After all, it was at the SOTU merely just a year ago that President Obama assured us that something was going to be done about the Wall St. perpetrators of our mortgage and foreclosure crisis. This was a crisis in which they defrauded consumers with sub-prime NINJA loans pumping up the housing bubble and then dumping the private debt overhang onto the economy destroying over 10 trillion in housing wealth. This left consumers with massive loads of private debt and everyone else jobless like this recovery.
This White House’s DOJ has made a complete mockery of the concept of Justice in and of itself. That illusion of Justice is perpetuated to this day and normal people are devastated because of it. Let President Obama know you are not amused. I have.
After his exclusive interview with MSNBC’s Chris Hayes, host of Up with Chris Hayes, Nobel Prize winning economist and New York Times columnist/blogger, Dr. Paul Krugman (@NYTimeskrugman) joins Chris and his panel guests Dean Baker (@DeanBaker13), co-director Center for Economic & Policy Research and author; Alexis Goldstein (@alexisgoldstein), a former vice president of information technology at Merrill Lynch and Deutsche Bank, now an Occupy Wall Street activist; and Heather McGhee (@hmcghee), vice-president of Demos. Enjoy the lively and informed discussion about the self imposed sequester crisis, global austerity and the role of inequality in the recovery.
The US economy is stagnating and all that our elected officials are fixated on is reducing the deficit and debt with more spending cuts at a time when the government should be investing in this country to help produce jobs. Nobel Prize winning economist and New York Times columnist/blogger, Dr. Paul Krugman has explained that austerity measures in this sluggish economy will only further the pain with more job losses and increase the likely hood of a second recession.
MSNBC’s Chris Hayes, host of Up with Chris Hayes, sat down with Dr. Krugman for a fascinating one on one conversation about the president’s latest bid to delay the looming sequester cuts and why there is a difference between “Macro-economics 101” and what policy makers in DC are talking about. They also discuss the banking crisis and the continued divergence between profits and wages.
President Barack Obama told Democratic delegates and congressional members meeting at the annual House Democratic retreat at Lansdowne Resort in Virginia that the he wants a “big budget deal”
President Barack Obama said he wants to reach a “big deal” on the budget that will cut the nation’s deficit without slashing spending on education and research that is needed to ensure future growth.
Obama said negotiations with congressional Republicans over avoiding the $1.2 trillion in automatic, across-the-board spending reductions set to begin March 1 shouldn’t push aside the effort for a broader plan to cut government debt.
While the president stood firm against “government by crisis” and the need for more revenue in any future deficit reduction deal, and much like the Republicans, who keep saying that they will close loop holes in the tax code but not which ones, there have been few details in how that deal would be accomplished. Nobel Prize winning economist points out that any reduction in government spending at this time would “destroys jobs and causes the economy to shrink”
This really isn’t a debatable proposition at this point. The contractionary effects of fiscal austerity have been demonstrated by study after study and overwhelmingly confirmed by recent experience – for example, by the severe and continuing slump in Ireland, which was for a while touted as a shining example of responsible policy, or by the way the Cameron government’s turn to austerity derailed recovery in Britain. [..]
But aren’t we facing a fiscal crisis? No, not at all. The federal government can borrow more cheaply than at almost any point in history, and medium-term forecasts, like the 10-year projections released Tuesday by the Congressional Budget Office, are distinctly not alarming. Yes, there’s a long-term fiscal problem, but it’s not urgent that we resolve that long-term problem right now. The alleged fiscal crisis exists only in the minds of Beltway insiders.
(my emphasis)
Prof. Krugman discussed with MSNBC’s The Last Word host, Lawrence O’Donnell the consequences of such a deal at this time would mean and what the government should be doing to restart the economy.
As you might have heard the economy is contracting while unemployment remains high inching higher especially in real terms again while Washington is too stupid or corrupt across the board to notice. I can’t say I didn’t see this coming even as just an above average layman. All this focus on austerity is detrimental. After all, spending is actually income and so are deficits which are the life blood of the private sector in the economy when it comes to those sectoral balances you hear me always harping about.
