes, the conservative-leaning Congressional Budget Director, Douglas Holtz-Eakin, couldn't come up with figures showing tax revenues increasing in the wake of the tax cuts.  If the goal - as initially stated - was to fight the projected surplus in government solvency, it worked brilliantly.

That argument is over - at least among normal folks who aren't on ideological crack. But the persistent argument remains that cutting taxes for corporations generates essential capital that will be directed to creating new jobs - that increasing corporate profitability inevitably leads to a robust, growing economy and employment for just about anyone willing to work.

There certainly may be particular, targeted scenarios - such as cuts in employer payroll taxes or credits tied to new employment  - where the desired effect of job-creation can be enhanced by tax breaks, but overall evidence for a rebound of corporate profitability as the magic bullet that will get us out of a deep jobs slump appears slim to non-existent.

Andrew Leonard at Salon has the facts and figures:

When "conservatives" were actually...uh...conservative

In the wake of the near-insane radicalism of contemporary "conservatism" it's useful to look back at the governing policies of Margaret Thatcher,  an authentic conservative.

She's no hero of mine, but neither was Margaret Thatcher a far-right radical along the lines of so many who invoke as icons the lady and her good buddy Ronald Reagan (who, himself, despite starting out with large tax cuts that began the trend toward large deficits, rolled back about half of his initial tax reductions, with as many as 11 tax increases over the course of his Presidency, when reality started to collide with rhetoric.)

Bruce Bartlett - our favorite conservative commentator based on his connection to reality over ideology and wishful thinking - offers this view:  

While Mrs. Thatcher is a towering figure in British political history, well deserving of admiration, the conservative legend about her time in power is at odds with the facts. In this legend, she was even more aggressive than Reagan in cutting taxes and the welfare state. But that is not true...

Paul Krugman's latest over-the-top, shrill, vituperative, anti-GOP column in the New York Times...

(T)he Republican Party may no longer be a normal party...it has been infected by a faction that is more of a psychological protest than a practical, governing alternative. The members of this movement do not accept the logic of compromise...

The members of this movement do not accept the legitimacy of scholars and intellectual authorities...

The members of this movement have no sense of moral decency...

The members of this movement have no economic theory worthy of the name....

The struggles of the next few weeks are about...an odd protest movement that has separated itself from normal governance, the normal rules of evidence and the ancient habits of our nation.

Oh wait a minute.  That's not Prof. Krugman - it's that other Times columnist David Brooks, musing on the incoherence of GOP Mad Hatters, fearful of chickens that have come home to roost on his carefully trimmed front lawn, smelling the noxious stuff that has hit his "conservative" fan, chafing at the inmates taking over his asylum and obviously angered at long-ago losing any shot at gaining the driver's seat in the GOP Clown Car.

"A lie gets halfway around the world before the truth has a chance to get its pants on." - Winston Churchill

Apparently via George Will's cherry-picking a new book on the finanical crisis, the "Fannie Mae and Freddie Mac (and Community Reinvestment Act and Democrats) caused the financial crisis" fairy tale is finding new currency.  Pushing this phony narrative is of utmost importance for the right because it puts government rather than Wall Street at the center of the ugly story that's caused the country so much pain.

We went through this fraudulent "history" at the rarified levels of polite parlor conservatism already with David Brooks parroting the nonsense that generally emanates from crazy old Know-Nothings with tea bags taped to funny hats.

Now it's George Will, whose words will be echoed "halfway around the world" in certain ideological and intellectually vulnerable circles before they are countered. Certainly Will's pronouncements have more cachet than a guy holding a hand-lettered sign at a Michele Bachmann rally or  the ravings of one of the usual suspects on FOX News. Will's voluminous commentaries are larded with the Ivy League erudition of 19th Century historical references and lots of Winston Churchill quotes.

Will once wrote "A politician's words reveal less about what he thinks about his subject than what he thinks about his audience." Apparently - given Will's willfull misrepresentations, aka Big Lies, regarding Fannie, Freddie and the CRA - this applies to pundits as well. George Will thinks his readers are as ignorant and eager to swallow fabrications based on his long-standing ideological resentments as the Tea Partiers he echoes. 

We'll let Dean Baker at Council for Economic and Policy Research do the necessary debunking:

It really is incredible to see such a concerted effort to rewrite history in front of our faces. There is not much ambiguity in the story of the housing bubble. The private financial sector went nuts. They made a fortune issuing bad and often fraudulent loans which they could quickly resell in the secondary market. The big actors in the junk market were the private issuers like Goldman Sachs, Citigroup, and Lehman Brothers. However, George Will and Co. are determined to blame this disaster on government "compassion" for low-income families.

This land...

Crisis at the state level

The Center on Budget and Policy Priorities:

States have enacted deep cuts in education, health care, and other important public services in their budgets for fiscal year 2012 (which begins July 1 in most states).

