Less to be thankful about …

Posted: November 24, 2010 | Author: | Filed under: Global Financial Crisis, The Bonus Class, The Great Recession, U.S. Economy | Tags: , | 15 Comments

The Fed  has lowered its economic expectations despite the news that corporate profits during the third quarter have rallied like it’s 1984. What does this say for our economy?  More importantly, what does it say about our policy makers who steadfastly refuse to see the significance in these conflicting figures?

Top Federal Reserve officials project that the unemployment rate, now 9.6 percent, will fall only to about 9 percent at the end of 2011 and about 8 percent when the next presidential election arrives, in late 2012. The central bankers had envisioned a more rapid decline in joblessness in their previous forecasts, prepared in June.

The sober economic forecast comes despite signs that the recovery is picking up slightly. The Commerce Department said Tuesday that gross domestic product rose at a 2.5 percent annual rate in the three months ending in September, not 2 percent as earlier estimated. And there have been solid readings in recent weeks on job creation, manufacturing and retail.

The apparent contradiction reflects the brutal math that faces a nation trying claw out of a deep recession: Moderate growth, which would be fine in normal times, will do little to bring down sky-high joblessness, a reality reflected in the Fed’s forecasts.

The uneven impact of recovery is amazing and well, downright unAmerican.  While corporations are now feeling the benefits of the stimulus, people are not.  Tax cuts made by stimulus nearly two years ago are not reaching the jobs markets or households.  The NYT analysis shows that corporate spending on payrolls are way down, while their write-offs of foolish investments is no longer the problem it once was.  Additionally, U.S. firms doing business over seas are doing remarkably well.  So, where are these profits going?  Certainly, they are not ‘trickling down’ via job creation or anything else that would be a boon to Main Street.

The moderate growth of GDP will not be enough to curb unemployment which is why it is vital the government do something.  The news today impacted the stock market so even Wall Street is aware that this is bad news.

The Fed’s top policymakers project that gross domestic product will rise 3 to 3.6 percent next year – which would represent a solid acceleration from the past two quarters but still would only be enough to bring the unemployment rate to the 8.9 to 9.1 percent range in the final months of 2011 and 7.7 to 8.2 percent at the end of 2012.

The officials also increased their estimate of how low the nation’s unemployment rate could ultimately go without stoking inflation. Several estimated that level is 6 percent or higher, not the 5 to 5.3 percent earlier thought.

Businesses cannot expand and grow without customers.  The current improvement is mostly due to bookkeeping past errors.  This is not the solid underpinning of a strong recovery.  It is easy to see why Bernanke is considering the QE2 given these GDP forecasts and the ongoing reality revision of Okun’s rule of thumb on the relationship between GDP growth and the unemployment rate.  The Fed’s statement shows that the BOG is doing QE2 because it’s necessary.  There is a tone of reluctance in their accompanying statements.  There is also the underlying feeling that policy at the zero-bound is not all that effective.

But most Fed officials expected the results of bond purchases “to help promote a somewhat stronger recovery in output and employment while also helping return inflation, over time, to levels consistent with the Committee’s mandate.” Some also thought the action would offer insurance against a further drop in inflation or against the “small probability” of persistent deflation.

But the document also leaves little doubt that several Fed officials remain uneasy with the action. Some anticipated that they would have only a “limited” effect on the pace of recovery, arguing the action should only be taken if the odds of deflation “increased materially.”

And several “noted concern” that the action “could put unwanted downward pressure on the dollar’s value in foreign exchange markets” or “an undesirably large increase inflation.”

I’ve said this before, but I continue to be baffled by the reluctance to aggressively pursue the fiscal policy means to buoy up the economy for the every day American.  Certainly, the last two elections were the result of frustration by the voter about the continual emphasis within the Beltway of the interests of the power that be.  War machines and paper profits get subsidies.  Suffering people are left to their devices.  Even, if they’ve been productive and paid for themselves up until now.

It is undoubtedly beyond time to move policy attention away from banks, auto manufacturers, and rich people seeking continued tax breaks.  It is not time to listen to the groups that don’t read data that reflect the danger of deflation.  If only Milton Friedman were alive to cut them off at the knees!  I can’t imagine these self-styled ‘conservatives’ could stand up to him.

I picked this item up at Economist’s View. It’s just discouraging that no policy maker seems to read these things and feel like they’ve been making huge mistakes. I have to get on the University library website to get the paper free, but so far, just what Thoma has quoted is horrifying.  It includes this.

