Tag: Economy

Under the first U.S. income tax law that was passed in 1913, only 1 percent of Americans were required to file income tax returns, and to be liable to file you would have had to be earning an annual income of about $120,000 in todays dollars. It was passed during a period called the Progressive Era: “a period of social activism and reform that flourished from the 1890s to the 1920s” during which there were widespread “efforts to reform local government, education, medicine, finance, insurance, industry, railroads, churches, and many other areas” of American life.

It was a period of steady economic growth in the U.S. and produced a since unparalleled level of prosperity that lasted for decades. The politics of the era included the concept of an economy of high wages and the idea that American labor could undersell foreign labor by being highly paid, well clothed, well educated, healthier labor with high productivity. The concept of “free market” during the period was an entirely different concept than it is today.

Michael Hudson is President of The Institute for the Study of Long-Term Economic Trends (ISLET), a Wall Street Financial Analyst, Distinguished Research Professor of Economics at the University of Missouri, Kansas City and is the author of “Super-Imperialism: The Economic Strategy of American Empire” (1968 & 2003), “Trade, Development and Foreign Debt” (1992 & 2009) and of “The Myth of Aid” (1971).

ISLET engages in research regarding domestic and international finance, national income and balance-sheet accounting with regard to real estate, and the economic history of the ancient Near East. Hudson acts as an economic advisor to governments worldwide, including Iceland, Latvia and China, on finance and tax law.

As an advisor to the White House, the State Department and the Department of Defense at the Hudson Institute, and subsequently to the United Nations Institute for Training and Research (UNITAR), Hudson has been one of the best known specialists in international finance. He also has consulted for the governments of Canada, Mexico and Russia, most recently for the Duma opposition to the Yeltsin regime.

Yesterday we heard Assistant Research Professor at the Political Economy Research Institute (PERI) Jeannette Wicks-Lim explain how currently most minimum wage earners in the U.S. can no longer the afford the basic necessities of life, and outline a proposal to combine minimum wage and earned income tax credit policies to guarantee a decent living wage for all.

Hudson here today talks with The Real News Networks’ Paul Jay and concludes that the the U.S economy can again outperform foreign economies with high wages, increased living standards, and with high top tier tax rates producing higher productivity – a progressive concept, like Wicks-Lim’s ideas, that is nearly the exact opposite of the free lunch economic ‘theories’ so widespread today that are behind wall street’s pillaging of the U.S. economy with the support of both major political parties.

Big Tent Democrat commented earlier today at Talkleft in his post Policy And Politics: The Economy that:

Discussing E.J. Dionne’s column today, Booman makes some good points:

Considering that [the column] is supposed to be about [Dems] regaining the initiative, it’s pretty weak to lecture the White House about its tendency to defend itself and “the left” about never being satisfied. Those things aren’t going to change. We can be critical of that reality, but we ought not offer it up as something to fix so that we can get our mojo back.

In fact it is not something to fix. The White House should tout its accomplishments. They are in the politics business after all. And people dissatisfied with what the White House is doing should say so and work to make them do what they want. That’s how it works. But both Booman and Dionne miss the connection between the political problems Dems have and the economic policies of the Obama Administration.

[…]

And these failures explain almost all of the political trouble the Democrats are in. Booman writes:

There are two things that will help us get our mojo back: Speaker Boehner and Obama’s reelection campaign. That’s all we need. And improving economy would be nice, but realistically we are going to be fighting over who is to blame for high unemployment and who has a better plan to get something through Congress that will create jobs.

(Emphasis supplied.) If that is where the political battle is going to be fought, then the Dems’ political fortunes do not look bright.

“An improving economy would be nice but realistically we are going to be fighting over who is to blame for high unemployment”?

Booman of course and as usual has his finger on the pulse of reality, and like many strong Obama supporters knows deep in his heart that it’s far more important for them to “win” than it is to have the administration produce results, even if he has to lose to win.

Michael Hudson is President of The Institute for the Study of Long-Term Economic Trends (ISLET), a Wall Street Financial Analyst, Distinguished Research Professor of Economics at the University of Missouri, Kansas City and is the author of “Super-Imperialism: The Economic Strategy of American Empire” (1968 & 2003), “Trade, Development and Foreign Debt” (1992 & 2009) and of “The Myth of Aid” (1971).

ISLET engages in research regarding domestic and international finance, national income and balance-sheet accounting with regard to real estate, and the economic history of the ancient Near East. Michael acts as an economic advisor to governments worldwide including Iceland, Latvia and China on finance and tax law.

Here Hudson talks with The Real News Networks’ Paul Jay about the 800+ empire of military bases the U.S. has established around the globe, about how all of the money that the military spends abroad is spent on foreign economies and is then “siphon[ed] up into the central banks. And the central banks would have nothing to do with these dollars but to keep their currency stable by recycling the dollars into US Treasury bills.” and about how “If it weren’t for the military deficit, America would have had to finance its own domestic budget deficit. It’s been foreigners that are financing the budget deficit.”

