Friday Reads
Posted: May 20, 2011 Filed under: abortion rights, Economy, Foreign Affairs, Israel, morning reads, Reproductive Rights, U.S. Economy, U.S. Politics | Tags: Federal Debt, Filibuster, Goodwin Liu, israeli Palestianian morass, President Obama, State Department Speech, Texas sonogram law 46 CommentsIt is definitely the silly season! You can tell that an election count down is nearing in the District. A judge of Chinese descent was successfully blocked by Republican Senators and Ben NelSOB for sounding like a communist. Did we go back to the McCarthy era and I missed it?
Six years ago, Ninth Circuit judicial nominee Goodwin Liu published an op-ed in which he made the utterly banal point that a conservative interest group used the terms “free enterprise,”‘ “private ownership of property,” and “limited government” as “code words for an ideological agenda hostile to environmental, workplace, and consumer protections.” In a speech on the Senate floor yesterday, however, Sen. Chuck Grassley (R-IA) somehow managed to interpret this op-ed as proof that Liu wants to turn America into “Communist-run China”:
GRASSLEY: Does [Liu] think we’re the communist-run China? That the government runs everything? That it’s a better place when they put online every week a coal-fired plant to pollute the air, put more carbon dioxide into the air then we do in the United States, and where children are dying because food is poisoned, and consumers aren’t protected, and where every miner in the China coal mines is in jeopardy of losing their lives? That’s how out of place this guy is when he talks about “free enterprise,” “private ownership of property,” and “limited government” being something somehow bad, but if you get government more involved, like they do in China, it’s somehow a better place.
Republicans appear to be pulling out all the bells and dogwhistles for this one. This is the first time a judicial nominee has been blocked since 2005.
Liu also drew Republican ire over his criticism of Supreme Court Justice Samuel Alito in testimony when the conservative judge was nominated to the court.
“His outrageous attack on Judge Alito convinced me that Goodwin Liu is an ideologue,” South Carolina Sen. Lindsey Graham said before Thursday’s vote. “His statement showed he has nothing but disdain for those who disagree with him. Goodwin Liu should run for elected office, not serve as a judge.”
Imagine that! Some one with an opinion! Does that mean a person isn’t capable of honest judgement?
Obama gave a speech yesterday at the State Department indicating support for the Arab Spring and suggesting that a dialogue between Israel and Palestine is possible but must meet certain ground rules. One of these is controversial because it breaks with a speech given by President Bush that more or less accepted the reality of some Israel colonies in the occupied territories. That is that the negotiations be based on the 1967 agreement which would reverse Israeli colonization of territories that occurred after the agreement. Israel has already rejected the idea.
So while the core issues of the conflict must be negotiated, the basis of those negotiations is clear: a viable Palestine, a secure Israel. The United States believes that negotiations should result in two states, with permanent Palestinian borders with Israel, Jordan, and Egypt, and permanent Israeli borders with Palestine. We believe the borders of Israel and Palestine should be based on the 1967 lines with mutually agreed swaps, so that secure and recognized borders are established for both states. The Palestinian people must have the right to govern themselves, and reach their full potential, in a sovereign and contiguous state.
As for security, every state has the right to self-defense, and Israel must be able to defend itself -– by itself -– against any threat. Provisions must also be robust enough to prevent a resurgence of terrorism, to stop the infiltration of weapons, and to provide effective border security. The full and phased withdrawal of Israeli military forces should be coordinated with the assumption of Palestinian security responsibility in a sovereign, non-militarized state. And the duration of this transition period must be agreed, and the effectiveness of security arrangements must be demonstrated.
These principles provide a foundation for negotiations. Palestinians should know the territorial outlines of their state; Israelis should know that their basic security concerns will be met. I’m aware that these steps alone will not resolve the conflict, because two wrenching and emotional issues will remain: the future of Jerusalem, and the fate of Palestinian refugees. But moving forward now on the basis of territory and security provides a foundation to resolve those two issues in a way that is just and fair, and that respects the rights and aspirations of both Israelis and Palestinians.
Obama also made it clear that Hamas’ failure to recognize the state of Israel was a huge problem.
Now, let me say this: Recognizing that negotiations need to begin with the issues of territory and security does not mean that it will be easy to come back to the table. In particular, the recent announcement of an agreement between Fatah and Hamas raises profound and legitimate questions for Israel: How can one negotiate with a party that has shown itself unwilling to recognize your right to exist? And in the weeks and months to come, Palestinian leaders will have to provide a credible answer to that question. Meanwhile, the United States, our Quartet partners, and the Arab states will need to continue every effort to get beyond the current impasse.