According to our measures almost 40% of households have been affected either by unemployment, negative home equity, arrears on their mortgage payments, or foreclosure. Additionally economic preparation for retirement, which is hard to measure, has undoubtedly been affected. Many people approaching retirement suffered substantial losses in their retirement accounts: indeed in the November 2008 survey, 25% of respondents aged 50-59 reported they had lost more than 35% of their retirement savings, and some of them locked in their losses prior to the partial recovery in the stock market by selling out. Some persons retired unexpectedly early because of unemployment, leading to a reduction of economic resources in retirement which will be felt throughout their retirement years. Some younger workers who have suffered unemployment will not reach their expected level of lifetime earnings and will have reduced resources in retirement as well as during their working years.

Prudent fiscal policy requires running deficits when the economy is faltering.  Not only that, there are laws–like the Humphrey Hawkins Act of 1978–that demand it!!!  Long term fiscal restraint should be examined when the U.S. economy is on a secure footing.  Now isn’t the time for austerity.  Now is the time to conquer the real problems of people and not those imagined in the minds of Washington DC bloviates who just want more power and more money. Most Americans are worried about keeping their homes, feeding themselves, and holding on to jobs if they have one right now.  How is that less important than the tax cuts of the very few or the other special interest bills that they are working on the current lame duck session?

Where is the real leadership of the Democratic Party?

An act of Economic Sabotage

Posted: November 20, 2010 | Author: | Filed under: The Bonus Class, The Great Recession, The Media SUCKS, U.S. Economy, Voter Ignorance | Tags: | 14 Comments

Over at The Washington Monthly, there’s a new hypothesis in town. Steven Benen thinks the Republican Party is working hard to ensure that joblessness remains high and that the economy doesn’t recover.  It is because this would be their certain path back to power.    Evidently there are other liberal/progressive columnists that are floating around the hypothesis so I think it’s worth examining and discussing.

Is there a Republican plot to tank the economy or are they just stuck in VooDoo economics fantasy land?  Is this possibly a new meme for Democratic partisans that’s come from some Journolist replacement?

Benen points first to several other sources, so let’s begin there.  Stan Collender writes at a blog called capital gains and games. Collender mention the idea was while writing on the seemingly endless attacks on the Federal Reserve by the GOP.  The GOP is notoriously filled with gold bugs and with folks that scream communism at any thing they think looks like big government overreach. (Say, fluoridating the water or giving children polio shots, or initiating an income tax to pay for war.) They go through cycles of screaming about the Fed ever so often.  However, this set of attacks is gaining some footing with the populace for some reason.  This is a quote from something Collender wrote last August.

It’s not at all clear, however, whether Bernanke realizes that the same political pressure that has brought fiscal policy to a standstill in Washington is very likely to be applied to the Fed if it decides to move forward. With Republican policymakers seeing economic hardship as the path to election glory this November, there is every reason to expect that the GOP will be equally as opposed to any actions taken by the Federal Reserve that would make the economy better, and that Republicans will openly and virulently criticize the Fed for even thinking about it. The criticism is likely to come both before any action is taken to try to stop it from happening and afterwards to make the Fed think twice about doing more.

Matt Yglesias echoed a similar sentiment which is where Benen comes up with the hypothesis.  They appear to have a mutual admiration society.  He says that every one knows that the path to re-election for President Obama is improvement on the economic front.  Mitch McConnell has made it very clear his goal is to see that Obama is a one term president. Therefore, is it possible that the Republicans are prepared to sabotage anything that improves the economy that might improve Obama’s chance at re-election?

Which is just to say that specifically the White House needs to be prepared not just for rough political tactics from the opposition (what else is new?) but for a true worst case scenario of deliberate economic sabotage.

The next cite is from Paul Krugman who echos a similar theme in his op-ed ‘The Axis of Depression’ in last week’s NYT.

What do the government of China, the government of Germany and the Republican Party have in common? They’re all trying to bully the Federal Reserve into calling off its efforts to create jobs.

