People support higher taxes to reduce the deficit

Grover Norquist rules our world.

Twenty-three polls taken over the last 8 months - including Gallup, Rasmussen, CNN, New York Times, Washington Post/ABC, CBS, Bloomberg and others - show the public supports additional taxes for deficit reduction by margins of more than two-to-one.

The list is HERE, at Bruce Bartlett's "Capital Gains and Games" blog.

"A long malaise seems like the optimistic scenario"

Nobel Prize-winner and former chief economist at The World Bank, Joseph Stiglitz writing in The Financial Times offers a bleak appraisal of the moment: the US can borrow at extremely low rates to make the investments in infrastructure and targeted job-creation that could jump-start economic growth (which is also the key to longer-term deficit reduction), but the politics of austerity make any effective policies or optimistic scenarios impossible:

Pre-crisis, America, and to a large extent the world economy, was sustained by a bubble. The breaking of the bubble has left a legacy of excess leverage and real estate. Consumption will therefore remain weak and austerity on both sides of the Atlantic now ensures the state will not fill the void. Given this, it is not surprising that companies are unwilling to invest – even those that can get access to capital…

"Why didn’t the stock market go up?"

"Cheap Talk" on the apparent paradox of Treasury bonds becoming more sought after as a secure investment in the wake of their "downgrade" by the "geniuses" at S&P:

You might have thought it obvious that the stock market would go down after S&P downgraded US government debt. The bad news about US debt made investors worry, and worried investors are usually less enthusiastic about holding stocks.

But there is something wrong with this view.

Stewart pretty much says it all on "downgrade"

The GOP is bad for business

The GOP: flying on a wing-nut and a prayer.

James Suroweicki, at The New Yorker, argues that the country would be much better off if the Republicans abandoned the political hostage-taking and the Tea Party "crazy train" - and went back to the more respectable and risk-averse  business of simply being corporate lapdogs:

Moody's Mood

That other "big three" ratings agency - which for the record, was just as complicit as the execrable Standard & Poors in aiding and abetting the junk mortgage markets that triggered financial crisis -  has affirmed that the United States has “unmatched access to financing, meaning that the U.S. government can support higher debt levels than other governments” and rates the country "AAA."

Excerpts of the basis of their "AAA" assessment, via New York Times "Economix":

The impact of "starving the beast" on unemployment

Think Progress: "If government payrolls were the same today as they were back in 2009, the unemployment rate would be significantly lower, standing at 8.4 percent, instead of the current 9.1 percent."

Krugman does the math - deficit hysteria doesn't add up

In the wake of the S&P downgrade, the Nobel Prize-winning economist and New York Times columnist Paul Krugman looks at the numbers behind the deficit hype:

Amid all the debt hysteria, it’s worth taking a look at the actual arithmetic here — because what this arithmetic says is that the size of the deficit in the next year or two hardly matters for the US fiscal position — and in fact the size over the next decade is barely significant.

The Triple-AAA Arrogance of Standard & Poors

Former Labor Secretary Robert Reich:

S&P has downgraded the U.S. because it doesn’t think we’re on track to reduce the nation’s debt enough to satisfy S&P — and we’re not doing it in a way S&P prefers.

Here’s what S&P said: “The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government’s medium-term debt dynamics.” S&P also blames what it considers to be weakened “effectiveness, stability, and predictability” of U.S. policy making and political institutions.

Pardon me for asking, but who gave Standard & Poor’s the authority to tell America how much debt it has to shed, and how?

More evidence that nonsense supply-side mantras like "corporate tax cuts" aren't going to move the economy

Clearly the problem driving a weak recovery - in serious danger of a "double-dip" - isn't that corporations don't have enough capital to make the sorely needed investments in jobs:

Source: BEA

Economist Jared Bernstein:

How is this picture consistent with an economy and job market hovering at stall speed? A lot of these firms are able to sell into (and create jobs in) foreign, emerging markets, where growth has been reliably solid in recent years. Others have found ways to squeeze productivity gains out of their incumbent workforce, able to meet current levels of weak demand without adding workers.

The only thing that will get these guys off of their piles of cash is a steady increase in domestic demand - and I don't see that coming soon without the government doing a major jump-start. An infrastructure bank that could begin to green-light immediate repairs and large-scale new initiatives - something that both the labor unions and the Chamber of Commerce have come to agree on - is the only politically feasible proposal in this direction I've seen to date.

Double-Dippin'...and where do we go from what feels like "nowhere"?

