Lazy Saturday Reads

Peruvian artist Hugo Lecaros

from the brush of Peruvian artist Hugo Lecaros

How’s your Saturday going?

I have a few odds and end reads  on Brazil and Venezuela that I’d like to suggest today.  I’m trying to take a breather from US politics so let’s look to two Southern neighbors with economic and political crises.  I’m going to start out with a few articles on Venezuela.  The country is having serious issues on the economic and political front.  It’s never good when one of our trading partners experiences such disruption.

Venezuela is experiencing hyperinflation which is something that is rare these days in places that we generally view as having functioning and non-politically manipulated central banks.  Usually, hyperinflation occurs in countries when the central government tries to solve its problems by printing money or devaluing its currency internationally and the central bank obliges. Venezuela’s debt is also out of control given the range and value of the countries assets.  Usually, these kinds of things will start transmitting instability to the region and to the country’s trading partners because prices of goods and services, interest rates, and exchange rates will fluctuate.

 There is civil unrest also as the country is experiencing food shortages and riots.  None of this is good and we’re really not hearing much about this in the traditional US media outlets.  Most of this analysis comes from the British Press and analysts focused on the region.

The rumour was there would be chicken.

Word had spread that a delivery of poultry meat was due at the Central Madeirense supermarket, and long before dawn a queue of shoppers was snaking around the block.

Kattya Alonzo was one of them. The 48-year-old mother of three was already planning to make the traditional chicken and rice dish arroz con pollo – if she could also find some rice.

“I haven’t been able to buy chicken in more than a month, so I was there early at about 4am,” she said.

At about 6.30, two trucks finally drew up outside the store, but before the drivers could start to unload, national guardsmen told them to drive on.

Perhaps it was not surprising that the mood outside the supermarket quickly turned ugly: frustration turned to despair, anger to violence. Before long, the incident on Tuesday had escalated.

Mobs tried to loot several bakeries and delis and another food delivery truck.

The unrest soon spread throughout this city of 200,000 just outside the capital, Caracas. Protesters shouted “We want food” as they blocked intersections with burning tyres and clashed with security forces.

Police and the national guard quickly controlled the outburst, with some 14 people reportedly arrested, and at least one person was injured, according to witnesses.

The protests were not related to marches in Caracas and other major cities, which were called this week by opposition leaders seeking to cut short the term of President Nicolás Maduro who they say has driven the country into the ground through mismanagement.

But spontaneous outburst such as the one in Guarenas may present a more serious challenge to Maduro’s rule than any efforts by his political rivals.

Things are not going well in Venezuela since global oil prices are down.  There are black markets everywhere since the food shortages began. Vendors get rich selling basics like diapers and milk.  The government has been trying to control prices but what this has done is lead to folks turning to side channels in black markets where the price is set by desperation and greed.  These black market shoppers are called “bachaqueros”  which is a play on the name of the bachaco leaf-cutting ant that carries several times its weight.  This place is no longer the socialist dream of the late Hugo Chavez who ruled the country for 14 years.  It is an example of socialism gone very wrong.

Epic Mural in Chile Mexican artist Jorge González Camarena, assisted by Chilean painters, Eugenio Brito and Albino Echeverría.

Epic Mural in Chile by Mexican artist Jorge González Camarena, assisted by Chilean painters, Eugenio Brito and Albino Echeverría.

It wasn’t always this way. Diego Moya-Ocampos, senior political risk analyst at IHS, says the current crisis is the result of years of “economic mismanagement” by the ruling socialist party.

Led by Hugo Chávez, the country’s firebrand former president, the country embarked on a wave of expropriation and redistribution with the charismatic leader offering  cut-price fridges, appliances and even new homes to poor Venezuelans.

Chávez wanted to create a socialist paradise, an ideology that has been reinforced by his successor Maduro following his death in 2013.

But the oil price collapse a year later served as a wake-up call for a country that chose profligacy over prudence in the hope that a rainy day would never come.

Oil accounts for 98pc of total exports and 59pc of fiscal revenues, but Moya-Ocampos says the price slide isn’t the country’s only problem.

“Even under Chavez and $100 a barrel oil, debt was rapidly rising and there were already food shortages,” he says, “This is ultimately to do with an interventionist model that is not sustainable and has reached a tipping point.”

Maduro’s declaration of a fresh three month state of emergency has sparked fears that the government will try to seize control of more private companies.

Many Venezuelans have already left the country, including Francisco Flores. “Venezuela has taken good working companies, given them to the poor but not equipped them with the skills to run them so they go bankrupt,” he says.

“That’s just a recipe for destroying a country.”

The NHS therapist, who now lives in London, says the regime is based on a principle of keeping everyone “equal but poor”.

Brazilian artist Adelio Sarro is known for portraits

Brazilian artist Adelio Sarro is known for portraits

I’ve always been interested in South American countries and their various economic crises.  The Mexican Peso Crisis is still taught in basic International Economics/Finance courses as a cautionary tale that’s frequently forgotten.   It’s also called The Tequila Crisis and happened while Bill Clinton was President in 1994. A country in crisis transmits economic and political instability to its neighbors through trade.  Here’s a an example of that from the current Venezuela crisis.  Coca Cola is one of those ubiquitous US products that basically is every where in the world.  Its recipe may be slightly different depending on the sugar dependency of a country’s consumers, but the trademark and product packaging are quite recognizable.  Venezuela’s access to Coke is gone.

And so we will have to chalk this up as another of those great successes of Bolivarian socialism. Yes, as I’ve been saying for some time now, this is not because of some misplaced zeal in making the lives of the poor better: it’s simply because messing with markets is not the way to achieve anything at all. Well, not unless your actual goal is to have a country run out of everything.

The news itself:

CARACAS, Venezuela— Coca-Cola KO -0.83% is halting production in Venezuela of its namesake beverage due to a sugar shortage brought on by the country’s economic crisis.

Production of sugar-sweetened beverages will be suspended in the coming days after local suppliers reported they had run out of the raw material, the Atlanta company said in an emailed statement Friday.

This isn’t even about the currency and import problems that have affected beer production:

The move comes as Venezuela’s economy is teetering on the edge of collapse with widespread food shortages and inflation forecast to surpass 700 percent. Last month, Empresas Polar, Venezuela’s largest food and beverage company, stopped production of beer because of a lack of imported barley.

I think teetering on the edge is using the wrong tense there. I think teetered would be better, making sure that we use the past tense. In any realistic sense that consumer economy has gone …

All countries have modified market economies.  Some markets function perfectly well with very little interference.  Some markets would not exist without government provision or if they did, would be prohibitively expensive.  There are three

Mexican Street artist Spaik and work in Michoacan

Mexican Street artist Spaik and work in Michoacan

primary agents in an domestic economy. That would be the government, the sellers, and the buyers.  Whenever any one of those agents gets into any market and has more unchecked power than the rest, you’re going to have issues. Market excesses can result from power and profit seeking private enterprise or from Government overreach.   You can find many examples of each throughout the modern history of many South American Countries.

Brazil is another country that is experiencing both economic and political troubles.   Its President was removed and is now fighting impeachment proceedings.

Brazil’s economy sank into the deepest recession in recent history last year amid low prices for key exports, soaring inflation and depressed confidence levels. Moreover, as the economy plummeted so did President Dilma Rousseff’s political career. A wide-spread corruption scandal and the economy’s abysmal performance caused approval levels to fall to all-time lows and resulted in the commencement of impeachment proceedings last year. On 12 May, the Senate voted to continue with these proceedings, forcing Rousseff to step down for a maximum of 180 days while a trial is conducted. Vice President Michel Temer took over as interim president and his first task will be to find a way to halt the sinking ship. However, a number of daunting challenges lie in Temer’s path and recent economic data remain poor: retail sales returned to contraction in March and the manufacturing PMI fell to the lowest level in over seven years in April.