Indeed, we’re seeing all kinds of weird things coming from Republicans these days including that infamous WSJ letter where they all are in a panic about inflation.  This teeth-gnashing occurs despite that October’s core consumer price index rose by a meager .6% .  That is the lowest it has risen since records have been taken;  starting in 1957.  Then, we have that ridiculous little cartoon that ramps up the same kind of fallacy-based nonsense with those two cute little bears using some strange form of English.   In all my years of teaching economics, I have never seen so much misinformation get spread around by so many.  We’ve got plenty of data now that completely debunks the anti-Keynsians, the Austrians, and the Reagan worshipers.  The facts recruited infamous supply sider Bruce Bartlett to the truth. What more proof do they need?

So, what is Benen implying, no make that stating?  He’s saying that the data, the proof, and the fact that people are suffering from joblessness has nothing to do with the agenda here.  The agenda is that the folks that want to deregulate us into Somalia status simply want to regain their power.

One of the interesting things Benen does is actually give some thought to  the idea that the Republicans are just misguided ideologues.  He gives the thought a test drive by looking at a column by Jon Chait in the TNR called “It’s Not a Lie if You Believe It” that ascribes less motive and more ignorance.  Benen dismisses it.

That seems largely fair. Under this line of thought, Republicans have simply lied to themselves, convincing one another that worthwhile ideas should be rejected because they’re not actually worthwhile anymore.

But Jon’s benefit-of-the-doubt approach would be more persuasive if (a) the same Republicans weren’t rejecting ideas they used to support; and (b) GOP leaders weren’t boasting publicly about prioritizing Obama’s destruction above all else, including the health of the country.

Indeed, we can even go a little further with this and note that apparent sabotage isn’t limited to economic policy. Why would Republican senators, without reason or explanation, oppose a nuclear arms treaty that advances U.S. national security interests? When the treaty enjoys support from the GOP elder statesmen and the Pentagon, and is only opposed by Iran, North Korea, and Senate Republicans, it leads to questions about the party’s intentions that give one pause.

So, that seems a little paranoid.  It also  seems like there would be some conversations some place outside of left blogosphere that would shun a group of office holders that show such naked hatred of their own country and the people they represent; even if the naked hatred extends mostly to those that don’t vote for them.  Benen says that the that assumes a vigilant press.  I think we can all agree these days that what we do not have is a vigilant and intellectually vigorous set of journalists.

Historically, lawmakers from both parties have resisted any kind of temptations along these lines for one simple reason: they didn’t think they’d get away with it. If members of Congress set out to undermine the strength of the country, deliberately, just to weaken an elected president, they risked a brutal backlash — the media would excoriate them, and the punishment from voters would be severe.

But I get the sense Republicans no longer have any such fears. The media tends to avoid holding congressional parties accountable, and voters aren’t really paying attention anyway. The Boehner/McConnell GOP appears willing to gamble: if they can hold the country back, voters will just blame the president in the end. And that’s quite possibly a safe assumption.

If that’s the case, though, then it’s time for a very public, albeit uncomfortable, conversation. If a major, powerful political party is making a conscious decision about sabotage, the political world should probably take the time to consider whether this is acceptable, whether it meets the bare minimum standards for patriotism, and whether it’s a healthy development in our system of government.

This gets me to another interesting thing that popped up in my mail this week.  It’s an announcement for one of those debate topics that you get if you’re a subscriber to The Economist. The motion this week is “This house believes that America’s political system is broken.” Right now, 76% of the folks voting agree with the motion. Interestingly enough, Matthew Yglesias is the one defending it.

So,  I’m not willing to draw any conclusion at this point, but I am willing to entertain the idea that the Republicans are willing to sabotage the President no matter what he chooses to do.  I am not willing to see it as a take down of the nation’s first ‘black president’.  I am willing to see it as a continuation of the job they wished they’d done on Bill Clinton. The hate all ‘liberals’. Plus, Republicans have felt entitled to power for as long as I can remember.  I do know–from experience–that they will do and say anything to get their agenda through.  Does this now include leaving incredibly large numbers of their own citizens suffering in poverty and without a job to do so?

My guess is that any means justifies any ends if you think some universal power broker is on your side.   Just read about the C Street group if you think that’s an outrageous hypothesis.  Then, tell me what you think.

Inflation: Not a Problem

Posted: November 18, 2010 | Author: | Filed under: The Media SUCKS, U.S. Economy | Tags: , , , , , | 36 Comments

Core Inflation: the Japanese Stagnation compared to the U.S. Great Recession via the SF Fed and Mary Daly.

