Tuesday Reads

Posted: August 9, 2011 | Author: | Filed under: 2012 presidential campaign, Global Financial Crisis, Hillary Clinton, Medicaid, Medicare, morning reads, psychology, religious extremists, Republican presidential politics, Social Security, The Great Recession, the villagers, U.S. Economy, U.S. Politics, voodoo economics, WE TOLD THEM SO | Tags: , , , , , , , , , , , , , , , , , , , , , , | 43 Comments

Good Morning!! I’m switching to strong coffee this morning, because I’ve had the sleepies for the past few days. It’s been really damp and humid here, so maybe that’s the reason. All I know is I keep dozing off, and I don’t like it! Anyway, let’s get to the news before I nod out again.

A few days ago, commenter madaha turned me on to an article about a fascinating new book that just came out last week. The book is called A First Rate Madness. The author is Nassir Ghaemi, a professor of psychiatry at Tufts University. From Salon:

Nassir Ghaemi, an author and professor of psychiatry at Tufts University School of Medicine, argues that many of history’s most famous and admired figures, from Churchill to FDR to Gandhi, showed signs of mental illness — and became better leaders because of it. Ghaemi bases his argument on historical records and some of the latest experimental studies on depression and mania, arguing that mild symptoms can actually enhance qualities like creativity or empathy.

After reading the piece in Salon, I immediately ordered the book and I’ve been dipping into it over the past couple of days.

So far, I’ve read the chapter on FDR, and I’m going to read about JFK next. According to Ghaemi, both of these men had hyperthymic personalities: basically, they were upbeat, enthusiastic, energetic, and creative, because they tended to be somewhat hypomanic (a milder, less disabling form of the mania experienced by those with bipolar disorder). In addition, both FDR and JFK suffered from serious physical illnesses–FDR from polio and JFK from Addison’s disease. These illnesses and other adversities these two men faced enabled them to develop empathy for the suffering of ordinary people–even though they were both from privileged backgrounds. Ghaemi argues that people with slightly abnormal personalities are better leaders–particularly in times of crisis when great creativity, empathy, and resilience are needed. According to Ghaemi:

Many people who experience traumas [like terrorism or war] don’t develop PTSD or other illnesses. So the question is, what keeps those people from getting sick? What creates resilience? The psychological research suggests that personality is a major factor. Resilience seems to be associated with mild manic symptoms, but you can’t develop resilience unless you’ve already experienced trauma. Many of these leaders faced adversity in their childhood and adulthood, and that seemed to make them better able to handle crises. It’s like a vaccine. You get exposed to a little bit of a bacteria then you can handle major infections and I think trauma and resilience and hyperthymic personality seem to follow a similar path.

Ghaemi does not discuss Obama’s personality in the book, but Salon interviewer Thomas Rogers asked the author whether Obama may be too “sane” to be a successful President in our current time of crisis.

Obama’s persona is that of a very sane, rational person who is good at compromise — which is definitely how he sold himself during the debt ceiling crisis. Do you think Obama’s sanity is hurting his abilities as a leader?

I didn’t discuss Obama and other current leaders in the book, because there are documentation and confidentiality issues, and a lot of speculation would have to happen. That said, Obama has said himself that he thinks he’s very normal. This no-drama-Obama persona is meant to reassure people about his normality, but I think that when you look at his memoir there’s a sense of a much more complex and profound person who may have experienced a great deal of anxiety and maybe some depression growing up, being half-white half-African-American. The [sane] parts of his psychology may hinder his leadership in terms of not being creative, and that may not be as useful in a crisis. But to whatever extent he’s not fully completely average, he’ll have some psychological reservoir to draw on to think more creatively and realistically about the current situation.

I wish I could agree that Obama might learn to deal with the nation’s difficulties, but so far he doesn’t seem to learn anything from experience. Most of the leaders that Ghaemi discusses suffered from mood disorders–depression or bipolar disorder. Obama, on the other hand, appears to have a different kind of disorder–either Narcissistic Personality Disorder or Antisocial Personality Disorder, or both.

Dakinikat alerted me to an interview with Ghaemi on NPR. I haven’t listened to it yet, but here’s the link.

Getting back to current news, this coming Saturday, Rick Perry plans to announce that he’s running for the Republican presidential nomination.

Rick Perry intends to use a speech in South Carolina on Saturday to make clear that he’s running for president, POLITICO has learned.

According to two sources familiar with the plan, the Texas governor will remove any doubt about his White House intentions during his appearance at a RedState conference in Charleston.

It’s uncertain whether Saturday will mark a formal declaration, but Perry’s decision to disclose his intentions the same day as the Ames straw poll — and then hours later make his first trip to New Hampshire — will send shock waves through the race and upend whatever results come out of the straw poll.

Immediately following his speech in South Carolina, Perry will make his New Hampshire debut at a house party at the Portsmouth-area home of a state representative, Pamela Tucker, the Union Leader reported Monday. Tucker was among the Granite Staters who went to Texas last week to encourage Perry to run.

What can I say? This is ghastly news. Think Progress is reporting that besides being a fundamentalist religious fanatic, Perry shares a similar problem to that of fellow wingnut Michele Bachmann–he has taken lots of Federal money in farm subsidies–$80,000, to be exact.

Verizon workers have gone out on strike–45,000 of them.

