The case for principal reduction to stem the tide of foreclosures

Jessie Eisinger, ProPublica and Chris Arnold, NPR @ Huffington Post:

New analyses by mortgage giants Freddie Mac and Fannie Mae have added an explosive new dimension to one of the most politically charged debates about the housing crisis: Whether to reduce the amount of money beleaguered homeowners owe on their mortgages.

Their conclusion: Such loan forgiveness wouldn't just help keep hundreds of thousands of families in their homes, it would also save Freddie and Fannie money. That, in turn, would help taxpayers, who bailed out the companies at a cost of more than $150 billion and are still on the hook for future losses.

The analyses, which have not been made public, were recently presented to the agency that controls the companies, the Federal Housing Finance Agency, according to two people familiar with the matter. Freddie Mac's meeting with the FHFA took place last week.

Can stimulus pay for itself and help shrink deficits?

Larry Summers and Brad DeLong argue, yes.  When the economic picture is really, really bad. Here's the (wonky) argument that we're in such a deep long-term unemployment trough that stimulus is key to keeping folks in the labor force and generating future tax revenues :

WHEN he was at the Treasury nearly 20 years ago Larry Summers would counsel President Bill Clinton on the merits of “stimulative austerity”: cut deficits, and interest rates will fall by enough to produce stronger economic growth. Now Mr Summers is making the opposite case: stimulate growth through a bigger deficit, and the long-term debt may shrink.

In a new paper* written with Brad DeLong of the University of California, Berkeley, Mr Summers, now at Harvard after a stint as Barack Obama’s chief economic adviser, says that in the odd circumstances America faces today temporary stimulus “may actually be self-financing”.

This sort of argument is not new. Advisers to John Kennedy and Lyndon Johnson thought their 1964 tax cut might stimulate so much new spending it would pay for itself. In the early 1980s, supply-side economists argued something similar about Ronald Reagan’s tax cuts. Neither claim stood the test of time.

The Ryan-GOP Budget: "An Immoral Dsaster"

Think Progress:

Paul Ryan's "Supply-Side Jesus"

When House Budget Committee Chairman Paul Ryan (R-WI) released his Medicare-ending, safety net-gutting 2012 budget plan last year, he was slammed by faith leaders who denounced his cuts to programs that aid the poor and middle class. Ryan released the 2013 version of that budget yesterday, and he is again facing criticism from a diverse group of faith leaders. 

Ryan often says it is “morally wrong” not to address America’s debt, but faith leaders like Bishop Gene Robinson said the budget Ryan crafted fails basic moral tests. “The Ryan budget robs the poor, the marginalized and the vulnerable of the safety net so integral to their survival,” Robinson said. “By any measure of civility and regard for one’s neighbor, it is an immoral disaster.”

Father Thomas Kelly, a Catholic priest and constituent of Ryan’s, felt similarly:

“As a constituent of Congressman Ryan and a Catholic priest, I’m disappointed by his cruel budget plan and outraged that he defends it on moral grounds. Ryan is Catholic, and he knows that justice for the poor and economic fairness are core elements of our church’s social teaching. It’s shameful that he disregarded these principles in his budget.”

That the GOP cuts vital programs like Medicare, Medicaid, and other safety net programs while giving tax breaks to the richest Americans is “immoral” and “unconscionable,” other leaders said. “The poor are not statistics,” Rabbi Jackie Moline said. “Whatever one thinks of Congressman Ryan’s ideas, it is unimaginable to look into the face of a child who would go hungry without government assistance and say, ‘Sorry — we need to reduce the deficit.’”

The Lies of Willard M. Romney

Rachel Maddow "goes there":
 
 

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

He's Baaack!

Congressman Paul Ryan is back putting the GOP's tax-cut and austerity strategy on the table. Ezra Klein at the Washington Post comments on what he sees an as inevitable gutting of the social safety net given the tax-cuts-for-millionaires ideology, coupled with a clamor for short term deficit reduction, at the core of every GOP economic proposal:

Ryan's budget asks for enormous sacrifice from, say, disabled Medicaid beneficiaries even as it appears to provide enormous tax benefits to wealthier Americans. The same is true for Romney's budget, and, in even more exaggerated ways, for the fiscal promises made by Newt Gingrich and Rick Santorum. The Republican Party has backed itself into a fiscal strategy in which this kind of concentrated sacrifice on the part of the poor is the only possible path forward.

Jonathan Cohn at New Republic takes apart the new Paul Ryan GOP budget plan:

Imagine a politician held a press conference in order to boast about a plan that would take health insurance away from tens of millions of people, while effectively eliminating the federal government except for entitlements and defense spending. You probably can’t, because no politician would ever do that.

Except Paul Ryan just did.

No, he didn’t put it in quite those terms. Instead, Ryan on Tuesday unveiled the latest version of his proposal for the federal budget, which he calls the “Path to Prosperity.” He vowed that it would reduce deficits, promote economic growth, and strengthen the safety net. The first two claims are dubious, at best. The third is just dishonest—and, if taken literally, morally bankrupt.

