07/11/2011 archive

Bad Policy, Bad Politics- Part 1

Monday Business Edition

Economy Faces a Jolt as Benefit Checks Run Out

By MOTOKO RICH, The New York Times

Published: July 10, 2011

Close to $2 of every $10 that went into Americans’ wallets last year were payments like jobless benefits, food stamps, Social Security and disability, according to an analysis by Moody’s Analytics. In states hit hard by the downturn, like Arizona, Florida, Michigan and Ohio, residents derived even more of their income from the government.

By the end of this year, however, many of those dollars are going to disappear, with the expiration of extended benefits intended to help people cope with the lingering effects of the recession. Moody’s Analytics estimates $37 billion will be drained from the nation’s pocketbooks this year.

“If we don’t get more job growth and gains in wages and salaries, then consumers just aren’t going to have the firepower to spend, and the economy is going to weaken,” said Mark Zandi, chief economist of Moody’s Analytics, a macroeconomic consulting firm.

Job growth has remained elusive. There are 4.6 unemployed workers for every opening, according to the Labor Department, and Friday’s unemployment report showed that employers added an anemic 18,000 jobs in June.

Consumers account for an estimated 60 to 70 percent of the country’s economic activity, but two years into the official recovery, businesses are still complaining that people simply are not spending enough.

Because benefit payments tend to be spent right away to cover basic needs like food and rent, they provide a direct boost to consumer spending. In a study for the Labor Department, Wayne Vroman, an economist at the Urban Institute, estimated that every $1 paid in jobless benefits generated as much as $2 in the economy.

Government Aid Dissipating, Damaging Economic Performance

By: David Dayen, Firedog Lake

Monday July 11, 2011 6:55 am

The Times story tells a simple tale, one rooted in elementary macroeconomic theory, and one which has escaped everyone in Washington. If you reduce benefits on those who have the highest propensity to spend money, that money gets taken out of the economy, and GDP suffers. And GDP has a direct bearing on unemployment. Our automatic stabilizers actually worked decently during the Great Recession. In fact, most of the stimulus went to tax cuts and beefing up those stabilizers, through aid to states and expanded benefits (in fact, too much so, as public investment in jobs was barely a sliver of the total stimulus). No doubt Republicans will see this article as some evidence of lazy Americans living on the dole, but it’s a direct result of an intelligently designed system to provide a safety net when the bottom drops out of the economy.

Herr Doktor Professor

Regular readers of this blog know that I make a big deal of the failure of interest rates to rise despite massive government borrowing. There’s a reason for that: what happens to interest rates is a key indicator of which economic model, and hence which economic policies, are right.

The Very Serious position has been that government borrowing will drive up rates, crowd out private investment, and impede recovery. A Keynes-Hicks analysis, by contrast, says that when you’re in a liquidity trap, even large government borrowing won’t drive up rates – and hence won’t crowd out private investment. In fact, it will promote private investment by raising capacity utilization and giving firms more reason to expand.

What we usually get in response to this seemingly decisive data are a series of excuses – most recently, that rates were low because the Fed was buying all the bonds. Well, that program has ended, and interest rates are still low.

More Herr Doktor Professor on excuses

The fact is, the United States economy has been stuck in a rut for a year and a half.

The truth is that creating jobs in a depressed economy is something government could and should be doing.

Our failure to create jobs is a choice, not a necessity – a choice rationalized by an ever-shifting set of excuses.

Excuse No. 1: Just around the corner, there’s a rainbow in the sky.

  • Remember “green shoots”? Remember the “summer of recovery”? Policy makers keep declaring that the economy is on the mend – and Lucy keeps snatching the football away. Yet these delusions of recovery have been an excuse for doing nothing as the jobs crisis festers.

Excuse No. 2: Fear the bond market.

  • Two years ago The Wall Street Journal declared that interest rates on United States debt would soon soar unless Washington stopped trying to fight the economic slump. Ever since, warnings about the imminent attack of the “bond vigilantes” have been used to attack any spending on job creation.

    But basic economics said that rates would stay low as long as the economy was depressed – and basic economics was right. The interest rate on 10-year bonds was 3.7 percent when The Wall Street Journal issued that warning; at the end of last week it was 3.03 percent.