More than 45,000 workers from New England to Virginia went on strike just after midnight today at Verizon Communications. Since bargaining began July 22, Verizon has refused to move from a long list of concession demands. As the contract expired, Verizon, a $100 billion company, still was looking for $1 billion in concessions from 45,000 workers and families. That’s about $20,000 in givebacks for every family, nearly 100 concessionary proposals remained on the table.

This despite Verizon’s 2011 annualized revenues of $108 billion and net profits of $6 billion. At the same time, Verizon Wireless just paid its parent company, Vodaphone, a $10 billion dividend. Meanwhile, Verizon’s five top executives received $258 million over the past four years.

The workers, members of the Communications Workers of America (CWA) and the Electrical Workers (IBEW), say they are striking until Verizon “stops its Wisconsin-style tactics and starts bargaining seriously.”

According to Reuters, both sides are accusing each other of bad acts:

The second day of a strike by Verizon workers turned ugly after union representatives accused managers of injuring three workers while driving past picket lines, and the phone giant complained of a spike in network sabotage cases.

[….]

Verizon complained of network sabotage cases in the same statement where it said some picketing workers were unlawfully blocking Verizon managers’ access to work centers.

A spokeswoman for the Communications Workers of America, representing 35,000 of the strikers, said the union “does not condone illegal action of any kind.” The International Brotherhood of Electrical Workers, representing 10,000 strikers, also said members “are expected to obey the law.”

However, the CWA said some picketing workers were hurt by Verizon managers’ cars and that one worker was knocked unconscious when he was clipped by the mirror of a manager’s car that was speeding past a picket line.

Dean Baker had a great piece at Truthout yesterday: The Economic Illiterates Step Up the Attack on Social Security and Medicare

The nonsense with the S&P downgrade is yet another distraction – after four months of haggling over the debt ceiling idiocy – from the real problem facing the country: a downturn that has left 25 million people unemployed, underemployed or out of the labor force altogether. Tens of millions of people are seeing their career hopes and family lives wrecked by the prospect of long-term unemployment.

The incredible part of this story is that the people who are responsible are all doing just fine, and most of them are still making policy. Furthermore, they are using their own incompetence as a weapon to argue that we have to take even more money from the poor and middle class, this time in the form of Social Security, Medicare and Medicaid benefits.

The basic story is that the economy needs demand. The housing bubble generated more than $1.4 trillion in annual demand through the construction and consumption that it spurred. Now that this demand is gone, there is nothing to replace it. President Obama’s stimulus was replaced by some of the lost demand, but it was nowhere near large enough. We tried to fill a $1.4 trillion hole in annual demand with around $300 billion in annual stimulus in 2009 and 2010. In 2011, most of this boost has been exhausted and the economy is coming to a near standstill.

If we had serious people in Washington, they would be talking about jobs programs, about rebuilding the infrastructure, about work sharing, and any other measure that could get people back to work quickly. However, instead of talking about ways to re-employ people, the fixation in Washington is reducing the deficit.

We’ve heard these arguments again and again (especially from our own Dakinikat), but they bear repeating until the ignorant Villagers get the message.

Remember the “rape cops” in New York–the ones who were found not guilty recently? Well, one of them finally got a tiny bit of justice. A judge sentenced Kenneth Moreno to one year in prison for official misconduct. But then another judge freed him.

Disgraced ex-cop Kenneth Moreno didn’t stay in jail for long.

A couple hours after an angry Manhattan judge flat-out called Moreno a liar Monday and dispatched him to Rikers Island to being a year-long prison sentence, an appeals court judge sprung him.

Moreno, acquitted in May of raping a bombed fashion executive while his partner served as lookout, was released on $125,000 bail by Appeals Court Judge Nelson Roman so he can appeal his conviction on official misconduct charges.

It was a startling turnabout for the 43-year-old Moreno, who Supreme Court Justice Gregory Carro ordered remanded.

I sure hope he ends up serving at least some jail time.

Dakinikat sent me this article on a report (PDF) called How to Liberate American from Wall Street Rule. Here are the report’s basic recommendations:

How to Liberate America from Wall Street Rule spells out details of a six-part policy agenda to rebuild a sensible system of community-based and accountable financial services institutions.

1. Break up the mega-banks and implement tax and regulatory policies that favor community financial institutions, with a preference for those organized as cooperatives or as for-profits owned by nonprofit foundations.

2. Establish state-owned partnership banks in each of the 50 states, patterned after the Bank of North Dakota. These would serve as depositories for state financial assets to use in partnership with community financial institutions to fund local farms and businesses.

3. Restructure the Federal Reserve to function under strict standards of transparency and public scrutiny, with General Accounting Office audits and Congressional oversight.

4. Direct all new money created by the Federal Reserve to a Federal Recovery and Reconstruction Bank rather than the current practice of directing it as a subsidy to Wall Street banks. The FRRB would have a mandate to fund essential green infrastructure projects as designated by Congress.

5. Rewrite international trade and investment rules to support national ownership, economic self-reliance, and economic self-determination.

6. Implement appropriate regulatory and fiscal measures to secure the integrity of financial markets and the money/banking system.

Finally, in case you missed it, I want to call your attention to this article that commenter The Rock linked to last night: Hillary Told You So

At a New York political event last week, Republican and Democratic office-holders were all bemoaning President Obama’s handling of the debt-ceiling crisis when someone said, “Hillary would have been a better president.”

“Every single person nodded, including the Republicans,” reported one observer.

