Occupy Wall Street

September 26th, 2011

A running log of events in the Occupy Wall Street movement.

Economist Dean Baker makes an extremely good point about the mocking NY Times piece on the protests:

The NYT used its news section to mock critics of Wall Street. It presented the comments of some of the people protesting Wall Street. While the people quoted in this article do appear to be confused about the role of the financial industry in the economy, the paper would have no difficulty finding articulate critics of the financial industry.

For example, it could present the views of Nobel prize winning economist Joe Stiglitz. Or, it could present the views of Nobel prize winning economist, and NYT columnist, Paul Krugman. Or could interview Simon Johnson, a former chief economist at the International Monetary Fund.

Are lefties doing as much as they can to help the movement?

It’s no secret that the protesters on Wall Street are actively being marginalized by the press. Of course, it’s also no secret that the protesters themselves are doing an effective job of self-marginalization as well through a lack of focus on media management, goal orientation and message coordination. One of the challenges of the protest movement on the left is resistance to the forms of coordinated discipline that maximize the efficacy of group action.

But this also isn’t exactly the fault of the protesters. The reality is that labor orgs, Democratic clubs and central committees and other left-leaning organizations should be putting the full weight of their money, messaging and organaizing capacity into a directly anti-wall street movement. In the absence of that, particularly in New York, the action is left to a ragtag bunch of college kids and disparate activists with little in the way of media skills and organizational experience.

President Obama and the war on the middle class

The war against the middle class has been a relatively silent one until now. For decades, certain corporate interests and their influence peddlers in Washington (both lobbyists and politicians alike) have orchestrated a stealth ambush targeted at the core of American society. By and large, outside of high-information circles, the legislative actions that filled their coffers at the expense of middle class wallets went largely undetected by most Americans.

Obama’s proposal

September 10th, 2011

We got ourselves some vigorous criticism from one of our “usual suspects” and we have ourselves a warning about how Obama intends to pay for the new stimulus (Not at all clear as to why, but President Obama is avoiding using the term “stimulus”).

The news about how the debt-ceiling debacle was perceived by the public is that, as a sheer, unmitigated disaster, it ranks a bit below Hurricane Katrina/flooding of New Orleans and just a hair above Iraq’s inavsion of Kuwait in 1991. Personally,  I regard that as extremely good news because that means that Obama is likely to avoid that sort of complete collapse/surrender in the upcoming negotiations over how much of his proposal to put into law.

And sure enough, the President is reacting to House Majority Leader Eric Cantor’s plea “The message was: either accept my package as it is, or I will take it to the American people. I would say that that’s the wrong approach.” by taking his case directly to Cantor’s own district, telling citizens to contact Congress and demand quick action.

Economists are generally happy about the plan and what’s really, REALLY cool is that the White House is refusing to make preemptive concessions!

Recommendations for the President

August 29th, 2011

Rep. Michele Bachmann (R-MN) has gone on record, saying that God is displeased at America’s spending habits and “we’ve got to rein in the spending.”

 

House Majority Leader Eric Cantor is making noises about attaching spending cut measures to disaster-relief bill.

 

The good news is that Obama’s debt-ceiling deal was politically, a catastrophe. 46% to 32%, the public thought it was a lousy deal that would hurt the economy.

 

Obama signed the bill all alone.

 

Absolutely no one wanted to be visually associated with the deal, even though Speaker of the House John Boehner said “We got 98 percent of what we wanted,” he said adding that the framework cuts more spending than it raises the debt limit. It also caps future spending to limits in the growth of government.

 

The problem for the President is not that lefty bloggers are critical of him and his performance (They are), but that they’re the canaries in the coal mine who are warning him that he’s really starting to slip in the estimation of the voters. The President’s embrace of austerity was a really bad move that he really needs to pivot away from.

 

My recommendations are two: Obama needs to demand a clean bill for disaster relief. No cuts or the bill gets vetoed. He can’t let himself get rolled again by giving in to blackmail as he did in the debt-ceiling deal. Two: He needs to cancel Cat Food Commission II, or as Senator Pat Toomey calls it, the super-committee to cut spending. He can do it by quietly telling all the Democrats on the Commission to simply not show up for meetings, Republicans will then complain, Obama can then come out and say the Commission was a lousy idea to start with and he supports Democrats who stay away from it. He should then stand with the public and say that he’s opposed to any further cuts.

 

Failure to do this could very easily result in a President Romney/Perry/Bachmann.

 

Update: Progressive Keynesian economist Dean Baker examines Obama’s proposed job creation schemes and finds them most underwhelming. If this is the best he can do, it means he hasn’t learned anything and is probably doomed to be a one-term president.

