America and the Beltway - Parallel Universes

The President spoke Thursday night of the deep skepticism and disaffection many Americans feel for Washington when confronted with craziness like the debt ceiling brinksmanship.

But a big part of this problem is that too much of the rhetoric we hear, even from the White House and leading Democrats, puts cutting deficits before creating jobs and feeds the frustration and disbelief that our political system can help solve the worst of our problems.

If the main problem is posed as cutting government spending, the GOP's social nihilism has already won the day and prospect of promoting effective public policy has been severely diminished.

Former Chairman of the White House Council of Economic Advisors Lawrence Summers - set free from his official spokesmanship - stated unequivocally a few days ago,  "I think the biggest problem the country has right now is not the budget deficit. The biggest problem the country has right now is the jobs deficit." 

When Larry Summers and Paul Krugman agree that most of the Beltway politicians are barking up the wrong economic tree, one has what anyone to the left of David Brooks might well consider a compelling consensus. 

Robert Reich has more good commentary on the divide between Washington's political games and the realities most of us face:

We now live in parallel universes.

Was the White House & Treasury's "Grand Bargain" debt ceiling strategy a major mistake?

Felix Salmon thinks it was:

For 37 years, the debt ceiling has provided an easy way for the party which isn’t in the White House to posture politically against the party which is in the White House. Even Barack Obama voted against raising it, once. Every one of the dozens of times the debt ceiling was reached, there was a small but non-zero probability that something disastrous would happen. And each time, disaster was, predictably, averted. It’s a classic sign of how tail risks are treacherous and breed invidious complacency…

And now we’re paying the price. It’s increasingly looking like the best-case scenario is that America simply loses its triple-A credit rating — something which in and of itself will be pointless, dangerous, unnecessarily expensive and potentially catastrophic. The worst-case scenario, of course, is an outright default.

The lion’s share of the blame here belongs with the Republicans in general, the House Republicans in particular, and the Tea Party caucus within the House Republicans most of all. But it’s not like these people’s existence or intransigence was any great secret. And so the White House tactics over the course of the past few months look dangerously naive…

Bohener's Plan: "The Greatest Increase in Poverty and Hardship Produced by Any Law in Modern U.S. History"

From Mark Thoma, "Economist's View" -

Mathew Yglesias:

CBPP Analysis of John Boehner’s Plan: The Center on Budget and Policy Priorities concludes that if enacted, John Boehner’s debt ceiling plan “could well produce the greatest increase in poverty and hardship produced by any law in modern U.S. history.”

That sounds to me like something that would create strong incentives to not be poor and, indeed, to fully incentive richness. Consequently, we’ll have massive economic growth. Right?

Think of all the old people who will be willing to do odd jobs, whatever, in order to pay for health care. No more free-riding from grandma and grandpa to slow the economy down.

Are Medicare cuts "on the table" in the debt ceiling hostage negotiations - and, if so, why?

Paul Krugman addresses this deep concern - which is shared by the general public, not just "partisan" or "ultra-liberal" Democrats - over including Medicare cuts as part of the debt ceiling wheeling and dealing:

(A)ccording to many reports, the president offered both means-testing of Medicare benefits and a rise in the age of Medicare eligibility. The first would be bad policy; the second would be terrible policy. And it would almost surely be terrible politics, too.

The crucial thing to remember, when we talk about Medicare, is that our goal isn’t, or at least shouldn’t be, defined in terms of some arbitrary number. Our goal should be, instead, to give Americans the health care they need at a price the country can afford. And throwing Americans in their mid-60s off Medicare moves us away from that goal, not toward it.

"How the deficit got this big"

Teresa Tritch at The New York Times:

With President Obama and Republican leaders calling for cutting the budget by trillions over the next 10 years, it is worth asking how we got here — from healthy surpluses at the end of the Clinton era, and the promise of future surpluses, to nine straight years of deficits, including the $1.3 trillion shortfall in 2010. The answer is largely the Bush-era tax cuts, war spending in Iraq and Afghanistan, and recessions.

Despite what antigovernment conservatives say, non-defense discretionary spending on areas like foreign aid, education and food safety was not a driving factor in creating the deficits. In fact, such spending, accounting for only 15 percent of the budget, has been basically flat as a share of the economy for decades. Cutting it simply will not fill the deficit hole.