Excuse No. 3: It’s the workers’ fault.

  • (I)f there really was a mismatch between the workers we have and the workers we need, workers who do have the right skills, and are therefore able to find jobs, should be getting big wage increases. They aren’t. In fact, average wages actually fell last month.

Excuse No. 4: We tried to stimulate the economy, and it didn’t work.

  • Everybody knows that President Obama tried to stimulate the economy with a huge increase in government spending, and that it didn’t work. But what everyone knows is wrong.

    What happened to the stimulus? Much of it consisted of tax cuts, not spending. Most of the rest consisted either of aid to distressed families or aid to hard-pressed state and local governments. This aid may have mitigated the slump, but it wasn’t the kind of job-creation program we could and should have had. This isn’t 20-20 hindsight: some of us warned from the beginning that tax cuts would be ineffective and that the proposed spending was woefully inadequate. And so it proved.

Neoliberal Economics has as much credibility as Stalinist Genetics.

Obama: Progressives, “Eat Your Peas”

Catfood is made out of peas? Who knew? lambert

This press conference tells us that the austerity crap isn’t some bit of political posturing, it’s a belief. We’re doomed. Atrios

The right wing Republican talking points that were spewed by President Obama at his press conference were so thick that it has left no doubt the president is about to sell out the middle class and poor.

President Obama said Monday that he had “bent over backwards” to forge a compromise with Republicans on a debt limit deal – and that it was time for them to “budge.”

“I am prepared to take on significant heat from my Party to get something done and I expect the other side to be willing to do the same thing,” he said. . . . .

“We have to pull off the Band-aid — to eat our peas,” he said.

I don’t often agree with NYT Columnist Russ Douthat but his analysis of the “madness” cuts to the point:

Barack Obama wants a right-leaning deficit deal.  

The not-so-secret secret is that the White House has given ground on purpose. Just as Republicans want to use the debt ceiling to make the president live with bigger spending cuts than he would otherwise support, Obama’s political team wants to use the leverage provided by those cra-a-a-zy Tea Partiers to make Democrats live with bigger spending cuts than they normally would support. . . .

Why? Because the more conservative-seeming the final deal, the better for the president’s re-election effort. In that environment, Republicans have every incentive to push and keep pushing. Since any deal they cut will be used as an election-year prop in 2012, they need to make sure the president actually earns his budget-cutting bona fides.

The problem is that voters don’t care about the deficit. They care about jobs and the economy. Spending cuts, tax cuts and austerity programs do ot create jobs. Even Ronald Reagan’s budget director, David Stockman, now admits that Reaganomics and the Bush tax cuts are a major cause of the current “debt crisis” and takes Obama and Rep. Paul Ryan to the “woodshed”

“In attacking the Bush tax cuts for the top 2 percent of taxpayers, the president is only incidentally addressing the deficit,” he writes. “Mr. Obama is thus playing the class-war card more aggressively than any Democrat since Franklin D. Roosevelt – surpassing Harry S. Truman or John F. Kennedy when they attacked big business or Lyndon B. Johnson or Jimmy Carter when they posed as champions of the little guy.”

“On the other side,” he continues, “Representative Ryan fails to recognize that we are not in an era of old-time enterprise capitalism in which the gospel of low tax rates and incentives to create wealth might have had relevance.”

Eat your peas, we are doomed.

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”.

Paul Krugman: No, We Can’t? Or Won’t?

If you were shocked by Friday’s job report, if you thought we were doing well and were taken aback by the bad news, you haven’t been paying attention. The fact is, the United States economy has been stuck in a rut for a year and a half.

Yet a destructive passivity has overtaken our discourse. Turn on your TV and you’ll see some self-satisfied pundit declaring that nothing much can be done about the economy’s short-run problems (reminder: this “short run” is now in its fourth year), that we should focus on the long run instead.

This gets things exactly wrong. The truth is that creating jobs in a depressed economy is something government could and should be doing. Yes, there are huge political obstacles to action – notably, the fact that the House is controlled by a party that benefits from the economy’s weakness. But political gridlock should not be conflated with economic reality.