I have to thank NY brit expat for introducing me to John whom is not only a brilliant economist, but an all around cool guy who is very approachable and has an awesome taste in music. He stresses that the economics discipline hasn’t made economics very understandable to the general public and he’s right; however, you wouldn’t know that by reading his many excellent pieces on why everything people think they know about debt and deficits is absolutely wrong. As John points out, it’s not only wrong, it pervades this entire ignorant and corrupt political debate happening right now over this stupid sequester that was a creation of the White House and Congress.
As you will read down below, this horrible self induced debt ceiling pro austerity political show where never is heard an encouraging word like full employment, but instead for Peter Peterson’s enjoyment, idiotic words praising deficit terrorism(budget balance and cutting our safety net) rule the day. It only amounts to economic decay and a likely recession on the way depending on how much deficit spending is cut in the coming days.
In the “I’ll believe this when I see it” category, there are two bits of news about banking and Wall Street have been too long in the coming and if it happens, there will be a lot of happy dances in places like Zucotti Park.
George Osborne told executives from JPMorgan that the days of banks being “too big to fail” are over in Britain, and that taxpayers shouldn’t be expected to bail out the lenders. The next time a crisis hits, he wants more options to act. [..]
The new measure gives regulators the power to force a complete separation of a lender’s retail business from its investment banking. Risky investments undermined banks’ stability in 2008, leading to taxpayer bailouts of two big U.K. banks. [..]
The banking standards commission said that the scandal of manipulating key lending indexes (LIBOR) had “exposed a culture of culpable greed far removed from the interests of bank customers.” [..]
Other countries and regulators are also grappling with how to prevent future bailouts. In the United States, legislation known as the Dodd-Frank act seeks to bar banks them from engaging in risky trading on their own account. The European Union is also examining how banks might separate their riskier investment banking operations from the rest of their business.
Besides that, new international rules – known as Basel III – will require banks to hold more financial reserves to protect against possible losses. The requirements will be phased in over the coming years, but banks have said they are too demanding.
The likely move by U.S. officials would be the first federal enforcement action against a credit-rating firm for alleged illegal behavior related to the crisis. Several state attorneys general are expected to join the case, making it one of the highest-profile and widest-ranging enforcement crisis-era crackdowns.
The expected civil charges against S&P follow the breakdown of long-running settlement talks between the Justice Department and S&P, the people said. [..]
All three credit-rating firms have faced intense criticism from lawmakers for giving allegedly overly rosy ratings to thousands of subprime-mortgage bonds before the housing market collapsed.
The Financial Crisis Inquiry Commission concluded two years ago that the top credit-rating agencies were “key enablers of the financial meltdown.”
The Justice Department and other law-enforcement agencies have long been investigating whether the rating firms broke securities laws or simply failed to predict the housing crisis.
Certainly if S&P is being targeted so will be the Octogenarian of Omaha’s pet rating company, Moody’s as well, not to mention French Fitch. Or maybe not: after all these were the two raters who sternly refused to downgrade the US when the country boldly penetrated the 100% debt/GDP target barrier, and which at last check has some 105% in debt/GDP with no actual plan of trimming spending. As in ever.
And in these here united banana states, it is only reasonable to expect that such crony, corrupt behavior is not only not punished but solidly rewarded.
According to Macroeconomic Advisers, the sequester will knock 0.7 percent off of GDP growth this year. The Bipartisan Policy Center estimates that the sequester will kill one million jobs. [..]
Of course, scrapping the sequester – which includes equal cuts from defense spending and non-defense discretionary spending – does not mean the government simply has to plow that money back into the Pentagon. Domestic spending is headed toward historic lows. The country has a huge infrastructure gap that needs to be filled. And the American Jobs Act, which Republicans filibustered, would have significantly boosted growth according to several independent analyses.
