Why we need unions...

 

Via Think Progress

I heard the news today - Oh Boy!

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"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?