Paul Rosenberg:

As things stand today, the US is hurtling toward a budget showdown in less than a month. Either President Obama will once again capitulate to extreme Republican budget-slashing demands, making Democrats seem as much of a threat to Medicare as Republicans, and virtually ensuring a GOP electoral sweep in 2012, or the US will default on its debt for the first time in its history, most likely plunging the world economy back into another five-continent recession, also costing Democrats the 2012 elections. These are the options left for a president and a political class completely divorced both from reality, and its own history of how one of the three greatest US presidents of all time steered the country from the brink of collapse eight decades ago

Entirely forgetting the real history of how Franklin D Roosevelt used activist government to save American capitalism from itself, the entire US political establishment is instead hypnotized by the false history woven around its most over-hyped president of all time: Ronald Reagan. Idolatry of Reagan’s supposed tax-cutting wonders propels the now widespread economic belief that up is down, that cutting government spending is the way out of – rather than into – a severe recession. At the same time, idolatry of Reagan’s supposed political wonders propels GOP extremists to ignore all other considerations.

Joseph E. Stiglitz: The Evils of Unregulated Capitalism

Just a few years ago, a powerful ideology – the belief in free and unfettered markets – brought the world to the brink of ruin. Even in its hey-day, from the early 1980s until 2007, US-style deregulated capitalism brought greater material well-being only to the very richest in the richest country of the world.

Indeed, over the course of this ideology’s 30-year ascendance, most Americans saw their incomes decline or stagnate year after year.

Moreover, output growth in the United States was not economically sustainable. With so much of US national income going to so few, growth could continue only through consumption financed by a mounting pile of debt.

I was among those who hoped that, somehow, the financial crisis would teach Americans (and others) a lesson about the need for greater equality, stronger regulation, and a better balance between the market and government.

Alas, that has not been the case.

Eugen Robinson: A little more revenue could go a long way

Do progressives care about reducing the national debt? Of course they do, no matter what the White House might believe.

“We think that obviously there are some Democrats who don’t feel as strongly about deficit reduction as [President Obama] does,” senior adviser David Plouffe said Wednesday at a breakfast with reporters and columnists. But that’s not obvious at all. It isn’t even true.

There’s no dispute about where we need to go. The question is what path to take.

Clearly, the federal government cannot continue spending at a rate of 25 percent of gross domestic product while taking in revenue that equals less than 15 percent of GDP, as is the case this year. We would reach the point where debt service crowds out health care, education and other priorities dear to progressives’ hearts. Major investments the nation desperately needs to make – for infrastructure and energy research, for example – would be impossible. Decline would be inevitable.

Steven J. D’Amico: Trade Deals are No Deal for US

LONG BEFORE 2008, when Wall Street’s unchecked greed brought the world’s economy to its knees, we in the middle class could feel our future slipping away. We knew that we were working longer and harder – we could see that even with two salaries, most families had less disposable income than families did in the 1960s and ’70s when one income was the norm. We knew that good quality jobs were harder to find and hold. And we knew that a big reason we were falling behind was a flawed trade policy that shipped many of our jobs overseas.

Yet even after losing 682,000 jobs to NAFTA since it took effect in 1994, and 2.4 million to China since it joined the World Trade Organization, Washington continues in its blind faith that somehow these trade deals are good for us. This summer Congress is expected to take up three new trade deals – with Korea, Panama, and Colombia. These trade pacts are bad for American workers, bad for our domestic economy, and bad for democracy.

New York Times: An Aggressive Ruling on Clean Air

The Environmental Protection Agency on Thursday issued a welcome and overdue rule compelling power plants in 27 states and the District of Columbia to reduce smokestack emissions that pollute the air and poison forests, lakes and streams across the eastern United States. The regulation reflects the E.P.A.’s determination to carry out its mandates under the Clean Air Act despite fierce Congressional opposition, and bodes well for progress on a host of other regulatory challenges the agency faces.

The rule, which takes effect in 2012, would cut emissions of sulfur dioxide, a component of acid rain, and nitrogen oxide, a component of smog, by more than half by 2014 compared with 2005 levels. The E.P.A. administrator, Lisa Jackson, said the rule would improve air quality for 240 million Americans in the states where the pollution is produced and in areas downwind.

