"GOP Alternatives to Obamacare"

Tom Tomorrow:

We should be talking about increases in Social Security, not cuts...

The initiative supported by Senators Tom Harkin, Sherrod Brown, Bernie Sanders, Elizabeth Warren and other reliable liberals to change the conversation about Social Security from cuts to the need for increases in a program where the typical senior gets less than $1500 a month for their retirement has freaked out the "serious" people at the Washington Post. The Professor responds. Paul Krugman @ NYTs:  

The Washington Post editorial board wants to cut Medicare and Social Security. That has been its consistent position as long as I can remember. And what it advocates, always, are cuts in benefits, not costs — that is, while it may give lip service to efforts to control health-care costs (which seem to be going surprisingly well, in one of the untold success stories of Obamacare), what it has pushed repeatedly are things like a rise in the Medicare age. These are the kind of moves that are considered serious inside the Beltway. And as you might imagine, the Post has gone wild over recent suggestions that Social Security should be expanded, not cut.

But perceived seriousness is not the same as actual seriousness, which depends on the facts. We now know that raising the Medicare age is a truly terrible idea, which would create a lot of hardship while making next to no dent in the budget deficit. And the central premise of the latest editorial — that the elderly are doing fine — just isn’t true.

The Post writes:

The bill’s authors warn of a looming “retirement crisis” because of low savings rates and disappearing private-sector pensions. In fact, the poverty rate among the elderly is 9.1 percent, lower than the national rate of 15 percent — and much lower than the 21.8 percent rate among children.

This suggests that Social Security is doing a good job of fighting poverty as is and that those gains could be preserved in any attempt to trim the program.

"Wall Street Isn't Worth It"

Economist John Quiggan @ Jacobin:

---

The financial sector has grown massively since the 1970s, whether size is measured in terms of the volume of transactions, the number and remuneration of highly skilled professionals, the share of corporate profits, or, most importantly, the political power of the finance capital. As Frase observes, referencing Felix Salmon, the huge returns extracted by this sector distort the distribution of income for the economy as a whole. The market return on any activity must be adjusted for the cut taken by the financial sector. This fact makes the attempt to assign ethical status to marginal productivity academic, in the worst sense of the term.

Taking this further, any strategy for the Left that yields more than modest changes in the distribution of income, wealth and power, must involve a direct conflict with the financial sector, and must imply a substantial contraction in the size, wealth and power of that sector. A necessary condition for such a strategy to be feasible is the premise that the incomes flowing to the financial sector come at the expense of the rest of the economy, and in particular, at the expense of working people.

The Damage Done...

Professor Krugman @ NYTs:

Five years and eleven months have now passed since the U.S. economy entered recession. Officially, that recession ended in the middle of 2009, but nobody would argue that we’ve had anything like a full recovery. Official unemployment remains high, and it would be much higher if so many people hadn’t dropped out of the labor force. Long-term unemployment — the number of people who have been out of work for six months or more — is four times what it was before the recession.

These dry numbers translate into millions of human tragedies — homes lost, careers destroyed, young people who can’t get their lives started. And many people have pleaded all along for policies that put job creation front and center.

John Stewart takes down Obamacare's critics - must see!

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Income soars at the top, falls for the lower half

David Cay Johnston @ Al Jazeera:

Last year the median wage hit its lowest level since 1998, revealing that at least half of American workers are being left behind as the economy slowly recovers from the Great Recession.

But at the top, wages soared — the latest indication in a long-running trend of increasing inequality, with income gains going to top earners while the majority of workers see stagnant or falling wages...

The cruelty of cutting food stamps

Dorothy Samuels @ NYTs:

Even as negotiations proceed in Congress over a new farm bill likely to contain a

large cut in food stamps, needy Americans who rely on the program are confronting an immediate drop in benefits.

As of today, the boost to the federal food stamps program included in the 2009 Economic Recovery Act expires, abruptly slashing benefit levels that were already inadequate for millions of poor children and their families, as well as impoverished disabled and elderly people, who will now find it significantly harder to afford adequate food.