"The only Social Security reform worth considering..."

 Former Labor Secretary Robert Reich:

The very idea that Social Security might be on the chopping block in order to pay the ransom Republicans are demanding reveals both the cravenness of their demands and the callowness of the opposition to those demands.

In a former life I was a trustee of the Social Security trust fund. So let me set the record straight.
Social Security isn’t responsible for the federal deficit. Just the opposite. Until last year Social Security took in more payroll taxes than it paid out in benefits. It lent the surpluses to the rest of the government.

Now that Social Security has started to pay out more than it takes in, Social Security can simply collect what the rest of the government owes it. This will keep it fully solvent for the next 26 years.

But why should there even be a problem 26 years from now? Back in 1983, Alan Greenspan’s Social Security commission was supposed to have fixed the system for good – by gradually increasing payroll taxes and raising the retirement age. (Early boomers like me can start collecting full benefits at age 66; late boomers born after 1960 will have to wait until they’re 67.)

Greenspan’s commission must have failed to predict something. What?

Where the jobs are & cognitive dissonance in the "deficit debate"

Princeton economist Uwe Reinhardt at NYT's Economix:

(A)ccording to (an eye-opening report for the Council on Foreign Relations by Michael Spence, a Nobel laureate, and Sandile Hlatshwayo) close to 98 percent of the 27.3 million new jobs in the American economy in the last two decades were created in the nontradable sectors (those sectors whose output is not traded across international borders), led by government and health care in first and second place.

These two sectors alone accounted for 40 percent of the total job growth over the last two decades. They were followed by retailing and construction, both of which grew on the back of heavy debt financing and a real-estate bubble.

Gambling mogul grapples with insanity

Trumpelicious

There is a point at which cognitive dissonance and intellectual incoherence moves dangerously close to the very edges of apparent sanity. In quotes caught by Andrew Leonard at Salon, it looks like Las Vegas' billionaire gambling mogul Steve Wynn is staring deep into that abyss.

Wynn on President Obama, his "pure socialist" talk and the "fear of government" in the United States:

(T)his administration is the greatest wet blanket to business, and progress and job creation in my lifetime. And I can prove it and I could spend the next 3 hours giving you examples of all of us in this market place that are frightened to death about all the new regulations, our healthcare costs escalate, regulations coming from left and right. A President that seems -- that keeps using that word redistribution. Well, my customers and the companies that provide the vitality for the hospitality and restaurant industry, in the United States of America, they are frightened of this administration… And those of us who have business opportunities and the capital to do it are going to sit in fear of the President… it's Obama that's responsible for this fear in America. The guy keeps making speeches about redistribution, and maybe we ought to do something to businesses that don't invest or holding too much money. We haven't heard that kind of talk except from pure socialists. Everybody's afraid of the government, and there's no need to soft peddling it, it's the truth. It is the truth.  

Wynn on the "delicious" worker's - and capitalist - paradise that is the People's Republic of China:

September will be our fifth anniversary in the People's Republic of China in Macau, and we love it there. We are so grateful to be part of that market and to be allowed to participate in that community. We find the political environment, the regulatory environment, the human resource environment that we're in to be absolutely delicious. Life is quite straightforward in China. The government is predictable. Our employees are eminently trainable. They're anxious to please. 

Obama's USA = a climate of "fear."  PRC = "delicious" political and human resource environment. The guy is, not to put too fine a point on it, a complete idiot. Or something...

Taking excellent advice where one finds it...

Larry Summers brings The Sanity:

Larry leaning left.

I think the biggest problem the country has right now is not the budget deficit.  The biggest problem the country has right now is the jobs deficit.  Yes, there's a risk that we will misplay things and make the mistakes of the 1970's, and have inflation and have excessive borrowing.

But far and away the larger risk is that we will make the mistakes of 1937, and that we will not have a recovery that is sustained, that we will make the mistakes that Japan made, and that we will have a decade or two of stagnation.  The right question to be focused on is how to stimulate demand.