Caroline Arnold: How Much Blame Do We Share for Our Leaders’ Failures?

Six years ago, in the wake of the botched management of Hurricane Katrina and its aftermath, a friend warned me against blaming Republicans.

I replied flippantly that as an unrepentant progressive, I quite enjoyed blaming Republicans, though I recognized that even the GOP, PNAC, and all their associated think-tanks and trained media rescue-dogs couldn’t have single-handedly created a disaster of that magnitude. I added that if the Republicans had planned Katrina, they probably would have directed it to Ohio. Of course there aren’t any hurricanes in Ohio, but heck, there weren’t any WMDs in Iraq, either.

Another friend who had volunteered in the cleanup of Katrina running a ham radio operation observed that among the agencies and organizations trying to help, the farther up the hierarchy of any institution, public or private, the worse prepared the people were, the more out of touch, the more incompetent, and the more their efforts were downright damaging.

… sounds like The Peter Principle to me. And an interesting corollary would probably be that the higher the hierarchy, the greater the level of incompetence.

Le Tour- Rest Day 1

Le.  Tour.  De.  France.

What did I say about the wicked?  Oh… yeah.

Yesterday was hit and run day as a chase car plowed into 2 riders but neither one of them were forced to retire.  Yet.  It might have been bigger, new GC leader Voeckler was close enough to get whacked in the leg by Flecha as Flecha spun into a barbed wire fence.

The actual big crash happened earlier on a rain slick descent and took out Vinokourov who was a legitimate contender for Yellow in Paris.  In all 8 riders retired, nearly doubling the list to 18.

On the Stage Sanchez (Louis-Leon) had the victory with Voeckler and Casar close behind.  Almost 4 minutes back was a group including Gilbert, Evans, the 2 Schlecks, Sanchez (Samuel), and Contador.  Hushovd finished tied for 79th on the day, 6:47 behind.

In the General Classification the 2 Medium Mountain days have bubbled up some of the usual suspects-

Rank Name Team ET delta
1 Thomas Voeckler Europcar 38h 35′ 11″
2 Luis-Leon Sanchez Rabo Bank 38h 37′ 00″ + 01′ 49″
3 Cadel Evans BMC 38h 37′ 37″ + 02′ 26″
4 Frank Schleck Leopard Trek 38h 37′ 40″ + 02′ 29″
5 Andy Schleck Leopard Trek 38h 37′ 48″ + 02′ 37″
6 Tony Martin HTC 38h 37′ 49″ + 02′ 38″
7 Peter Velits HTC 38h 37′ 49″ + 02′ 38″
8 Andréas Kloden Radio Shack 38h 37′ 54″ + 02′ 43″
9 Philippe Gilbert Omega Pharma 38h 38′ 06″ + 02′ 55″
10 Jakob Fuglsang Leopard Trek 38h 38′ 19″ + 03′ 08″
16 Alberto Contador Saxo Bank 38h 39′ 18″ + 04′ 07″
24 Thor Hushovd Garmin 38h 40′ 24″ + 05′ 13″
36 Levi Leipheimer Radio Shack 38h 42′ 27″ + 07′ 16″

We have raced 989 miles of 2132 or 46%.

BruceMcF’s assessment

When the front of the peleton crashes overcooking a corner going 50mph+ downhill, that defines “a mess”. The yellow and green jersey wearers made the decision to neutralize the race until those involved still riding rejoined the peleton ~ despite the fact that it assured the yellow jersey wearer that he would surrender the maillot jeune, though the fact that he had not expected to still be wearing it today may have made the decision easier.

In the race for the Yellow, Voeckler is not considered to be a serious GC threat, so it serves the interests of the main GC contenders for him to be in yellow into the Pyrenees. The three fancied race winners all finished same time, but several podium threats crashed out, while Lulu Sanchez vaulted into second place, so he will have to be taken seriously as long as he holds the time.