The President said that US commitment to Israel is unshakeable but the status quo is unsustainable. The Israeli/Palestinian situation continues to the most vexing problem on the planet. If you’re going to venture an opinion, be aware that the topic creates such tension that its discussion is actually banned on many blogs. I’d prefer not to relive past experience myself but I thought it needed mentioning.
Lawrence Mishel of the Economic Policy Institute says “We’re not broke nor will we be”. It seems more and more economists are fighting back on the weird suggestion that a country with a huge economy, rich people, and tons of assets can’t invest in its own future because it’s broke. Here’s the link to the briefing paper. This is good explanation of why we are not Greece and will not go down the Greek Road. There are tons of nifty graphs so go check it out!!
Despite the rhetoric, it is clear that “we” as a nation are not broke. While the recession has led to job loss and shrinking incomes in recent years, the economy has produced substantial gains in average incomes and wealth over the last three decades, and economists agree that we can expect comparable growth over the next three decades as well. Between 1980 and 2010, income per capita grew 66.4%, and wealth per capita grew 73.2%. Over the next 30 years, per capita income is projected to grow by a comparable 60.6%. In other words, “we” are much richer as a nation than we used to be and can expect those riches to rise substantially in the future. So who is the we in the “we’re broke” mantra? The recession has certainly been a rough patch of road for many families, but the output produced by corporations in the private sector has already recovered to pre-recession levels, and these firms’ profi ts were 21.7% higher overall, driven largely by the 60% jump in pre-tax profi ts enjoyed by fi rms in the fi nancial sector.
Here’s why we can actually afford to invest in America and Americans!
Despite the fact that average incomes have increased substantially over the past 30 years, the federal government is currently running a projected defi cit of 9.8% of gross domestic product. As noted above, many use the deficit to support the “we’re broke” theme. But how can that be the case? How can the country have much more income, collectively, onwhich to draw, yet all levels of government are “broke” and unable to aff ord anything?
The answer is that revenue has declined substantially due to the recession and due to the Bush-era tax cuts. The Congressional Budget Offi ce projects federal revenues will be just 14.8% of GDP in the fi scal year ending September 30, 2011—by far the lowest revenue intake relative to GDP since 1951. In contrast, federal revenues totaled over 18% of GDP at the end of the last recovery (fi scal year 2007) and were roughly 20% at the end of the 1990s recovery. A largepart of the revenue shortfall can be attributed to legislated changes in taxes under George W. Bush, which lowered the revenue share by 2.1%.
As the economy recovers, the defi cit will fall as unemployment declines, as incomes and associated revenues increase, and as recession-sensitive expenditures automatically decline (expenditures for food stamps, unemployment benefits, Medicaid and other programs rise with the economic distress in a recession and fade as unemployment declines). This expected decrease in the defi cit is refl ected in CBO projections showing the defi cit declining from 9.8% of GDP in 2011 to just 3.0% in fi scal year 2015. Some of this decline can be attributed to the assumed expiration of the Bush tax cuts extended in 2010 and the inheritance tax change in 2010 (plus the R&D, ethanol, and fi rst-year depreciation tax breaks), which would total 2.9 percentage points of GDP that year. Even so, that still leaves the defi cit falling by 4.0 percentage points due to the recovery.
Texas officially joins the war on women by mandating sonograms before terminations. This is just more harassment and costs to women seeking to exercise their constitutional rights to privacy and self-determination. Ridiculous!
Texas Governor Rick Perry Thursday signed into law a measure requiring women seeking an abortion in the state to first get a sonogram.
Texas is one of several U.S. states with strong Republican legislative majorities proposing new restrictions on abortion this year. The Republican governor had designated the bill as an emergency legislative priority, putting it on a fast track.
Under the law, women will have to wait 24 hours after the sonogram before having an abortion, though the waiting time is two hours for those who live more than 100 miles from an abortion provider.
So, like I said, it’s the silly season which means there’s plenty of news out there that’s bound to upset people! What’s on your reading and blogging list today?
Monday Reads
Posted: May 16, 2011 Filed under: 2012 presidential campaign, Economy, Federal Budget and Budget deficit, fundamentalist Christians, Global Financial Crisis, income inequality, Medicare, religion, religious extremists, Republican politics, Republican presidential politics, Team Obama, The Bonus Class, The Great Recession, U.S. Economy, U.S. Politics | Tags: Debt Ceiling, End Times, evangelical Christians, Harold Campaign, Mark Thoma, Newt Gingrich, Rapture, the plutocracy, Timothy Giethner 52 Comments
Good Morning!