Melissa Harris Perry: The case against education privatization

"EU Economist Backs Austerity's Critics"

 Matina Stevis @ WSJ:

Coordinated austerity in euro-area countries has stifled economic recovery and deepened the crisis across the currency bloc, according to a new technical paper prepared by an economist at the European Commission.

Spending cuts in Germany in particular have made things worse for the weaker members of the euro area through “spillovers” – the economic impact on economies connected to Germany’s– the paper says, adding that limited stimulus programs in richer countries could help the whole of the currency bloc.

The paper, which doesn’t necessarily represent the views of the powers-that-be at the Commission, presents some inconvenient conclusions for European authorities from one of their own economists. The European Union and national governments have come under fire from outside economists for pursuing austerity across the euro zone. These critics have argued that Germany in particular should be running bigger deficits to help drag the bloc’s weaker members out of their slumps.

"Washington is still stuck in the wrong conversation"

Ryan Cooper @ WaPo Plumline explains how the Beltway is still stuck on Stupid...or worse:

With the shutdown and debt ceiling crisis over and budget negotiations beginning, it’s worth noting that we’re stuck back in the same old rut we’ve been stuck in since Republicans took the House in 2010. Republicans want cuts to social insurance, or say they do, and Democrats want a bit of new tax revenue in return. On a policy level, this is nuts. We’re trading austerity for…more austerity. Democrats and Republicans ought to consider bringing in other ideas. Almost anything else would be better.

"Republicans are delusional about US spending and deficits"

Dean Baker @ The Guardian:

It is understandable that the public is disgusted with Washington; they have every right to be. At a time when the country continues to suffer from the worst patch of unemployment since the Great Depression, the government is shut down over concerns about the budget deficit.

There is no doubt that the Republicans deserve the blame for the shutdown and the risk of debt default. They decided that it was worth shutting down the government and risking default in order stop Obamacare. That is what they said as loudly and as clearly as possible in the days and weeks leading up to the shutdown. In fact, this is what Senator Ted Cruz said for 21 straight hours on the floor of the US Senate.

Going to the wall for something that is incredibly important is a reasonable tactic. However, the public apparently did not agree with the Republicans. Polls show that they overwhelmingly oppose their tactic of shutting down the government and risking default over Obamacare. As a result, the Republicans are now claiming that the dispute is actually over spending.

Anywhere outside of Washington DC and totalitarian states, you don't get to rewrite history. However, given the national media's concept of impartiality, they now feel an obligation to accept that the Republicans' claim that this is a dispute over spending levels.

But that is only the beginning of the reason that people should detest budget reporters. The more important reason is that they have spread incredible nonsense about the deficit and spending problems facing the country, causing most of the public to be completely confused on these issues. If budget reporters were held to the same standards as school teachers, with the expectation that they would be able to convey information, they would all be fired in a minute.

Contrary to the widely repeated stories of out-of-control deficits and spending, deficits have plunged in the last four years falling from 10.1% of GDP in 2009 to just 4% of GDP in 2013. The Congressional Budget Office projects the deficit to be just 3.4% of GDP in 2014. The latest projections show the debt-to-GDP ratio falling for the rest of the decade.

Truth in the Age of Niallism

This is too much fun not to post. Matthew O'Brien at Atlantic on Niall Ferguson's latest:

Here are three facts about how the 10-year budget outlook has changed in the past year: 1) the fiscal cliff deal raised $600 billion in new revenue; 2) the sequester, if left in place, cut spending by $1.2 trillion; 3) the CBO revised its projection for federal healthcare spending down by $600 billion. 

Harvard historian Niall Ferguson has a counterfactual take. Here's how he described how our debt trajectory changed the past year: 

A very striking feature of the latest CBO report is how much worse it is than last year's. A year ago, the CBO's extended baseline series for the federal debt in public hands projected a figure of 52% of GDP by 2038. That figure has very nearly doubled to 100%. A year ago the debt was supposed to glide down to zero by the 2070s. This year's long-run projection for 2076 is above 200%. In this devastating reassessment, a crucial role is played here by the more realistic growth assumptions used this year. 

This isn't a difference of opinion. It's incorrect. But it's incorrect for reasons that will escape casual readers.