From afar and even up close, the new Ryan budget actually looks a lot like the old Ryan budget. It calls for a reduction in taxes that, if implemented, would likely give a disproportionate share of benefits to the wealthy. It calls for radically reducing discretionary spending, so that it is less than 4 percent of gross domestic product by 2050. And it calls for transforming Medicare into a voucher system.

Officially, the end result would be lower deficits, lower even than the deficits that President Obama’s latest budget proposal would produce. And that’s a major selling point for Ryan and the Republicans. But the numbers seem more than a little fanciful.

For one thing, Ryan envisions a reduction in non-defense discretionary spending to levels this country hasn’t had since just after World War II. According to the Center on Budget and Policy Priorities, by 2050 “most of the federal government aside from Social Security, health care, and defense would cease to exist.” That’s everything from air traffic control to medical research to food inspections to Pell Grants, by the way. If the Ryan budget somehow became reality then you might have to give up on college and avoid air travel—assuming you survived the food poisoning and killer diseases.

 Read the rest of Cohn HERE.

And more HERE from Jon Chait on the "GOP's Plan to Save America From the Poor"

Big Lies and Inconvenient Truths

We hear this all the time: "President Obama is a big spender." Or, from the growing Krazy Korner of the GOP (which includes the rhetoric of every one of their current Presidential aspirants), some sort of "socialist" who is enmeshed in a European-style Big Government pattern that takes us far afield from the fiscal restraint of...say...that all-purpose conservative icon, St. Ronald Reagan (The Imagined.)

Here's a graph from Mark Thoma that shows growth in real government spending per capita under Presidents from Nixon to Obama (annualized.)

So the only President in recent history who has shown more fiscal restraint than President Obama is...Bill Clinton?  The GOP partisans - up to and including the "moderate" Willard M. Romney - need to stop following those FOX News crazy-talk scripts and cut out the lying.

The Tax Cut Delusion

Economist Christina Romer on "supply side" tax-cut theories:

Since World War II, the top rate has ranged from less than 30 percent (at the end of the Reagan presidency) to more than 90 percent (throughout the Eisenhower years). The 1964 Kennedy-Johnson tax cut significantly reduced the typical marginal rate paid by American families, but rates rose greatly over the next 15 years as inflation pushed people into higher tax brackets. Rates fell sharply under President Reagan, rose under President Bill Clinton and fell again under President George W. Bush.

If you can find a consistent relationship between these fluctuations and sustained economic performance, you’re more creative than I am. Growth was indeed slower in the 1970s than in the ’60s, and tax rates were higher in the ’70s. But growth was stronger in the 1990s than in the 2000s, despite noticeably higher rates in the ’90s...

I can’t say marginal rates don’t matter at all... But the strong conclusion from available evidence is that their effects are small. This means policy makers should spend a lot less time worrying about the incentive effects of marginal rates and a lot more worrying about other tax issues.

Most obviously, the federal budget is on a collision course with reality. Reining in the long-run deficit will have to involve slowing the growth rate of spending. But unless we choose to gut Medicare and Medicaid, additional tax revenue will be needed. This essential truth is the No. 1 factor that should be driving tax policy. And anyone who tells you that the way to raise revenue is to cut marginal tax rates is arguing from ideology, not solid evidence.

"Hurray for Health Reform"

Paul Krugman, often a critic of "actually existing health care reform", sings it's praises:

oldamericancentury.org

It’s said that you can judge a man by the quality of his enemies. If the same principle applies to legislation, the Affordable Care Act — which was signed into law two years ago, but for the most part has yet to take effect — sits in a place of high honor.

Now, the act...isn’t easy to love, since it’s very much a compromise, dictated by the perceived political need to change existing coverage and challenge entrenched interests as little as possible. But the perfect is the enemy of the good; for all its imperfections, this reform would do an enormous amount of good. And one indicator of just how good it is comes from the apparent inability of its opponents to make an honest case against it. 

To understand the lies, you first have to understand the truth...

The fact is that individual health insurance, as currently constituted, just doesn’t work. If insurers are left free to deny coverage at will — as they are in, say, California — they offer cheap policies to the young and healthy (and try to yank coverage if you get sick) but refuse to cover anyone likely to need expensive care. Yet simply requiring that insurers cover people with pre-existing conditions, as in New York, doesn’t work either: premiums are sky-high because only the sick buy insurance. 

Discussing the Obama recovery efforts & financial regulation

Some great economic discussion this morning on MSNBC's Up with Chris Hayes, featuring guest host Ezra Klein, Noam Shrieber (author of a new book on the Obama recover strategy in the wake of financial collapse), former administration economist Jared Bernstein, Alexis Goldstein of Occupy SEC and William Cohan, former Wall Streeter and author of a book on Goldman Sachs. Excellent TeeVee:

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

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

It's the regulation, stupid!