At a luncheon in the members’ dining room at the Metropolitan Museum of Art on Saturday, a 64-year-old African-American from the Bronx was complaining about Obama’s ineffectiveness in dealing with the implacable hostility of congressional Republicans when an 80-year-old lawyer chimed in about the president’s unwillingness to stand up to his opponents. “I want to see blood on the floor,” she said grimly.

A 61-year-old white woman at the table nodded. “He never understood about the ‘vast right-wing conspiracy,’” she said.

Looking as if she were about to cry, an 83-year-old Obama supporter shook her head. “I’m so disappointed in him,” she said. “It’s true: Hillary is tougher.”

Go read the whole thing. That’s all I’ve got for today. What are you reading and blogging about? Please share.

All Talk, No Action on Jobs

Posted: August 4, 2011 | Author: | Filed under: jobs, Stock Market, U.S. Economy, U.S. Politics, unemployment, voodoo economics | Tags: , , , , , , , , , , , , | 17 Comments

Disappoint Mints*

A couple of days ago Newt Gingrich made the bizarre claim that

President Barack Obama’s tenure in the White House “is a Paul Krugman presidency.”

Of course we know that Obama cannot stand Paul Krugman, because Krugman has been criticizing Obama since the back in 2008. No, Obama’s is not “a Krugman presidency.” It’s “a ‘the dog ate my homework'” presidency. It’s a “smoke and mirrors” presidency. Or maybe a “confidence fairy” presidency.

In the morning post today, I quoted both White House Press Secretary Jay Carney and Treasury Secretary Tim Geither holding forth on what Digby calls “the confidence fairy.”

Here’s Carney yesterday:

Spokesman Jay Carney says there is no question that economic growth and job creation have slowed over the past half year.

But, Carney told a White House briefing, “We do not believe that there is a threat of a double-dip recession.”

Really? And how do you know this, Jay?

He blamed the earthquake and tsunami in Japan, higher energy prices, default worries in Europe and recently resolved uncertainty over raising America’s borrowing limit. Carney said, “We believe the economy will continue to grow.”

Uh huh. But what’s that based on? Where is your evidence? Carney never produced any.

Now here’s Tim Geithner on the dramatic spending cuts included in the debt ceiling bill:

GEORGE STEPHANOPOULOS: So this won’t cost us jobs?

TIM GEITHNER: No, it will not. Now … if we put this behind us then we can turn back to the important challenge of trying to find ways to make sure that we do everything we can to get more people back to work, strengthen our growth. And we’ll have more ability to do that now with people more confident and we can start to get our arms around the long-term problems.

Leaving aside the fact that no one I know is “more confident,” and Wall Street sure doesn’t seem “confident,” how will “confidence” translate into jobs? Especially now that there are caps on domestic spending that will prevent the government from helping create jobs?

Read the rest of this entry »

Thursday Reads: A Poverty Tour, Confidence Fairies, A-Rod, D.B. Cooper, and Wingnut Censors

Posted: August 4, 2011 | Author: | Filed under: 2012 presidential campaign, Barack Obama, Crime, Democratic Politics, poverty, religion, Republican politics, Surreality, Team Obama, U.S. Economy, U.S. Politics, voodoo economics | Tags: , , , , , , , , , , , , , , , , , , | 27 Comments

Good Morning!! Let me get a sip of my breakfast tea, and then I’ll share what I found in the news today.

After doing his level best to wreck the U.S. economy, President Obama headed to Chicago to celebrate his birthday and rake in some campaign donations.

Taking a brief hometown respite Wednesday night, President Barack Obama used a 50th birthday bash in Uptown to raise re-election money from a friendly crowd as he sought to recharge a presidency showing signs of scars from Washington’s partisan battles.

The president told supporters at the Aragon Entertainment Center that the nation doesn’t have time to “play these partisan games.”

“I hope we can avoid another self-inflicted wound like we saw over the last couple weeks,” Obama said of the recent debt-ceiling gridlock.

Although Obama doesn’t turn 50 until Thursday, his visit symbolized presidentially and politically a need to turn the corner following weeks of bruising debate over raising the nation’s debt ceiling and cutting the country’s deficit.

Awww, poor guy. Screwing the poor, the elderly, baby boomers, and the working- and middle-classes must be really exhausting.

Meanwhile, Tavis Smiley and Cornel West are heading up a “poverty tour”

to highlight what they see as deficiencies in the Obama’s administration and to force the president and Congress to pay more attention to poor people who have been hit hardest by the recession.

Smiley called the legislation, signed by the president, “a declaration of war on the poor.”

“I don’t understand how the president could agree to a deal that does not extend unemployment benefits, does not close a single corporate loophole and doesn’t raise the taxes on the rich,” said Smiley. “The poor are being rendered more and more invisible in this country. Nobody, not the president, not the Republicans in Congress, is speaking to the truth of the suffering of everyday people.”

Paul Krugman was on Keith Olbermann’s show last night. I keep forgetting to watch that! Krugman discussed a number of things related to the debt ceiling bill, including Newt Gingrich’s remark that the Obama’s is “the Krugman Presidency.” It is to laugh!

Vodpod videos no longer available.

Today, Obama’s press secretary Jay Carney said there won’t be a double-dip recession and the economy is going to grow.

He blamed the earthquake and tsunami in Japan, higher energy prices, default worries in Europe and recently resolved uncertainty over raising America’s borrowing limit. Carney said, “We believe the economy will continue to grow.”

Al-righty then! I guess we have nothing to worry about.

At his blog, Krugman responded that “hope is not a plan.”