"Debt Threat" nonsense from academic clown Niall Ferguson

Niall Ferguson, the egregious blowhard Harvard professor who gets everything wrong, strikes again via the Wall Street Journal with remarkable stupidity. Increasingly it appears Ferguson isn't simply in error, so much as a right-wing troll of the FOX & FRIENDS school of aggressive disinformation. UC economist Brad DeLong takes Fergie apart:

Niall Ferguson: The Shutdown Is a Sideshow. Debt Is the Threat:

Only a fantasist can seriously believe "this is not a crisis." The fiscal arithmetic of excessive federal borrowing is nasty even when relatively optimistic assumptions are made about growth and interest rates. Currently, net interest payments on the federal debt are around 8% of GDP…

DeLong responds:  Um…. No. Not 8. Only 1/6 of 8.

Look at: http://www.cbo.gov/sites/default/files/cbofiles/attachments/44521-LTBO2013.pdf. Currently, net interest payments on the federal debt are not 8% but only one-sixth that--1.3% of GDP:



The fantasy is the 8% number, and the belief that the debt is, right now, a crisis.

Moreover, 1.3% is the wrong number to look at. We want to adjust for inflation at 2%/year, and that gets us to 1.3% - 2% x 80% = -0.3% of GDP. We want our concept of budget balance to be not a stable real value, but a constant debt-to-GDP ratio. Making that adjustment tells us that right now the U.S. could run a primary deficit of 0.3% + 2.5% x 80% = 2.3% of GDP without seeing any increase in the debt-to-GDP ratio.

That's right: rather than the debt forcing us to cut spending on programs below the level of taxes (i.e., run a primary surplus) in order to keep the debt-to-GDP ratio from growing, right now the United States can have spending on programs exceed taxes by 2.3% of GDP (i.e., run a primary deficit) and still keep its debt-to-GDP ratio stable. In terms of real resources, right now the debt is not a burden. It does not reduce how much the U.S. can afford to spend on programs. It is a profit center. It is providing a net addition to federal resources to the tune of 2.3% of GDP.

That's how far the federal debt is today from being a burden on the economy.

Everything you need to know about the rationale behind the GOP's government shutdown...

Via Politicalwire: Extra Bonus Quote of the Day

"We're not going to be disrespected, We have to get something out of this. And I don't know what that even is."

-- Rep. Marlin Stutzman (R-IN), quoted by the Washington Examiner, on the government shutdown.

"How a Debt-Ceiling Crisis Could Become a Financial Crisis"

Annie Lowrey @ NYTs Economix:

Come mid-October, the United States will have only $30 billion of cash on hand. On any given day, its net payments can reach as high as $60 billion. That means that unless Congress raises the debt ceiling, allowing the Treasury to issue new debt, the United States may find itself unable to make all of its payments — stiffing government contractors, or state and local governments, or even its bondholders.

Economists widely agree that such an unprecedented event would have profound effects for the markets, likely precipitating a stock-market sell-off and setting off a round of global financial turbulence. But it has always been a little unclear just how it may play out. The Treasury might announce it would be forced to delay some payments, promising to do what it could to make sure bondholders were made whole. But then what?

"The Austerians Have a Lot To Answer For"

 Professor Krugman @ NYTs:

Right now the official unemployment rate is 7.3 percent. That’s bad, and many people — myself included — think it understates the true badness of the situation. On the other hand, there are some reasonable people (like Bob Gordon) arguing that at this point, possibly thanks to long-run damage from the Great Recession, “full employment” is now a number north of 6 percent. So there’s considerable uncertainty about just how depressed we are relative to potential.

But we’re clearly still well below potential. And we’ve also had exactly the wrong fiscal policy given that reality plus the zero lower bound on interest rates, with unprecedented austerity. So, how much of our depressed economy can be explained by the bad fiscal policy?

To a first approximation, all of it. By that I mean that to have something that would arguably look like full employment, at this point we wouldn’t need a continuation of actual stimulus; all we’d need is for government spending to have grown normally, instead of shrinking.