Hudson concludes here with the observation that “Now that foreigners are essentially saying, we don’t want any more dollars, we’re not going to fund your deficit, all of a sudden they think: who’s going to fund the deficit if not foreign central banks? The answer is: American labor, the American middle class and working families are going to fund it, not the military.”

The rest of the world has had enough of financing it’s own encirclement and subjugation by the U.S. military.

From here on in it is you who is going to be paying the bill…

Brilliant original economic insight (not that I ever have any) is in short supply this morning, but perhaps there will be some later if I collect my thoughts.  In the mean time here are the Business News headlines and TheMomCat has a very good interview with Roubini which will follow soon.

1 Chinese web users sceptical on inflation-busting moves

by Susan Stumme, AFP

Mon Dec 27, 2:34 am ET

Dr. Nouriel Roubini, the chairman and co-founder of Roubini Global Economics and professor of Economics at NYU’s Stern School of Business, joined Rachel Maddow for a two part interview on the economic state of the US economy. What he had to say was not encouraging. The transcripts to both segments are below the fold.

The 3rd segment was on-line only. It was diaried here: Dr. Doom: Nothing Has Changed

Nouriel Roubini, chairman and co-founder of Roubini Global Economics and professor of economics at NYU’s Stern School of Business, appeared in a web only interview with Rachel Maddow. Roubini argues that efforts to restore the collapsing economy are too little too late and that the structure that caused the collapse has not been fixed.

‘It’s a problem when you have a society where you have more financial engineers than computer engineers.’

Monday Business Edition

As Krugman points out–

When historians look back at 2008-10, what will puzzle them most, I believe, is the strange triumph of failed ideas. Free-market fundamentalists have been wrong about everything – yet they now dominate the political scene more thoroughly than ever.

…

(T)he fact is that the Obama stimulus – which itself was almost 40 percent tax cuts – was far too cautious to turn the economy around. And that’s not 20-20 hindsight: many economists, myself included, warned from the beginning that the plan was grossly inadequate. Put it this way: A policy under which government employment actually fell, under which government spending on goods and services grew more slowly than during the Bush years, hardly constitutes a test of Keynesian economics.

…

(E)verything the right said about why Obamanomics would fail was wrong. For two years we’ve been warned that government borrowing would send interest rates sky-high; in fact, rates have fluctuated with optimism or pessimism about recovery, but stayed consistently low by historical standards. For two years we’ve been warned that inflation, even hyperinflation, was just around the corner; instead, disinflation has continued, with core inflation – which excludes volatile food and energy prices – now at a half-century low.

And while it is true that Republicans are trying to write certain false narratives–

(T)he modern Republican Party is utterly dedicated to the Reaganite slogan that government is always the problem, never the solution. And, therefore, we should have realized that party loyalists, confronted with facts that don’t fit the slogan, would adjust the facts.

…

It’s not as if the story of the crisis is particularly obscure. First, there was a widely spread housing bubble, not just in the United States, but in Ireland, Spain, and other countries as well. This bubble was inflated by irresponsible lending, made possible both by bank deregulation and the failure to extend regulation to “shadow banks,” which weren’t covered by traditional regulation but nonetheless engaged in banking activities and created bank-type risks.

Then the bubble burst, with hugely disruptive consequences. It turned out that Wall Street had created a web of interconnection nobody understood, so that the failure of Lehman Brothers, a medium-size investment bank, could threaten to take down the whole world financial system.

It’s a straightforward story, but a story that the Republican members of the commission don’t want told. Literally.

Last week, reports Shahien Nasiripour of The Huffington Post, all four Republicans on the commission voted to exclude the following terms from the report: “deregulation,” “shadow banking,” “interconnection,” and, yes, “Wall Street.”

…

That report is all of nine pages long, with few facts and hardly any numbers. Beyond that, it tells a story that has been widely and repeatedly debunked – without responding at all to the debunkers.

In the world according to the G.O.P. commissioners, it’s all the fault of government do-gooders, who used various levers – especially Fannie Mae and Freddie Mac, the government-sponsored loan-guarantee agencies – to promote loans to low-income borrowers. Wall Street – I mean, the private sector – erred only to the extent that it got suckered into going along with this government-created bubble.

Shahien Nasiripour–

During a private commission meeting last week, all four Republicans voted in favor of banning the phrases “Wall Street” and “shadow banking” and the words “interconnection” and “deregulation” from the panel’s final report, according to a person familiar with the matter and confirmed by Brooksley E. Born, one of the six commissioners who voted against the proposal.

…

The shadow banking system refers to the part of the financial system in which investors and other nonbanks like hedge funds and investment firms provide credit to borrowers, as opposed to more traditional banks. Interconnection refers to the links that bind financial institutions to one another, like derivatives, borrowings, and investments.

They’re not the only ones.

Neo-Liberal economics, especially of the Trickle Down Voodoo Variety (call a spade a spade Paul) is a complete, abject failure.

Coming from Republicans or Democrats.

It’s hard for me to fathom how these people can claim Economics is even a “Social” Science when their theories so blatantly violate the first law of Scientific Inquiry- Your Results Shall Be Testable AND Duplicatable.