Of course there’s a threat. Larry Summers puts the odds at one in three; I might be slightly more optimistic, but the risk is very real. Who, exactly, is at the White House who knows better?

And think about the politics here. For two years the White House has been determinedly cheerful, always declaring that the recovery was on track, that its policies were working fine. And all it did was squander its credibility. Maybe admitting the truth, saying that in fact we hadn’t done nearly enough, would not have helped get useful legislation through Congress. But at least it would have conveyed the message that the WH was living in the same reality as ordinary workers.

Now they’re doing it again. To what purpose? Do they think the markets will be reassured? Do they think consumers will be reassured? At this point, after the “summer of recovery” came and went a whole year ago?

Apparently, that is what they think. Via Digby, Tim Geithner, who seems to be the person Obama listens to most on economic issues, strongly believes in the “confidence fairy.” He must also be the source of Jay Carney’s belief that we won’t have another recession, because that’s what Geithner told George Stepanopoulos a couple of days ago.

GEORGE STEPHANOPOULOS: But don’t you think that any deficit reduction now will — will hurt the attempts of the economy to recover?

TIM GEITHNER: You know, I think the — basic reality we live with and, you know, part of governing is recognize we live with — we don’t have unlimited resources, and we inherited and are left with unsustainable deficits long term. And the president understands that for the sake of the economy long-term it’s very important we demonstrate to the American people, to people around the world that we can get our arms around this and start go back to living’ within our means.

Now, we want to do that very carefully so we create room for the economy to grow and we have the resources necessary to invest in things that are going to be very important to the future like education, like infrastructure, like incentives for private investment. And to do that, it is absolutely essential to lock in these long term savings. Now — the president was very strong on this and made sure that we were not going to accept spending cuts that would damage the prospects for near term recovery. Now, with this behind us, and we get this —

GEORGE STEPHANOPOULOS: So this won’t cost us jobs?

TIM GEITHNER: No, it will not. Now … if we put this behind us then we can turn back to the important challenge of trying to find ways to make sure that we do everything we can to get more people back to work, strengthen our growth. And we’ll have more ability to do that now with people more confident and we can start to get our arms around the long-term problems.

WTF?! Is this guy for real? As Krugman said, “hope is not a plan,” but they don’t seem to have anything else.

At The Nation, George Zornick asks a very good question: Is it time to downgrade the ratings agencies?

…by almost all accounts inside the beltway, a downgrade in the federal government’s credit rating would be catastrophic. But a closer look at who issues these ratings, how they do it, and the real-world impact of these ratings tells a different story.

The first clue that these ratings might not be highly calibrated, serious indicators of creditworthiness can be found in the 2008 economic collapse. The financial products created by Wall Street that were full of toxic mortgage securities were all blessed with gold-star ratings as safe investments from the country’s three main credit ratings agencies, Moody’s, Fitch and Standard and Poor’s.

These products were so awful as to destroy Lehman Brothers, threaten many other trading firms, and plunge the economy into recession, but the ratings agencies consistently told investors they were safe. As William Greider has noted here, this essentially made the rating agencies “unindicted co-conspirators” in the collapse.

Were these agencies just bad at their jobs? Maybe, but Greider offers another more sinister theory: since the banks pay the rating agencies to examine their financial products, a harmful rating would persuade the banks to just shop elsewhere for a more favorable outcome. “This is an outrageous conflict of interest at the very heart of the financial system,” Greider writes.

Overpaid New York Yankee Alex Rodriguez is in trouble again, this time for illegal gambling. Baseball officials opened an investigation after

Star Magazine reported that Rodriguez “played in an underground, illegal poker game where cocaine was openly used, and even organized his own high-stakes game, which ended with thugs threatening players.”

Under the rules that govern baseball players, Rodriguez will have to truthfully answer baseball’s questions. If he acknowledges that he played in underground games or if officials uncover evidence that he did so, he could face a suspension.

The report Wednesday came a month after Major League Baseball opened its own investigation into Rodriguez’s ties to gambling. The investigation was prompted by a Star Magazine report in June that said Rodriguez had participated in a high-stakes illegal poker game with the actors Tobey Maguire, Leonardo DiCaprio, Ben Affleck and Matt Damon.

Hmmm…he was playing with Red Sox fans Affleck and Damon. I wonder who talked to Star Mag? I also learned on Google that A-Rod is dating actress Cameron Diaz. Boy is she making a big mistake.

Here’s an update on the D.B Cooper story I wrote about in the Tuesday Reads: My uncle was D.B. Cooper, Oklahoma woman claims It sounds crazy, but apparently the FBI believe this woman’s story.

To Marla Cooper of Oklahoma, her uncle was D.B. Cooper — except she knew him as Uncle L.D. She believes he died in 1999.

“I saw my uncle plotting a scheme,” Cooper told CNN’s Brooke Baldwin of what she said she remembers witnessing as an eight-year-old girl four decades ago.

Cooper said she was with two uncles at her grandma’s house around Thanksgiving time.

“I was with them while they were plotting it. I didn’t really know what was going on,” Cooper said. “Afterwards on Thanksgiving Day, I saw them return and I heard them discussing what they had done with my father. I have very vivid memories of it.”

Her claim might be cause for healthy speculation, especially 40 years after the fact, but two sources close to the investigation have told CNN that Marla Cooper’s tip led to the FBI reviving the case and for the past year the agency has been actively working the lead.