Are you reading for the end of the world next Saturday? Nope, it’s not 2012 yet and we’re not talking about the Mayan Prophecy. Harold Campaign has convinced a group of evangelicals that the date is May 21, 2011. I wonder if any of them would like me to take care of their left behind pets for all their money? You can read more about the man and his end of days wishes at Salon.
The self-appointed harbingers are not tied to any particular church — they claim organized religion has been corrupted by the devil — but rather to Internet- and radio-based ministries. And their lone mission is to tell anyone and everyone that the end of days is May 21. That’s when, they insist, God’s true believers will be lifted into heaven and saved, during a biblical event widely referred to as the Rapture.
The finer points of Christian eschatology have long been the subject of dispute (not to mention the inspiration for movies and books, like the blockbuster “Left Behind” series). Though mainstream churches reject the the notion that doomsday can be predicted by any man, fringe scholars continue to work feverishly pinpointing the moment of the final, divine revelation. And one such man — 89-year-old radio host Harold Camping — has been at the game for decades.
In the early ’90s, Camping published a book titled “1994?,” which claimed judgment day would arrive in September of that year. When confronted with such a staggering anticlimax — the world, after all, kept on spinning — Camping chose not to be discouraged, but to learn from his mistakes. (He hadn’t considered the Book of Jeremiah, he says.) A civil engineer by trade, Camping went back to the drawing board and continued to crunch the numbers, before arriving at the adamant determination that Rapture would come on May 21, 2011. He began to spread the word through his broadcasting network, Family Radio, in 2009, and quickly built up a fervid following.
I guess it takes all kinds. That’s what my mother used to tell me when she was alive, anyway. Speaking of that, MoJo has a great list of Newtisms that will take you a trip back in time with Gingrich’s greatest tongue trips. Here’s some of his earliest hits.
1978 In an address to College Republicans before he was elected to the House, Gingrich says: “I think one of the great problems we have in the Republican party is that we don’t encourage you to be nasty. We encourage you to be neat, obedient, and loyal and faithful and all those Boy Scout words.” He added, “Richard Nixon…Gerald Ford…They have done a terrible job, a pathetic job. In my lifetime, in my lifetime—I was born in 1943—we have not had a competent national Republican leader. Not ever.”
1980 On the House floor, Gingrich states, “The reality is that this country is in greater danger than at any time since 1939.”
1980 Gingrich says: “We need a military four times the size of our present defense system.” (See 1984.)
1983 A major milestone: Gingrich cites former British Prime Minister Neville Chamberlain on the House floor: “If in fact we are to follow the Chamberlain liberal Democratic line of withdrawal from the planet,” he explains, “we would truly have tyranny everywhere, and we in America could experience the joys of Soviet-style brutality and murdering of women and children.”
What is it that Republicans put in their formula that turns out people like this? Newt was on Meet the Press yesterday where he mouthed off on a number of subject’s including Paul Ryan’s Medicare pogrome. This is the National Review’s take so read with caution.
Newt Gingrich’s appearance on “Meet the Press” today could leave some wondering which party’s nomination he is running for. The former speaker had some harsh words for Paul Ryan’s (and by extension, nearly every House Republican’s) plan to reform Medicare, calling it “radical.”
“I don’t think right-wing social engineering is any more desirable than left-wing social engineering,” he said when asked about Ryan’s plan to transition to a “premium support” model for Medicare. “I don’t think imposing radical change from the right or the left is a very good way for a free society to operate.”
As far as an alternative, Gingrich trotted out the same appeal employed by Obama/Reid/Pelosi — for a “national conversation” on how to “improve” Medicare, and promised to eliminate ‘waste, fraud and abuse,’ etc.
“I think what you want to have is a system where people voluntarily migrate to better outcomes, better solutions, better options,” Gingrich said. Ryan’s plan was simply “too big a jump.”
He even went so far as to compare it the Obama health-care plan.”I’m against Obamacare, which is imposing radical change, and I would be against a conservative imposing radical change.”
I have to say that having Trump, Gingrich, Santorum and Paul all debating each other on one stage would probably be highly entertaining. They could have a contest for who would make the craziest old uncle.
The White House is out on the road trying to head off problems with the national debt ceiling. Timothy Geithner says that the economy will double-dip if the Republicans don’t raise the ceiling.
In a heavily-anticipated response to Sen. Michael Bennet, D-Colo., who asked Geithner to document the economic and fiscal impacts of failing to lift the statutory debt limit, the Treasury secretary detailed a chain reaction that would cripple the economy, costing jobs and income.