The Stimulus That Isn’t

By Robert Kuttner, The Huffington Post

Posted: December 19, 2010 07:41 PM

It is astonishing how the Beltway echo-chamber, most egregiously the editorial page and news columns of the Washington Post (hard to tell the difference), thinks this deal is good for the Republic. The Post has become a cheerleader for policies that fail to cure the economy and show off Obama as a weakling waiting to be rolled again.

The tax deal, re-branded as a stimulus program, is paltry and ineffective as economic tonic. What hardly anyone seems to have grasped is that the deal basically continues the status quo with almost no stimulus.

If the tax rates on the books in 2010 did not produce a recovery, why should we expect that the very same rates will change the economy in 2011?

Business News below.

So here’s the deal. Grab your bootstraps and pull as hard as you can. Elbow everybody else out of the way, and climb over any mountains of bodies in your way. Or stomp them if they won’t be reasonable and just die.

Do unto others before they do unto you, and you too can make the big time. Baby.

The top of the mountain waits for you! The shining city on the hill where the streets are paved with gold and you’ll never have to look another whining starving emaciated worthless shiftless lazy ass bum in the eye again and all the beautiful people look like they just walked off the cover of a magazine.

God loves you and he wants you to live a rich life in heaven on earth.

Believe, my friends. Believe, and you too can live the American Dream. Jeezus loves you too and this is God’s Country my friends!

Give up your whining socialist fantasies and screw the suckers. Be a real self made man or woman. The brass ring is there just waiting for you to grab. You can do this!

Buck up, straighten up, and fly right. If you miss it you have only yourself to blame for being so worthless. The world doesn’t owe you a living. You have to get out there, grab a live baby, and rip it’s heart out with your teeth if you want to live the blessed life of a fulfilled human being.

The only winners are those who die with the most toys. You know this in your heart of hearts, and everyone else is a loser. Just fertilizer. Shit. Made to serve you. The ground upon which you strut in silver slippers, my friends.

It’s get better on the flip…

Moody’s Investors Service said in a Monday report that the tax-cut deal hammered out between President Obama and congressional Republicans jeopardizes the Aaa credit rating enjoyed by U.S. Treasury bonds. The package could add $900 billion to the national debt, if it is made permanent, and this increases the chances the U.S. would one day default on its debt.

“From a credit perspective, the negative effects on government finance are likely to outweigh the positive effects of higher economic growth. Unless there are offsetting measures, the package will be credit negative for the US and increase the likelihood of a negative outlook on the US government’s Aaa rating during the next two years,” Moody’s analyst Steven Hess writes.

Hess writes that the higher economic growth from the tax cuts and unemployment benefits might be substantial, but the effect of the growth on budget deficits will be less than the effect of the foregone revenue and increased spending.

He notes that the Congressional Budget Office has found that the package would raise the ratio of debt-to-gross domestic product from 61.6 percent to 68.5 percent by 2012.

Remember that housing/mortgage/fraud crisis?  Well, it’s still here and now getting worse.

Home Prices Falling Fast, Eroding American Wealth And Threatening Recovery

Plunging home prices hammered household finances in the third quarter, eroding homeowners’ wealth and making them more vulnerable to foreclosure. As prices are expected to continue falling, the economic recovery could face a major stall.

Millions of homeowners saw their most valuable asset decay between July and September, according to recently released data from the Federal Reserve, as they lost a portion of the stake they can claim in their homes. A series of new reports reflects home prices are continuing to decline, increasing the pressure on America’s tepid housing market. Until the market finds a bottom, the foreclosure epidemic will feed upon itself, analysts say, as foreclosed properties drive home values down. With the unemployment rate hovering near 10 percent, and with companies showing historic reluctance to hire, the housing drag poses a significant impediment to an economic recovery.

Today Dan Froomkin wrote this at the Watchdog Blog:

Time For Real-Estate Watchdogs To Start Howling Again

You might not know it from reading the news, but the nation’s housing prices are in free fall again.

For the many Americans who have (or had) most of their wealth tied up in their homes, the consequences of this will be profound. The effect on nationwide consumption will inevitably be severe. In fact, there are some not inconceivable scenarios in which the housing market could just take the economy down with it again. . . . .

Despite the fact that the nation is officially in a period of economic recovery, the latest data show that home prices are diving. One recent survey pegged the decline at 0.7 percent per month; another found prices down 5.8 percent between August and October.

One analysis found  home values will likely drop more than $1.7 trillion this year, on top of the $1.05 trillion drop in 2009. That would bring the loss in wealth to $9 trillion since the June 2006 market peak, when the housing stock was valued at about $24 trillion.

And many market analysts expect prices to drop 10 percent or more in 2011.

The sudden decline starting this past summer is traced in part to the end of the home-buyer’s tax credit, in April. But the real problem is the huge downward pressure caused by the the record number of homes being foreclosed.

Foreclosures depress prices directly –  foreclosed homes are currently selling at a percent discount. They also depress prices indirectly, by creating urban (and in some cases suburban) blight.