She says her uncle returned home badly injured and was treated at a VA hospital. Then he disappeared and she never saw him again. Her family made her swear she would never talk about what had happened.

Finally, from Think Progress, here’s an update from the annals of wingnut craziness: MO High School Bans ‘SlaughterHouse Five’ From Curriculum, Library Because Its Principles Are Contrary To The Bible

On Monday at the Republic, MO school board meeting, four Republic School Board members reviewed a year-old complaint that three books are inappropriate reading material for high school children. In a 4-0 vote, the members decided to ax two of the three books from the high school curriculum and the library shelves: Twenty Boy Summer by Sarah Ockler and Slaughterhouse-Five by Kurt Vonnegut. Speak by Laurie Halse Anderson was spared. The resident who filed the original complaint targeted these three books because “they teach principles contrary to the Bible”

Wesley Scroggins, a Republic resident, challenged the use of the books and lesson plans in Republic schools, arguing they teach principles contrary to the Bible.

“I congratulate them for doing what’s right and removing the two books,” said Scroggins, who didn’t attend the board meeting. “It’s unfortunate they chose to keep the other book.”

Horrors! Contrary to the Bible? We can’t have that! You know, sometimes I’m very grateful to live in a relatively civilized place like Boston. This is one of those times.

On that note, I’m going to get another cup of tea and then check out what you all are reading and blogging about. Please post your links in the comments.

Balanced Budget Amendments are Bad Policy

Posted: August 3, 2011 | Author: | Filed under: U.S. Economy, U.S. Politics, voodoo economics | Tags: , , , , , , , , , , , , , | 9 Comments

I always have to cover this topic in any introductory macroeconomics class I teach because usually one nutjob or another running for office always brings this up and people fall for it.  The arguments are usually based on complete fallacies and misunderstanding of the math of economics, but hey, for some reason balanced budgets sound ‘reasonable’ when they are anything but.

I used to talk theoretically about how balanced budget amendments will kill state economies when the next real recession hits.  Well, it hit a few years ago and we’re there.  States continue to make their own economies worse day in and day out but there’s still those people that insist that if a family has to balance its budget, then so should the country.  That’s even stupid considering most families have mortgages and car payments and probably student loans. Take Michele Bachmann as an example. She’s got all of the above plus farm subsidies and government grants.  Even the President is guilty of that false equivalency.  No person or family exists in perpetuity.  No person or family can print money.  No person or family has the power of taxation.  Because of these three things, you cannot compare government to a family.  Nor can you compare government to a business.  Businesses exist to make a profit.  Government exists to provide services and goods that the private sector will not provide or provides at an outrageous cost.  It exists to administer justice and ensure level playing fields and fair play exists.  Everything about a government is unique and is no way comparable to either businesses or households.

Macroeconomists know from years of study that the federal government can influence the economy at large.  It does so through its spending and taxing priorities and policies.  This is called fiscal policy.  We have found several economic laws that guide the relationship between taxes and government spending and the behavior of Gross Domestic Product (GDP) which roughly measures all the legal and reported spending by households, governments, foreigners, and businesses.  In our economy, household spending comprises about 68% of all GDP.

Investment or purchases by businesses is the smallest and most erratic component of GDP.  Keynes said that it is easily spooked and subject to animistic spirits.  Because it’s an unreliable source of growth, Keynes argued that in down turns, government should use its power to spend.  Business investment usually only does fine in good economies. Please note,  Keynes said deficit spend in recessions.  Keynes’ prescription also said that Federal governments should run balanced budgets during times when the economy is fully employed and surpluses during bubble or boom times to relieve inflationary pressure.  As usual, conservative politicians completely lie about the nature of Keynes and his highly proven and credible theories on fiscal policy.  A lot of what we know about Monetary Policy comes from Milton Friedman, however, that is not the subject today.  What I want to emphasize is that both men spent a lot of time analyzing panics and the Great Depression and are very much at the heart of accepted theory.  We are seeing a classical lack of aggregate demand today.  It is what’s driving the budget deficit.  It is what’s driving the joblessness. It is what’s driving the slow recovery.  Government must and will by automatic stabilizers be in a deficit position during downturns.  It is simple math.  More revenues come in during good times than bad.  More safety net spending increases during bad times than good.  We naturally run towards deficit in bad economies and towards surplus in good.

However, show me an economy that’s booming with high revenues and lower safety net spending and I will show you a group of politicians spending wildly.  This tends to create inflation and can lead to bubbles.  However, you never hear them complain at that point in time.   That’s because it should be relatively easy to balance a budget then, but they do not do so or if they do its by expanding programs that cannot be sustained without borrowing during bad economies.

With that short explanation, let me cite you some folks that tell you why balanced budget amendments are bad policy.  This first quote is from Simon Johnson who is the former chief economist for the IMF.  He asks us to keep in mind that GDP is a measurement that is fraught with problems.   He also mentions the fact that a balanced budget amendment makes the government make recessions worse.

Second and more seriously, imagine that this constitutional amendment were in place and that federal spending were roughly at its limit relative to the size of the economy. Then, what happens should the financial sector blow up again — either through no fault of its own (which, believe it or not, is the current prevailing myth on Wall Street about 2007-9) or because of some toxic combination of malfeasance and malpractice (the current predominant view of 2007-9 among many other people)?