This morning we have a banquet of bad news, triggered by a dive in the markets, days after the end of a debt ceiling hostage drama was expected to restore "confidence."

Floyd Norris at the New York Times says what no one wants to hear:

It has been three decades since the United States suffered a recession that followed on the heels of the previous one. But it could be happening again. The unrelenting negative economic news of the past two weeks has painted a picture of a United States economy that fell further and recovered less than we had thought.

On the heels of the Obama White House's former Council of Economic Advisors' head Larry Summers giving us a one-in-three chance of a double dip into another full recession, Business Week offers this bit of gloom from President Reagan's old CEA chief, along with worries of our current Fed chairman:

“This economy is really balanced on the edge,” Harvard University economist Martin Feldstein said in a Bloomberg TV interview on Aug. 2. “There’s now a 50 percent chance that we could slide into a new recession.” Even Federal Reserve Chairman Ben Bernanke has referred in speeches to the risk of an economic stall...

Ezra Klein looks behind the Dow Jones drop, at the much more alarming weaknesses not just in our economy but in our politics - and an inability to conduct an even minimally informed public conversation on the problems we face:

... the Dow Jones isn’t diving because spending has risen, deficits have grown or stimulus policy has changed. It’s diving because of forces Washington can’t control, and in many cases, doesn’t understand very well. How many members of Congress do you think could give a coherent account of what has happened to oil or steel prices over the last three years? Or what’s happening in the Eurozone? Or to the yuan?

A dramatic gap has opened between the economy as Washington sees it -- and wants to intervene in it -- and the economy that actually exists.

Reality trumps hyperbole

Mitch: "A snapshot, not a cartoon."

The GOP's Senate Leader Mitch McConnell:


“I think some of our members may have thought the default issue was a hostage you might take a chance at shooting. Most of us didn’t think that. What we did learn is this — it’s a hostage that’s worth ransoming."


So the dangerously venal were mere accomplices to the crazy terrorists?  Good to know.

The Good, The Bad and The Ugly...

Lawrence Summers in the Washington Post outlines his 3-way take on The Deal:

Relief. There will be no default; no economy-damaging short-run austerity; no attack on the nation’s core social protection programs or universal health care; and no repeat, for at least 15 months, of the recent shabby spectacle. All of this was in doubt just a few days ago. It is no small thing for the administration to have reached an agreement that does no immediate harm. And it may well be that no better agreement was achievable given the political dynamics in Congress.

Cynicism. Objective observers would forecast larger U.S. budget deficits in the out-years than would have been predicted a few months ago. The economic forecast has deteriorated, and it is reasonable to estimate that even a half-a-percent reduction in growth averaged over 10 years adds more than a trillion dollars to the national debt in 2021...

Economic anxiety. The issues pressing the United States today are much more about jobs and a growth deficit than an excessive budget deficit... On the current policy path, it would be surprising if growth were rapid enough to reduce unemployment even to 8.5 percent by the end of 2012. A substantial withdrawal of fiscal stimulus will occur when the payroll tax cuts expire at the end of the year. With growth at less than 1 percent in the first half of this year, the economy is effectively at a stall... The indicators suggest that the economy has at least a 1-in-3 chance of falling back into recession if nothing new is done to raise demand and spur growth.

Emphasis added!!!  Where does Summers think we can go from here?

We defer to...yes...David Frum, who judges his "enemies" right!

Although my own view is that the first question posed here is more complicated than inferred, this comment by Bush speechwriter and neo-conservative stalwart David Frum is startling in the amount of ground it gives:

In February 1982, Susan Sontag made a fierce challenge to a left-wing audience gathered at New York’s Town Hall:

Imagine, if you will, someone who read only the Reader’s Digest between 1950 and 1970, and someone in the same period who read only The Nation or The New Statesman. Which reader would have been better informed about the realities of Communism? The answer, I think, should give us pause. Can it be that our enemies were right?

Posing that question won Sontag only boos from an audience that the New York Times described as “startled.” Yet the question has only gained power over the intervening years. It contributed to the rise of a healthier, more realistic left much less tempted to make excuses for “progressive” dictatorships than the left of the last generation. If Hugo Chavez has any defenders on the contemporary American left, I haven’t heard of them.

Think of Susan Sontag as you absorb the horrifying revised estimates of the collapse of 2008 from the Commerce Department. Two years ago, Commerce estimated the decline of the US economy at -0.5% in the third quarter of 2008 and -3.8% in the fourth quarter. It now puts the damage at -3.7% and -8.9%: Great Depression territory.