In the wake of disillusioned Goldman Sachs manager Greg Smith's farewell to the "Greed is Good!" culture going viral, Robert Reich reminds us that the greed of self-serving insiders has always been with us.  If we want to keep their perverse incentives under control, it's really about the regulation:

In 1928, Goldman Sachs and Company created the Goldman Sachs Trading Corporation, which promptly went on a speculative binge, luring innocent investors along the way. In the Great Crash of 1929, Goldman’s investors lost their shirts but Goldman kept its hefty fees...

In the late 1920s, National City Bank, which eventually would become Citigroup, repackaged bad Latin American debt as new securities which it then sold to investors no less gullible than Goldman Sachs’s. After the Great Crash of 1929, National City’s top executives helped themselves to the bank’s remaining assets as interest-free loans while their investors and depositors were left with pieces of paper worth a tiny fraction of what they paid for them.

The problem isn’t excessive greed. If you took the greed out of Wall Street all you’d have left is pavement. The problem is endemic abuse of power and trust. When bubbles are forming, all but the most sophisticated investors can be easily duped into thinking they’ll get rich by putting their money into the hands of brand-named investment bankers.

"Fixing What's Wrong With Our Economy"

The AFL-CIO's perspective on what's gone wrong and what we can do about it :

The economic policies that led to the financial crash of 2008 and the subsequent Great Recession should have been permanently discredited by their epic failure. Instead, the Republican presidential candidates are now resurrecting the same failed policies and pretending the crash never happened.

America cannot afford to go down this path again. If we want to fix what is wrong with our economy, we have to learn from our mistakes and avoid repeating them.

The crash of 2008 and the Great Recession were inevitable consequences of three decades of economic policies designed by and for Wall Street and the wealthiest Americans. At the heart of the problem was the hollowing out of American manufacturing, the growing dysfunction of our financial sector and a rapid increase in economic inequality, all of which crippled the growth engine of the U.S. economy.
Starting in the 1980s, corporate America decided to boost profits by shipping U.S. jobs overseas.

NAFTA and the admission of China into the World Trade Organization (WTO) accelerated the drive to relocate production to “export platforms” in foreign countries that would ship goods back to the U.S. market. Corporations that sent jobs overseas became forceful proponents of a “strong” (overvalued) dollar, which enhanced the profitability of their overseas operations but at the same time made much of the U.S. manufacturing sector uncompetitive and led to perennial U.S. trade deficits.

Also by the 1980s, the U.S. financial sector was failing to perform its essential function of channeling savings to productive investment in the real economy. Financial firms on Wall Street focused instead on making a quick buck by stripping assets from existing businesses and downsizing their workforces, and on various forms of complex financial engineering that had little economic value. Financial firms also provided critical support for a “strong dollar” policy that diverted productive investment away from the U.S. manufacturing sector toward overseas operations.  By the eve of the crash of 2008, the manufacturing sector had shrunk to half its 1960 size, while the financial sector had doubled in size and accounted for 40 percent of corporate profits.

The deindustrialization of America and the substitution of speculation for productive investment were not accidents, they were not inevitable, and they were not the outcome of natural forces.  They were the predictable results of mistaken policy choices made by politicians of both parties for more than a generation.  These policy choices had victims with first and last names: millions of displaced workers, shuttered factories and hollowed-out communities across the country hobbled by shrinking tax bases that no longer could support vital public services.

The Shame of Wall Street

Bloomberg Business Week on Goldman Sachs:

In his extraordinarily public resignation letter, Greg Smith, who had spent time recruiting the best and the brightest to Goldman Sachs, wrote, “I knew it was time to leave when I realized I could no longer look students in the eye and tell them what a great place this was to work.”

The proper functioning of Wall Street is too vital to the economy to tolerate the duplicitous practices of Goldman and firms like it, especially after what the American people did to rescue these businesses in their darkest hours.

The country’s political class appears to lack the power or will to hold large financial institutions to account.

There is a massive leadership vacuum at the top of Wall Street today; and it’s quite possible that only continued, relentless public shaming will force the leaders of these firms to make the kinds of cultural changes necessary to bring their actions in line with normative behavior.

The obstruction of Ed DeMarco

Peter S. Goodman, Business Editor @ Huffington Post:

The single largest obstacle to meaningful economic recovery is a man who most Americans have probably never heard of, Edward J. DeMarco. 

From his perch as acting director of the Federal Housing Finance Agency, DeMarco oversees Fannie Mae and Freddie Mac, the government-owned mortgage behemoths that collectively control about half of all home loans in the land. What he does shapes both the national housing market and the ability of troubled borrowers to hang on to their homes. What he has been doing lately has been so unhelpful that Democratic lawmakers and grassroots advocacy groups are properly demanding his ouster.

President Obama's Top 50 Accomplishments

Keep the heat on, keep the focus on critical issues that aren't being fully addressed, protest what needs protesting - but let's do it in the context of the reality of this Presidency as having taken important steps forward with the potential for much more. Washington Monthly looks at the glass, not brimming over, but at least half full - which is better than other administration in my memory.  HERE

The Wisdom of George W. Bush (OMFG! I wrote that?)