 

Further update: Good! Looks like that’s just what he’s doing.

Cat Food Commission II

August 12th, 2011

A few days ago (Aug 7th), Representative Allyson Schwartz (D-PA) caught my attention with the statement: “[The debt increase agreement] cuts $2.7 trillion from federal spending over 10 years, protects Medicare and Social Security, and does not harm our economic recovery.” I immediately sent her a letter, protesting that any and all cuts to government spending harmed the economy. A Republican/Tea Party Representative sent a letter to the Congressional Budget Office, asking about the effects of cuts on the economy. The CBO’s answer was:

“When demand for goods and services falls short of the economy’s ability to produce them, as is the case currently, increasing government spending can increase aggregate demand and thereby narrow the gap between the economy’s actual and potential levels of output,” Elmendorf writes.

The precise details matter. The more robust the economy, the lower the impact. But, according to Elmendorf, “when the Federal Reserve’s ability to lower short-run interest rates is constrained because those rates are already near zero, as they are currently, the short-run effects of changes in government spending on output tend to be larger than usual.” [emphasis in blog post]

In other words, yes, cutting the budget by anything harms the “economic recovery.” Elmendorf adds that cuts “would decrease real (inflation-adjusted) gross national product (GNP) in 2012, 2013, and 2014 by amounts ranging from roughly 0.1 percent to 0.6 percent depending on the year and the assumptions used.” In other words, no, there is no “safe” level of cuts that will not harm the recovery.
Of course, this is quite significant given Cat Food Commission II, or in Senator Pat Toomey’s (R-PA) words, the “deficit super-panel,” which just finished picking its roster of persons to serve on it, is constituted to produce cuts only. Toomey himself says “I’m not interested in some kind of big tax increase; that would be counterproductive.”

Senate Minority Leader Mitch McConnell (R., Ky.), who chose Toomey, said his main criterion was finding senators “who are interested in achieving a result that helps to get our nation’s fiscal house in order. . . . That means reforming entitlement programs that are the biggest drivers of our debt, and reforming the tax code in a way that makes us more competitive and leads to more American jobs.”

So, whether Democrats agree or not, and at least some of them are in agreement with Republicans that there should be spending cuts, but no tax increases, the real problem is the Committee itself:

The super-committee itself is a profoundly conservative and anti-Democratic entity, immune from public pressure and tasked with deciding between two bad choices—a so-called grand bargain that would significantly reduce the social safety net vs. deep across the board cuts at a time of economic peril. The idea of doing anything to stimulate the economy is totally absent from its purview. The scope of the committee itself, rather than who’s on it, is the real problem.

And as to the notion that the Democrats on the Commission are flaming lefties, erm, no.

What does the S&P downgrade of US creditworthiess mean?

August 7th, 2011

A very, very serious math error was allegedly behind the Standard & Poor downgrade of the US credit rating from AAA to AA+. S&P admitted the $2 trillion error, but downgraded US creditworthiness anyway.

A round-up of opinions on the downgrade.
Lots and lots of questions about whether S&P is competent to rate anybody.  Lehman Brothers and AIG were both issuing bonds that S&P rated as AAA only a month before they crashed and burnt.

Very good question by an economist.
“It would have also been worth asking what S&P thinks it means by this downgrade. U.S. government debt is payable in dollars. The U.S. government issues dollars. What does it mean that S&P thinks that at some point the government will not have the dollars needed to pay interest and principle and its outstanding debt. Does S&P think the U.S. government will forget how to print dollars?”

Yee-hah to this!
“…sound fiscal policy must take precedence over ideological hissy fits and constant threats of government shutdowns and partial-shutdowns as petty acts of gamesmanship (see: FAA shutdown, etc.)”

Terrorism and debt

August 2nd, 2011

Well, having just finished watched the movie “The Taking of Pelham 1 2 3,” I feel it goes pretty well with the drama that was just more-or-less concluded in Washington DC. As in Pelham, this was a hostage crisis, with Republicans threatening the good name and credit rating of the United States. As The Philadelphia Inquirer made clear, the whole episode has left US creditors and allies very troubled. Unfortunately, President Obama seems to have these “Grand Bargain” fantasies where everybody gets something and gives up something and all parties ends up reasonably satisfied. Or perhaps Obama just might be a fan of the old Clintonian trick of “Triangulation,” a strategy whereby the President would stand between the left wing of his own party and Republicans and thereby appear to be the centrist, Third-Way “grown-up in the room.” It worked for the President, but greatly weakened the Democratic Party as a whole.

