Daily Archive: 03/01/2013

Mar 01 2013

Punting the Pundits

“Punting the Pundits” is an Open Thread. It is a selection of editorials and opinions from around the news medium and the internet blogs. The intent is to provide a forum for your reactions and opinions, not just to the opinions presented, but to what ever you find important.

Thanks to ek hornbeck, click on the link and you can access all the past “Punting the Pundits”.

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Paul Krugman: Ben Bernanke, Hippie

Earlier this week, Mr. Bernanke delivered testimony that should have made everyone in Washington sit up and take notice. True, it wasn’t really a break with what he has said in the past or, for that matter, with what other Federal Reserve officials have been saying, but the Fed chairman spoke more clearly and forcefully on fiscal policy than ever before – and what he said, translated from Fedspeak into plain English, was that the Beltway obsession with deficits is a terrible mistake. [..]

So the deficit is not a clear and present danger, spending cuts in a depressed economy are a terrible idea and premature austerity doesn’t make sense even in budgetary terms. Regular readers may find these propositions familiar, since they’re pretty much what I and other progressive economists have been saying all along. But we’re irresponsible hippies. Is Ben Bernanke? (Well, he has a beard.)

New York Times Editorial: The White House Joins the Fight

President Obama made good on the promise of his second Inaugural Address on Thursday by joining the fight to overturn California’s ban on same-sex marriage. Having declared that marriage equality is part of the road “through Seneca Fall and Selma and Stonewall,” we can’t imagine how he could have sat this one out. [..]

The administration’s brief to the Supreme Court was a legally and symbolically important repudiation of Proposition 8, the 2008 voter referendum that amended California’s Constitution to forbid bestowing the title of marriage on a union between two people of the same sex – a right the California Supreme Court had found to be fundamental under the State Constitution.

William K. Black: ‘Pervasive’ Fraud by Our ‘Most Reputable’ Banks

A recent study confirmed that control fraud was endemic among our most elite financial institutions: Asset Quality Misrepresentation by Financial Intermediaries: Evidence from RMBS Market. Tomasz Piskorski, Amit Seru & James Witkin (February 2013) (“PSW 2013”).

The key conclusion of the study is that control fraud was “pervasive.”

   [A]lthough there is substantial heterogeneity across underwriters, a significant degree of misrepresentation exists across all underwriters, which includes the most reputable financial institutions.

Finance scholars are not known for their sense of humor, but the irony of calling the world’s largest and most harmful financial control frauds our “most reputable” banks is quite wondrous. The point the financial scholars make is one Edwin Sutherland emphasized from the beginning when he announced the concept of “white-collar” crime. It is the officers who control seemingly legitimate, elite business organizations that pose unique fraud risks because we are so loath to see them as frauds.

Joe Conason: While Republicans Warn Against ‘Greece,’ That Is Exactly Where Austerity Budgeting Will Lead U.S.

Indebted America is in danger of turning into destitute Greece, or so congressional Republicans and conservative commentators have been warning us for years now. For many reasons, this is an absurd comparison-but it may not always be quite so ridiculous if Washington’s advocates of austerity get their way.

The Republicans actually want to impose Greek-style budget slashing on the United States. And the federal budget sequestration scheduled to take effect next week could represent the first serious step here toward the kind of fiscal policies that have proved so ruinous not only in Greece-raising unemployment, destroying hope and encouraging extremism-but across Europe.

E.J Dionne: Ending the Permanent Crisis

This has to stop.

Ever since they took control of the House of Representatives in 2011, Republicans have made journeys to the fiscal brink as commonplace as summertime visits to the beach or the ballpark. The country has been put through a series of destructive showdowns over budget issues we once resolved through the normal give-and-take of negotiations.

The old formula held that when government was divided between the parties, the contending sides should try to “meet in the middle.” But the current Republican leadership doesn’t know the meaning of the word “middle,” so intimidated has it become by the tea party.

Richard (RJ) Eskow: If Government ‘Acted Like a Business,’ It Would Reject Today’s Deficit Madness

The pro-corporate, anti-majority political class is sustaining itself with a lot of self-serving myths these days. Guess you need to do that when you’re dismantling the social contract. In the closed society that is Insider Washington, rites and mythologies are used to promote the otherwise-indefensible: the cruel irrationality of Austerity Economics.