A change in leadership will not be a magic bullet for Brazil’s economy and the recession is expected to continue throughout this year. FocusEconomics panelists see the economy contracting 3.7% in 2016, which is down 0.2 percentage points from last month’s forecast. For 2017, the panel sees the economy recovering slightly and growing 0.7%.

It’s never good when your president is impeached and on trial.  Rouseff was interviewed several days ago.   Dilma Rousseff argues that the Old Brazilian oligarchy behind ‘coup’ (FULL INTERVIEW).  This is her explanation of the events.

DR: I think it’s an impeachment process, to remove me from the office. Our Constitution provides for an impeachment, but only if the President commits a crime against the Constitution and human rights. We believe that it’s a coup, because no such crime has been committed. They put me on trial for additional loans [from state banks]. Every president before me has done it, and it has never been a crime. It won’t become a crime now. There is no basis for considering it a crime. A crime has to be legally defined. So we believe this impeachment is a coup, because it’s clearly stated in the Constitution that only a crime of malversation can serve as basis for impeachment. The actions currently under scrutiny do not, strictly speaking, fall under that category. Besides, Brazil is a presidential republic. You can’t remove a president or a prime minister who hasn’t committed a crime. We’re not a parliamentary republic, where a president can dissolve the congress, which, in turn, can call for a vote of no confidence out of purely political reasons. So it’s impossible to impeach a president in Brazil based solely on political reasons or political distrust. We believe that what’s happening now in Brazil is an attempt to replace an innocent president involved in no corruption-related legal proceedings in order for the politicians that lost the 2014 election to control the state bypassing the new election. That’s what’s happening. This is an attempt to replace the entire political program that includes both the social and economic development aspects and is aimed at tackling the crisis that Brazil has been going through in recent years with a program clearly neoliberal in nature. This program provides for minimizing our social programs in accordance with the minimal state doctrine. This doctrine is at odds with all the Brazilian legal norms regarding healthcare, construction and ensuring that our people have their own houses, availability of high-quality education and minimum wages guaranteed to the poorest part of the Brazilian population. They want to do away with these rights and at the same time they conduct an anti-national policy, for example, when it comes to Brazil’s oil resources. Significant subsalt oil reserves, lying 7,000 m below the surface, were discovered recently. The ministers were saying that exploring these reserves was impossible, but now we’re extracting a million barrels daily from subsalt oil reserves. Undoubtedly, they were saying that thinking to change the legislation in order to guarantee access to these reserves to international companies. Moreover, in terms of foreign policy, starting from Lula da Silva and throughout my presidency, we have been seeking to strengthen ties with Latin American, African, BRICS countries and other developing nations, in addition to the developed world – the US and Europe. I think that BRICS is one of the most important multilateral groups created in the last decade. But the interim government holds different views on BRICS and the importance we place on Latin America. They are even discussing the possibility of closing embassies in some African countries. We have very special relations with Africa. Brazil is the country with the highest percentage of population of African descent in the world, second only to African countries. We have a lot of people of African descent, so over the last few years we’ve been putting particular emphasis on our relations with the African countries, and not only Portuguese-speaking ones. This shows a wider approach to the world, as opposed to the traditional one, supported by those who have usurped the power now and are taking steps that are at odds with the program approved by the Brazilian people, by 54 mln votes, on the day I was elected.

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Early 20th century Brazilian artist Francisco da Silva

Brazil’s crisis is being transmitted to its neighbors.   Again, this is always likely between close trading partners. The crisis country will not likely have their trading partners interests so much as their own, however.

Yet as Brazil is consumed by the worst political and economic crisis in decades, the country has turned inward. This has contributed to a regional power vacuum and a sense of paralysis when it comes to devising regional approaches to South America’s most pressing challenges. For example, Venezuelan President Nicolás Maduro’s increasingly blatant disregard for even basic democratic standards has seen a less meaningful regional reaction because of Brazil’s problems. Given Brazil’s dominant role in South America – representing roughly half its GDP, population and territory – its travails are inevitably bad news for the continent.

The current crisis is only part of the story. Even prior to reelection in 2014, when the government refused to acknowledge that Brazil’s economy was in trouble, Dilma Rousseff failed to articulate a coherent foreign policy doctrine. Brazil’s international strategy since 2011 was shaped, above all, by the president’s astonishing indifference to all things international and officials’ incapacity to convince Rousseff that foreign policy could be used to promote the government’s domestic goals.

Her predecessors knew better: Fernando Henrique Cardoso (1995-2002) helped establish a series of regional mechanisms to preserve democratic governance, thus reducing the number of external political crises that could hurt the Brazilian economy. Luiz Inácio Lula da Silva (2003-10) promoted regional integration further to facilitate the entry of Brazilian companies into neighboring markets. Lula not only had a trusted foreign minister and a special adviser for international affairs, but also a highly active minister of defense who embraced foreign policy to promote Brazil’s interests, for example by using the newly established South American Council of Defense to enhance trust between the continent’s armed forces.

Paradoxically, just as the bitter political battle to unseat Rousseff is reaching its climax, the president has at last begun to accept the importance of foreign affairs. She and Vice President Michel Temer (poised to become president if she is removed from office) have engaged in an international war of narratives about the legitimacy of impeachment proceedings. Rousseff traveled to New York, where she denounced Temer as a “coup-monger” on the sidelines of a UN meeting. Temer reacted swiftly, giving interviews to major international newspapers, and sending allies abroad to make his case.

Rousseff also broadened her fight to regional bodies and leaders. In somewhat vague terms, she announced she would ask Mercosur to invoke its democracy clause, arguing that a democratic rupture was underway in Brazil. From New York, Brazil’s foreign minister and special foreign policy adviser traveled directly to Quito to make Rousseff’s case at Unasur. Maduro and Bolivia’s President Evo Morales are among those who agree Rousseff is facing a “coup.” For the government in Caracas, which recently assumed the temporary presidency of Unasur and will soon assume the presidency of Mercosur, it is an opportunity to try to draw attention away from the catastrophic situation at home.

It is easy to forget that we do have neighbors and some of them may have issues that will suddenly impact our economy in our own election year with so much focus on ISIS and the middle east.  This is one of the reasons I trust Hillary Clinton.  I can guarantee that if you ask her about either of these countries, their leaders, and their issues she will have insightful analysis and probably know the players personally.  Many of the biggest issues in these countries have roots in populist leaders of one extreme or another.   My guess is that the other two choices standing for President at this point will be clueless as to the situations, causes, and ramifications. You can tell that not only by their words and polices but also by the absence of discussion on these two important neighbors in crisis.

What’s on your reading and blogging list today?  This is an open thread!!!  Please share!

 

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The Media and Policy Makers deliberately misrepresent and ignore Economists

I use to watch PBS a lot. It’s been rather overrun by nutso libertarians and republicans the same way Europe was over run with Bubonic Plague-carrying fleas black_deathduring the middle ages.  Back in the middle ages, the “enlightened” religious and kingdom policy makers decided cats were the problem–since they obviously represent all things witchy–when they were really part of the solution.  Cats ate rats and mice and a lot of the worst of the flea-bearing vermin.  The guilty fleas escaped blame.  Nowdays, pundits, policy preachers, and the political class believe that economists are part of the problem and have created a serious amount of snake oil-based explanations that simply do not hold up to analysis or data.