Jared Bernstein has it:

Steve Rattner’s oped in this AM’s NYT provides a useful reality check of the credit market conditions back during the auto bailout in 2009, attacking Gov Romney’s view that the government should have stayed out of the picture.

In late 2008 and early 2009, when G.M. and Chrysler had exhausted their liquidity, every scrap of private capital had fled to the sidelines…

Without government financing — initiated by President George W. Bush in December 2008 — the two companies would not have been able to pursue Chapter 11 reorganization. Instead they would have been forced to cease production, close their doors and lay off virtually all workers once their coffers ran dry.

Those shutdowns would have reverberated through the entire auto sector, causing innumerable suppliers almost immediately to stop operating too.
Despite the relative health of its balance sheet, even Ford would have been forced to close temporarily, because critical parts would have become unavailable. And service providers — trucking companies, restaurants and more — would have been severely affected.

More than a million jobs would have been lost, at least for a time. Michigan and the entire industrial Midwest would have been devastated.

I was particularly impressed by a recent comment from President George W. Bush about his role in providing the initial lifeline to GM and Chrysler:

“I’d do it again,” Mr. Bush said of the rescue in a recent speech. “Sometimes circumstances get in the way of philosophy.”

We need more conservatives who recognize when pragmatism should trump ideology.

On letting the Bush tax cuts die a natural death

The current Democratic mantra regarding the Bush Tax Cuts is to raise them on the top incomes but leave the cuts in place for families making $250,000 or less.  Given political gridlock that makes any short-term alternatives linked to economic recovery unlikely, Felix Salmon, at Baseline Scenario, argues for letting the whole package of Bush Tax Cuts die when they are due to expire at year's end:

We are dealing with a Republican Party that will block any package that raises taxes on anybody. They will block any tax increase, even if it hurts them in the general elections, because they are completely locked in by the Grover pledge and the Koch brothers. The only choice we have is between extending all of the tax cuts and complete gridlock, which means that they all expire. And if we extend the Bush tax cuts, we are just four Senate seats away from making them all permanent.

Can't get enough of this graph.

Given that choice, I vote for gridlock. I understand the counterargument: tax increases would weaken the recovery and increase unemployment in the short term. But those tax revenues are crucial to the long-term health of the middle class. Ending the Bush tax cuts will slash projected deficits and push right-wing claims about the bankruptcy of Social Security and Medicare decades into the future. Yes, conservatives will always want to privatize Social Security and dismantle Medicare, but they only have a chance of actually succeeding when government deficits make those programs seem unsustainable, bringing so-called centrists over to their side.

So, for me, letting all the tax cuts expire on December 31 is better than making them permanent. Letting them all expire is also better than making just the “middle-class” tax cuts permanent. (Another note to Democrats: since when do we push for tax cuts for families making $200,000 a year?)  ...

In the end, I think the Bush tax cuts were one of the two most catastrophic policy decisions of this century (the other was the Iraq War). They were a terrible idea then and they are a terrible idea now. I think letting them all expire would be good for the world and for the middle class. And whether or not that makes me a “fiscal conservative,” I think it makes me a Democrat.

"Jobs Day By the Numbers"

From Think Progress:  "Jobs, Jobs, Jobs"

Today is Jobs Friday.

Here’s the rundown on the monthly employment report from the Department of Labor.

-647,000…the number of jobs
created
lost in state and local governments since August 2008.

-22,000…the average number of public sector jobs
created
lost each month in 2011, thanks to ongoing spending cuts at all levels of government which in turn continue to drive layoffs at the state and local level.

-14,000…the number of construction industry jobs
created
lost last month, something which could have been avoided and turned into a net positive for the economy if Republicans had not blocked the infrastructure investments in the American Jobs Act.

-6,000…the number of public sector jobs
created
lost last month, thanks to ongoing spending cuts at all levels of government which in turn continue to drive layoffs at the state and local level.

3…the number of consecutive months with more than 200,000 jobs gained.

24…the number of consecutive months of private sector job growth.

31,000…the number of manufacturing jobs created last month.

61,000…the additional jobs created during the months of December and January, according to revised figures released today.

61,000…the number of new health care jobs created last month.

227,000…the number of net new jobs created in February.

233,000…the number of private sector jobs created in February.

245,000…the average number of new jobs created over the past three months.

444,000…the number of jobs in durable goods manufacturing added since January 2010.

GOP Austerity in Action: Public Sector Job Losses Drag Down the Recovery

While Republicans are calling for tens or even hundreds of thousands more public sector workers to be axed, it’s clear that the public sector has already severely contracted even as the private sector recovers. Check out this chart (red is public sector employment, blue is private sector employment):

"Incoherent in our hour of need..."

Paul Krugman trashes his profession's performance in context of the 2008 crisis:

"New Clothes!"