"Unemployment? Who Cares?" Revisited

Ezra Klein at Wonkbook:

With 15 million people unemployed, and more than 20 million underemployed, you’ve got a fairly large constituency for action on the jobs crisis. But it’s not a constituency that has any evident power in Washington. … 

“Most policy changes with majority support didn’t become law,” (Jacob) Hacker and (Paul) Pierson write (in Winner-Take-All-Politics.) The exception was “when they were supported by those at the top. When the opinions of the poor diverged from those of the well-off, the opinions of the poor ceased to have any apparent influence: If 90 percent of poor Americans supported a policy change, it was no more likely to happen than if 10 percent did. By contrast, when more of the well-off supported a change, it was substantially more likely to happen.”

If 15 million college-educated professionals were unemployed right now, the political system would care.

Maddow Interviews Our Hero!

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

Via Ta-Nehisi Coates 

More on Elizabeth Warren HERE

More on Fannie and Freddie - and the intentional ignorance of Mr. Brooks and Mr. Will

In the wake of the financial crisis of 2008, conservatives who rail against government regulation and for the efficacy of unfettered markets have had to circle their wagons and regroup. The crisis was caused by raging greed, lack of transparency in a huge and highly-leveraged market,  and the ability of a few powerful players at the pinnacle of our financial system to endanger the global economy and rob millions of wealth, employment and confidence in the economic and political system.

In order to regain control of their anti-government, free-market narrative we've seen attempts to blame the government-backed mortgage giants, "Fannie Mae" and "Freddie Mac," for creating the conditions that led to a near-total collapse of the housing market, while the big players walked off with enormous rewards for their nihilistic behavior.

This argument has been brewing since the earliest days of the crisis, but most recently two conservative pundits who have some credibility with "thinking liberals" have indulged themselves in the "it's Fannie and Freddie's (ergo, the government's) fault" line of defense for their faith in "free enterprise" ideology.

Both David Brooks and George Will have written high-profile columns mining a recent book that focuses the bulk of the blame for the 2008 meltdown on the "Government Sponsored Enterprises" Fannie and Freddie.  Brooks called the role of the GSEs in allegedly causing the crisis of 2008 "the most important political scandal since Watergate" and Will claimed that the former head of Fannie Mae "may be more culpable for the peacetime destruction of wealth than any individual in history."

As we have noted previously - and not terribly surprising for a Will or Brooks column - the problem with their arguments about the roots of the crisis is that they aren't honest and are based on assertion, not evidence.

Jeff Madrick and Frank Portnoy take the source of these columns apart fairly definitively in a recent New York Review of Books piece:

Prestigious Murdoch publication debunks the "Business Confidence" hype - without breaking any laws

The Wall Street Journal:

100% scandal-free reporting

The main reason U.S. companies are reluctant to step up hiring is scant demand, rather than uncertainty over government policies, according to a majority of economists in a new Wall Street Journal survey.

Via Andrew Leonard at Salon.

The Austerity Delusion

According to the International Monetary Fund, via "The Economist":

100% Hair Shirt - Available only in Small.

In a recent study of 173 fiscal-policy changes in rich countries from 1978 to 2009, economists from the IMF found that cutting a country’s budget deficit by 1% of GDP typically reduces real output by about two-thirds of a percentage point and raises the unemployment rate by one-third of a percentage point...

Whenever investors seek shelter, even from an American slowdown, they choose Treasuries, and thus the dollar. In an economy constrained by low interest rates, a stubborn trade deficit and natural demand for the world’s reserve currency, there is little to cushion the blow of austerity...

America cannot wait forever to rein in its debt. It needs to lay out credible plans for medium-term deficit reduction. But it has more leeway to delay cuts than most other countries, thanks to continued demand for its debt. Another year of recovery would help confidence more than a premature swing of the fiscal axe. 

Amen.

(Link thanks to Mark Thoma - Economist's View.)

No confidence in the "business confidence" hype

One hears a lot about "business confidence" as the key to recovery.

Here's how the argument goes: Businesses are so worried about any increases in future taxes or possible rises in interest rates (both of which are now very, very low relative to recent history) and  about deficits (which have increased dramatically in the past two years solely because of the downturn itself, but are otherwise due primarily to tax cuts and unfunded initiatives of the Bush administration) that they are refusing to invest.  Restoring "confidence" is key to unlocking investment.