Impact of "The Deal" on Jobs

Expected effects of the debt ceiling deal's spending cuts, combined with the impact on consumer demand of not extending unemployment benefits or cuts in payroll taxes as part of the "compromise."

Economic Policy Institute

Why we need unions...

 

Via Think Progress

I heard the news today - Oh Boy!

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

"Lousy Negotiating Skills Are Not the (Main?) Problem"

Jared Bernstein, formerly VP Joe Biden's chief economic advisor and currently a Senior Fellow at the Center on Budget and Policy Priorities offers a "balanced" view of a deal that's hardly "balanced":

America wakes up this morning with the specter of a self-inflicted national default behind us, at least until 2013, according to the deal announced last night.

That is unequivocally a good thing for our economy not to mention our national sanity.  It’s a good thing in the same way that ceasing to bang yourself on the head with a hammer would be a good thing.

But really, what the h-e-double-hockey-sticks (sorry, I’ve got young kids) was that about??!!

If your conclusion is that Democrats got rolled because the President is a lousy negotiator, I disagree.

Not on his negotiating skills…as someone said in comments, I wouldn’t want him in the auto showroom with me when I’m bargaining for a better price.  I disagree that better negotiating skills would have made a big difference.  The problem goes much deeper.

The best of all possible worlds in the wake of "The Deal" ?

Jon Chait at The New Republic speculates that this debt ceiling brouhaha and the GOP's penchant for all-or-nothing "negotiating" might have a much more optimal result than anyone currently is willing to even discuss:

If Obama wins reelection, he can refuse to extend any tax cuts on income over $250,000. That will prompt Republicans to refuse to extend tax cuts on any income under $250,000 (as they signaled last December, and in keeping with their longstanding priorities, which deem the middle class tax cuts mere sweetener to get the tax cuts for the rich they really want.) Then the tax cuts expire while Obama blames Republicans for holding the (popular) universal tax cuts hostage to the (unpopular) tax cuts that only benefit the rich.

Assuming the economy has limped into some sort of recovery track by 2013, allowing an automatic default to Clinton-era tax rates would be the simplest path in returning to sane fiscal policy. 

The Deal - Two views

A Wall Street heavy reacts, via The New York Times:

Last week brought the disconcerting news that the economy grew no faster than the population during the first six months of the year, in part because of spending cuts by state and local governments. Now the federal government is cutting, too.

“Unemployment will be higher than it would have been otherwise,” Mohamed El-Erian, chief executive of the bond investment firm Pimco, said Sunday on ABC. “Growth will be lower than it would be otherwise. And inequality will be worse than it would be otherwise.”

He added, “We have a very weak economy, so withdrawing more spending at this stage will make it even weaker.” 

Paul Krugman, one of the President's severest critics in the debt-ceiling negotiations from the liberal end of the spectrum :

What Republicans have just gotten away with calls our whole system of government into question. After all, how can American democracy work if whichever party is most prepared to be ruthless, to threaten the nation’s economic security, gets to dictate policy? And the answer is, maybe it can’t.

Centrism in extremis: how "serious people" handed the hostage-takers their weapons

A moment of great opportunity?

Jon Chait at New Republic offers some important analysis of how the "serious center" enabled the hostage-takers and outright loonytoons types of the Tea Party - who are driving Republican strategy and threatening to take the country off of an economic cliff in an act of political insanity never before even seriously contemplated in American politics.

His conclusion is clear and simple: "...the deficit hawks who represent the center of Washington establishment thought badly underestimated the danger entailed by tying high stakes negotiations involving the Republican Party to a cataclysmic event." 

Deficit reduction, focused on conjured issues like the future budgets of Medicare or Social Security (which have absolutely nothing to do with our deficits or the debt ceiling), has become the Holy Grail among many Beltway types - when in fact the economic crisis we actually face is about jobs and resultant shortfalls in federal revenues, made worse by a decade of profligate tax cuts.

The hysteria around deficits is not just wrong-headed but dangerous in our current straits - former Council of Economic Advisors chair Laura D'Andrea Tyson warned this week that "the risk grows that large, premature cuts in government spending will reduce aggregate demand, will tip the economy back into recession and drive the unemployment rate back into double digits." The way out of crisis is not through slashing the federal budget but by getting people back to work and, ultimately,  re-balancing our tax code.

The "deficit hawks" dominating "serious" Washington-centric opinion have consistently acted as enablers of a "Tea Partyized" GOP - the runaway vehicle driven by an extremist faction whose agenda ranges from incoherence steeped in cultural resentments to the outright sinister and duplicitous Randian schemes of Norquist & Co.

