Effective regulation, and on that note, it is a positive thing that the Summers of our discontent can finally be laid to rest. After all the damage Larry Summers has caused in being one of the architects of this crisis, from boxing in Brooksley Born and ignoring her warnings with regard to derivatives which brought down Long Term Capital Management during the Clinton administration, to his sexism among everything else. He has now thankfully taken himself out consideration for the job.
It’s a good thing he did. Rather than fighting for something or someone that helps people suffering from this economic crisis, President Obama strongly recommended and fought for Larry Summers to be Chairman of the Federal Reserve, a guy who lost a billion dollars as President of Harvard betting on interest rates. Yeah, let that sink in for awhile.
It’s really not OK. This is why making excuses for everything the President does, as too many Democrats do without thinking of the damage, is dangerous, immoral, and unprincipled. Now it looks like the front runner to replace Ben Bernanke as Chairman of the Federal Reserve is going to be Vice Chairwoman of the Board of Governors of the Federal Reserve System and once President and Chief Executive Officer of the Federal Reserve Bank of San Francisco, Janet Yellin. Unlike Larry Summers, she at least saw the crisis coming as early as 2005.
In the real world and the reality based community, there is talk about austerity from people who understand the nuances of it and macroeconomic accounting identities. They point out the undeniable fact that there is austerity in the UK, the Eurozone, and yes, the United States. This interactive chart will show this, though I can’t embed it here. So instead, I will add a small snapshot of some of the data.
Net spending in the United States has steadily declined since it rose from 2008 to 2009 when the inadequate stimulus(only $500 billion of direct spending at about 1.5 percent of GDP) was passed. Stimulus packages don’t exist in a vacuum, and you have to count all government spending, which basically shows how exactly the numbers, including the stimulus as this does, didn’t close the output gap. And since the numbers didn’t, that is actually austerity. After all, spending went up in the UK and Eurozone from 2008 to 2009 as well, and since then, their spending has declined. Even though it is on a higher level, it is being cut at an even more alarming rate with its fate set to go below our miserable level by 2017.
I have pointed this out before. Sometimes I get frustrated, and point this out harshly, because some pride themselves on denying this established data to support whatever a politician in their party says or does. I don’t know why. Denying reality is not going to give resources to people who need them. There is a reason my last diary has been cited by the reality based Post Keynesian MMT community, in which I am truly grateful for and humbled by; it is the truth.
The real economy of jobs and wages continues to go nowhere thanks to the lack of deficit spending and an illogical debate in DC about how much austerity we need to appease the invisible bond vigilantes and confidence fairies. It is neoliberal deficit terrorist economic insanity based on lies. And on that note, it is my pleasure to republish a piece by someone in the reality based economic community whom I can now proudly say is a friend of mine, Post Keynesian MMT economist John T. Harvey. He, once again, brings clarity to these matters in a way that only he can.
Of course that can be easy to do with corporate media hacks parading around as “journalists” basically working to preserve the corrupt machine they feed off of. They’re feeding people revisionist nonsense about the so called fiscal cliff; nonsense like how because of the President was reelected he has more leverage this time. As if Democrats ever use leverage after they win elections like how they kept funding the Iraq war in 2006 after their opposition to the war gave them those mid term victories. Nancy Pelosi also took impeachment of the war criminal GWB off the table so future war crimes could be committed.
And then in 2008 after winning an unprecedented majority in both Houses of Congress, higher than at anytime leading up to that point on the GOP’s end, we were told we didn’t have a mandate for progressive polices despite the fact that the right’s neoconservative Laissez-faire ideology had been fully discredited.
As I predicted a while back, the Partisan-Industrial Complex in Washington, D.C. has deployed its quadrennial Mandate Manipulation Machine to make sure that the 65 million Americans who voted for Barack Obama remember that America giving more than 340 electoral votes to an African American billed as a Islamic Marxist terrorist means there is no mandate for real change in this, a country obviously more conservative than ever.
A cursory glance at the newspapers today shows the media teeming with stories quoting incoming Obama administration officials, Democratic Party leaders and spokespeople for corporate front groups insisting that actually, no real change can be made, and what small-bore changes can happen, will have to happen in the very distant future, not soon. My favorite was the one-two punch from Senate Majority Leader Harry Reid (D-NV) and Democratic National Committee chair Howard Dean. Upon hearing of his bigger senate majority, Reid said on Tuesday, “This is not a mandate for a political party or an ideology.
And of course we now know that was Democrats’ way of telling us they would waste the crisis that elected them, keep TBTF, not prosecute anyone who caused the crash, dump the EFCA, enact Dolecare instead of a public option or Medicare Buy In, and go half ass on all qualitative legislation. This is what actually led up to the mid term losses in 2010. And keep in mind this 2012 election victory doesn’t even compare to the victory in 2008.