Meanwhile, as Suzie Madrak at Crooks and Liars observed, hell may have just froze over at the conservative think tank, American Enterprise Institute where conservative economist John H. Mankin just told the deficit hawks, in so many words, to “shut up about austerity”.
Congress, take note. Although American deficits do need to be reduced and debt accumulation does need to be slowed and eventually reversed, cries of imminent disaster from “unsustainable” deficits and a supposed bond market collapse will not accomplish this goal. Persistently rising bond prices in Japan and the United States have undercut the “sky-is-falling” rationale for deficit reduction. [..]
If fiscal austerity is applied too rapidly, US growth will drop and the debt-to-GDP ratio will rise, boosting the nation’s debt burden. If the Fed tries to stem the rise with too much money printing, inflation could rise and drive up interest rates, exacerbating the US debt burden. [..]
Congress and the president need to avoid excessive austerity with respect to changes in fiscal policy this year. Over the past four years, on average, the fiscal boost applied to the American economy has been worth about 3 percent of GDP. This year, with tax increases and sequestration, fiscal drag will be about 1.5 percent of GDP. [..]
The lessons from Europe and Japan are that austerity, per se, is not the way to move to a sustainable fiscal stance. Rather, the US economy needs a combination of tax reform to boost growth and legislation enacted now to stabilize the future growth of outlays on entitlement programs.
Economist Paul Krugman, at his NYT blog, Conscience of a Liberal, talks about “incestuous amplification” which happens 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“.
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.
Will AEI’s resident economics scholar, John Mankin’s warnings be heeded? Or will the “incestuous amplification” continue?
In his speech to Republican Party official in Charlotte, NC, Gov. Bobby Jindal said that
“the GOP must stop being the party of stupid.” The problem there is that actions, including Gov. Jindal’s, just reinforce how stupid the GOP is, especially when it comes to the economy.
As he seeks to eliminate the state’s income tax, Gov. Bobby Jindal has cast a covetous eye both west and east. The tax systems in Florida and Texas should serve as a model for Louisiana’s, the governor believes.
Neither state has an income tax, he notes, and both have reputations as hospitable to business investment.
But to make Louisiana look more like Florida and Texas, Jindal’s plan would have to include two significant elements that he dislikes: taxes on business and higher property taxes. [..]
“Most states have a three-legged stool for raising revenue,” said Jim Richardson, a Louisiana State University economist who co-chaired PAR’s tax study. “Texas and Florida have two legs – sales and property – since they don’t have an income tax.” Under the Jindal plan, “Louisiana would have a one-and-a-half-legged stool – sales taxes and some local property taxes.” [..]
“In our system, the highest marginal tax rates — the biggest disincentives to work in our system — are not for the rich. They are for lower-income workers who are in that range where if you earn a little bit more you start to lose benefits, you start to lose Medicaid, you lose housing subsidies,” the Nobel Prize-winning economist said. “This is going to raise taxes precisely on the people who actually have the biggest disincentives to work. So it’s actually, even from that old supply-side incentive thing, this is going in the wrong direction.”
In his Monday New York Times column, Prof. Krugman called the Republicans “Makers, Takers, Fakers”
Like the new acknowledgment that the perception of being the party of the rich is a problem, this represents a departure for the G.O.P. – but in the opposite direction. In the past, Republicans would justify tax cuts for the rich either by claiming that they would pay for themselves or by claiming that they could make up for lost revenue by cutting wasteful spending. But what we’re seeing now is open, explicit reverse Robin Hoodism: taking from ordinary families and giving to the rich. That is, even as Republicans look for a way to sound more sympathetic and less extreme, their actual policies are taking another sharp right turn.
Despite the lessons of the 2012 election, the Republicans, in states that are not checked by Democrats, are pushing tax policies that punish the poor and the middle class and benefit the wealthy.