To say the obvious: we’re now in the fourth year of a truly nightmarish economic crisis. I like to think that I was more prepared than most for the possibility that such a thing might happen; developments in Asia in the late 1990s badly shook my faith in the widely accepted proposition that events like those of the 1930s could never happen again. But even pessimists like me, even those who realized that the age of bank runs and liquidity traps was not yet over, failed to realize how bad a crisis was waiting to happen – and how grossly inadequate the policy response would be when it did happen.

And the inadequacy of policy is something that should bother economists greatly – indeed, it should make them ashamed of their profession, which is certainly how I feel. For times of crisis are when economists are most needed. If they cannot get their advice accepted in the clinch – or, worse yet, if they have no useful advice to offer – the whole enterprise of economic scholarship has failed in its most essential duty.

And that is, of course, what has just happened...

The Afflictions of the Comfortable

Conservative commentator Bruce Bartlett at the NYT's Economix:

A curious phenomenon occurs during every economic crisis – the rich whine that they are the ones who are suffering most. While obviously one’s capacity to suffer under any circumstances is subjective, when we hear that the very well-to-do, under any reasonable definition of the term, seek pity, it comes across as callous and clueless.

That is especially so when the political agents of the rich are demanding still more tax cuts for them while doing their best to slash spending for programs that aid the poor.

I first noticed this woe-is-me attitude among the rich in 1974. Alan Greenspan, a very successful private economist and devotee of the radical libertarian novelist Ayn Rand, had just been named chairman of the Council of Economic Advisers by President Gerald Ford. One of his first tasks was to address a conference on social services sponsored by what was then the Department of Health, Education and Welfare.

The Republican administration was struggling to get control of the budget deficit, which it viewed as the prime cause of inflation, the nation’s No. 1 problem. Much of the emphasis was on cutting programs to aid the poor, which brought demonstrators to the event.

In an effort to show that everyone was suffering from inflation, Mr. Greenspan said, “If you really wanted to examine percentage-wise who was hurt the most on their income, it was Wall Street brokers.” ...

It’s hard to feel sorry for people who may have saved almost nothing during their prosperous years and made 50 percent more than the median family income of $13,000 in 1974. But the urge to find ways to pity the well-off is still alive and well.

Government Spending in Recessions Under Reagan vs. Obama

As preface to this post, let's remind ourselves of Keynesian guru Dick Cheney's cogent observation, "Reagan taught us deficits don't matter."

Here's Paul Krugman, ensconced as usual at The New York Times, with data on government spending in a recession under Iconic Fiscal Conservative St. Ronald "Gipper" Reagan compared to government spending under Radical Kenyan Socialist Barack Hussein Obama:

This is just current government expenditures divided by the GDP deflator, starting from 1982 (Quarter)IV and 2009 (Quarter)II; no attempt to separate out unemployment benefits, other transfers, etc.. Slightly weaker than the purchases-only comparison, mainly because unemployment benefits fell faster under Reagan, but the story remains the same:

They're Back!

 Mike Konczal at Rortybomb:

The top 1% had a rough Great Recession.  They absorbed 50% of the income losses, and their share of income dropped from 23.5% to 18.1% percent (in 2009.)  Is this a new state of affairs, or would the 1% bounce back in 2010?

Well we finally have the estimated data for 2010 by income percentile, and it turns out that the top 1%  had a fantastic year.  The data is in the World Top Income Database, as well as Emmanuel Saez's updated Striking it Richer: The Evolution of Top Incomes in the United States ...

The takeaway quote from Saez should be: "The top 1% captured 93% of the income gains in the first year of recovery."

...(L)et's get some absolute numbers here.  Here is income by important percentiles, as well as the change from 2009-2010.  I include the change with and without capital gains, to make sure we understand that this is a phenomenon both in and independent of a strong stock market:

The bottom 90% of Americans lost $127, the bottom 99% of Americans gained $80, and the top 1% gained $105,637.  The bottom 99% is net positive for the year because of around $125 in average capital gains.  They can take comfort in efforts by the Right to set the capital gains tax to 0%, which would have netted them an addition couple dozen bucks...

"Will Wall Street Ever Face Justice?"

Phil Angelides, a former state treasurer of California and the chairman of the Financial Crisis Inquiry Commission at the New York Times:

Four years after the disintegration of the financial system, Americans have, rightfully, a gnawing feeling that justice has not been served. Claims of financial fraud against companies like Citigroup and Bank of America have been settled for pennies on the dollar, with no admission of wrongdoing. Executives who ran companies that made, packaged and sold trillions of dollars in toxic mortgages and mortgage-backed securities remain largely unscathed. 

Meager resources have been applied to investigate the financial assault on our country, which wiped away trillions of dollars in household wealth and has resulted in 24 million people jobless or underemployed. The Financial Crisis Inquiry Commission, which Congress created to examine the full scope of the crisis, was given a budget of $9.8 million — roughly one-seventh of the budget of Oliver Stone’s “Wall Street: Money Never Sleeps.” The Senate Permanent Subcommittee on Investigations did its work on the financial crisis with only a dozen or so Congressional staff members. 