Chait:

"The US Is Not Drowning In Debt"

It's hard to believe he actually said it in a Time magazine column, but Zachary Karabell at Time Moneyland goes against the grain and puts the debt and deficits in much-needed perspective.

Ridin' the Crazy Train!

The GOP has intentionally generated an artificial crisis and forced the entire political and media machinery - at a time of deep unemployment and a crisis in demand that is keeping the economy stalled - into a bogus "debate" over a phony, manufactured and disastrously diversionary issue.

One is not supposed to raise any questions about the irrationality and dishonesty of the "deficit hype" - or that this misdirection is dangerous in an extremely weak economy - at the risk of exclusion from the circle of "seriousness,"  but Karabell does - and to his credit he does it in a mainstream media outlet:

...Washington is currently consumed in an acrimonious debate over whether to raise the debt ceiling. There is no agreement about whether to do so or how, but both parties appear to accept the logic that the United States is suffering from an unacceptably high level of government debt and that further debt will doom the U.S. to generations of decline. Judging by polling data, large swaths of the country agree. Nonetheless, that consensus is wrong...

Invisible bond market vigilantes just yawn with a couple of days 'til Doomsday in the debt-ceiling brouhaha

Where the hell is "Harvey"?

Is this whole crazy episode just political kabuki? The bond market seems to think so - and their "any day now" but currently-still-invisible loss of faith in the US' ability to pay its debts, after all, is supposed to be our master in the march toward austerity.

Brad DeLong has it HERE.

A conservative limps back toward reality (aka "The unbearable dishonesty of the Wall Street Journal")

Another fine Murdoch enterprise

Conservative writer David Frum, famously author of the utterly idiotic "Axis of Evil" locution for George W. Bush (tying together Iran, Iraq and North Korea, which defied comprehension), has over the years spouted a lot of dangerous nonsense (mostly in the "neo-con" vein.)  Needless to say, he's not one of my favorite people.

But in recent months - maybe as "long ago" as the emergence of the analytically-challenged conservative spokes-model Sarah Palin - Frum has devoted himself to walking back the crazy. He's faced marginalization on the right for his efforts, after counseling uncomfortable notions like "compromise" with the President to his fellow Republicans.

So the guy who wrote the aggressively neo-conservative tract, "An End to Evil," with Richard Perle - which concept, since it doesn't even fly in the theologies I'm aware of, always struck me as a bizarre notion in the realm of foreign policy analysis - isn't far enough right for today's GOP.

This week Frum has written a provocative piece - for which he definitely gets kudos from me - on another nutty, dishonest Wall Street Journal editorial and frames his analysis in his own experience as a former WSJ editorialist.  The Journal, which has long been noted for the schizophrenia of a reliable news operation twinned with purely ideological extreme right editorials, is part of the scandal-ridden Rupert Murdoch media empire:

I used to write editorials for the Wall Street Journal myself, 20 years ago now.

So I’m well aware of the challenge faced by those assigned to compose these documents. The strict demands of the paper’s ideology do not always lie smoothly over the rocky outcroppings of reality. It can take considerable skill to match the two together.

Goldman Sachs (!) debunks "growth through austerity"

Via Jared Bernstein, we get this "note" from Goldman Sachs' researchers:

“A review of the spending and tax data at the federal, state, and local level suggests that a significant part of the weakness in economic activity in 2011 so far is due to fiscal retrenchment. In the first quarter, the Commerce Department estimates that spending cuts at the federal, state, and local level subtracted 1.2 percentage points from the annualized pace of real GDP growth; moreover, the expiration of the “Making Work Pay” federal tax cut and hikes in state taxes probably offset most, if not all, of the boost to disposable income from the temporary payroll tax cut.

In the second quarter, the fiscal policy impact was probably smaller, but still negative. Indeed, monthly data on defense spending, state and local employment, and state and local construction all show a clear downward trend for 2011 so far.”

Let's repeat that. According to Wall Street giant Goldman Sachs' research: "A review of the spending and tax data at the federal, state, and local level suggests that a significant part of the weakness in economic activity in 2011 so far is due to fiscal retrenchment."

Swine casting pearls?  We'll take 'em.

"The Age of Austerity Is Here"

Talking Points Memo:

Are reports of his death exaggerated?

Whatever the outcome of Thursday's projected House vote on Speaker Boehner's debt plan, this process has already ended the political life of one prominent member of the Washington establishment: John Maynard Keynes.