It is the fourth year in a row of budget-cutting for states, and the 2012 cuts are deeper than in past years. Of the 32 states that have enacted budgets, as least 24 are imposing significant cuts. These cuts will delay the nation’s economic recovery and undermine efforts to create jobs...

Excellent advice from strange places

Via Krugman's "Conscience of a Liberal":

Barton Biggs, re-born in Keynesia

Speaking exclusively with The Wall Street Journal, Barton Biggs, managing partner at multibillion dollar hedge fund Traxis Partners, painted a bleak outlook for the developed world with only huge government intervention likely to improve things...

Mr. Biggs, former chief global strategist for U.S. investment banking powerhouse Morgan Stanley, demanded the U.S. government temporarily return to ideas used in the Great Depression as a way to get the country back to higher growth.

“What the U.S. really needs is a massive infrastructure program … similar to the WPA back in the 1930s,” he says.

The plan would be to employ some of the many unemployed people, jump start the economy, as well as help catch up with Asia, which is building state-of-the-art infrastructure from new mechanized port facilities to high-speed trains.

He suggested financing such building through the sale of U.S. Treasuries.

Just for the heck of it, I checked Wikipedia on Barton Biggs and found he was chief global strategist for Morgan Stanley for 30 years before partnering at Traxis.  Institutional Investor rated him the "top global investor" from 1996 to 2000 and he's been "the premier prognisticator on the global scene" according to Smart Money mag.

So Biggs is a formidable, greatly respected character in the upper echelons of global finance.  And he's currently pushing hard-core "New Deal" style Keynesianism in response to the economic crisis that puts him approximately in Bernie Sanders' territory.

Welcome aboard, Mr. Biggs.  Now, not to be rude, but what about those bizarre super-low tax rates on your mega-compensation as a hedge fund manager?

Giving Larry Summers his due...

American Public Media's Marketplace correspondent Jeremy Hobson had an interesting interview with the much-maligned Summers that helps put some perspective on his role and views within the Obama administration and suggests he's on the side of the need for more stimulus:

HOBSON: You recently called for a new stimulus in the form of a payroll tax cut. But it's been reported over and over again that within the Obama administration -- when you were in the administration -- you were actually on the side of a smaller stimulus back in 2009.  

SUMMERS: Not accurately. Not accurately.

HOBSON: That's not true? You weren't pushing for a less-than $1.2 trillion stimulus?

SUMMERS: No, I mean it's a much more complicated story, but those reports are not accurate. It was my judgment as an economist that there was no danger of doing too much stimulus and one should achieve as much stimulus as possible. There were a set of political calculations having to do with what the Congress could accept that were mostly determined by the president's political advisers and ultimately by the president which pointed towards the size of the program that was ultimately passed. But the economic advice that I gave was that the stimulus program should be as large as it could be.

HOBSON: Do you think it was too small in the end?

The crisis is jobs, not deficits

Yes, we have a serious need to reduce spending over the long-term - with rising health care costs in both private and public markets the key area that appears out-of-control.

But at this point in a weak, essentially "jobless" recovery, the focus on deficit reduction is a fool's errand.  This entire deficit debate has been generated, cynically, by a GOP that has put their fetish for fiscally profligate tax cuts over balancing budgets.

Underlying the GOP's apparent cognitive dissonance on fiscal matters is a long-term strategy to use a deficit crisis to destroy essential government social programs.  In the nearer term, their aim is to weaken the President even if it means economic ruin.

Clinton administration economic advisor Laura Tyson brings some sensible thought about serious priorities into the heated atmosphere of deficit hysterics and debt-ceiling roulette - smokescreens obscuring our very real problems that, frankly, too many Democrats have bought into:

Long term, the United States faces a fiscal challenge that must be tackled –- but it is not an immediate fiscal emergency. In the labor market, though, there is an immediate crisis, the worst since the Great Depression...

The Jobless and Wageless "Recovery"

Steven Greenhouse at NYT's Economix has disturbing - but not really surprising - news on the unequal benefits at the center of a historically weak economic recovery. 

Regular folks aren't making signficant gains, while the corporate and economic elites are doing just fine and taking the lion's share of increases in national income. The arc of inequality that's predominated over the last thirty years continues, in extremis:

Economists at Northeastern University have found that the current economic recovery in the United States has been unusually skewed in favor of corporate profits and against increased wages for workers.

In their newly released study, the Northeastern economists found that since the recovery began in June 2009 following a deep 18-month recession, “corporate profits captured 88 percent of the growth in real national income while aggregate wages and salaries accounted for only slightly more than 1 percent” of that growth.

"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.

"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.

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?

Friends shouldn't let friends vote for Republicans

      Via Washington Monthly

"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.

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.

" 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?

"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:

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":

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

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:

'Tis the season

Stephen Colbert's commencement address to Northwestern University graduates.

"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.