So, PBS Newshour gets David Brooks–dilettante extraordinaire–and Ruth Marcus–professional effete intellectual snob for hire–to explain the recent employment numbers.  Yup,  why get economists to talk about the consensus in our community when you can have inside-the-beltway surrealism ?  Why is David Brooks given a platform to spew lies, nonsense, and propaganda?  Dr. Baker, I am excerpting you completely.  Forgive me the lapse in fair use.

The PBS Newshour won the gold medal for journalistic malpractice on Friday by having David Brooks and Ruth Marcus tell the countrywhat the Friday jobs report means. Brooks and Marcus got just about everything they said completely wrong.

Starting at the beginning, Brooks noted the slower than projected job growth and told listeners:

“Yes, I think there’s a consensus growing both on left and right that we — the structural problems are becoming super obvious.

“So when the — this recession started a number of years ago, you had 63, something like that, out of 100 Americans in the labor force. Now we’re down, fewer than in [the employment to population ratio is now 58.7 percent] — than when the recession started. And so that suggests we have got some deep structural problems. It probably has a lot to do with technological change. People are not hiring — companies are not hiring human beings. They’re hire machines.”

It’s hard to know what on earth Brooks thinks he is talking about. There is nothing close to a consensus on either the left or right that the economy’s problems are structural, as opposed to a simple lack of demand (i.e. people spending money). This is shown clearly by the overwhelming support on the Federal Reserve Board for its policy of quantitative easing. This policy is about trying to boost demand. A policy that the Republican Chairman, Ben Bernanke, has repeatedly advocated to Congress as well. This policy would not make sense if they viewed the weak demand for labor in the economy as being the result of structural problems. So clearly Brooks’ consensus excludes the Fed.

It also is worth noting the other part of Brooks’ story, that instead of hiring workers firms “hire machines,” is completely contradicted by the data. Investment has actually slowed in the last couples of years. (Non-residential investment is up by just 2.4 percent from its year ago level.) This means that firms are not hiring machines, or at least not as rapidly as they had in prior years. Also the rate of productivity growth has slowed sharply from the pre-recession period. In the last three years productivity growth has averaged less than 1.0 percent a year. This compares to more than 2.5 percent a year from 1995 until the recession in 2007. This means that machines are displacing workers much less rapidly than in a decade when we had much lower unemployment.

How does one get a job speculating on national TV on things one knows nothing about?  I think I would like a job like that.  It has to be easier than actually going to school and become a research specialist in a field. I think I’d be great at astrophysics commentary. Maybe I can replace Dr. Neil DeGrassi who gets all the kewl special effects-based astronomy gigs on PBS.  Hell, there’s a doctor in front of my name too.  Who cares if it’s not in anything germane or relevant to astrophysics?  Certainly not PBS.   But,here’s the shrill one with the facile, data-based debunk.

Indeed: one strong indicator that the problem isn’t structural is that as the economy has (partially) recovered, the recovery has tended to be fastest in precisely the same regions and occupations that were initially hit hardest. Goldman Sachs (no link) looks at unemployment in the “sand states” that had the biggest housing bubbles versus the rest of the country; it looks like this:

So the states that took the biggest hit have recovered faster than the rest of the country, which is what you’d expect if it was all cycle, not structural change.

I’ve done a quick and dirty take on unemployment by occupation, looking at changes in unemployment rates from the 2007 business cycle peak to the unemployment peak in 2009-10, and then the subsequent decline; it looks like this:

It’s the same as the geographical story: the occupations that took the biggest hit have had the strongest recoveries.

In short, the data strongly point toward a cyclical, not a structural story — and there is broad agreement, for once, among economists on this point. Yet somehow, it’s clear, Beltway groupthink has arrived at the opposite conclusion — so much so that the actual economic consensus on this issue wasn’t even represented on the Newshour.

Robert Reich thinks that its basically in Republican best interests to keep people unemployed and suffering.  Believe me, people are unemployed and suffering.  I can really offer us some anecdotal evidence on that as well as the numbers.

Job-growth is sputtering. So why, exactly, do regressive Republicans continue to say “no” to every idea for boosting it — even last week’s almost absurdly modest proposal by President Obama to combine corporate tax cuts with increased spending on roads and other public works?

It can’t be because Republicans don’t know what’s happening. The data are indisputable. July’s job growth of 162,000 jobs was the weakest in four months. The average workweek was the shortest in six months. The Bureau of Labor Statistics has also lowered its estimates of hiring during May and June.

It can’t be Republicans really believe further spending cuts will help. They’ve seen the effects of austerity economics on Europe. They know the study they relied on by Carmen Reinhart and Kenneth Rogoff has been debunked. They’re no longer even trying to make the case for austerity.

It could be they just want to continue opposing anything Obama proposes, but that’s beginning to seem like a stretch. Republican leaders and aspiring 2016 presidential candidates are warning against being the “party of ‘no.’” Public support for the GOP continues to plummet.

The real answer, I think, is they and their patrons want unemployment to remain high and job-growth to sputter. Why? Three reasons:

First, high unemployment keeps wages down. Workers who are worried about losing their jobs settle for whatever they can get — which is why hourly earnings keep dropping. The median wage is now 4 percent lower than it was at the start of the recovery. Low wages help boost corporate profits, thereby keeping the regressives’ corporate sponsors happy.

Second, high unemployment fuels the bull market on Wall Street. That’s because the Fed is committed to buying long-term bonds as long as unemployment remains high. This keeps bond yields low and pushes investors into equities — which helps boosts executive pay and Wall Street commissions, thereby keeping regressives’ financial sponsors happy.

Third, high unemployment keeps most Americans economically fearful and financially insecure. This sets them up to believe regressive lies — that their biggest worry should be that “big government” will tax away the little they have and give it to “undeserving” minorities; that they should support low taxes on corporations and wealthy “job creators;” and that new immigrants threaten their jobs.

It appalls me that some one classified as a “liberal”–like Ruth Marcus supposedly is–can be a mouthpiece for lies that support a decidedly illiberal agenda.   I believe Economist Mark Thoma has the correct take on this one.

The arguments serve an ideological goal. Perhaps we shouldn’t assume that the main motivation of many pundits and policymakers is economic rather than political?

True Dat.


Monday Reads

Good Morning!

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So, I’m still a little bit out of the loop at the moment. I’m not really reading much in the way of news or even watching TV so I had to do some searching for something interesting to read this morning. This will be a bit of a link dump. I promise I will do better by midweek.

Will we ever be rid of Fat Tony and his blatant hypocrisy?

With his own claims to originalism fading fast, Scalia suggests liberal judicial activism, practiced by some of colleagues on the Court, is part of what brought about the Holocaust in Nazi Germany. The speech was an address to the Utah State Bar Association.

From the Aspen Times …

Scalia opened his talk with a reference to the Holocaust, which happened to occur in a society that was, at the time, “the most advanced country in the world.” One of the many mistakes that Germany made in the 1930s was that judges began to interpret the law in ways that reflected “the spirit of the age.” When judges accept this sort of moral authority, as Scalia claims they’re doing now in the U.S., they get themselves and society into trouble.

The Prisoner’s Dilemma is something we teach a lot in economics.  You may remember the movie  “A Beautiful Mind” and the invention of game theory.  Well, there’s been an interesting test of the theory.

The “prisoner’s dilemma” is a familiar concept to just about anybody that took Econ 101.