This is one of the posts that I want to use to debunk that stupid cartoon that I keep seeing on Facebook.   That cartoon also brought on many comments that come under the classification of  ‘fallacy’. A fallacy is a type of error in reasoning. I have to identify the common ones we see when folks discuss economics when teaching economics.  The fallacy associated with comments I see about inflation recently come under the heading of  unrepresentative samples.  People make hasty generalizations that because one thing they experience is true, they can generalize that experience to everything.

These inflation fallacies pretty much fall into line.  It’s like, I went to the grocery store, I’ve been keeping track  of what I’ve been paying for meat and that’s going up.  Therefore, inflation must be a problem.   (The other one I’ve been hearing is about rising taxes which I’ll debunk in another post. Let me stick to this one first.)  So, first, inflation is not just the increase in one or two prices, it’s the increase in the average price levels in a country.  That means everything.  Not only the meat at the grocery store in your town, but the average prices every where in the country for the price of meat and everything else.  While, your meat is going up, I’ll raise you that pound of brisket and tell you how cheap it is to buy a HD TV or a normal pair of jeans these days, or for that matter any apparel. But then,  I’d just be engaging in the same fallacy.  So, instead I’ll go with defining inflation, showing you how we measure it as economists, and then letting you look at the numbers.  That graph top left is a good illustration of the average prices in the country as measured by the CPI or Consumer Price Index through September.    Average Prices as measured by this index–which is the index quoted in that silly cartoon–show a distinct downward trend.  This indicates deflation not inflation.

That’s just the CPI which actually tends to overstate prices which is why economists and the FED don’t use the CPI to gauge inflation.  It’s been discredited since the 1980s as having distinct biases. Part of this is because it only applies to retail prices.  Another part is that it uses a basket of typically purchased consumer goods and until the basket is changed, the weights of each price in the index reflect the basket.  For example, if the basket still had VCR players in it, that would be a problem.  The basket has to be re-arranged ever so often or it doesn’t reflect the actual buying patterns or budgets of typical U.S. consumers in the top 40 cities where the prices are collected by the BLS. The Fed doesn’t even collect the inflation numbers, the BLS does.  The BLS also collects the unemployment and jobs market information.  The FED reports them in addition to the BLS and uses them for their studies.

The three main inflation indexes most people hear about are the CPI(the Consumer Price Index), the PPI (the Producer Price Index) and the GDP Deflator. The CPI only tracks retail prices.  The PPI tracks whole sale prices. The GDP Deflator tracks and weights all prices by what they represent of the current period GDP.  It’s the most broad-based and least biased because of that weighting system instead of the basket. It reflects “average prices” of everything in the country.  Most economists use the GDP Deflator unless they are specifically interested in how prices impact households.

The FED uses the PCEPI or Personal Consumption Expenditures Price Index to measure inflation for households. It is less volatile than the CPI and looks at ‘core inflation’.  It is also a chained index which  means there is no fixed base and it looks at inflation from quarter to quarter.  The other indexes use base  years which is why you typically see things like REAL (meaning it’s deflated) GDP in 1984 dollars or 1991 dollars.  That means those measures are tied to the purchasing power of the base year of the index.

The FED uses the PCE–and has since 2000-which has indicated about 1/3 less inflation than the CPI. This is because of those statistical biases we mentioned above in the way the CPI is calculated (not a chain index) and in the way it uses a basket.  The reason that the FED pays attention to “core” prices is because of seasonality that is present in things like food prices and gas prices.  Food prices tend to change based on season for obvious reasons and people will substitute in and out of products that are lower in price and ‘in’ season.  The CPI does  not reflect this because of its use of the constant basket.  It has a ‘substitution’ bias.

Economists detect and detrend series like these for seasonality.  The biggest example of seasonality is in retail sales which typically peak extensively in November and December.  It’s not part of an overall trend in the series.  It’s just a recurring blip that we can account for by figuring out what magnitude it tends to be each season.

So let me go back to FedViews and an article over at Mark Thoma’s Economist’s View and talk about why inflation is not a problem, even though the meat prices at your market may be.  Then there’ this from the Clelevand FED’s expectations of future inflation today.

The Federal Reserve Bank of Cleveland reports that its latest estimate of 10-year expected inflation is 1.50 percent. In other words, the public currently expects the inflation rate to be less than 2 percent on average over the next decade.

The FT puts this in perspective.

Expected inflation over every time horizon longer than six years is now at its record low in the period since 1982 that the series covers. Expected inflation over the next ten years is now down to 1.5 per cent per annum.