Pres. Barack Obama nominated former US Attorney of the Southern District of New York, Mary Jo White, to head the troubled Securities and Exchange Commission. The announcement comes a day after the damning PBS Fraontline expose of the Department of Justice’s failure to prosecute bank fraud and the resignation of Lanny Breuer, the head of the DOJ criminal division. Ms. White certainly has a fine reputation of being a tough prosecutor during her tenure as US Attorney, she managed something Rudi Guiliani failed to do, finally putting notorious mobster John “The Teflon Don” Gotti behind bars. However, in the 10 years since she left that office, Ms. White has worked diligently to protect the heads of the “Too Big To Fail” banks. In his Salon article, David Sirota called her a “Wall Street enabler” and goes on to enumerate the evidence:
The deal looked like a classic case of insider trading. But in the summer of 2005, when Aguirre told his boss he planned to interview Mack, things started getting weird. His boss told him the case wasn’t likely to fly, explaining that Mack had “powerful political connections.”…
Aguirre also started to feel pressure from Morgan Stanley, which was in the process of trying to rehire Mack as CEO … It didn’t take long for Morgan Stanley to work its way up the SEC chain of command. Within three days, another of the firm’s lawyers, Mary Jo White, was on the phone with the SEC’s director of enforcement…
Pause for a minute to take this in. Aguirre, an SEC foot soldier, is trying to interview a major Wall Street executive – not handcuff the guy or impound his yacht, mind you, just talk to him. In the course of doing so, he finds out that his target’s firm is being represented…by the former U.S. attorney overseeing Wall Street, who is going four levels over his head to speak directly to the chief of the SEC’s enforcement division…
Aguirre didn’t stand a chance. A month after he complained to his supervisors that he was being blocked from interviewing Mack, he was summarily fired, without notice. The case against Mack was immediately dropped: all depositions canceled, no further subpoenas issued.
In February of 2012 on a panel at a New York University School of Law even, Ms White expressed her doubts about whether banks had committed crimes ahead of the financial crisis stating that care should be taken to “distinguish what is actually criminal and what is just mistaken behavior, what is even reckless risk-taking, and not bow to the frenzy.”
Another point of conflict is Ms. White’s husband. Yves Smith at naked capitalismnotes that “John White, who headed the SEC’s corporate finance section under Chris Cox and was heavily involved in detailed Sarbanes Oxley rulemaking, and now that he is back at Cravath, has been lobbying against regulation.”
Although she has represented many executives accused of financial crimes, White is not an expert on the inner workings of trading systems, a lack of knowledge that may not serve her well as the SEC struggles to keep up with rapid changes in increasingly complex financial markets.
“The problem with the SEC is that they don’t seem to have a grip on” high-frequency trading and other major issues affecting modern financial markets, said Joe Saluzzi, co-head of equity trading at independent brokerage Themis Trading and a frequent critic of high-speed trading. “We’re concerned about cleaning up the market, and we need the SEC to take the lead here.”
Her background puts to question how aggressively White might prosecute financial fraud and enforce new rules under the Dodd-Frank financial reform law — most of which have not yet been adopted by the SEC.
His point about White is simple and it makes a lot of sense. She may very well at one time have been a tough prosecutor. But she dropped out and made the move a lot of regulators make – leaving government to make bucketloads of money working for the people she used to police. “That move, being a tough prosecutor, then going to work defending scumbags, you can only make that move once,” was his point. “You can’t go back again, you know what I mean?”
Think about it: how do you go back and sit in S.E.C.’s top spot after all of those years earning millions as a partner for a firm that represented Morgan Stanley, Bank of America, Goldman, Sachs, Deutsche, Chase, and AIG, among others? Think that fact that his firm has retained her firm has anything to do with Jamie Dimon coming out and saying that White is the “perfect choice” to run the S.E.C.? Think of all the things she knows but can’t act upon. Could she really turn around and target Morgan Stanley after being their lawyer for all those years?