The basic version goes like this. Two criminals are arrested, but police can’t convict either on the primary charge, so they plan to sentence them to a year in jail on a lesser charge. Each of the prisoners, who can’t communicate with each other, are given the option of testifying against their partner. If they testify, and their partner remains silent, the partner gets 3 years and they go free. If they both testify, both get two. If both remain silent, they each get one.

In game theory, betraying your partner, or “defecting” is always the dominant strategy as it always has a slightly higher payoff in a simultaneous game. It’s what’s known as a “Nash Equilibrium,” after Nobel Prize winning mathematician and A Beautiful Mind subject John Nash.

In sequential games, where players know each other’s previous behaviour and have the opportunity to punish each other, defection is the dominant strategy as well.

However, on a Pareto basis, the best outcome for both players is mutual cooperation.

Yet no one’s ever actually run the experiment on real prisoners before, until two University of Hamburg economists tried it out in a recent study comparing the behaviour of inmates and students.

Surprisingly, for the classic version of the game, prisoners were far more cooperative  than expected.

Menusch Khadjavi and Andreas Lange put the famous game to the test for the first time ever, putting a group of prisoners in Lower Saxony’s primary women’s prison, as well as students through both simultaneous and sequential versions of the game.The payoffs obviously weren’t years off sentences, but euros for students, and the equivalent value in coffee or cigarettes for prisoners.

They expected, building off of game theory and behavioural economic research that show humans are more cooperative than the purely rational model that economists traditionally use, that there would be a fair amount of first-mover cooperation, even in the simultaneous simulation where there’s no way to react to the other player’s decisions.

And even in the sequential game, where you get a higher payoff for betraying a cooperative first mover, a fair amount will still reciprocate.

As for the difference between student and prisoner behaviour, you’d expect that a prison population might be more jaded and distrustful, and therefore more likely to defect.

The results went exactly the other way for the simultaneous game, only 37% of students cooperate. Inmates cooperated 56% of the time.

On a pair basis, only 13% of student pairs managed to get the best mutual outcome and cooperate, whereas 30% of prisoners do.

Where do these modern day evangelicals get their whacked ideas about women and especially about abortion?

While America languishes in an economic depression, Republican officeholders are bending all their efforts… to ban abortion. In the last few weeks and months, we’ve seen a blizzard of anti-choice legislation in Texas, Ohio, Wisconsin, North Carolina, and many other places. These laws stall women seeking abortions with mandatory waiting periods, brutalize them with invasive and unnecessary transvaginal ultrasounds, force doctors to read shaming scripts rife with falsehoods, and impose onerous regulatory requirements that are designed to be impossible to comply with so that family-planning clinics will be forced to close. At the federal level, the Republican-controlled House of Representatives voted for a bill banning all abortion after 20 weeks, without even putting up a pretense that this was constitutional.

One would think the drubbing taken by anti-choice zealots like Todd Akin in the last election would have given Republicans an incentive to step back and consider whether this is a winning strategy. Instead, it seems as if their losses have only inspired them to fight harder. For the right-wing Christian fundamentalists who dominate the Republican Party, banning abortion, or at least piling up pointless regulations to make it as burdensome and difficult to obtain as possible, has become an all-consuming obsession, akin to a religious crusade.

Given the amount of effort and political capital the religious right puts into trying to restrict abortion, you’d guess that opposition to women’s choice must take up a huge portion of the Bible. But the reality is that nothing could be further from the truth.

The Bible says nothing whatsoever about abortion. It never mentions the subject, not once, neither in the Old Testament nor the New. This isn’t because abortion was unknown in the ancient world. Much to the contrary, the ancient Greeks and Romans were well-acquainted with the idea. Surviving writings from these cultures recommend the use of herbs like pennyroyal, silphium and hellebore to induce abortion; others advise vigorous physical activity to cause a miscarriage, and some even discuss surgical methods.

Here’s an intriguing investigation of secret US prisons being carried out by Poland. What exactly do we and other countries know about these black ops sites run by the CIA?

The only sign of life at Szymany’s “international airport” are mosquitoes eager to suck blood out of a rare visitor. The gate is locked with a rusted chain and a padlock.

Evidence suggest that some of the last passengers at this site were CIA officers and their prisoners. That was in 2003. Soon after, the airport about 180 km north of Warsaw inside the picturesque Mazury forests went out of service.

Bounded by the Freedom of Information Act, Polish Airspace authorities have revealed that at least 11 CIA aircrafts landed at Szymany, and some of their passengers stayed on in Poland. The European Organisation for the Safety of Air Navigation (Eurocontrol) was not informed about those flights.

From Szymany the prisoners were driven to a nearby intelligence academy in Stare Kiejkuty, where the CIA had a separated facility. In 2006, a few months after Poland was first identified as having hosted a secret CIA prison, Polish ombudsman Janusz Kochanowski visited the CIA villa – only to see that its chambers have been freshly renovated.

Two other European countries with known but unconfirmed black sites are Romania and Lithuania; the rest were in Asia and North Africa.

Human rights groups believe about eight terror suspects were held in Poland, including Khalid Sheikh Mohammed, the self-proclaimed mastermind of the 9/11 attacks. Two other men currently detained at the Guantanamo Bay detention facility have been granted “injured person” status in the ongoing investigation.

The first is Abd al-Rahim al-Nashiri, a Saudi national alleged to have organised the bombing of the USS Cole in 2000. He has claimed that he was often stripped naked, hooded, or shackled during seven months at Stare Kiejkuty, and subjected to mock execution with a gun and threats of sexual assault against his family members.

The second, a stateless Palestinian known as Abu Zubaydah, said he was subjected to extreme physical pain, psychological pressure and waterboarding – mock drowning.

Any Polish leaders who would have agreed to the U.S. programme would have been violating the constitution by giving a foreign power control over part of Polish territory, and allowing crimes to take place there.

Former prime minister Leszek Miller, now chairman of the opposition Democratic Left Alliance has been the prime target of criticism. There are demands he should face a special tribunal charged with trying state figures.

In March 2008, the Polish authorities opened a criminal investigation. “This indicates that Poland is a country with a rule of law,” Senator Jozef Pinior told IPS. “But the protraction is a reason for concern. The investigation has been moved to the third consecutive prosecutor’s office, in what looks like playing for time.”

Pinior, one of the leaders of the Solidarity opposition movement during the 1980s, and more recently a member of the European Parliament, has for long been lobbying for a full investigation into what the CIA was doing in Poland. Twice he was called in as witness in the investigation. He claims to have seen a document on a CIA prison with PM Miller’s signature.

“Poland is no banana republic, our security services do not do such things behind the back of the government.” — Polish Senator Jozef Pinior

“The Polish government, especially Leszek Miller, must have had knowledge that such sites existed on Polish territory without any legal basis,” Pinior said. “They must have known about the torture too. Poland is no banana republic, our security services do not do such things behind the back of the government.”

It is still not clear how much knowledge the Polish leaders had about the black site in Stare Kiejkuty. Some have vehemently denied the prison’s existence, but some admit it between the lines, though denying responsibility.

“Of course, everything took place with my knowledge,” said former president Aleksander Kwasniewski in an interview with leading daily Gazeta Wyborcza.

So, that’s a few odds and ends to get us started today.  What’s on your reading and blogging list today?


What Does it Mean to Have a Speaker that Knows Nothing about Economics?

boehner_gavel_apSpeaker John Boehner is bad at a lot of things.  His speakership has been marred by so many mishaps and embarrassing moments that it’s easy just to try to laugh at him and the entire House of Representatives.  They seem to do nothing but try to repeal the impossible and stand for the unfathomable.  However,  the country is struggling to come out of an extremely horrible financial crisis with deep, lasting and dangerous unemployment.   The Fed chair–a republican and republican appointee–points out exactly how bad this has been for our economy. What does it mean when the third in line to the presidency is clueless about one of the most important functions of modern government and appears to get all of his knowledge from a bad Ayn Rand novel?

