Monday Morning Reads

Good Morning!

Elections happened in Egypt and Greece.  Pro-Bailout Parties in Greece have taken the majority.  The Muslim Brotherhood candidate is ahead in the run off for the presidency in Egypt.

Greece’s largest pro-bailout parties, New Democracy and Pasok, won enough seats to forge a parliamentary majority, official projections showed, easing concern the country was headed toward an imminent exit from the euro. The currency rose on the result.

The election would give New Democracy and Pasok 163 seats if they agree to govern together in the 300-member parliament, according to the official projection by the Interior Ministry in Athens based on 63 percent of today’s vote.

“For markets, a majority for an ND-Pasok coalition would be a relief,” Holger Schmieding, London-based chief economist at Berenberg Bank, said in a note today. “It would very much reduce the risk of a Greek euro exit.”

The vote forced Greeks, in a fifth year of recession, to choose open-ended austerity to stay in the euro or reject the terms of a bailout and risk the turmoil of exiting the 17-nation currency. The election threatened to dominate a summit of world leaders that starts tomorrow in Mexico.

Krugman’s Op Ed today has a nice, succinct explanation of the Greek situation.

Fifteen years ago Greece was no paradise, but it wasn’t in crisis either. Unemployment was high but not catastrophic, and the nation more or less paid its way on world markets, earning enough from exports, tourism, shipping and other sources to more or less pay for its imports.

Then Greece joined the euro, and a terrible thing happened: people started believing that it was a safe place to invest. Foreign money poured into Greece, some but not all of it financing government deficits; the economy boomed; inflation rose; and Greece became increasingly uncompetitive. To be sure, the Greeks squandered much if not most of the money that came flooding in, but then so did everyone else who got caught up in the euro bubble.

And then the bubble burst, at which point the fundamental flaws in the whole euro system became all too apparent.

Ask yourself, why does the dollar area — also known as the United States of America — more or less work, without the kind of severe regional crises now afflicting Europe? The answer is that we have a strong central government, and the activities of this government in effect provide automatic bailouts to states that get in trouble.

Consider, for example, what would be happening to Florida right now, in the aftermath of its huge housing bubble, if the state had to come up with the money for Social Security and Medicare out of its own suddenly reduced revenues. Luckily for Florida, Washington rather than Tallahassee is picking up the tab, which means that Florida is in effect receiving a bailout on a scale no European nation could dream of.

Egypt continues to see stand offs between the judiciary, military rulers, and the electorate.  It appears that Egyptian elections may put a Muslim Brotherhood candidate into office just as the military rulers  disbanded parliament due to a ruling by courts.  Final election results are expected on Thursday.

In a final run-off election marked by relentless fear-mongering and negative campaigning on both sides of the contest, many polling stations remained near-empty for much of the two-day ballot – with potential voters seemingly put off by scorching temperatures, which reached 40C in the capital, and the increasingly oppressive political climate of military-led manipulation and national division that has gripped the country a year and a half after the start of its ongoing revolution.

As ballot counting began inside more than 13,000 schools nationwide, the Brotherhood’s Freedom and Justice Party insisted that its candidate, 60 year old engineer Mohamed Morsi, was on course for a clear victory unless state-sponsored electoral fraud dictated otherwise. But local media reports and anecdotal evidence suggested a far closer race, with millions turning out to back Ahmed Shafiq, Hosni Mubarak’s final prime minister and a polarising emblem of the old regime, in a last-ditch effort to prevent political Islamists from taking power.

Egypt continues on its course of political uncertainty.

The high court ruled that some provisions of the electoral law, which allowed political parties to compete with independent candidates for some seats, violated the constitution.

The ruling invalidated the 508-member People’s Assembly, chosen during a six-week election which began in November. It also voided the constitutional assembly which members of parliament agreed to last week and appointed on Tuesday.

SCAF said it will announce its own assembly next week.

The ruling was a blow to the entire transition process, but perhaps most of all to the Brotherhood, which controlled nearly half of the assembly.

Mohamed el-Beltagy, a senior FJP politician, called the rulings a “fully-fledged coup” on his Facebook page.

The Brotherhood issued a statement late on Thursday night warning that the court’s decision would undo the gains of the revolution and push Egypt into “dangerous days”.

The Economist has some interesting analysis on what might happen if the Roberts SCOTUS throws out portions of the Affordable Healthcare Act. You have to remember this is written in England where our health care system is considered something out of a dystopian science fiction horror novel.