The blame game is irrelevant when G.D.P. drops 10 percent; the issue is how to prevent a Great Depression. But note that with such a decline in G.D.P., a level of nominal spending that was 18 percent of G.D.P. is suddenly 20 percent, and now a constitutional crisis awaits – even before we get to the question of whether tax cuts or other forms of stimulus might be appropriate.

It makes no sense to take aim, as a matter of constitutional process, at two numbers that are both outcomes of deeper economic processes.

And to be frank, sometimes it makes a great deal of sense to apply an economic stimulus to an economy in free fall. One such moment was 1930 (and 1931 and 1932), when no stimulus was applied. Other moments were 2008 and 2009; both President Bush and President Obama initiated stimulus packages. When credit for and confidence in the private sector evaporates, do you really want the government sector to be forced to make quick cuts — or to raise taxes?

James Ledbetter at Reuters argues that even conservatives should oppose a balanced budget amendment (BBA).  His reasons are more pragmatic.  He argues that it won’t work.

Historically, conservatives have opposed extending government authority in places where it is not effective. You can find all the evidence you need to conclude that balanced budget requirements are useless by simply investigating the oft-repeated claim that 49 states have laws requiring a balanced budget. Leave aside the falsity of the claim and just consider the logic: if so many states are required to balance their budgets, why are so many states in the red?

The answer is that requiring state governments to annually balance their books simply encourages them to find clever ways to disguise debt and deficits. For example: California has both a Constitutional and a statutory requirement that its budgets be balanced. Would any sane person maintain that the state’s books have been anything resembling healthy for at least a decade? This year, after some brutal spending cuts, the governor’s office found that the state still had a short-term deficit of more than $9 billion and $35 billion in long-term debt. The governor’s budget report noted that California’s “massive budget deficits for most of the past decade…have been largely the result of a reliance on one-time solutions, borrowing, accounting maneuvers, and cuts or revenues that were illusory and therefore did not materialize.”

If that sounds familiar, it may be because, as Richard Quest pointed out on CNN Sunday evening, we’ve witnessed numerous Congressional attempts in recent decades to rein in federal deficits—including Gramm-Rudman in 1985 and the Budget Enforcement Act of 1990—all of which fell victim to legislative legerdemain. Why would a federal balanced budget amendment be any different?

Here’s something from The Economist on “Fiscal Rules”.  Some fiscal rule–rather than a balanced budget amendment–would better stop congress from spending during booms and full employment cycles rather than balancing its budget via a BBA. This would be a rule that attaches the spending mandates to what’s going on in the economy.  But again, I doubt they’d follow it since they’ve ignored a good portion of the Keynesian prescription for years any way.

It is difficult for Congress to tie its own hands. Any law that can pass Congress can later be undone or changed. In the rare cases that Congress puts together a near-perfect piece of legislation, that’s a bad thing. In the vastly more common occurrence that Congress passes highly imperfect legislation in need of significant future tweaks, that’s a very good thing. Support for an amendment to the constitution is a spectacular vote of confidence in the ability of a legislature to design near-perfect legislation, because the only thing rarer than an amendment to the constitution is a subsequent amendment undoing or clarifying a previous amendment.

I see the argument for a well-designed, over-the-business-cycle balanced-budget amendment. But the idea of enshrining this Congress’ pathologies into the constitution is terrifying. Let’s see Congress design some quality fiscal rules using the normal legislative process first, and then we can talk about adding those to the constitution.

Bruce Bartlett has some excellent analysis up for the current go round of balanced budget amendments.  Mark Thoma explains how a BBA is a very bad idea. His analysis includes looking at the destabilizing effects that states’ BBAs have had on their economies. There’s a nifty graph that I did not include here if you’d like to go view it.

I’ve argued on many occasions that one of the big lessons we need to learn from this recession is that state-level balanced budget requirements are highly destabilizing. When a recession hits, spending goes up for social services and taxes fall as income, sales, property values, and other sources of revenue for state and local governments decline.

The result is a big hole in state and local government budgets, and that forces either increases in taxes or cuts in spending both of which make things even worse. And though some state and local governments were an exception to this, far and away the choice is to cut spending. We can see this in the state and local government employment statistics:

That’s not what we want to have happening when we are trying to recover from a recession. It would be much better if states had rainy day funds to rely upon, and if the rainy day funds fall short, the federal government could backfill the budget holes to prevent the destabilizing downsizing.

So have we learned the lesson? Nope, at least not if you are a Republican. They’d like to impose the same destabilizing rules on the federal government:

You really would have to search high and low for an economist that actually supports a BBA.  The more conservative ones go for the fiscal rule that attaches spending to business cycles but even they believe that it would be unenforceable and easy to avoid. Can you imagine some District Judge trying to look over a complex macroeconomic model and figure out if the government forecast was correct or not?

A group of leading economists, including five Nobel Laureates in economics, today publicly released a letter to President Obama and Congress opposing a constitutional balanced budget amendment. The letter outlines the reasons why writing a balanced budget requirement into the Constitution would be “very unsound policy” that would adversely affect the economy. Adding arbitrary caps on federal expenditures would make the balanced budget amendment even more problematic, the letter says. The Economic Policy Institute and the Center on Budget and Policy Priorities organized the letter.

“A balanced budget amendment would mandate perverse actions in the face of recessions,” the letter notes. By requiring large budget cuts when the economy is weakest, the amendment “would aggravate recessions.”