Dean Baker, for example, points out that Democrats must “prove their manhood” by cutting a treasured and valuable program like Social Security. (Funny: Republicans are never asked to do the same.) This initiatory rite is something like a Mafioso’s “earning his bones” as a “made man” by “whacking” somebody — in this case, his own grandmother.

Here’s another myth: Government must “act more like a business” through spending cuts. Is that really what a smart business person would do? What savvy executive would tell his managers to cut spending by a certain percentage over the next ten years when she or he doesn’t even know what the sales figures will look like?

Mar 01 2013

How many times do I have to be right?

19:20 (h/t Susie Madrak)

Ben Bernanke, Hippie

By PAUL KRUGMAN

Published: February 28, 2013

We’re just a few weeks away from a milestone I suspect most of Washington would like to forget: the start of the Iraq war. What I remember from that time is the utter impenetrability of the elite prowar consensus. If you tried to point out that the Bush administration was obviously cooking up a bogus case for war, one that didn’t bear even casual scrutiny; if you pointed out that the risks and likely costs of war were huge; well, you were dismissed as ignorant and irresponsible.

It didn’t seem to matter what evidence critics of the rush to war presented: Anyone who opposed the war was, by definition, a foolish hippie. Remarkably, that judgment didn’t change even after everything the war’s critics predicted came true. Those who cheered on this disastrous venture continued to be regarded as “credible” on national security (why is John McCain still a fixture of the Sunday talk shows?), while those who opposed it remained suspect.

And, even more remarkably, a very similar story has played out over the past three years, this time about economic policy. Back then, all the important people decided that an unrelated war was an appropriate response to a terrorist attack; three years ago, they all decided that fiscal austerity was the appropriate response to an economic crisis caused by runaway bankers, with the supposedly imminent danger from budget deficits playing the role once played by Saddam’s alleged weapons of mass destruction.

Now, as then, this consensus has seemed impenetrable to counterarguments, no matter how well grounded in evidence. And now, as then, leaders of the consensus continue to be regarded as credible even though they’ve been wrong about everything (why do people keep treating Alan Simpson as a wise man?), while critics of the consensus are regarded as foolish hippies even though all their predictions – about interest rates, about inflation, about the dire effects of austerity – have come true.

Incestuous Amplification, Economics Edition

Paul Krugman, The New York Times

January 29, 2013, 5:44 pm

Back during the early days of the Iraq debacle, I learned that the military has a term for how highly dubious ideas become not just accepted, but viewed as certainties. “Incestuous amplification” happen when a closed group of people repeat the same things to each other – and when accepting the group’s preconceptions itself becomes a necessary ticket to being in the in-group. A fundamentally flawed notion – say, that the Germans can’t possibly attack though the Ardennes – becomes part of what everyone knows, where “everyone” means by definition only people who accept the flawed notion.

We saw that in the run-up to Iraq, where perfectly obvious propositions – the case for invading is very weak, the occupation may well be a nightmare – weren’t so much rejected as ruled out of discussion altogether; if you even considered those possibilities, you weren’t a serious person, no matter what your credentials.

Which brings me to the fiscal debate, characterized by the particular form of incestuous amplification Greg Sargent calls the Beltway Deficit Feedback Loop. I’ve already blogged about my Morning Joe appearance and Scarborough’s reaction, which was to insist that almost no mainstream economists share my view that deficit fear is vastly overblown. As Joe Weisenthal points out, the reality is that among those who have expressed views very similar to mine are the chief economist of Goldman Sachs; the former Treasury secretary and head of the National Economic Council; the former deputy chairman of the Federal Reserve; and the economics editor of the Financial Times. The point isn’t that these people are necessarily right (although they are), it is that Scarborough’s attempt at argument through authority is easily refuted by even a casual stroll through recent economic punditry.

But these people aren’t part of the in-group, and if they do make it into the in-group’s conversation at all, it’s only by blurring their message sufficiently that the in-group doesn’t understand it.

And at this point, of course, all the Very Serious People have committed their reputations so thoroughly to the official doctrine that they almost literally can’t hear any contrary evidence.

Disastrous Predictions and Predictable Disasters

Paul Krugman, The New York Times

March 1, 2013, 9:53 am

Joe Weisenthal is wrong. He writes that the unfolding economic disaster in Europe is what everyone predicted. Not so. It’s what he predicted, it’s what I predicted, but it’s not at all what many people were predicting. And the people who got it completely wrong happen to be the people still running European economic policy.