And yet they tell us we will see a new reinvigorated President and Congress. They tell us they are confident this time. They tell us that this time Democrats know they have a mandate for progress so things will be different than when the debt ceiling debacle made fools of them all. No, this is actually what the White House is telling us; the same thing as after the 2008 election victory now in 2012.
Obama senior campaign adviser David Axelrod downplayed talk of an election mandate on the “fiscal cliff” on Thursday.
Axelrod said presidents always talk after an election about a mandate, but he called such talk “foolish.” President Obama and congressional Republicans are bracing for talks on tax hikes and spending cuts that are now set to be implemented in January.
“Everyone’s going to have to come to the table in the spirit of getting things done, but on this issue of particularly the fiscal cliff – presidents always say, ‘I have a mandate’; that’s a foolish word and generally untrue,” Axelrod told MSNBC’s “Morning Joe” on Thursday.
Yes, it’s true. If the White House would like to disavow David Plouffe’s words now is the time. Time is running short but it’s pretty obvious that he speaks for the White House given that David Plouffe is the President’s closest confidante. If you have the stomach to sit through this forum it’s right there for you to see, but I’ll post the relevant portion that matches up with Lloyd Blankfein’s mentality that the 99% need to sacrifice Medicare and retire later for the fantasy deficit crisis he, the White House, and Congress are peddling to the American people.
The President’s closest adviser is telling his base that additional cuts to pay down the deficit(not the 716 billion to Advantage, fraud, or providers from the 2010 CBO baseline on the effects of the ACA) in Medicare and Medicaid are coming and to be ready for them.
“The only way that gets done is for Republicans again to step back and get mercilessly criticized by Grover Norquist and the Right, and it means that Democrats are going to have to do some tough things on spending and entitlements that means that they’ll criticized on by their left,” Plouffe said at his alma mater in conversation with former McCain campaign manager Steve Schmidt.
Plouffe added that while the White House wants to engage in comprehensive tax reform, they know they must also “carefully” address the “chief drivers of our deficit”: Medicare and Medicaid.
Lloyd “Sell them shitty deals with the blessing of the US DOJ” Blankfein whole heartedly agrees with Plouffe. He’s also visiting the White House today. I have a feeling whatever good feelings labor and progressive groups had yesterday were perhaps misguided given the statement we just heard from David Pouffe. That and of course basically the priority of making capital whole on the backs of labor as 93% of the “recovery” goes into Lloyd Blankfein’s pocket since 2010.
BLANKFEIN: You’re going to have to undoubtedly do something to lower people’s expectations — the entitlements and what people think that they’re going to get, because it’s not going to — they’re not going to get it.
PELLEY: Social Security, Medicare, Medicaid?
BLANKFEIN: You can look at history of these things, and Social Security wasn’t devised to be a system that supported you for a 30-year retirement after a 25-year career. … So there will be things that, you know, the retirement age has to be changed, maybe some of the benefits have to be affected, maybe some of the inflation adjustments have to be revised. But in general, entitlements have to be slowed down and contained.
Yes, another crash is coming. I can’t predict precisely when as that would be a fool’s errand, but much closer than you think. It will probably be after our President is reelected and will care very little what you or I think once he and his treasury push for criminal TBTF banks to bailed out once again. Doctor Doom: the nickname for economist Nouriel Roubini: one of the relatively few outside the mainstream(part of the Got It Right (pdf) project) who predicted the last crash thinks 2013 is a perfect storm for another one which will be even worse and it makes sense.
Despite on theoretical fiscal policy limits with regard to the US, Roubini is absolutely right on the political deadlock with the coming crisis. We wasted our last crisis and that’s something Conservatives have not done whether we’re talking about the stagflation crisis of the 70s or 9/11. There won’t be as many political options this time to prop up the underlying economy in 2013 because Democrats have failed to change the Senate rules because most of them secretly like the way things work or don’t work in Washington. Sadly, if Republicans take over both houses again, they will change the Senate rules as they threatening to do in 2005 and 2006.
Anyway some might still want to scoff at Roubini’s prediction, but that will come back to bite them in the ass. Not even Roubini can predict the exact moment it will happen, but if one knows anything about the history of financial crashes, since the 80s when the 1933 banking reforms passed by FDR started slowly being dismantled, they started happening once again in a 5-7 year time-frame(and even closer than that if you count global stock crashes which count now more than ever since our markets turned dark with OTC derivatives and Information Asymmetry all around); some worse than others as the 2008 bust was on par with 1929 but you get the idea.