“A default would inflict catastrophic far-reaching damage on our nation’s economy, significantly reducing growth and increasing unemployment,” said Geithner in the letter to Bennet which was dated May 13. “Even a short-term default could cause irrevocable damage to the economy.”
Geithner has imposed an August deadline for Congress to lift the $14.3 trillion debt ceiling, but lawmakers are still negotiating over Republican demands to tie the move to spending cuts. And a portion of the GOP still remains skeptical about the need to act by the deadline at all, arguing that the consequences have been overstates.
Economist Mark Thoma has a better explanation of how the refusal to increase the debt ceiling would impact the economy on CBS Money Watch. This explanation is much more precise.
If politicians fail to reach a deal to increase the debt ceiling, there would be a large fall in federal spending. The decline in federal purchases of private sector goods and services would reduce aggregate demand, and this could slow or even reverse the recovery (it could also threaten the delivery of critical services that some people depend upon). In addition, the failure to pay wages to federal workers would disrupt household finances and cause a further decline in demand, as would the failure of the government to pay its bills for the goods and services it has already purchased from the private sector (and it could even threaten some households and businesses with bankruptcy should the problem persist). There may be some room for the Treasury to use accounting tricks to avoid the worst problems, at least for a time, but it is not at all clear how well this would work to insulate the economy from problems and eventually this strategy will come to an end.
That’s potentially bad enough, but it’s far from the end of the problems that could occur. Failure to raise the debt ceiling could also undermine faith in the safety of US Treasury bills. If we default on bond payments, or appear willing to do so even if it doesn’t actually occur and investors lose faith in US Treasury Bills, they will begin demanding higher interest rates to cover the increased perception of risk. This could be very costly. We depend upon the rest of the world to finance our debt at extremely low interest rates. If the willingness of other countries to do this diminishes, then the cost of financing our debt would rise substantially. And that’s not all. In addition to increased debt servicing costs, an increase in interest rates would also choke off business investment potentially lowering economic growth, and the consumption of durable goods by households would fall as well. Rising interest rates would also be bad for the housing recovery (such as it is). Thus, failure to reach an agreement could be very costly.
The Economist‘s Blog on American Politics: Democracy in America has an interesting post right now on ‘The Road to
Plutocracy’. It’s an interesting read with a lot of quotes from other pundits.
THE word “plutocracy” is in the air these days. Some say the era of the de facto rule of the mighty top 10%, or top 1%, or whatever insidious sliver of the income distribution is thought to constitute the moneyed power elite, is upon us, or nearly so. I’m not so sure. I am sold on the proposition that there’s something deeply whacked about the American financial system, and that whatever that’s whacked about it is significantly responsible for the top 1% pulling so far away from the rest of the income distribution. This needs to be fixed, whatever its other consequences. It’s not clear to me, however, what exactly is whacked. I don’t know whether to sign up for Tyler Cowen’s “going short on volatility” story, Daron Acemoglu’s “financial-sector lobbying and campaign contributions ‘bought’ an enriching (and destabilising) regulatory structure” story, or some other story. No doubt the truth is in some subtle combination of stories. In any case, accounts such as Mr Acemoglu’s, according to which big players in certain sectors over time manage to rig the regulatory climate to their advantage, are quite compelling for reasons both theoretical and empirical
Newsweek has an interesting article up on why the megarich manage to have such a sweet tax deal. Even if we raise their income taxes, it really doesn’t hit them where it counts. Here’s why.
It drives economist Bruce Bartlett crazy every time he hears another bazillionaire announce he’s in favor of paying higher taxes. Most recently it was Mark Zuckerberg who got Bartlett’s blood boiling when the Facebook founder declared himself “cool” with paying more in federal taxes, joining such tycoons as Bill Gates, Warren Buffett, Ted Turner, and even a stray hedge-fund manager or two.
Bartlett, a former member of the Reagan White House, isn’t against the wealthy paying higher taxes. He’s that rare conservative who thinks higher taxes need to be part of the deficit debate. His beef? It’s a hollow gesture to say the federal government should raise the tax rate on the country’s top wage earners when the likes of Zuckerberg have most of their wealth tied up in stock. Many of the super-rich see virtually all their income as capital gains, and capital gains are taxed at a much lower rate—15 percent—than ordinary income. When Warren Buffett talks about paying a lower tax rate than his secretary, that’s because she sees most of her pay through a paycheck, while the bulk of his compensation comes in the form of capital gains and dividends. In 2006, for instance, Buffett paid 17.7 percent in taxes on the $46 million he booked that year, while his secretary lost 30 percent of her $60,000 salary to the government.