Bernanke spoke to the press after the release of the Federal Open Market Committee minutes.

If the recovery continues, the Fed plans to taper off mortgage-backed securities purchases once the unemployment rate hits 7%, the Fed Chair suggested.  And while reporters grilled Bernanke about inflationary risks and the impact of MBS purchases, he remained cautiously optimistic.

The Fed Chair’s more optimistic tone stemmed from improving market fundamentals, with Bernake highlighting increases in household wealth and fewer large scale layoffs. State and local governments also are improving somewhat financially, he said.

The only major drag is federal fiscal policy.

It is difficult to understand why the portion of US government designed to be the most accountable to the masses seems least concerned with jobs and economic growth.  It is undoubtedly due to the significant misunderstanding and willful ignorance of economics recently demonstrated by the speaker and many–if not most– in his party. Paul Krugman speaks sincerely to this problem.

John Boehner’s remarks on recent financial events have attracted a lot of unfavorable comment, and they should. Actually, I think even the stuff most commentators have shied away from — he talks about the Fed “deflating” when I think he means either inflating or debasing, or possibly is doing a Sarah Palin and merging the two — is significant. I mean, he’s the Speaker of the House at a time when economic issues are paramount; shouldn’t he have basic familiarity with simple economic terms?

But the main thing is that he’s clinging to a story about monetary policy that has been refuted by experience about as thoroughly as any economic doctrine of the past century. Ever since the Fed began trying to respond to the financial crisis, we’ve had dire warnings about looming inflationary disaster. When the GOP took the House, it promptly called Bernanke in to lecture him about debasing the dollar. Yet inflation has stayed low, and the dollar has remained strong — just as Keynesians said would happen.

Yet there hasn’t been a hint of rethinking from leading Republicans; as far as anyone can tell, they still get their monetary ideas from Atlas Shrugged.

Oh, and this is another reminder to the “market monetarists”, who think that they can be good conservatives while advocating aggressive monetary expansion to fight a depressed economy: sorry, but you have no political home. In fact, not only aren’t you making any headway with the politicians, even mainstream conservative economists like Taylor and Feldstein are finding ways to advocate tighter money despite low inflation and high unemployment. And if reality hasn’t dented this dingbat orthodoxy yet, it never will.

It is rather obvious and rather sad that nearly all the economic ideas of the Speaker and his party come from a bad piece of fiction and ignore every lesson of economics learned from even libertarian-leaning economists like the late Milton Friedman. The result has been damaging to many Americans and the underlying economy.

SPEAKER JOHN BOEHNER: Well,it certainly could because you know, people open their 401(k) statements you know, at the end of every quarter and for most people it’s an indication of their wealth. And the value of their home would be another indication,how well homes are selling in their neighborhoods.

But sell off is in large part due to the policies that we’ve had coming’ out of the Federal Reserve. You know, you can’t continue to deflate our money and deflate it and deflate it– have equity markets go– without some change, yeah. Bernanke has made it clear he’s doing these policies in the absence of the government doing its part to help improve our economy.

That’s why Democrats and Republicans here on Capitol Hill and the president need to deal with– fix our tax code that would help us promote more economic growth and deal with our long term spending problem. We’ve spent more money than what we’ve brought in for 55 of the last 60 years. That ought to scare the hell out of every American.

We need to deal with this problem openly and honestly. Because if we do, investors around the country, business owners are going to look up and go, “Gee, they’re actually dealing with the issues that I’m most concerned about.” Then they’ll begin to invest.

MARIA BARTIROMO: But how likely is that over the next year? I mean, Bernanke made it clear yesterday that if the data continues as it is then they could be out of the bonds buying business by next year this time. So that’s one year. Will we see fiscal policy in terms of tax reform, in terms of regulatory clarity? Will we see that in the next 12 months?

SPEAKER JOHN BOEHNER: Listen,hope springs eternal in my heart. And while we have big differences over what tax reform might look like, what entitlement reform might look like we have to — we have to come together and deal with these things. Because if we want our economy to grow, we want to create jobs– we’ve got to deal with the issues that are affecting it.

You know, Republicans– we’ve got our jobs plan. We’ve had it now for literally the last three or four years. We’ve updated this effort and it’s our number one focus here. And while, you know, we’ve got other obligations under the constitution that provides oversight of the Executive Branch we’re trying to stay focused on those things that would improve our economy– help the American people’s wages increase and have more jobs available.

Fixing the tax code is not fiscal policy.  It’s not anything that will create any kind of job growth or economic well being.   What is this man thinking?

To quote Matthew O’Brien at The Atlantic Boehner is “dangerously clueless” about economics and economic policy required of the Federal Government in challenging times.  It is rather pathetic and deluded.  O’Brien points out the facts about that quote from Boehner above.

Bookmark this, print it out, and put it in a time capsule, because this is about as wrong as anybody could possibly be about economics (excluding Don Luskin, of course). Now, Boehner doesn’t put it very clearly, but when he says markets are going down because Bernanke is “deflating the dollar”, he means markets are in the red because the Fed is weakening the dollar. The opposite is true. Markets sold off not because the Fed is doing too much, but because markets worry it won’t do enough. As you can see below from Bloomberg, the dollar went up during the recent sell-off on Wednesday and Thursday after Bernanke explained how and when the Fed expects to wind down QE3. That’s what happens when the Fed tightens policy.

DollarIndex1.png

For all the talk of “currency debasement” from conservatives who fancy themselves monetary experts, the dollar is actually stronger today than it was when the Great Recession began. Core PCE inflation, the Fed’s preferred measure, just hit a 50-year low at 1.05 percent. And no, stripping out food and energy prices isn’t hiding the inflation monster: headline PCE inflation was a meager 0.74 percent in April. Weimar we are not.

Boehner was no more coherent on fiscal policy. Now, it’s true that Bernanke would like to see some kind of budget deal that reins in long-term deficits, but he wishes we were doing less to try to rein in short-term deficits. In other words, he wants less austerity now, and more austerity later. Here’s what Bernanke said about about our cutting-spending problem in his press conference on Wednesday:
The main drag or the main headwind to growth this year is, as you know, is the federal fiscal policy, which the CBO estimates is something on the order of 1.5 percentage points of growth.
That’s not exactly the clarion call for future spending cuts that Boehner imagines. It’s a plea, in the understated lexicon of central bankers, to stop maiming the recovery with pointless and premature austerity. But Boehner either isn’t listening or doesn’t understand. He somehow thinks it’s scary that the government has run deficits for 55 of the last 60 years (though not so scary that he didn’t vote for many of those budgets). This is nonsense. As Josh Barro points out, there’s no better proof that we shouldn’t be scared of deficits than the fact that we have run them for 55 of the past 60 years without any problem. As long as the economy grows faster than the debt, there’s no reason we can’t run deficits forever.

We tried Hoovernomics. It failed. So we’re … trying it again?

Yes.  Republicans are completely in love with failed policies of the past and they’re not about to change anything now.  It’s unbelievable that we could have a Speaker of the House that can be so completely ignorant about economic policy this day and age.  It’s pathetic and it’s sad.  It is also dangerous.


New Stage in Eurozone Crisis: Cyprus Forced to Cover Bailout from Individual Bank Deposits

Lines formed at ATMs in Cyprus after news of bank levy broke

Lines formed at ATMs in Cyprus after news of bank levy broke

This is a topic on which I know very little, but I thought we should have a thread on it anyway.