False "Centrism" on Tax Rates

James Kwak at Baseline Scenario on the skewed notion of "bi-partisan compromise" and "consensus" over cutting tax rates:

Today’s tax rates were set by George W. Bush in 2001 and are considerably lower than the rates that prevailed under Bill Clinton and, for that matter, during most of the history of the income tax. The tax rates on capital gains and dividends, in particular, are at their lowest levels since before World War II. For those of you who care about global competitiveness, total taxes in the United States are lower than in most other advanced industrialized countries. Given the expected growth in the national debt due to demographic shifts and health care inflation, the obvious thing to do would be to simply return to Clinton-era tax rates.

The need to lower rates is not economic, but political. The simple fact is that given the Republican Party of Grover Norquist, you cannot get a single prominent Republican to sign on to a tax plan that does not cut tax rates. Ergo, if you want to call yourself bipartisan, you have to cut rates. But that doesn’t mean it’s right; that just means that the Republicans have successfully eliminated their negotiating room, forcing would-be centrists to cave in to their demands...

Bowles-Simpson, Domenici-Rivlin, and the Gang of Six would all drastically reduce tax revenue from the levels dictated by current law.

Remember, under current law the Bush tax cuts all expire. These “centrist” plans only “increase” tax revenue by first adopting a baseline in which the Bush tax cuts are made permanent.

The Education of a Centrist

Brad DeLong on two decades of GOP "Crazy":

I went to Washington in 1993 to work for what we called Lloyd Bentsen's Treasury as part of the sane technocratic bipartisan center. And it took me only two months--two months!--to conclude that America's best hope for sane technocratic governance required the elimination of the Republican Party from our political system as rapidly as possible. Dole and Gingrich's "We really don't care that these policies are good for the country--are a lot like policies we would enthusiastically support if proposed by a Republican president--but we are going to try to block them because that will weaken Clinton" wad a real eye-opener. Nothing since has led me to question or change that belief--only to strengthen it. We really need a very different opposition party to the Democrats: a less dishonorable one.

The GOP's "Fiscal Phonies"

Paul Krugman compares the tax proposals of the GOP presidential contenders with President Obama's, projecting debt as a % of GDP under the varying plans:

(C)ompare the Republican plans with the Obama administration’s plan, which would at least allow the high-end tax cuts to expire. How does debt under this plan compare with the four Republicans?

Well, here’s debt as a percentage of GDP in 2021 (using the OMB numbers (pdf) for Obama and CRFB (Committee for a Responsible Federal Budget) for the others):

 

Yep: as Republicans yell about Obama’s deficits and cry that we’re turning into Greece, Greece I tell you, all of them, all of them, propose making the deficit bigger.

And for what? For reverse Robin-Hoodism, taking from the poor and the middle class to lavish huge tax cuts on the rich.

And I believe that all of them know this, too. It’s pure hypocrisy – and it’s all in the service of class warfare waged on behalf of the top 0.1 or 0.01 percent of the income distribution.

The mortgage crisis is holding back economic recovery

Robert Reich at Financial Times:

(T)he biggest continuing problem for most Americans is their homes. Purchases of new homes are down 77 per cent from their 2005 peak. They dropped another 0.9 per cent in January. Home sales overall are still dropping and prices are still falling – despite already being down by a third from their 2006 peak. January’s average sale price was $154,700, down from $162,210 in December. 

Houses are the major assets of the middle class. Most Americans are therefore far poorer than they were six years ago. Almost one out of three homeowners with a mortgage is now “underwater”, owing more to the banks than their homes are worth on the market...the negative wealth effect of home values, combined with declining wages, makes it highly unlikely the US will enjoy a robust recovery any time soon.

 Read the entire piece HERE.

Gas prices and reality - speculation is driving higher prices

With the GOP primary players engaged in demagogy claiming they can bring down the price of gas quickly with more drilling and across-the-board deregulation, this reality check discussion on Chris Hayes Sunday morning show "UP" is an excellent antidote to ill-informed crackpot rants and disingenuous campaign pandering:

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

Which political party is best for business and the economy?

Bloomberg reports:

While Republicans promote themselves as the friendliest party for Wall Street, stock investors do better when Democrats occupy the White House. From a dollars- and-cents standpoint, it’s not even close...

(O)ver the five decades since John F. Kennedy was inaugurated, $1,000 invested in a hypothetical fund that tracks the Standard & Poor’s 500 Index (SPX) only when Democrats are in the White House would have been worth $10,920 at the close of trading yesterday. That’s more than nine times the dollar return an investor would have realized from following a similar strategy during Republican administrations.

Willard's Wild Tax Scheme II

Via Progress Report:

Previous Romney Giveaways to the Wealthy

• Abolishes the estate tax — a tax paid only by the wealthiest one-quarter of one percent of Americans.
• Maintains the special low tax rates on investments put in place by President Bush that disproportionately benefit the wealthy and would otherwise expire at the end of this year. Romney himself takes advantage of these special low rates on a considerable portion of his sizable income.
• Maintains special loopholes for hedge fund and private equity managers — loopholes Romney himself takes advantage of.
• Maintains the Bush marginal tax rates for the wealthy which would otherwise expire at the end of this year.