As an old peacenik buddy David Gibson puts it (David had a long-time relationship to the group Peace Action, a group that’s big in California and that has a significant chapter in New Jersey, but is next to unknown here in Philly), I cheerfully and wholeheartedly agree with him that the “People’s Budget” is a vastly superior alternative to anything that’s been discussed by either Obama’s “Cat Food Commission” or Representative Paul Ryan’s (R-WI) plan “The Path to Prosperity,” that was voted on by the Republican-controlled House of Representatives (“No Dems voted for the measure; and only four Republicans jumped ship”). Alas, the People’s Budget was considered a minor also-ran that was worth little, if any, attention as far as the national press corps was concerned.

According to NY Times columnist Paul Krugman, the deal reached by President Obama and the Republicans/Tea Partiers is an unmitigated disaster.

Indeed, slashing spending while the economy is depressed won’t even help the budget situation much, and might well make it worse. On one side, interest rates on federal borrowing are currently very low, so spending cuts now will do little to reduce future interest costs. On the other side, making the economy weaker now will also hurt its long-run prospects, which will in turn reduce future revenue. So those demanding spending cuts now are like medieval doctors who treated the sick by bleeding them, and thereby made them even sicker.

As the blogger Digby puts it:

The idea that they are even talking about this at a time of nearly 10% official unemployment with the economy looking like it’s going back into recession (if it ever left) makes this debate surreal and bizarre. To cut the safety net and shred discretionary spending in massive numbers at a time like this is mind boggling. That it’s happening under a Democratic President and a Democratic Senate is profoundly depressing.

A blogger for the Washington Monthly felt progressives were so down about the results, he rounded up people who saw the deal as something other than a complete disaster, but Daily Kos pours cold water all over his first example. Various people have tried to suggest that the Bush (Now the Obama) tax cuts will be eliminated at the end of 2012, but that appears to be very highly unlikely.

I really wish I could say something positive about the deal, but I’m afraid that Pelham had a much happier ending.

Updates:  Y’know, it’s always nice when people wake up to a realization (AFL-CIO also chimes in), but it’s kind of annoying when they realize something after close of business, like a few minutes after 5:00pm, after most everyone has left for the day.
Senate Minority Leader Mitch McConnell has absolutely, positively no intention whatsoever of turning to the jobs issue. Why Obama thinks we’ve settled the spending issue and can now turn to jobs, I just don’t know.
Very disturbing photo, of the President signing the debt bill all by himself. Neither Republicans nor Democrats want to be associated with this bill.

Status of the debt ceiling fight

July 21st, 2011

Not a whole lot of good news to pass on. As Time puts it, the Tea Party fringe of the Republican/right-wing movement has now broken off from the Establishment big-finance Republicans and is running wild, without any clue as to how the economy actually works. Heck, not many people in the American establishment generally, appear to have any clue about how economics works!

A major problem is that right-wingers don’t really seem to understand how representative democracy is supposed to work and are giving up vastly too much authority to groups that demand pledges. A representative democracy is one where one chooses a representative based on basic compatibility with ones own viewpoints and then give the representative some latitude to negotiate bargains. President Obama expressed this basic point of view but, according to progressives at least, went much, MUCH too far towards pleasing the other political party. Unfortunately, the President appeared to reinforce this view that he’s far more a Blue Dog Democrat (as opposed to a Progressive Democrat, which a lot of people thought they were electing in 2008). Good video commentary on that last piece

Is there hope? Actually, there is.
Grover Norquist demanded that Republican Congresspeople sign a “No new taxes! EVER!” pledge, but appeared to grant dispensation to break that pledge before hastily taking it back. Still, it’s a very positive sign to see that at least some people are at least open to discussing tossing the Bush tax cuts into the wastebasket.

It was also very good to see the Inky (The Philadelphia Inquirer) recognize that the Republican Party appears to be more and more fanatical and separated from reality, though they ultimately wimped out and accused Republicans of “pandering to their right-wing base” instead of being Tea Partiers themselves.
Don’t know. We certainly hope the President does the right thing. Let’s just hope he has to take a better approach than the one he’s been taking up until now.