On Saturday morning, news broke that the terms of a bailout of banks in Cyprus would require a levy on individual depositors–including those holding small accounts. People immediately rushed to ATMs to withdraw as much cash as possible before the deal was voted on. The most accessible article I found on this is by Edward Harrison of Credit Writedowns blog, posted at Alternet: Hell Breaks Loose in Europe as Banking Crisis Unfolds: Depositors’ Money May Be Seized.

Saturday morning we learned that after hours of tense negotiation, Europe has hammered out a 10bn euro “bailout” of Cyprus. I put the term bailout in quotes because the key feature of this deal is the bail-in of Cypriot depositors to the tune of 5.8bn euros, about a third of Cyprus’ GDP. This means that depositors went to sleep on Friday night and woke up Saturday to find that their money, deposited safely in Cypriot banks, had been seized and used to “bail out” the country. While the bail-in became official EU bank rescue policy during the Spanish crisis last summer, bank depositors were never mentioned at that time. I see this as an extreme measure which, if the European banking crisis continues elsewhere, will have very negative implications for bank depositor confidence in other European periphery countries.

There has since been a revision in the amounts to be deducted–I’ll get to that later on.

Back to Harrison:

Cyprus’ finance minister Michalis Sarris said large deposit withdrawals would be banned. Jörg Asmussen, a German member of the ECB board and a key ally of Angela Merkel, added that the part of the deposit base equivalent to the actual bail-in levies would be frozen immediately so the funds could be used to pay for the “bailout”….

Some of the bailout lenders like the IMF had actually been calling for Cyprus to seize all deposits larger than 100,000 euros. So this falls well short of those demands. Nonetheless, a rubicon has been crossed. Not only are senior bank debt lenders now on the hook before a single penny of European Union loans or guarantees flow to busted eurozone countries, but so are subordinated debt holders and so are even depositors. As an EU citizen, you must now believe that any lending exposure you have to a bank whether as a bond lender or deposit lender can be seized and confiscated by government, no matter how small the exposure. The FT notes that “[e]ven Ireland, whose banking sector was about as large relative to its economy as Cyprus’ when it was forced into a bailout in 2010, never considered such a measure.

Read much more at the Alternet link.

Here’s an FAQ on the crisis published at Fortune earlier tonight. The scary introductory paragraphs after the jump:

Read the rest of this entry »


Friday Reads: Dismal Scientist Edition

Good Morning!420px-Emerson_reading_newspaper

I’ve got a few reads for you from economists on some of today’s economic policy questions.  I always complain that we never hear from economists and always hear from politicians, journalists, and lawyers. So, here’s the take on the austerity fetish in the beltway from an economists’ perspective.

Economist Dean Baker thinks there’s a cut Social Security on the Horizon.

According to inside Washington gossip, Congress and the president are going to do exactly what voters elected them to do; they are going to cut Social Security by 3 percent. You don’t remember anyone running on that platform? Yeah, well, they probably forgot to mention it.

Of course some people may have heard Vice President Joe Biden when he told an audience in Virginia that there would be no cuts to Social Security if President Obama got reelected.  Biden said: “I guarantee you, flat guarantee you, there will be no changes in Social Security. I flat guarantee you.”

But that’s the way things work in Washington. You can’t expect the politicians who run for office to share their policy agenda with voters. After all, we might not like it. That’s why they say things like they will fight for the middle class and make the rich pay their fair share. These ideas have lots of appeal among voters. Cutting Social Security doesn’t.

While the politics of cutting Social Security are bad, it also doesn’t make much sense as policy. In Washington, the gang who couldn’t see an $8 trillion housing bubble until its collapse sank the economy, has now decided that deficit reduction has to be the preeminent goal.

They don’t care that we are still down more than 9 million jobs from our growth trend; deficit reduction must take priority. These whiz kids apparently also don’t care that the cuts that have already been made are slowing growth and costing us jobs.

Meanwhile, economist Paul Krugman shows–once again–that the deficit isn’t really that big of problem and is dwindling.  Oh, just a reminder, Social Security has nothing to do with the Federal Budget, debt or deficit other than than the trust fund is invested in US Treasuries.

Recently the nonpartisan Center on Budget and Policy Priorities took Congressional Budget Office projections for the next decade and updated them to take account of two major deficit-reduction actions: the spending cuts agreed to in 2011, amounting to almost $1.5 trillion over the next decade; and the roughly $600 billion in tax increases on the affluent agreed to at the beginning of this year. What the center finds is a budget outlook that, as I said, isn’t great but isn’t terrible: It projects that the ratio of debt to G.D.P., the standard measure of America’s debt position, will be only modestly higher in 2022 than it is now.

The center calls for another $1.4 trillion in deficit reduction, which would completely stabilize the debt ratio; President Obama has called for roughly the same amount. Even without such actions, however, the budget outlook for the next 10 years doesn’t look at all alarming.

Now, projections that run further into the future do suggest trouble, as an aging population and rising health care costs continue to push federal spending higher. But here’s a question you almost never see seriously addressed: Why, exactly, should we believe that it’s necessary, or even possible, to decide right now how we will eventually address the budget issues of the 2030s?

Consider, for example, the case of Social Security. There was a case for paying down debt before the baby boomers began to retire, making it easier to pay full benefits later. But George W. Bush squandered the Clinton surplus on tax cuts and wars, and that window has closed. At this point, “reform” proposals are all about things like raising the retirement age or changing the inflation adjustment, moves that would gradually reduce benefits relative to current law. What problem is this supposed to solve?

Well, it’s probable (although not certain) that, within two or three decades, the Social Security trust fund will be exhausted, leaving the system unable to pay the full benefits specified by current law. So the plan is to avoid cuts in future benefits by committing right now to … cuts in future benefits. Huh?

Economist Allen Blinder wrote in the WSJ that the Debt Ceiling Debacle is far scarier than than the debt itself.

In today’s Wall Street Journal, Alan Blinder points out that running into the debt ceiling would provoke a severe fiscal contraction.

“At current rates of spending and taxation, federal receipts cover less than 74% of federal outlays. So if the government hits the debt ceiling at full speed, total outlays—which includes everything from Social Security benefits to soldiers’ pay to interest on the national debt—will have to be trimmed by more than 26% immediately. That amounts to more than 6% of GDP, far more than the fiscal cliff we just avoided,” Blinder writes.

The fiscal cliff, by contrast, would have erased 4.5 percent of GDP.

Any sustained captivity below the debt ceiling, in other words, means that the economy will enter a severe recession. This recession will be made far worse because the so-called automatic stabilizers that kick in when the economy slumps—think unemployment insurance—will not be able to function because of the budget constraint. So unemployment will grow while unemployment insurance contracts. This will not only pose a hardship on the people out of work, it will mean that the spending power of the American consumer will shrink rapidly.

Where the fiscal cliff might have led to a recession, this is downward spiral toward depression. The shrinking economy will shrink the government’s tax revenues. And since the budget deficit cannot increase, the spiral will go unchecked. Falling taxes will trigger falling spending. “Downward spiral” may be too mild. Economic black hole better fits the bill.

“In short, the consequences of hitting the debt ceiling are too awful to contemplate—worse even than going over the fiscal cliff. A sane Congress wouldn’t even think about it,” Blinder writes. He’s absolutely correct.

Blinder goes on to propose a plan to avoid a crises based on the assumption that Congress is sane. Let’s hope that assumption is correct.

Meanwhile, the House Republicans are discussing another short term fix to the debt ceiling.