True, Keynes died in 1946. But his ghost hovered over America's economic debate until pretty much Monday night. At that time, in their ostensibly dueling speeches, both President Obama and House Speaker Boehner embraced the language of "austerity" and performed an unwitting exorcism...

On Monday night even House Minority Leader Nancy Pelosi - for so long demonized by the right as the smiling face of big government - released a pro-austerity statement. That's a clear sign which way the wind is blowing.

Read the entire TPM piece by Thomas Lane HERE for a good, relatively brief backgrounder on our current political - and economic - quagmire.

Update note: A commenter at TPM points out,  "The death of Keynes is due almost solely to a quasi-religious movement of free-market fundamentalist that is bank-rolled by billionaires. It is not based on data. It is not based on the dominant views in the academia, most economists and others social scientists believe that austerity in a recession is foolish...(T)his is something much closer to the victory of zealous religious movement with very powerful friends. The reason they offer the same solution to every problem--tax cuts and deregulation--is that they have larger social goals that have nothing to do with empirical facts or what is needed to help America. It is about changing America to match their Ayn Rand gospel."


Via Balloon Juice

The crisis within the crisis - staggering unemployment, with "recovery" centered in low-wage jobs

Steven Greenhouse at "NYT Economix"

(A new) report by the National Employment Law Project, a liberal research and advocacy group, found that while 60 percent of the jobs lost during the downturn were in midwage occupations, 73 percent of the jobs added since the recession ended had been in lower-wage occupations, like cashier, stocking clerk or food preparation worker.

According to the report, “The Good Jobs Deficit,” the number of jobs in midwage and high-wage occupations remains significantly below the prerecession peak, while the number of jobs in lower-wage occupations has climbed back close to its former peak.

Source: National Employment Law Project analysis of Current Population SurveyNet change in occupational employment during and after the Great Recession.

“During the Great Recession, employment losses occurred across the board, but were concentrated in midwage occupations,” the report said. “But in the weak recovery to date, employment growth has been concentrated in lower-wage occupations, with minimal growth in midwage occupations and net losses in higher-wage occupations.”

 And for those low wage workers, there's additional bad news:

For workers in lower-wage occupations, median wages fell 2.3 percent after inflation — partly because many of the newer workers hired had lower wages than others in that group. For workers in midwage occupations, wages slipped by 0.9 percent, while there was some good news for workers in higher-wage occupations — their wages rose by 0.9 percent.

It looks like the carving out of the middle-class and the rise in income inequality continues apace...

GOP on deficits: all the credibility of vampires running a blood drive...

 It bears repeating. The unbearable hypocrisy of the GOP:

House Speaker John Boehner often attacks the spendthrift ways of Washington.

“In Washington, more spending and more debt is business as usual,” the Republican leader from Ohio said in a televised address yesterday amid debate over the U.S. debt. “I’ve got news for Washington - those days are over.”

Yet the speaker, House Majority Leader Eric Cantor, House Budget Chairman Paul Ryan and Senate Minority Leader Mitch McConnell all voted for major drivers of the nation’s debt during the past decade: Wars in Afghanistan and Iraq, the 2001 and 2003 Bush tax cuts and Medicare prescription drug benefits. They also voted for the Troubled Asset Relief Program, or TARP, that rescued financial institutions and the auto industry.

Together, according to data compiled by Bloomberg News, these initiatives added $3.4 trillion to the nation’s accumulated debt and to its current annual budget deficit of $1.5 trillion.

Bloomberg, via  New Deal 2.0

Bogus Tweet from a Big Hypocrite: "HALF of America pays NO taxes. Zero"

Hullabaloo:

Jesus breaking up a Rick Warren book signing

Yesterday famed "Christian" pastor Rick Warren, wealthy author and megachurch leader (considered one of the most influential evangelicals in the US), tweeted the following:

HALF of America pays NO taxes. Zero. So they're happy for tax rates to be raised on the other half that DOES pay any taxes.

After a firestorm ignited decrying this egregious mix of selfishness and ignorance, Mr. Warren deleted his tweet. But the screenshot is preserved for Internet eternity.

"Titanic" offers Jon Stewart's recent "tax day" response to this bit of demagogic, right-wing nonsense that is a staple of the FOXoids (a false assertion that's doubly shocking dressed up in the cloak of "Christianity," which is rooted in the belief that privileges of the wealthy  are, if anything, an impediment to their salvation and that "the least among you" are favored in the eyes of God):

The Daily Show
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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":

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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.