New Romney Giveaway to the Wealthy

• Cuts tax rates on the wealthiest Americans by another 20 percent below Bush tax rates. Under President Obama, the wealthiest Americans will pay a top income tax rate of 39.6 percent in 2013; under Romney, they would pay just 28 percent.

Magic Math

• Jobs: Mitt Romney promises his expansion of the Bush tax cuts will create jobs; however, the Bush tax cuts resulted in the weakest job growth in decades. There’s no reason to think that cutting taxes on the wealthy even more will result in a different outcome.
• Deficits: The Romney campaign promises that his massive new tax cuts “do not expand deficits” because of “stronger economic growth and reductions in spending.” The Heritage Foundation promised the exact same thing about the Bush tax cuts in 2001, even going so far as to claim that the federal debt would be paid off by 2010.

Real Math

• Romney’s proposed tax cut would cost FOUR TIMES MORE than the Bush tax cuts.
• According to the Center for American Progress Action Fund’s Michael Linden, Romney’s plan would shrink tax revenues by an astounding $10.7 TRILLION over the next ten years and reduce taxes as a share of GDP to a paltry 15 percent. The only way to run the U.S. government on that level of revenue is to run massive deficits and undertake program-ending cuts in Social Security, Medicare, Medicaid, and all discretionary programs. Since Romney refuses to make cuts to defense — and indeed has proposed increasing defense spending — the deficits and the cuts would both be all the more massive as a result. All of course done in the name of giving more and larger tax cuts to the wealthiest Americans.

IN ONE SENTENCE: Instead of helping to create an economy that works for everyone, Romney’s tax plan simply quadruples down on a broken economy that is rigged for the benefit of a wealthy few.

Quote for the day - Christina Romer, former economic advisor to the Obama administration

 Romer, interviewed at The Browser:

CEA Chair Romer w/ the President

"The shocks hitting the American economy in 2008 were enormous, in terms of the destruction of wealth and the freezing of our financial system. I firmly believe that the stresses on the US economy in 2008 were much larger than those in 1929 and 1930. So why has this recession, as bad as it has been, not been a second Great Depression or even worse? I think the answer is a much better policy response.

"But this episode has also shown that policy is very hard to get right. The policy response is inherently based on forecasts, which are subject to great uncertainty. And the political process often puts constraints on what can be done. Moreover, the policy response is limited by our understanding of how policy works and our vision of possible options.

"The bottom line is that the Great Recession showed us that we have effective tools to fight a terrible downturn. But we also have much to learn about how to use those tools more successfully."

Kicking Newt Around...(this is so "last month")

"Connecting" with folks in Oklahoma.

Since his apparent devolution back into irrelevance,  we haven't paid much attention to Newt Gingrich lately.  But this, from Talking Points Memo, deserves notice - if only because it's SNL-worthy:

Speaking at a town hall-style event at Oral Roberts University in Tulsa, OK, Newt Gingrich mocked the Obama Administration's promotion of smaller, fuel-efficient vehicles.

"Let me start from a simple premise that Oklahomans will understand: you cannot put a gun rack in a Volt," Gingrich said.

Rick Santorum's Higher Ground

"With what judgment ye judge..."

Apparently Rick Santorum has his sights set higher than the Presidency. From his words one can only infer that he aspires to be our theologian-in-chief, rhetorically excommunicating millions of American Protestants from, in his view, "the world of Christianity."

               Visit msnbc.com for breaking news, world news, and news about the economy         Clip from Up w/ Chris Hayes

Santorum has followed that humble judgement up with the earnest accusation this week against President Obama that he adheres to "some phony theology.  Oh, not a theology based on the Bible, a different theology, but no less a theology."

In this spirit of theological inquiry, our Bible lesson for today comes from the Gospel According to St. Matthew, HERE.

Stubborn facts about the GOP's spending cuts "austerity agenda"

Paul Krugman at NYTs:

Pain Caucus peddling failed ideas from Europe

(I)n early 2010 austerity economics — the insistence that governments should slash spending even in the face of high unemployment — became all the rage in European capitals. The doctrine asserted that the direct negative effects of spending cuts on employment would be offset by changes in “confidence,” that savage spending cuts would lead to a surge in consumer and business spending, while nations failing to make such cuts would see capital flight and soaring interest rates...

Now the results are in — and they’re exactly what three generations’ worth of economic analysis and all the lessons of history should have told you would happen. The confidence fairy has failed to show up: none of the countries slashing spending have seen the predicted private-sector surge. Instead, the depressing effects of fiscal austerity have been reinforced by falling private spending.

George Romney's Prodigal Son II

"Up w/ Chris Hayes" is the best "news-talk" show on television. Far and away. Check out this segment on the stark contrast, both as a businessman and a political figure, between Willard Mitt Romney and his father, former chairman of American Motors and Michigan governor George Romney.