“It’s easy to say ‘Raise taxes’ when you know you’re not going to have to pay those taxes,” Bartlett says. “What I don’t hear is ‘Let’s raise the capital-gains tax.’” Instead the focus has been on the federal tax rate paid by those with an annual income of $250,000 or more—the top 3 percent of earners. Bartlett argues that while raising taxes on the country’s richest individuals would go a long way in easing the debt crisis, it makes no sense to treat the professional making a few hundred thousand dollars a year the same as the Richie Rich set. Maybe it’s hard to muster sympathy for an executive pulling down $1 million a year. But ours is a tax system where a person in the top tax bracket (those earning more than $374,000 in 2010) pays a tax rate of 35 percent on the upper portions of his or her income (37.9 percent if you include Medicare), whereas a hedge-fund manager or mogul earning 10 or 100 times that amount pays less than half that tax rate.
Well, now I’m thinking we’re all just so f’ked that I might as well stop while I’m ahead. What’s on your reading and blogging list today?
Misery Index hits Reagan Years High
Posted: May 15, 2011 Filed under: Economy, U.S. Economy | Tags: inflation, measurement issues, misery index, unemployment 9 Comments
One of the measurements of economic well-being that got some play in the Carter/Reagan years was the Misery Index. It basically measures the impact of price increases and unemployment on people. There’s some new information coming out of this index. It seems it’s as bad as it was in 1983.
John Williams, over at Shadow Stats, compiles economic data for inflation and unemployment the way it used to be calculated pre-1990. Based on that data, the CPI inflation rate is over 10%, and the unemployment rate is over 15% (see charts). The Misery Index is the sum of the current inflation rate and the unemployment rate. If it were to be calculated using the older methods, the Index would now be over 25, a record high. It surpasses the old index high of 21.98, which occurred in June 1980, when Jimmy Carter was president. Most believe the height of the Index along with the Iranian hostage crisis is what caused Carter to lose his re-election bid.
We’ve changed a lot of the way we measure inflation and unemployment since then partially because we’ve tried to focus more narrowly on measures of both inflation and unemployment but also because the measures were consistently high during the 1970s and 1980s. The inflation rate as stated by the CPI was frequently overstated because of its use of a base market basket that didn’t always reflect the introduction of new goods and services, the places people shop, and the switching or substitution behavior of people. It had a fix budget apportionment that was used to weight prices and those weights were frequently stale.
The changes in the way the unemployment rate was measured had to do with the shift away from reliance on the traditional 40 hour work week job by both businesses and job seekers. The unemployment rate was changed so that you only had to work at least one hour a week at paid work to be excluded. This is why economists look at a bunch of different statistics to get a handle on the job market. People that don’t want to work part time but are stuck there are now considered underemployed and are tracked separately. If you visit Shadow Government Statistics you can see comparisons of the old and the new way of doing things.
Some of the most salient points are that long-term, discouraged workers were taken out of the unemployment statistic in 1994. SGS calls this being “defined out of existence”. Again, the statistic is still being tracked so you have to go look for it at the BLS. I will say that economics reporters have been doing a better job of providing more than just the unemployment rate in their analysis. You have to look at the underemployed and the discouraged worker to get a good idea of what’s going on. We’ve talked about the changes in the make up of the labor force around here because it’s one of the reasons that you’re seeing the unemployment rate go up and down recently. When discouraged workers re-enter the labor force, the new unemployment rate will go up because the number of people in the labor force–the denominator in the statistic–goes up.
I actually have less problems with the changes in the inflation right but then again, the problem is that people need to realize that the definitions of the measures have changed and narrowed so it is important to look at more than just one rate. This does explain, however, why people whose budgets are being impacted by food and gas prices aren’t seeing the pain in the new inflation rates. We’ve talked about this before also.
So, what does this mean? I think it’s significant that the Misery Index is basically at similar levels to the last time the country was expressing discontent with the economy because it gives us a historical perspective. Ronald Reagan probably would not have won a second term if the Federal Reserve didn’t start significantly loosing monetary policy during that same time which brought down the inflation included in the Misery Index.The first Reagan term was the last time the economy was this bad. Changes in monetary policy were the real reason for the worst of the Carter Recession and much of the eventual Reagan Recovery although some of the Reagan Recovery was due to the incredible increase in government purchases which are typical Keynesian economic aggregate demand stimulation policies. Paul Volcker and the Fed brought on a recession by increasing interest rates in an attempt to reign in inflation and inflation expectations. They did so. It happened with some extreme economic pain and that was what the Misery Index was supposed to reflect at the time. The drivers for the misery right now are different. We have record loose monetary policy. The incredible shock to the economy of the financial crisis is the root of our issues now.








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