The Cleveland Fed index is not the last word on inflation expectations but it is certainly reason to think that those QE2 = hyperinflation fears are somewhat misplaced…

Mark Thoma responds to an outrageous letter by a bunch of miscreants at the WSJ that have the audacity to scare people with inflation fears.  It links to this “Open Letter To Ben Bernanke” and includes such ‘distinguished’ economists as “William Kristol, Editor, The Weekly Standard“.  Actually, the signatories aren’t distinguished economists at all.  They’re mostly political hacks and conservative policy ideologues.

I doubt the invisible inflation vigilantes will change their tune, but it’s hard to find evidence of inflation worries in the data. If anything, markets are reassessing the Fed’s ability to stop disinflation.

You can also see that Paul Krugman has disinflation concerns and he has a nifty graph up also. There is no inflation, there is deflation or disinflation.

The people who put out that cartoon also fall under the heading of ideologues and miscreants.  The cartoon uses cute little funny speaking creatures to lead you into logical fallacies.  You watch them and think, why yes this must be true because I just paid more for a pack of pork chops last week when the price most likely reflected the hog cycle. (Yes, hogs have gestational periods and some times even the best farmers don’t plan pig pregnancies at opportune times for household demand.)

So, I hope this gives you enough information on inflation to know that it is not a problem for the country.  You really don’t want me to make you do the underlying calculations to all these indexes, but if you want to torture yourself, any Principles of Economics textbooks will put you through the paces. Oh, and don’t buy used cars or the Brooklyn Bridge from any of the shiesters who signed that WSJ editorial or any of them that put out that silly cartoon.

 

Update: Here’s some data on State Revenues from taxes even though I said I’d wait for another post to debunk that portion of that silly little cartoon.  I’ve already explained how quantitative easing is not printing money, but I’ll do it again shortly because the blasted cartoon is getting more steam. It’s like some stupid chain letter now!

The data is from The Nelson Rockefeller Institute of Government at NYU-Albany and it shows how revenues from taxes are way down from the pre-recession period although slightly up this year from last.  That includes all forms of taxes taken in at the state level.  You can see if your state’s tax revenues are up or down in a Table 3.

 

 

Home, Lost Home

Posted: November 16, 2010 | Author: | Filed under: Bailout Blues, Equity Markets, Global Financial Crisis, U.S. Economy | Tags: , , , , , | 41 Comments

The Senate Banking Committee is looking into allegations today about Bank of America’s Foreclosure process.   As you may know, there have been problems with foreclosure documents that have led many to question the legality of many foreclosure actions by banks.  At least seven banking officers will appear before the committee to argue the case that robo-notorization and other means of speeding up the process of making people homeless are not illegitimate.  Retiring Senator Bank-Lobbyist-in-Training Chris Dodd is in charge of that committee.

Bloomberg has this to report about the hearings.

Democrats said they are concerned not only about foreclosures, but also about whether mortgage servicers are properly handling mortgage modifications intended to keep some homeowners from losing their properties.

“If many banks and servicers are not handling even basic foreclosure procedures correctly, it is likely that many are also not correctly evaluating homeowners for mortgage modifications,” Senator Robert Menendez, a New Jersey Democrat who is a member of the Banking Committee, said in a letter to Treasury Secretary Timothy F. Geithner that is scheduled to be sent today.

In the House, lawmakers will also call in overseers and regulators from government agencies, including the OCC and the Federal Housing Finance Agency.

Consumer advocates have been expressing concern about this process for years and aggressive lobbying is apparently paying off for the financial institutions.  This report on a flurry of FIRE lobbying is from WAPO.

The spotlight on the foreclosure process has anxious financial executives mobilizing on Capitol Hill. A financial lobbyist said senior executives have been meeting with lawmakers and their staffers, and industry groups are planning letter campaigns aimed at preventing aggressive new legislation.

“Everyone’s very nervous about what’s going to happen this week,” said another industry official, who spoke on condition of anonymity because his firm has a stake in the outcome. “We have all hands on deck.”

It’s unclear what new measure could pass in a politically divided Congress, but some ideas under consideration could broadly reshape the mortgage industry.

Some lawmakers want to resurrect legislation that would give bankruptcy judges the power to order lenders to reduce the principal that homeowners owe. Others are pushing for some big banks to spin off their mortgage-servicing arms to avoid conflicts of interest. There’s also discussion of replacing the industry’s current system for tracking mortgages with one that would be subject to federal regulation.