Ms. White is not only another example of the government’s revolving door from public service to private practice back to public service but of Pres. Obama’s signal to Wall Street that they are safe to continue with business as usual. Mary Jo White is the fox in the hen house.
Unbeknownst to most of the legislators and public, tucked very neatly in section 632 (pdf) of the “fiscal cliff” bill, was provision that gave the world’s largest biotechnology firm, Amgen, a drug maker that sells a variety of medications, a half billion dollar gift that allows the company to evade Medicare cost-cutting controls by delaying price restraints on a class of drugs used by kidney dialysis patients for two years. Meanwhile in December, Amgen had been fined $762 million in civil and criminal penalties for illegal marketing of one of its other drugs. This pricing break would wipe out two thirds of those fines.
This undercover handout of taxpayer’s dollars during a so-called “fiscal crisis” was reported in depth by The New York Times investigative reporters, Eric Lipton and Kevin Sack, who also revealed the “architects” of this giveaway, Republican Minority Leader Mitch McConnell, Democratic Senator Max Baucus, chair of the Senate Finance Committee, and that committee’s ranking Republican, Orrin Hatch.
Amgen has deep financial and political ties to lawmakers like Senate Minority Leader Mitch McConnell, Republican of Kentucky, and Senators Max Baucus, Democrat of Montana, and Orrin G. Hatch, Republican of Utah, who hold heavy sway over Medicare payment policy as the leaders of the Finance Committee.
It also has worked hard to build close ties with the Obama administration, with its lobbyists showing up more than a dozen times since 2009 on logs of visits to the White House, although a company official said Saturday that it had not appealed to the administration during the debate over the fiscal legislation.
The measure flies in the face of attempts to curb the enormous expense of dialysis for the Medicare program by reversing incentives to over-prescribe medication. But that didn’t deter the “three amigos” from sneaking in the provision to their generous benefactor:
Amgen’s employees and political action committee have distributed nearly $5 million in contributions to political candidates and committees since 2007, including $67,750 to Mr. Baucus, the Finance Committee chairman, and $59,000 to Mr. Hatch, the committee’s ranking Republican. They gave an additional $73,000 to Mr. McConnell, some of it at a fund-raising event for him that it helped sponsor in December while the debate over the fiscal legislation was under way. More than $141,000 has also gone from Amgen employees to President Obama’s campaigns.
What distinguishes the company’s efforts in Washington is the diversity and intensity of its public policy campaigns. Amgen and its foundation have directed hundreds of thousands of dollars in charitable contributions to influential groups like the Congressional Black Caucus and to lesser-known groups like the Utah Families Foundation, which was founded by Mr. Hatch and brings the senator positive coverage in his state’s news media.
Amgen has sent large donations to Glacier PAC, sponsored by Mr. Baucus in Montana, and OrrinPAC, a political action committee controlled by Mr. Hatch in Utah.
U.S. Rep. Peter Welch (D-Vt.) filed legislation this week to eliminate the exemption for a class of drugs, including Amgen’s Sensipar, that are used by kidney dialysis patients. [..]
“Amgen managed to get a $500-million paragraph in the fiscal-cliff bill and virtually no one in Congress was aware of it,” Welch said. “It’s a taxpayer ripoff and comes at a really bad time when we’re trying to control healthcare costs. Amgen should not be allowed to turn Medicare into a profit center.” [..]
Other co-sponsors of the bill seeking repeal include House Republican Richard Hanna of New York and two House Democrats, Jim Cooper of Tennessee and Bruce Braley of Iowa.
Rep. Welch sat down with Bill Moyers on Moyers & Company to discuss Amgen’s “sweetheart deal”
“When there is this back room dealing that comes at enormous expense to taxpayers and enormous benefit to a private, well-connected, for-profit company, we’ve got to call it out,” Welch tells Bill. “Those members of Congress who are concerned about the institution, about our lack of credibility, about the necessity of us doing things that are in the public good as opposed to private gain, we’ve got to call it out.”
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