Readers sometimes complain about my frequent references to the things my friends and I got right, and others got wrong. But look, it’s not ego (or anyway it’s not just ego). Predictions are how you judge between models. If the world delivers results that are very much at odds with what your framework says should have happened, you’re supposed to reconsider your framework – as I did, for example, after I was wrong about interest rates in 2003.

And the fact is that a more or less Keynesian framework – a framework that says that austerity in a depressed economy is a terrible idea – has yielded pretty good predictions through the crisis, while the anti-Keynesian stories that became the conventional wisdom in Brussels and Frankfurt have delivered an awesome record of predictive failure.

Mar 01 2013

On This Day In History March 1

This is your morning Open Thread. Pour your favorite beverage and review the past and comment on the future.

Find the past “On This Day in History” here.

March 1 is the 60th day of the year (61st in leap years) in the Gregorian calendar. There are 305 days remaining until the end of the year.

On this day in 1961, President John F. Kennedy issues Executive Order #10924, establishing the Peace Corps as a new agency within the Department of State. The same day, he sent a message to Congress asking for permanent funding for the agency, which would send trained American men and women to foreign nations to assist in development efforts. The Peace Corps captured the imagination of the U.S. public, and during the week after its creation thousands of letters poured into Washington from young Americans hoping to volunteer.

The Peace Corps is an American volunteer program run by the United States Government, as well as a government agency of the same name. The mission of the Peace Corps includes three goals: providing technical assistance, helping people outside the United States to understand U.S. culture, and helping Americans understand the cultures of other countries. Generally, the work is related to social and economic development. Each program participant, (aka Peace Corps Volunteer), is an American citizen, typically with a college degree, who works abroad for a period of 24 months after three months of training. Volunteers work with governments, schools, non-profit organizations, non-government organizations, and entrepreneurs in education, hunger, business, information technology, agriculture, and the environment. After 24 months of service, volunteers can request an extension of service.

Kennedy appointed his brother-in-law Sargent Shriver to be the program’s first director. Shriver fleshed out the organization with the help of Warren Wiggins and others. Shriver and his think tank outlined the organization’s goals and set the initial number of volunteers. The program began recruiting in July, 1962.

Until about 1967, applicants had to pass a placement test that tested “general aptitude” (knowledge of various skills needed for Peace Corps assignments) and language aptitude. After an address from Kennedy, who was introduced by Rev. Russell Fuller of Memorial Christian Church, Disciples of Christ, on August 28, 1961, the first group of volunteers left for Ghana and Tanzania. The program was formally authorized by Congress on September 22, 1961, and within two years over 7,300 volunteers were serving in 44 countries. This number increased to 15,000 in June 1966, the largest number in the organization’s history.

Mar 01 2013

Friday Night at the Movies

This would make much more sense if you were french or spanish or italian.

You know, european.

You cheese eating surrender monkey.

Mar 01 2013

What You Need To Know About “Fix The Debt”

Billionaires for Austerity: With Cuts Looming, Wall Street Roots of “Fix the Debt” Campaign Exposed

With $85 billion across-the-board spending cuts, known as “the sequestration,” set to take effect this Friday, a new investigation reveals how billionaire investors, such as Peter Peterson, have helped reshape the national debate on the economy, the debt and social spending. Between 2007 and 2011, Peterson personally contributed nearly $500 million to his Peter G. Peterson Foundation to push Congress to cut Social Security, Medicare and Medicaid – while providing tax breaks for corporations and the wealthy. Peterson’s main platform has been the Campaign to Fix the Debt. While the campaign is portrayed as a citizen-led effort, critics say the campaign is a front for business groups. The campaign has direct ties to GE, JPMorgan Chase, Morgan Stanley and Goldman Sachs. Peterson is the former chair and CEO of Lehman Brothers and co-founder of the private equity firm, The Blackstone Group. For more, we speak to John Nichols of The Nation and Lisa Graves of the Center for Media and Democracy.

Sequestration Is Austerity, but Not Enough for Simpson and Bowles

by John Nichols, The Nation

Sequestration?

Cue the return of Alan Simpson and Erskine Bowles, frontmen for American austerity. [..]

The former Republican senator and defeated Democratic senate candidate who praises Paul Ryan’s budget don’t particularly like the death-by-slow-cuts of sequestration. They prefer a full frontal assault on the most vulnerable Americans and a redistribution of the wealth upward.

As President Obama has noted, Washington has already reduced the deficit by $2.5 trillion.