Update: Interesting piece by Megan McArdle. McArdle is well to the right of me, politically (If, on a scale of 10, I count as a 2, McArdle is about an 8), but she brings up a debate that’s at least as old as Reagan’s 1980 campaign for the presidency. I was 20 years old at that time and going to college in Washington DC, so the debate may very well have been a good deal older, but that’s when I became aware of it. McArdle has taken the very same position that I subscribed to back then. Essentially, that position is “Okay, so ya wanna cut the budget, eh? Okay, fine. What, exactly, do ya wanna cut?” Reagan himself solved that problem by using the “magic asterisk” and “rosy scenario” along with a few other sleight-of-hand tricks, but essentially, the problem has remained  what it was back during the 1980 campaign, that is, no one really knows. Republicans know they want the budget to be smaller, but they’re pretty fuzzy when it comes to specifics.

The President’s wishful-thinking approach

July 16th, 2011

Once again, the President tries to move in two different directions at once. He’s trying to adopt two wildly contradictory approaches with his strategy on the debt “crisis.” What really amazes me is to hear statements like this:

You know, if you care about making investments in our kids and making investments in our infrastructure and making investments in basic research then you should want our fiscal house in order so that every time we propose a new initiative, somebody doesn’t just throw up their hands and say more big spending, more government.

But Republicans and to some extent, Blue Dog Democrats, oppose the New Deal and Great Society programs, period! They oppose these programs root and branch! Cutting these programs down to size is not going to satisfy them. Giving them a half a loaf is just going to whet their appetite for grabbing the whole loaf. Republicans want these programs destroyed, completely, absolutely and without anything left standing. They’re not the slightest bit interested in “splitting the difference” or in reaching some sort of reasonable compromise.

My recommendation is that we make the needed investments, period! Heck, even the right-wing NY Times columnist David Brooks recognizes that “The fiscal crisis is driven largely by health care costs.” The US spends about twice as much on health care per person than what every other advanced society does, yet the results are mediocre, in the middle and unspectacular. Yes, it would be marvelous to produce an even better health care system than what Obama managed to pass in 2010, but it’s actually even easier than that. There are ways in which American health care can be globalized and made to compete with other countries in ways that would lower America’s per-person costs. What does it mean that health care costs are the primary driver of deficits? It means that cutting grandma’s Social Security check and reducing grandpa’s Medicare reimbursement will do absolutely nothing to put our “fiscal house in order.”

Progressives managed to come up with a comprehensive plan that, unlike both the Representative Paul Ryan plan and the “Cat Food Commission” (Actually, the Simpson-Bowles Deficit Commission) plan, actually “gets the budget into primary balance by 2015.” Do Republicans/Blue Dogs like the plan? Of course not. They absolutely hate the plan because it preserves the New Deal and Great Society programs. Our President appears to want to please everybody, but maybe that simply isn’t possible.

As the FireDogLake piece says:

This “get it off the table” strategy was behind the 2002 Iraq war resolution, actually. Getting Iraq off the table would lead to a focus on the economy and a victory for Democrats in the midterms. It didn’t work out that way. It never does.

Blue Dog Democrats, and I’m including Obama in that group, appear to be extremely bad at judging what their opponents will do.  Obama wasted week after week talking with Senator Olympia Snowe (R-ME) about the ACA, trying to find areas on which they could agree. Sure, it would have been preferable to have gotten the votes of more than just the Senate’s 59 (Later 60 when Al Franken was approved as the Senator from Minnesota, but that went back down to 59 when Senator Ted Kennedy (D-MA) died) Democrats and the two Independents who were in the Democratic Caucus. But ultimately, Snowe decided not to vote for the ACA, thereby wasting many valuable weeks during which other things could have gotten done.

Would anyone have known or cared that the ACA was passed using the filibuster-proof reconciliation process? Considering how many times G.W. Bush used it (To pass, among other things, the Bush tax cuts of 2001 and 2003) Republicans would likely have made a stink about it, but that’s an “inside baseball” kind of thing where very few people are up to speed enough on the details to really care one way or another.

The essential political problem here is a rhetorical one, one of the political language that’s being used to describe the situation, not one of real facts. Keynesianism is not dead or disproven or discredited, it’s just that the President has not mounted a full-throated defense of it. He’s permitted Republicans to define political reality and to set the parameters of what is and isn’t politically possible. This was a completely incoherent and thoroughly confused statement when it was made back in February, but it’s pretty obvious that the thinking of the Obama Administration hasn’t improved at all:

“Well, Sam, I would point you to our logic, to the president’s logic, which is that we need to live within our means. We need to reduce spending. We need to demonstrate our seriousness about that, but we also need to invest where it’s essential. And we feel that we need to be careful about cuts so that we don’t threaten the recovery, that we don’t threaten growth, that we don’t threaten our national security. But we obviously agree with others that spending cuts are necessary.”

The obvious problem here is that ANY cuts to government spending are bad and counter-productive! If there were any harmless and necessary cuts, no one had identified them back in February and no one has identified them today.