Here’s a comparison of two series. One is actual government purchases of goods and services since the Great Recession began (this is at all levels; most of the fall has been state and local, but the Federal government could have prevented that with revenue sharing). The other is what would have happened if those purchases had grown as fast as they did starting in the first quarter of 2001, i.e., in the Bush years.

Stiglitz on inequality...again

Nobel Prize-winning Joe Stiglitz addressed the recent AFL-CIO convention:

I'm an economist-- I study how economies work and don't work. It’s been clear to me that our economy has been sick for a long time.  One of the reasons it's been so sick is inequality, and I decided to write an article and a book about it.

Two years ago, I wrote an article for Vanity Fair called, "Of the 1%, by the 1%, for the 1%,” which really got to the gist of it.  For too long, the hardworking and rule-abiding had seen their paychecks shrink or stay the same, while the rule-breakers raked in huge profits and wealth.  It made our economy sick, and our politics sick, too.  

You all know the facts:  while the productivity of America's workers has soared, wages have stagnated. You've worked hard – since 1979, your output per hour has increased 40%, but pay has barely increased. Meanwhile, the top 1% take home more than 20% of the national income.

The Great Recession made things worse.  Some say that the recession ended in 2009.  But for most Americans, that's simply wrong:  95% of the gains from 2009 to 2012 went to the upper 1%.  The rest — the 99% — never really recovered.

"Why Janet Yellen, Not Larry Summers should lead the Fed"

An appointment of Larry Summers to the Fed Chair fits perfectly the definition of insanity attributed to Albert Einstein: "Insanity is doing the same thing over and over again and expecting different results."

In that vein, Joseph Stiglitz argues contra Mr. Summers @ NYTs, with a great in-depth analysis of the background and the stakes in this appointment:

The controversy over the choice of the next head of the Federal Reserve has become unusually heated. The country is fortunate to have an enormously qualified candidate: the Fed’s current vice chairwoman, Janet L. Yellen. There is concern that the president might turn to another candidate, Lawrence H. Summers. Since I have worked closely with both of these individuals for more than three decades, both inside and outside of government, I have perhaps a distinct perspective.

But why, one might ask, is this a matter for a column usually devoted to understanding the growing divide between rich and poor in the United States and around the world? The reason is simple: What the Fed does has as much to do with the growth of inequality as virtually anything else. The good news is that both of the leading candidates talk as if they care about inequality. The bad news is that the policies that have been pushed by one of the candidates, Mr. Summers, have much to do with the woes faced by the middle and the bottom.

Corey Booker's bona fides...

Corey Booker, soon-to-be Senator from New Jersey has enormous star-power.  There are things to admire about Booker - he seems to have done a good job as Mayor of Newark against steep odds. He strikes me as slightly ridiculous in the degree of his obsession with ephemeral social media, but that's probably generational.  (Politicians in their mid-40s like Booker tend to be desperate to comport to an older person's notion of what younger potential voters are all about.)

But IMHO Booker is absolutely not the kind of Democrat we need more of on the national

scene - he's way too cozy with the 1%, clearly open to cutting bad deals for the young folks he's eager to impress around their long-term Social Security benefits, babbling right-wing nonsense on the Sunday morning idiot gabfests about deficits as a major problem when we need to be focused on when unemployment has been the burning issue for five years, shamelessly pointing fingers regarding the origins of the financial crisis of 2008 without mentioning the word "banks."

 Noam Sheiber @ TNR has a good break-down of Bookers' deep flaws as an incoming high-profile Democrat addressing issues at the national level:

Exactly what kind of senator will Cory Booker make once he coasts to (a near-certain) victory this fall? On the one hand, Booker—the Newark mayor and reigning viceroy of Twitter—has a habit of lionizing the tech and finance executives who are his biggest campaign donors. Last year on “Meet the Press,” he famously criticized President Obama’s “nauseating” assault on the private-equity industry. Booker’s ease around business moguls is such that he betrayed no sheepishness when The New York Times disclosed that several had funded his personal Internet venture, potentially worth millions to him, while he was ensconced in City Hall.

Reagan, the Republicans and Chemical Weapons

Never forget...never again...

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