Yet for all that, it is possible that the Supreme Court, by throwing a spanner into the works, may actually help Mr Obama as much as hurt him. For a start, the Republicans would suddenly find that they have a mess of their own making to sort out. If the Supreme Court does indeed strike down the Affordable Care Act, many popular provisions would fall with it: the one allowing parents to keep their children on their insurance policies until they are 26, for instance, and the abolition of lifetime ceilings on what the sick can claim. Both of those are already in force, and a ban on insurance companies refusing to insure the unwell is due to come in from 2014. Generous subsidies will help not just those who lack insurance, but also some of those who have it and find it hard to afford. And Mr Obama’s cost-control mechanisms, imperfect though they are, have a fiscally useful role to play in bringing down the costs of government-provided insurance for the poor and the elderly.

Even if only the “mandate” requiring everyone to buy health insurance is struck down as unconstitutional, the consequences of that could cause other parts of the bill to unravel, and would certainly lead to big increases in insurance premiums. One big insurance company has already said it would endeavour to keep some of the popular provisions intact: but it might not be able to. The Republicans have long said that they want to “repeal and replace” Obamacare, but they have been remarkably coy about what they would replace it with. If you break it, as Colin Powell remarked in another context, you own it.

So the danger to the Republicans of a backlash should not be discounted. And there is another, greater threat to them. Should Obamacare be struck down or crippled, the Roberts court will be seen by many as politically slanted. Arguably that has happened already, thanks to its recision of gun control in Washington, DC and Chicago in 2008 and 2010, and to its decision in 2010 to scrap limits on corporate (and trade-union) donations to political-action groups. And judgments on other highly political cases, on positive discrimination and on immigration, are expected before the election. Like the gun-control and campaign-finance rulings, these are likely to be “partisan” 5-4 decisions. A poll on June 7th found that 76% of people think that Supreme Court justices are sometimes swayed by their political or personal views, and that only 44% approve of the court’s performance. It used to be by far the most popular branch of government.

Romney just told us all not to worry our pretty little heads about his economics policy yesterday on Face The Nation.  He doesn’t want to give us any specifics and we should just “trust him”.  Does this sound like the guy you dated once in high school that didn’t think of much anything but getting a blow job from you or what?

Romney repeatedly refused to say whether he’d repeal Obama’s order to halt deportations of DREAM-eligible youth. He confirmed that he would not agree to even one dollar in new revenues in exchange for 10 dollars in spending cuts. And he again reiterated that his response to the crisis would be to cut government, in order to “ignite growth,” even though economists say that more austerity now would make the crisis worse.

But I wanted to flag this exchange in particular, in which Romney seemed to confirm that he will not be detailing how he would pay for his proposed tax cuts for the duration of the campaign:

SCHIEFFER: You haven’t been bashful about telling us yo want to cut taxes. When are you going to tell us where you’re going to get the revenue? Which of the deductions are you going to be willing to eliminate? Which of the tax credits are you going to — when are you going to be able to tell us that?

ROMNEY: Well, we’ll go through that process with Congress as to which of all the different deductions and the exemptions —

SCHIEFFER: But do you have an ideas now, like the home mortgage interest deduction, you know, the various ones?

ROMNEY: Well Simpson Bowles went though a process of saying how they would be able to reach a setting where they had actually under their proposal even more revenue, with lower rates. So, mathematically it’s been proved to be possible: We can have lower rates, as I propose, that creates more growth, and we can limit deductions and exemptions.

Romney went on to pledge, as he has in the past, that under his plan, the wealthy would continue to pay the same share of the tax burden as they do now. “I’m not looking to reduce the burden paid by the wealthiest,” he said. In other words, the disproportionally larger tax cut the wealthy would get from the across-the-board cut in rates he’s proposing would be offset by closing deductions and loopholes the rich currently enjoy. But asked twice by Schieffer how exactly he would do this, Romney refused to say, beyond noting that this has been mathematically proven to be possible. And in his first reply above, he confirmed that the details would be worked out with Congress when he is president — which is to say, not during the campaign.

As you may recall, Romney made big news when he was overheard at a private fundraiser revealing to donors a few of the specific ways he’d pay for his massive tax cuts. Since then, details have been in short supply. And today, Romney seemed to confirm that he sees no need to reveal those details until he becomes president.

You know.  If we don’t give him what he wants his balls will turn blue and it will be all our fault.

What’s on your reading and blogging list today?