In the race for Green, Phillipe Gilbert gained “best of the rest” sprint points at the only part of today’s stage close enough to flat to put a sprint point, and “best of the rest” points at the finish, to add 30 points to his Green Jersey talley ~ one more than the difference between winning a flat stage and finishing 8th. Cadel Evans finished “third best of the rest” to add 15 points to his 5th place in the Green Jersey, and Thor Hushovd picked up 7 points at the intermediate sprint just being near the front of the peleton as his team was still driving in an ultimately futile effort to hold the yellow. Thor goes into the rest day without having to worry about defending yellow, so can start thinking about staging an attack to move up in the Green Jersey competition.

Vs. Rest Day coverage starts at 8 am.

On This Day In History July 11

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.

July 11 is the 192nd day of the year (193rd in leap years) in the Gregorian calendar. There are 173 days remaining until the end of the year.

On this day in 1789, Jacques Necker is dismissed as France’s Finance Minister sparking the Storming of the Bastille.

Necker was seen as the savior of France while the country stood on the brink of ruin, but his actions could not stop the French Revolution. Necker put a stop to the rebellion in the Dauphiné by legalizing its assembly, and then set to work to arrange for the summons of the Estates-General of 1789. He advocated doubling the representation of the Third Estate to satisfy the people. But he failed to address the matter of voting – rather than voting by head count, which is what the people wanted, voting remained as one vote for each estate. Also, his address at the Estates-General was terribly miscalculated: it lasted for hours, and while those present expected a reforming policy to save the nation, he gave them financial data. This approach had serious repercussions on Necker’s reputation; he appeared to consider the Estates-General to be a facility designed to help the administration rather than to reform government.

Necker’s dismissal on 11 July 1789 made the people of France incredibly angry and provoked the storming of the Bastille on July 14. The king recalled him on 19 July. He was received with joy in every city he traversed, but in Paris he again proved to be no statesman. Believing that he could save France alone, he refused to act with the Comte de Mirabeau or Marquis de Lafayette. He caused the king’s acceptance of the suspensive veto, by which he sacrificed his chief prerogative in September, and destroyed all chance of a strong executive by contriving the decree of 7 November by which the ministry might not be chosen from the assembly. Financially he proved equally incapable for a time of crisis, and could not understand the need of such extreme measures as the establishment of assignats in order to keep the country quiet. Necker stayed in office until 1790, but his efforts to keep the financial situation afloat were ineffective. His popularity had vanished, and he resigned with a broken reputation.

Pique the Geek 20110710: Aspirin, a Wonder Drug

Before we get started, let me be clear that any information contained here, although to be best of my knowledge accurate, in in no way intended to be a substitute for advice and care from licensed medical professionals.  OK, disclaimer stated.

Aspirin is one of the first synthetic drugs, and is still in wide use after over 100 years.  It was first marketed by Bayer in 1899, and sales are still strong despite competition from drugs like acetaminophen,  ibuprofen, and naproxin sodium.  Bayer has in the past week or two come out with a new advert about its new “quick acting” aspirin.

This material is “quick acting” because the particle size is much smaller than that of regular aspirin.  Since aspirin is only slowly soluble in water, the greater surface area for the same mass does speed up absorption.

Sunday Train: Chairman Mica to Cities ~ Screw You

Burning the Midnight Oil for Progressive Populism

Chairman Mica says:

this proposal maximizes the value of our available infrastructure funding through better leveraging, streamlining the project approval process, attracting private sector investment, and cutting the federal bureaucracy, … Most importantly, this six-year proposal provides the stability states need to plan major transportation improvements and create long-term jobs.

Decoding that, Chairman Mica is saying: “Screw You, Cities”.

And of course, a bit of “screw you countryside” too, since those votes can be taken for granted.

Evening Edition

Evening Edition is an Open Thread

From Yahoo News Top Stories

1 Australia sets carbon tax to fight climate change

By Madeleine Coorey, AFP

11 hrs ago

Australia announced plans on Sunday to tax carbon pollution at Aus$23 (US$24.74) per tonne to help battle climate change, as it moved towards creating the region’s biggest emissions trading scheme.

Prime Minister Julia Gillard said there would be a fixed price on carbon pollution, blamed for global warming, from next year before an emissions trading scheme was introduced in 2015.

“We have had a long debate about climate change in this country,” Gillard said in a rare televised address to the nation.