The signatories of the letter are Nobel Laureates Kenneth Arrow, Peter Diamond, Eric Maskin, Charles Schultze, William Sharpe and Robert Solow; Alan Blinder, former Vice Chair of the Federal Reserve System’s Board of Governors and former member of the Council of Economic Advisors; and Laura Tyson, former Chair of the Council of Economic Advisors and former Director of the National Economic Council.

I’ll let former Reagan economist Bruce Bartlett have the last word here. He looks at the recent debate in Congress on the BBA.

Next week, House Republicans plan to debate a balanced budget amendment to the Constitution. Although polls show overwhelming public support, it is doubtful that many Americans realize that the measure to be debated is not, in fact, a workable blueprint to enforce a balanced budget. In fact, it’s just more political theater designed to delight the Tea Party.

We really need improved economic literacy in this country.  I genuinely can’t get over what some of the morons in congress can get away with saying.  Economists call them on it but it appears no one every listens.

Tuesday Reads

Posted: August 2, 2011 | Author: | Filed under: Barack Obama, children, Crime, Federal Budget and Budget deficit, Foreign Affairs, morning reads, Psychopaths in charge, Syria, the villagers, U.S. Economy, U.S. Politics, Violence against women, voodoo economics, We are so F'd | Tags: , , , , , , , , , , , , , , , , , , , , , | 33 Comments

Good Morning!! I have a few interesting reads for you today, and they aren’t all about the idiotic debt ceiling debate. I’m going to lead off with a few excellent blog posts about that idiocy, and then I’ll move on to something else.

First up, Scarecrow compares the movie Cowboys and Aliens to the events in DC: In Cowboys and Aliens, Humans Win; In Washington’s Zombies Vs. Pods, They Lose. In the movie, Scarecrow writes:

humans of all types realize they have to join together to defeat the rapacious creatures who are looting the planet and turning humans into zombies and pod people. There’s hope for our species!

Back in Washington, D.C. there are no heroes and no upbeat ending. Instead, the looting, muggings and beatings will continue until morale improves.

In our “real” world, there is a radical extremist group driven by zombies and zombie beliefs who successfully blackmail the nation into strangling its own economy. The supposedly “sane” group that is supposed to stop this madness has become cowardly and turned into mindless pod people, who assure the nation that the gutting of American government and essential services and safety nets won’t occur in one step but in several, whose outcome is locked in by an undemocratic Super Congress and the next debt limit blackmail in 2013.

It’s a terrific post.

On a more serious note, Emptywheel asks, Is Mark Warner the Designated Social Security Killer? It’s all about what may happen if the so-called “Super Congress” comes to be. Read it and weep.

At the New Yorker, John Cassidy argues that the debt ceiling bill is all smoke and mirrors.

In removing the immediate threat of a debt default, the agreement…signals that the U.S. government still satisfies the minimum standard of financial functionality: it pays its bills on time. That should be enough to head off an immediate downgrade in the nation’s credit rating, and it explains why Wall Street bounced at Monday’s opening bell.

Beyond that it is hard to see anything very positive about a deal in which President Obama finally persuaded the Republicans to accept a Republican plan. Putting on my ethicist cap, I agree with Bernie Sanders that the deal is wrongheaded and immoral. To be sure, America has a long-term fiscal challenge that needs to be confronted. But at a time when fourteen million Americans are unemployed, and many millions more have been forced to work just part-time, the government should be focussing on job growth rather than cutting the budget….

As I’ve said before, headlines such as “Democrats and Republicans agree on $2.4 trillion in spending cuts over 10 years” are virtually meaningless. The United States, like every other country, budgets on an annual basis. What really matters for the economy, and for the unemployed, is how much cash the federal government will spend in the remaining months of the 2011 fiscal year and in fiscal 2012, which begins October 1st. A pledge to cut spending in 2016, say, is just that: a pledge. Between now and then, we will have another bipartisan spending review (that’s also part of the deal), a Presidential election, and who knows how many budget battles. The actual 2016 spending outcome will almost certainly bear little relation to the figures in this agreement.

Also at the New Yorker, Hendrick Hertzberg has a funny piece about Louie Gohmert, looney Texas Republican Congressman quoting Communist Leon Trotsky. I don’t want to ruin it for you by pulling out a quote. It’s not long, so go read the whole thing.

Susie Madrak has a great post at Crooks and Liars: This Year We’ve Broken Or Tied 2,676 Heat Records – So Far. Think We Could Talk About Climate Change Yet? Be sure to check it out.

Do you realize how many people go missing in the U.S.? A lot. And most of them seem to be women and children. Here is a slide show of 64 people from the FBI’s kidnapped and missing persons list.

The little girl whose photo comes first is 11-year-old Celina Cass, from West Stewartstown, NH. Her body was found today in a river near her family home. Sadly, when a child disappears, a family is often responsible. In this case, I have a feeling her stepfather had something to do with Celina’s death. I hope I’m wrong. At least she was found fairly quickly.

Many missing people aren’t found for years, if at all. Indiana University student Lauren Spierer disappeared from Bloomington, Indiana on June 3. Despite intense searches by hundreds of volunteers and a large reward offered by her parents and IU, she has not been found. It looks like people whom Lauren thought were “friends” may have had something to do with her disappearance, because just about everyone who was with her before she went missing has lawyered up and isn’t talking to police.

A Denver woman, Amy Ahonen, disappeared without a trace a few weeks ago. Her car was found parked unlocked along the highway with her purse, ids, cell phone, and keys inside. What happened to her? No one knows and the police have stopped looking. It so happens that a budding serial killer was on the loose in the area at the time of her disappearance, but the police don’t seem to be making that connection.