House Republicans are discussing a short-term debt ceiling increase to buy time for broader deficit reduction negotiations with Democrats, Rep. Paul Ryan (R-Wis.) told reporters Thursday.

“We’re discussing the possible virtue of a short-term debt limit extension so that we have a better chance of getting the Senate and the White House involved in discussions in March,” Ryan told reporters gathered at the pricey Kingsmill resort in Williamsburg, where the House GOP is holding its annual retreat.

“All of those things are the kinds of things we’re discussing,” said Ryan, the party’s budget chief and 2012 vice presidential candidate.

A small hike in the $16.4 trillion debt ceiling would give the government more time to make payments on its responsibilities as lawmakers and the White House haggle over federal spending. A GOP leadership aide said there was no consensus on the size of a debt limit hike, and that it would have to be coupled with entitlement reforms or spending cuts.

Treasury Secretary Timothy Geithner has told Speaker John Boehner (R-Ohio) that the nation hit its borrowing limit at the end of 2012 and will run out of ways to avoid a first-ever default sometime between mid-February and early March. $85 billion in across-the-board 2013 cuts to defense and domestic spending are set to begin taking effect in March, and the government will run out of funding a month later.

 Economist Robert Schiller looks forward to Obama laying out his economic agenda in a metaphorical way.  Will he do this around the inauguration or at the upcoming SOTU speech?

Formulating a good metaphor for Obama’s second term is itself a task for intuitive creative thought that entails rethinking what he will propose in his second term. A good metaphor might embody the idea of an “inclusive economy.” The word “inclusive” resonates strongly: Americans do not want more government per se; rather, they want the government to get more people involved in the market economy. Opinion polls show that, above all, what Americans want are jobs – the beginning of inclusion.

The parallel to Chase’s book today is the 2012 bestseller Why Nations Fail by the economist Daron Acemoglu and the political scientist James Robinson. Acemoglu and Robinson argue that in the broad sweep of history, political orders that include everyone in the economic process are more likely to succeed in the long term.

The time seems ripe for that idea, and it fits with the triumph of inclusiveness symbolized by Obama himself. But another step in metaphor-building is needed to encapsulate the idea of economic inclusion.

The biggest successes of Obama’s first term concerned economic inclusion. The Affordable Care Act (“Obamacare”) is providing more people with access to health care – and bringing more people to privately-issued insurance – than ever before in the United States. The Dodd-Frank financial reforms created the Consumer Financial Protection Bureau, so that privately issued financial products would serve the public better, and created incentives for derivatives to be traded on public markets. And he signed the JOBS Act, proposed by his Republican opponents, which aims to create crowdfunding Web sites that allow small investors to participate in start-up ventures.

We have not reached the pinnacle of economic inclusion. There are hundreds of other possibilities, including improved investor education and financial advice, more flexible mortgages, better kinds of securitization, more insurance for a broader array of life’s risks, and better management of career risks. Much more progress toward comprehensive public futures and derivatives markets would help, as would policies to encourage the emerging world to participate more in the US economy. (Indeed, the inclusion metaphor is essentially global in spirit; had Obama used it in the past, his economic policies might have been less protectionist.)

The right metaphor would spin some of these ideas, or others like them, into a vision for America’s future that, like the New Deal, would gain coherence as it is transformed into reality. On January 29, Obama will give the first State of the Union address of his new term. He should be thinking about how to express – vividly and compellingly – the principles that have guided his choices so far, and that set a path for America’s future.

So, that’s a little news with views from economists.  Please, change the topic and let me know what’s going on with your reading and blogging this morning!!!
Oh, and just as an aside, any one want to take a guess as to which philosopher/writer is pictured in the photo above?  C’mon!  You can do it!!!

Thursday Reads: Romney’s Lies, Debt Ceiling Showdown, and Dimonfreude

Good Morning!

On Tuesday night I wrote a brief post about the bizarre speech Mitt Romney gave in Des Moines, Iowa earlier that day. I was struck by Romney’s childish effort to get at President Obama by talking about Bill Clinton’s economic policies and claiming that Obama must have ignored those policies because he has some kind of grudge against both Clintons. It was so strange and off key that I thought Romney sounded like a crotchety old busybody gossiping over the backyard fence.

I didn’t really even go into the many baldfaced lies Romney told in the speech–I guess I’ve become so accustomed to his total refusal to confine himself to reality as it is that I almost don’t notice it anymore. Basically, Romney attacked Obama the deficit that was primarily created by Bush, and made his usual claims that he (Romney) will be able to cut taxes by 20 percent, increase defense spending, and at the same time magically balance the budget and dramatically reduce unemployment. Only a moron would buy what he’s selling.

Yesterday, a number of bloggers commented on that speech, so I thought I’d share some of those reactions in this morning’s reads.

Steve Benen at Maddowblog: A peek into an alternate reality.

Mitt Romney delivered a curious speech in Iowa yesterday, presenting his thoughts on the budget deficit, the debt and debt reduction, which is worth reading if you missed it. We often talk about the problem of the left and right working from entirely different sets of facts, and how the discourse breaks down when there’s no shared foundation of reality, and the Republican’s remarks offered a timely peek into an alternate reality where facts have no meaning.

Even the topic itself is a strange choice for Romney. If the former governor is elected, he’ll inherit a $1 trillion deficit and a $15 [trillion] debt, which he’ll respond to by approving massive new tax cuts and increasing Pentagon spending. How will he pay for this? No one has the foggiest idea.

In other words, the guy who intends to add trillions to the debt gave a speech yesterday on the dangers of adding trillions to the debt.

Benen says he doesn’t believe Romney is “stupid,” but he must be “operating from the assumption that voters are stupid.” I’d say that’s true. I think Romney believes that he’s much smarter and more worthy than just about anyone and that poor and middle-class people are beneath contempt.

Jonathan Cohn at The New Republic: Romney’s Make-Believe Story on the Economy. Cohn writes about Romney’s claims that Obama’s failure to reduce the deficit is the cause of the “tepid recovery,” unemployment, and the struggles of seniors to get by on fixed incomes.

Note the way Romney establishes cause and effect here: Obama’s contribution to higher deficits are the reason more people can’t get work and more seniors can’t make ends meet right now. This is an audacious claim and, while I’m no economist, I’m pretty sure it places Romney on the outer edges of the debate among mainstream scholars.

I know of serious conservatives who think the Recovery Act, which has increased deficits temporarily, didn’t ultimately do much to create jobs in the near term. And I know of serious conservatives who think that creating jobs now wasn’t worth the long-term downside of adding to the federal debt, however incrementally. Both viewpoints seem to represent minority views, if a recent University of Chicago survey of leading economists is indicative. But the arguments have at least some logic to them.

But Romney’s suggestion that unemployment today is a consequence of Obama’s contribution to the deficit (real or imagined) requires further leaps of logic. You’d have to argue, for example, that extensions of unemployment benefits have reduced incentives to work (despite research to the contrary) and that such negative effects substantially outweigh the positive effects of traditional stimulus measures. It’s not impossible to make this case. I think Casey Mulligan, also of the University of Chicago, has written things along these lines for the New York Times. But, unless I’m missing something, that argument is even more marginal than suggestions the Recovery Act didn’t help at all.

I suspect that even Cohn’s effort to make sense of Romney’s fantasy economic theory will have Dr. Dakinikat pulling her hair out.

Jonathan Chait at New York Magazine: Romney’s Budget Fairy Tale.