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

George Romney's Prodigal Son

An informative article at Motoramic by Justin Hyde on "What Mitt Romney Gets Wrong" re: the auto industry "bailout":

Young Willard with his father in better days.

Republican presidential hopeful Willard Mitt Romney renewed his opposition to the Obama administration's bailout of General Motors and Chrysler today in several Michigan newspapers, contending President Obama's rescue made the companies worse. I wish I could leave politics to the professionals, but Romney's take just doesn't square with the facts as I lived them...

 Let me explain, point by point (Romney's words excerpted in bold quotes):


"Three years ago, in the midst of an economic crisis, a newly elected President Barack Obama stepped in with a bailout for the auto industry."

In fact, the bailout began with President George W. Bush, who was forced to lend GM and Chrysler $17.4 billion in December 2008 after Senate Republicans blocked a rescue plan in Congress. Bush told reporters just last week that he was warned by Federal Reserve Chairman Ben Bernanke and Treasury Secretary Hank Paulson that if he didn't act to shore up GM and Chrysler, up to 1 million jobs could vanish. Knowing what we know now, says Bush, "I'd do it again."

"The president tells us that without his intervention things in Detroit would be worse. I believe that without his intervention things there would be better."


The crux of Romney's argument: If Obama had not acted, private companies would have stepped in and run a "managed bankruptcy." What this ignores is that in the fall of 2008, before Obama was even sworn in, no one on Wall Street or anywhere else was willing to lend GM and Chrysler a penny — let alone the $81 billion they and their financial arms eventually needed.

What's The Matter With Red States? The "Entitlement" Hustle

Paul Krugman at NYTimes describes the almost absurd predicament of much of "red state" America. They're hooked on so-called "entitlements" while the GOP's  "severe conservative" pols are angrily pointing their fingers at some imagined class of moochers who are bleeding the government dry, immersed in a "culture of dependency." 

(What Krugman doesn't mention is that there's often a racial sub-text to the opportunistic political rhetoric, which explains the willful blindness and hypocrisy that drives this version of anti-government white populism within the GOP.)  Krugman:

Rick Santorum declares that President Obama is getting America hooked on “the narcotic of dependency.” Mr. Romney warns that government programs “foster passivity and sloth.” Representative Paul Ryan ... requires that staffers read Ayn Rand’s “Atlas Shrugged,” in which heroic capitalists struggle against the “moochers” trying to steal their totally deserved wealth, a struggle the heroes win by withdrawing their productive effort and giving interminable speeches.

Many readers of The Times were, therefore, surprised to learn, from an excellent article published last weekend, that the regions of America most hooked on Mr. Santorum’s narcotic — the regions in which government programs account for the largest share of personal income — are precisely the regions electing those severe conservatives. Wasn’t Red America supposed to be the land of traditional values, where people don’t eat Thai food and don’t rely on handouts? ...

The GOP's Stampede Toward Lunacy

Garry Wills at NYRB:

By a revolting combination of con men and fanatics, the current primary race has become a demonstration that the Republican party does not deserve serious consideration for public office. Take the controversy over contraceptives. American bishops at first opposed having hospitals and schools connected with them pay employee health costs for contraceptives. But when the President backed off from that requirement, saying insurance companies can pay the costs, the bishops doubled down and said no one should have to pay for anything so evil as contraception. Some Republicans are using the bishops’ stupidity to hurt the supposed “moderate” candidate Mitt Romney, giving a temporary leg up to the faux naïf Rick Santorum; others are attacking Barack Obama as an “enemy of religion.”...


The Phony Religious Freedom Argument

The bishops’ opposition to contraception is not an argument for a “conscience exemption.” It is a way of imposing Catholic requirements on non-Catholics. This is religious dictatorship, not religious freedom.

Who's "entitled"?

Center on Budget and Policy Priorities:

Some conservative critics of federal social programs, including leading presidential candidates, are sounding an alarm that the United States is rapidly becoming an “entitlement society” in which social programs are undermining the work ethic and creating a large class of Americans who prefer to depend on government benefits rather than work.  A new CBPP analysis of budget and Census data, however, shows that more than 90 percent of the benefit dollars that entitlement and other mandatory programs[1] spend go to assist people who are elderly, seriously disabled, or members of working households — not to able-bodied, working-age Americans who choose not to work.  (See Figure 1.)  This figure has changed little in the past few years.

CBPP continues:

In a December 2011 op-ed, former Massachusetts Governor Mitt Romney warned ominously of the dangers that the nation faces from the encroachment of the “Entitlement Society,” predicting that in a few years, “we will have created a society that contains a sizable contingent of long-term jobless, dependent on government benefits for survival.”  “Government dependency,” he wrote, “can only foster passivity and sloth.”[2]  Similarly, former Senator Rick Santorum said that recent expansions in the “reach of government” and the spending behind them are “systematically destroying the work ethic.”[3]