The "confidence" argument underlies the Beltway obsession that "fixing" deficits need be the current central priority - as opposed to focusing first and foremost on finding ways of quickly getting people back to work, even if it means more government spending and putting deficits aside until we are experiencing significant recovery and a steep drop in unemployment.

The reality that undermines any case for the "confidence" fixation is that business profits among the major companies are currently at record highs. Further, economist Brad DeLong offers a chart that shows businesses ARE investing and that "confidence" is not an issue, at least if investment  in capital equipment and software is a relevant measure.

Corporate "500" profits at record highs! Guess whose pocket it's coming from...

Harold Myerson at American Prospect gets it from the horse's mouth:

The subject of the July 11 (“Eye on the Market” report by J.P. Morgan Chase Chief Investment Officer Michael Cembalest) is corporate profits, in particular, the pre-tax profit margins of the S&P 500, the 500 largest publicly-traded companies based in the U.S.

Those profit margins, you’ll be glad to know, are close to record highs, nearing 13 percent of company revenues - their highest levels since the mid-1960s. And since medical costs are far higher today than they were back then, how, you may wonder, have those companies climbed back to the profit margins of those earlier, less costly, more innocent times?

Our health care system... how to say it? Oh yeah - it sucks.

Here's a chart:

This chart shows trends in life expectancy by trends in health spending from 1970 to 2008. The United States still stands out, and in a big way. Our gain in life expectancy per additional health spending is much smaller than in other countries, particularly after the early 1980s when we reached expenditures of about $2,500 per person (in 2005 dollars) and life expectancy of around 74-75 years...   (Consider the Evidence via Brad DeLong)

We're paying lots more than similarly wealthy countries and getting less in return, using the basic measure of life expectancy.  One hopes that the Affordable Care Act will at least begin the process of increasing both the value and effectiveness in our health care system.

Krugman on the GOP: "Wake up and smell the crazy!"

Sorry - no Bachmann pic for you!  Too easy.

In response to late-comers,  like his colleague at the New York Times David Brooks, who have recently taken to lamenting the obvious insanity and extremism of a "Tea Partyized" GOP that most notably has shown itself unwilling even to discuss minor increases to revenue during the debt ceiling confrontations, Paul Krugman notes that this has been a long time coming.

Worse,  a lot of the folks currently freaking out at "the crazy" have been enablers of the GOP's descent into madness.

Winning 2012 - Jobs, not "deficit reduction," is key

Former Labor Secretary Robert Reich asks, can President Obama win re-election using Bill Clinton's script?

Despite a 1994 midterm election that delivered Congress to the GOP and was widely seen as a repudiation of his presidency, President Clinton went on to win re-election. And many of Mr. Obama's top aides—including Chief of Staff Bill Daley, National Economic Council head Gene Sperling and Pentagon chief Leon Panetta—are Clinton veterans who know the 1995-96 story line by heart.

The GOP's Tea Party Jacobins

Martin Wolf at The Financial Times explains why most of what we're being told about deficits and spending by the GOP - and some Democrats - is simply false.  We do not have a spending crisis - we have an unemployment crisis and a resultant revenue crisis due to the financial collapse of 2008.

Wolf also notes - as regards the debt ceiling and revenue debates - that we face a crisis driven by some combination of ignorance and dangerously extremist ideology being packaged as "fiscal conservatism":

Exploding fiscal deficits are mainly the result of collapses in (economic) activity and revenue..,

The debt ceiling impasse - will the GOPer crazies go along with McConnell's handing off to Obama?

Is the GOP's Senate leader capitulating on the debt ceiling, salvaging nothing out of the negotiatons but some weak version of "face"?  Explanations and analysis of Mitch McConnell's somewhat arcane proposal to take an elaborate dive - while wagging a finger at the President - from Talking Points Memo HERE and Ezra "Wonkbook" Klein HERE.  If this thing flies, it looks like President Obama's game of high-stakes chicken with his adversaries has succeeded. Or not, in the less sanquine view of Salon's Andrew Leonard, HERE. We'll see how this scheme plays out very soon.

"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.