In the real world, the following things are true: The budget deficit was projected to top $1 trillion even before President Obama took office, and that was when forecasters were still radically underestimating the depth of the 2008 crash. Obama did propose temporary deficit-increasing measures, an economic approach endorsed in its general contours, if not its particulars, by Romney’s economists. These measures contributed a relatively small proportion to the deficit, and their effect is short-lived. Obama instead focused on longer-term measures to reduce the deficit, including comprehensive health-care reform projected to reduce deficits by a trillion dollars in its second decade. Obama put forward a budget plan that would stabilize the debt as a percentage of the economy. Obama has hoped to achieve deeper long-term deficit reduction by striking bipartisan deals with Congress, and he has tried to achieve this goal by openly endorsing a bipartisan deficit plan in the Senate and privately agreeing to a more conservative plan with John Boehner, both of which were killed by Republican opposition to any higher revenue.

But Romney doesn’t seem to live in the real world, and Chait suggests that Romney either doesn’t understand how deficits work or doesn’t care if what he says makes any sense at all.

In Romney’s telling, the terms debt and spending are essentially interchangeable. When presented with Obama’s position — that the solution to the debt ought to include both higher taxes and lower spending — he rejects it out of hand. Naturally, Romney has admitted before that his budget plan “can’t be scored.” It’s an expression of conservative moral beliefs about the role of government. While loosely couched in budgetary terms, Romney is expressing an analysis that resides outside of, and completely at odds with, mainstream macroeconomic forecasting and scoring assumptions.

At the Plum Line, Greg Sargent discusses How Mitt Romney gets away with his lying.

If you scan through all the media attention Romney’s speech received, you are hard-pressed to find any news accounts that tell readers the following rather relevant points:

1) Nonpartisan experts believe Romney’s plans would increase the deficit far more than Obama’s would.

2) George W. Bush’s policies arguably are more responsible for increasing the deficit than Obama’s are.

Oh, sure, many of the news accounts contain the Obama campaign’s response to Romney’s speech; the Obama campaign put out a widely-reprinted statement arguing that Romney’s plans would increase the deficit and that he’d return to policies that created it in the first place.

But this shouldn’t be a matter of partisan opinion. On the first point, independent experts think an actual set of facts exists that can be used to determine what the impact of Romney’s policies on the deficit would be. And according to those experts, based on what we know now, Romney’s policies would explode the deficit far more than Obama’s would.

Obviously, the problem is the obsequious corporate media. But the Romney campaign makes it impossible for even the few remaining serious reporters to question his policies by keeping the candidate completely insulated from the press except for occasional appearances on Fox News and lightweight network morning shows like Good Morning America. Yesterday, Politico reprinted tweets from several reporters who were “physically” blocked from talking to Romney on a rope line.

Speaking of Republican ignorance of basic economics, House Republicans are gearing up for another pitched battle on increasing the debt ceiling. Speaker John Boehner met with President Obama at the White House today and they “clash[ed] over” increasing the debt limit, according to The Hill.

The president convened the meeting of the bipartisan congressional leadership to discuss his “to-do list” for Congress, but an aide to the Speaker said the bulk of the meeting was spent on other issues, including a pile-up of expiring tax provisions and the next increase in the federal debt limit.

Boehner asked Obama if he was proposing that Congress increase the debt limit without corresponding spending cuts, according to a readout of the meeting from the Speaker’s office. The president replied, “Yes.” At that point, Boehner told Obama, “As long as I’m around here, I’m not going to allow a debt-ceiling increase without doing something serious about the debt.”

Shortly after the meeting, White House press secretary Jay Carney told reporters that the president warned the leadership that he would not allow a repeat of last August’s debt-ceiling “debacle,” which led to a downgrade in the U.S. credit rating.

Sigh……

In a related story, there’s this piece at Wonkblog about the Pete Peterson summit and how Democrats talked long-windedly about cutting “entitlements,” and Republican refused to talk about tax increases. Read it and weep. I’m not even going to quote from it, because it’s too damn depressing.

So far Jamie Dimon seems to have survived the $2 billion loss recently suffered by J.P. Morgan.

The CEO of JPMorgan Chase survived a shareholder push Tuesday to strip him of the title of chairman of the board, five days after he disclosed a $2 billion trading loss by the bank.

CEO Jamie Dimon also won a shareholder endorsement of his pay package from last year, which totaled $23 million, according to an Associated Press analysis of regulatory filings.

Dimon, unusually subdued, told shareholders at the JPMorgan annual meeting that the company’s mistakes were “self-inflicted.” Speaking with reporters later, he added: “The buck always stops with me.”

Yeah, right. The buck will stop with the taxpayers if Dimon’s bank ultimately crashes and burns. Bill Moyers asked economist Simon Johnson about that.

Moyers: I was just looking at an interview I did with you in February of 2009, soon after the collapse of 2008 and you said, and I’m quoting, “The signs that I see… the body language, the words, the op-eds, the testimony, the way these bankers are treated by certain congressional committees, it makes me feel very worried. I have a feeling in my stomach that is what I had in other countries, much poorer countries, countries that were headed into really difficult economic situations. When there’s a small group of people who got you into a disaster and who are still powerful, you know you need to come in and break that power and you can’t. You’re stuck.” How do you feel about that insight now?

Johnson: I’m still nervous, and I think that the losses that JPMorgan reported — that CEO Jamie Dimon reported — and the way in which they’re presented, the fact that they’re surprised by it and the fact that they didn’t know they were taking these kinds of risks, the fact that they lost so much money in a relatively benign moment compared to what we’ve seen in the past and what we’re likely to see in the future — all of this suggests that we are absolutely on the path towards another financial crisis of the same order of magnitude as the last one.

A number of shareholders have sued Dimon over the losses, according to Bloomberg (via the SF Chroncle). And of course lots of people are gloating over Dimon’s getting temporarily knocked off his pedestal. Jena McGregor writes in the WaPo:

It’s being called Dimonfreude.

There are barely disguised smirks emanating from the canyons of Wall Street and the business press over the fact that Jamie Dimon has had to admit a mistake — and a whale of one, for that matter.

For years, the JPMorgan CEO (and America’s least-hated banker, as he was known) has worn a halo over those pinstripes. Dimon has been called President Obama’s “favorite banker”. Institutional Investor magazine has called him the country’s best CEO for two years running. And his actions during the financial crisis have been painted in patriotic terms: Press reports said he “answered the call” from then-FDIC chairman Sheila Bair to buy Washington Mutual, one of two banks he scooped up during the financial meltdown, and he has cited a patriotic duty to a country in crisis as why he took in $25 billion in government aid.

Yet now, Dimon is in the hot seat as JPMorgan confronts a $2 billion trading loss and the early stages of a criminal probe by the Justice Department.

Finally, some sad news: Estranged Wife of Robert F. Kennedy Jr. Is Found Dead at Home in Westchester

Mary R. Kennedy, the estranged wife of Robert F. Kennedy Jr., was found dead on Wednesday at the family’s home in Bedford, N.Y. She was 52.

Ms. Kennedy’s death was confirmed in a statement from her family, who did not comment on the circumstances. The Bedford Police Department said only that it had investigated a “possible unattended death” in an outbuilding at the home.

Her lawyer, Kerry A. Lawrence, would not say whether foul play was suspected. Kieran O’Leary, a spokesman for Westchester County, said an autopsy was scheduled for Thursday morning.

Born Mary Richardson, Ms. Kennedy joined one of America’s foremost political families in 1994, in a marriage ceremony aboard a boat on the Hudson River, near Stony Point, N.Y. At the time, she was an architectural designer at Parish-Hadley Associates in New York.

Those are my suggested reads for today. What are you reading and blogging about?