“The risk is small that a bill gets through,” the financial lobbyist said, but “we are taking it very seriously.”

Meanwhile, Americans for Financial Reform have requested the FED withdraw a Rescission Rule. In real estate transactions, these rules generally offer up a ‘cooling off period’  that give a buyer a chance to nullify a sales contract within a certain period. Most state rescission rules run from five to 15 days.  The FED’s considering tightening the process to favor the lenders.  Here’s some information on the request from AFR to the FED.

In the face of an unparalleled foreclosure crisis, now is the time to reinforce the fundamental importance of TILA rescission. Instead, the Board’s proposal would eviscerate the single most effective tool that homeowners have to stop foreclosures and avoid predatory loans: the extended right of rescission. The FRB Docket R-1390 contains a series of proposed changes to the TILA rules governing mortgage lending.

A few of the proposed changes, including new “material A much greater concern is the proposed decimation of TILA’s right of rescission. At the  depths of the worst foreclosure crisis since the Great Depression, we are surprised that the Federal Reserve Board has proposed rules that would eviscerate the primary protection homeowners currently have to escape abusive loans and avoid foreclosure: the extended right of rescission in 12 CFR § 226.15 and 226.23. disclosures” for home secured credit, would advance consumer protections.

Some changes are neither particularly damaging nor particularly beneficial to consumers. Other parts of the proposal, however, would seriously undermine the reliability of TILA disclosures on home secured credit.  Instead of informing consumers about the terms of their loans as Congress intended, these proposals  would allow broad misstatements of loan terms through new tolerances that are without statutory authority.

The Truth in Lending Act passed by Congress specifically provides consumers the right to unwind an illegal loan through “rescission” for up to three years after the loan was consummated.  The statute – and current Board regulations –both provide that if the proper disclosures were not  provided to the homeowner at the closing, the homeowner can rescind the loan by sending a notice to the creditor. The statute then requires the creditor to cancel the security interest. Only after the  creditor has complied with its obligation to cancel the security interest is the homeowner required to pay back the lender the amount still due on the loan. This order of obligations is the essence of the protection provided by TILA’s extended right of rescission. The cancelling of the security interest means that the homeowner has a defense to a foreclosure. It also means that the homeowner has the means to obtain refinancing so as to be able to tender the amount due. The extended right of rescission does not mean that the homeowner does not have to repay the loan. While the amount due is reduced by the finance charges, fees and amounts the homeowner has already paid, the balance is still due the creditor.

Current momentum to push the laws to protect mortgage loan originators and processors appears aimed at protecting them from the consequences of some really shoddy underwriting practices.  This seems mostly motivated to save them the billions of dollars of costs they–and in turn the Federal Government–would incur should there be zero tolerance of these egregious practices.  Not only are billions of dollars of investors money at risk–including pensions and institutional investment funds–but there’s also that little matter of the bankrupt Fannie and Freddie that sit on tons of the nasty stuff and are currently being propped up by tax payer money.

Oddly enough, there are calls again for the FED or Treasury to do more ‘stress tests’ to see exactly what the potential fall out from this massive stupidity might be.  Will we once again have to fork over our Treasury to pay for the greed of the housing and mortage debacle?  All of this undoubtedly has the markets shaky, I went in search of why so  much Big RED numbers in the major stock indexes today.  The uncertainty inherent in this problem is undoubtedly fueling the equities set back.  We continue to see fall out from the District’s inability to deal with the current systemic risk in our Financial System due to massive  and hasty deregulation.   Here’s some more analysis from WAPO.

At the same time, he said, panel members sympathize with the conundrum facing policymakers as they deal with the issue: On one hand, grinding foreclosures to a halt unnecessarily could harm the economy and slow its recovery. On the other, he said, distressed borrowers are entitled to due process, especially when banks are trying to take their homes.

Administration officials say they are keeping a close watch on the issue.

“We strongly believe that the reported behavior within the mortgage servicer industry is simply unacceptable, and servicers who have failed to follow the law must be held accountable,” said Treasury spokesman Mark Paustenbach. He added that the administration has led an interagency effort to “investigate misconduct, protect homeowners and mitigate any long-term effects on the housing market. The independent regulatory agencies, the Justice Department and [the Department of Housing and Urban Development] are examining servicers’ behavior, and we will continue to monitor the situation closely.”