But the co-chairs of the failed National Commission on Fiscal Responsibility and Reform now want another $2.4 trillion.

To wit, in a “rehashed” plan to “Fix the Debt,” Simpson and Bowles are busy promoting schemes to “modernize…entitlement programs to account for” an aging population. That’s code for schemes to delay the point at which the hardest working Americans can get access to Social Security and Medicare.

Simpson and Bowles are arguing specifically for the adoption of “chained CPI.” That’s the assault on Social Security cost-of-living increases that Congressman Keith Ellison, D-Minnesota, correctly identifies as “a benefit cut.”

Remember who appointed these two charlatans to head the “National Commission on Fiscal Responsibility and Reform” when Congress refused to create it, Pres. Obama. Remember who embraced their recommendations when the committee failed to come to an agreement, Pres. Obama.

Remember who was privately financing the commission, Peter G. Peterson.

Sperling: Obama Wanted Sequester to Force Democrats to Accept Entitlement Cuts

by Jon Walker, FDL Action

The way Obama has handled basically every manufactured crisis from the debt ceiling, to the Bush tax cuts expiration, to the sequester has been about trying to force both Democrats and Republicans to embrace his version of a “grand bargain.” While it is clear this has been the driving force behind Obama’s decisions, if you pay close attention to his actions is is rare than an administration official will directly admit this. This is actually what I think it most interesting about the recently leaked email exchange between Bob Woodward and Gene Sperling up on Politico. Sperling wrote:

   But I do truly believe you should rethink your comment about saying saying that Potus asking for revenues is moving the goal post. I know you may not believe this, but as a friend, I think you will regret staking out that claim. The idea that the sequester was to force both sides to go back to try at a big or grand bargain with a mix of entitlements and revenues (even if there were serious disagreements on composition) was part of the DNA of the thing from the start. It was an accepted part of the understanding – from the start. Really. It was assumed by the Rs on the Supercommittee that came right after: it was assumed in the November-December 2012 negotiations. There may have been big disagreements over rates and ratios – but that it was supposed to be replaced by entitlements and revenues of some form is not controversial. (Indeed, the discretionary savings amount from the Boehner-Obama negotiations were locked in in BCA: the sequester was just designed to force all back to table on entitlements and revenues.)

Pres. Obama has close ties to Mr. Peterson, both want cuts to Social Security and Medicare. That the president is calling for tax increases is a cover so he can get away with unpopular cuts. If he can get a bipartisan agreement that cuts entitlements and raises taxes then everyone, and no one, is to blame. What John Walker said, “That is why even now Obama isn’t calling for the sequester to be simply repealed or delayed. Obama still wants to use this manufactured crisis to force congressional Democrats to betray their base by adopting Social Security cuts and get Republicans to accept revenue increases.

This is a fine mess you’ve got us into, Barack.

Mar 01 2013

Bipartisan Proposal to Break Up Too Big To Fail Banks

A pair of unlikely allies Sen. Sherrod Brown (D-OH) and Sen David Vitter (R-LA) have teamed up in an effort to break up the mega banks and put an end the taxpayer-funded party on Wall Street the:

“The best example is that 18 years ago, the largest six banks’ combined assets were 16 percent of GDP. Today they’re 64-65 percent of GDP,” Brown said. “So the large banks are getting bigger and bigger, partly because of the financial crisis, partly because of the advantages they have.” [..]

“The system is such that the big banks have far too many advantages, bestowed in part by the marketplace, because investors understand and the market understands that government might in fact bail them out, so there is lower risk for investors, and that means that they can borrow money at a lower cost than anybody else can,” Brown said, explaining why small- and mid-sized banks are at a disadvantage.

Brown and Vitter announced on Thursday that they were working together on bipartisan legislation to address this problem.

“I think the fact that Sen. Brown and I are both here on the floor echoing each other’s concerns, virtually repeating each other’s arguments, is pretty significant,” Vitter said Thursday in his Senate floor remarks. “I don’t know if we quite define the political spectrum of the United States Senate, but we come pretty darned close. And yet, we absolutely agree about this threat.”

Sen. Brown’s speech on the floor of the Senate arguing for fixing “Too Big To Fail”

Sen. Vitter’s edited speech on the Senate floor:

This is progress, let’s see if this float’s with the Senate allies of the TBTF banks. Just how much opposition will there be from Sen. Chuck Shumer (D-Wall St.).