There are many more stories like this breaking every day in this country. Why do we accept that women and children will disappear daily and in most cases, they will be found murdered and often raped?

Speaking of missing people, a legendary missing person has resurfaced in the news. From the LA Times: D.B. Cooper hijacking mystery is revived with ‘promising lead’

D.B. Cooper, the infamous airplane hijacker who vaulted into urban mythology by parachuting out of a jetliner over the Pacific Northwest with a $200,000 ransom, is back on the FBI’s radar screen.

Cooper, whose case remains the only unsolved airline hijacking in U.S. history, became the stuff of legend on the night of Nov. 24, 1971, when he jumped from a Boeing 727 into the skies between Portland, Ore., and Seattle. He disappeared with the ransom he extorted — 10,000 $20 bills.

The case has remained open, but the trail has been cold despite hundreds of tips, thousands of theories and dozens of breakthroughs in scientific investigation. Now the FBI, which has previously said that Cooper is likely dead, is looking at fresh evidence, according to weekend reports in the media in Seattle, the epicenter of the story that seemingly can never die.

From the Seattle Post-Intelligencer:

The man investigated as a suspect in the D.B. Cooper case – the nation’s only unsolved commercial airplane hijacking – has been dead for about 10 years, and a forensic check didn’t find fingerprints on an item that belonged him, an FBI spokesman told seattlepi.com Monday.

“There are also other leads we’re pursuing,” agent Fred Gutt said. “Some of the other names have been out in the public, some of the names have not come out.”

The name of a man not previously investigated was given to the FBI nearly a year ago by a law enforcement colleague, and an item that belongs to him was sent for fingerprint work at the agency’s Quantico, Va., forensic lab, agents told seattlepi.com.

“The nature of the material was not good for prints,” Gutt said.

He added agents are obtaining other items that may have the suspect’s fingerprints in hopes of matching them with prints taken from the Northwest Orient plane after Cooper jumped the night of Nov. 24, 1971.

The situation in Syria is escalating. There has been a great deal of violence there for some time, and it is not getting the same attention that Egypt, Iran, and Libya have gotten. But now the UN Security Council plans to take up the issue.

Reacting to new bloodshed in Syria, European powers relaunched a dormant draft U.N. resolution to condemn Damascus for its crackdown on protesters, circulating a revised text to the Security Council at a meeting on Monday.

Following the hour-long closed-door meeting, several diplomats said that after months of deadlock over Syria in the council, the fresh violence appeared to be pushing the divided members towards some form of reaction.

But envoys disagreed over whether the 15-nation body should adopt the Western-backed draft resolution or negotiate a less binding statement.

Germany requested the meeting after human rights groups said Syrian troops killed 80 people on Sunday when they stormed the city of Hama to crush protests amid a five-month-old uprising against President Bashar al-Assad.

More than 1600 people have been killed during the Syrian uprising.

From the Daily Beast:

You have to wonder if President Barack Obama ever rereads his speeches.

At the State Department last May, the president spoke at length of democratization in the Middle East. He chose his words carefully, dropping caveats and provisos. But Obama also bluntly declared that, “it will be the policy of the United States to promote reform across the region, and to support transitions to democracy.” He justified the intervention in Libya by recalling that “we saw the prospect of imminent massacre … Had we not acted along with our NATO allies and regional coalition partners, thousands would have been killed.”

Yet precisely such sordid outcomes have come to pass, not in Libya but during the four-month uprising against the regime of President Bashar al-Assad in Syria. Around 1,600 people are believed to have been killed, not mentioning some 3,000 disappeared, many of them presumed dead. Massacres have proliferated, and on Sunday, the eve of the holy month of Ramadan, the Syrian army entered the city of Hama, which had effectively escaped from government writ weeks ago.

Throughout, the White House has painstakingly avoided demanding that Assad step down, saying only that he must lead a transition to democracy or get out of the way. The Syrian dictator has, of course, done neither.

I’ll end with just one more link on the debt deal that Dakinikat sent me.

Reuters analysis – Debt deal unlikely to boost investor confidence

Rather than a relief rally, U.S. stocks ended modestly lower on Monday as ugly economic data and some lingering concerns about whether the deal would get through Congress dominated trading. But even when the House of Representatives voted to pass the plan late in the day there was little reaction from U.S. stock index futures.

The deal agreed to by Republican and Democratic leaders will raise the government’s borrowing ceiling while cutting spending by at least $2.1 trillion over 10 years. All of the burden could fall on spending cuts with no guarantee of steps to lift tax revenues.

Rather than perceiving it as a meaningful effort at tackling the United States’ huge debt problem, investors worried about the impact of austerity on an economy already hit by souring business and consumer confidence.

Plans for such a significant fiscal retrenchment, even though most of the impact will be in the latter years of the program, come at a vulnerable time for the world economy. Recession risks are rising in the United States, the European economy remains entwined in its own debt crisis, and China’s supercharged economy could slow.

“Risk markets may rally temporarily, but until economic growth and job creation is addressed, there can be no sustained rally,” Bill Gross, the co-chief investment officer of PIMCO, which manages more than $1.2 trillion, said in an interview.

Will Washington ever wake up to reality? I’m afraid they (and we) will have to hit bottom first. They are like alcoholics, except they are drunk on greed and power. So on that note, what are you reading and blogging about today?

← Older Entries
Newer Entries →