This loosely means they’re  probably anticipating the need for more bailouts.  Good luck with that given the influx of hostile partisans coming in from the right wing of the Republican Party in January.   What’s a bunch of lame ducks to do?

This is a Democratic Adviser?

Posted: November 15, 2010 | Author: | Filed under: Surreality, Team Obama, The DNC, The Great Recession, U.S. Economy | Tags: , , , , , | 39 Comments

I have to admit to being with Digby on this one.   It’s getting more obvious to me that this Democratic Administration is going after our Social Security benefits with gusto.  You may recall that Peter Orzag was the Obama Budget Director and is now one of the major economic advisers to the President.  This contribution to the NYT is not the first flare to be fired, but it is a distinctly blinding one.

So, first Orzag admits that Social Security is not a federal deficit problem. You would think he’d end with that.  Social Security is an off budget program and it’s self funding and managing.  That’s the deal.  People pay for the benefits and they expect them.  It’s a third rail of politics and you’d think after Dubya’s adventures into handing the trust fund to Wall Street that would be all she wrote.  But, it’s not.  (Emphasis is mine on this.)

So it would be desirable to put the system on sounder financial footing. And that is precisely what the co-chairmen of President Obama’s bipartisan commission on reducing the national debt have bravely proposed to do. It’s too bad their proposal has been greeted with so much criticism, especially from progressives — who really should look at it as an opportunity to fix Social Security without privatizing it. Although the plan leans too much on future benefit reductions and not enough on revenue increases, it still offers a good starting point for reform.

…

The main flaw in the proposed Social Security plan is that it relies too little on revenue increases and too much on future benefit reductions. A reasonable objective would be a 50-50 balance between changes in benefits and changes in revenues. But the way to bring reform into better proportion is to adjust the components of this proposal, not to fundamentally remodel it.

Alrighty, so let’s first IGNORE the fact that the cat food commission had no real business sticking its nose into Social Security because it’s charter said it was to go after the Federal Deficit.  And, as Orzag has stated, Social Security is NO contributor to that deficit.

So, here’s where I agree with Digby.

I can hardly believe anyone of his stature could argue this nonsense. Orszag agrees that SS does not contribute to the long term deficit and yet is trying to convince us that that the Deficit Commission draft just put it on the table anyway, apparently out of a surfeit of progressive idealism. Huh? Moreover, he also thinks it makes sense to jump right on the third rail in American politics because it would be desirable” to do something about a potential future problem — when we are in the middle of an epic economic shitstorm with stubborn 10% unemployment and a banking and housing crisis that shows no sign of abating.

Is he ignorant of the fact that most people in this country are convinced — mainly because they’re being told it every single day by every politician, talking head and gasbag — that “entitlements” are destroying the economy and the future of the United States? The idea that social security cuts could buy the administration a chance for more stimulus is delusional.

Yup, delusional. And get this closer …

The White House has been handed a highly progressive reform plan for Social Security that could attract Republican support as well.

If this is progressive, I want to be known as something completely different.

This just seems to be the start of the swansong for the program.  BostonBoomer sent me this call for liberals to get on board with similar clarion calls today. It’s from USN and John Farrell.

Okay, my liberal friends. On Friday I explained why the proposals of the Simpson-Bowles commission should be welcomed, and put on the bargaining table by conservatives. Today I will argue, despite what Paul Krugman says, that there’s good stuff for liberals too.

Remember, first and foremost, that this is a starting point. You don’t have to buy into everything to keep the conversation going. And beware misinformation.

You know, this all seems to assume that we don’t have Democratic pols that make Faustian bargains with themselves before they even start dealing with the Republicans.  I have to admit that I’m with Krugman on this one too.

Right at the beginning of his administration, what Mr. Obama needed to do, above all, was fight for an economic plan commensurate with the scale of the crisis. Instead, he negotiated with himself before he ever got around to negotiating with Congress, proposing a plan that was clearly, grossly inadequate — then allowed that plan to be scaled back even further without protest. And the failure to act forcefully on the economy, more than anything else, accounts for the midterm “shellacking.”

You expect any one to fight for what’s right in Social Security given recent history like Krugman identifies?  I don’t. No hope or expectation of it at all.  After all, a major Presidential Advisor just call Allan Simpson brave instead of being labeled the crazy old coot he is.

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