Update: The President also engages in a false equivalence:

“Let’s be honest. Neither party in this town is blameless,” he said in his weekly address. “Both have talked this problem to death without doing enough about it. That’s what drives people nuts about Washington.”

Daily Kos responds:

Wrong. There is one party that is to blame for the debt and the deficit: The Republican Party. From 1981-2011, this deficit problem emerged. Twenty of those years were under Republican rule, and the 10 years of Democratic rule produced a net surplus. Democrats balanced the budget. Republicans ruined it. No, Mr. President. There is not blame on both sides. There is blame on one side.

Debt negotiations

July 8th, 2011

Ga-a-ahhh!!!!! Some statements from the President just drive me absolutely crazy! They were made in response to Speaker Boehner’s question to him that:

“After embarking on a record spending binge that left us deeper in debt, where are the jobs?”

Okay, first off, House Minority Leader Nancy Pelosi was talking about the Republican Speaker’s failure to put up any jobs-creation bills after being the Speaker for 163 days (That was on 16 June), so yeah, where are the jobs, Mr. Speaker?!?!?!?! Money bills begin in the House, after all.

Second, someone ran a chart of spending year-to-year increases going back to John F. Kennedy. Yes, Clinton had relatively small increases during his two terms of 3.1% and 3.48% respectively, but Obama’s increase of 6.71% is quite similar to George W. Bush’s increases of 6.41% and 6.82%. BTW, Ronald Reagan had increases of 9.62% and 5.79% and Lyndon Johnson led the way with 10.79%. It’s far from clear that Obama oversaw a “record spending binge,” especially when one considers that Obama added the war spending to the normal budget. He didn’t try to keep war spending sequestered off from the rest of government spending.

As to the President’s infuriating statements:

And over the last 15 months, we’ve actually seen two million jobs created in the private sector.  And so we’re each month seeing growth in jobs,  But when you’ve got a 8 million dollar — 8-million-job hole and you’re only filling it 100,000-200,000 jobs at a time each month, obviously that’s way too long for a lot of folks who are still out of work.

[snip]

It’s estimated that we have about $2 trillion worth of infrastructure that needs to be rebuilt.  Roads, bridges, sewer lines, water mains; our air traffic control system doesn’t make sense.  We don’t have the kind of electric grid that’s smart, meaning it doesn’t waste a lot of energy in transmission.  Our broadband system is slower than a lot of other countries.

For us to move forward on a major infrastructure initiative where we’re putting people to work right now — including construction workers who were disproportionately unemployed when the housing bubble went bust — to put them to work rebuilding America at a time when interest rates are very low, contractors are looking for work, and the need is there, that is something that could make a huge, positive impact on the economy overall.  And it’s an example of making an investment now that ends up having huge payoffs down the road.

Now, my objection is not to the accuracy of any of this, but goes to the President’s priorities. Why on Earth is the President concentrating on deficit reduction at this point in time when there are so many obvious needs that need to be tackled now?!?!?!!
I strongly agree with this piece, which says Obama is destroying the Democratic “brand.” Obama clearly wants trillions of dollars in cuts, taken out of programs that help less wealthy Americans. AARP and the very wealthy, strongly anti-Social Security Pete Peterson are of course, on the same page along with him. All three use “clever” euphemisms to disguise the fact that they want to impoverish the non-rich. And yeah, I’m completely on the same page with this statement:

Now if you think that this is something the President is doing because it’s the only way to get Republican cooperation you can stop reading here, because we’re going to disagree.  From the moment he took the White House, the President has wanted to cut Social Security benefits.  David Brooks reported that three administration officials called him to say Obama “is extremely committed to entitlement reform and is plotting politically feasible ways to reduce Social Security as well as health spending” in March of 2009.  You can only live in denial for so long and still lay claim to being tethered to reality.

It’s been apparent for quite awhile that the President is holding his own arm behind his back and chuckling while he complains about his arm being twisted by those terrible Republicans. That’s not to say Republicans haven’t completely swallowed the Tea Party Kool-Aid and aren’t the flaming maniacs that they’re accused of being. I’m just saying it’s hard to say who’s really representing the American people here.

What we’re watching is the death of the Democratic Party.  Or, at least the Democratic Party as most of us have known it.  The one that has taken its identity in the modern era from FDR and the New Deal, from Keynsianism and the social safety net.  Despite any of its other shortcomings (and they are myriad), the Democratic Party has stood as a symbol for commitment to these principles.

AARP makes a pretty good statement here, but I’m bothered by the inclusion of one word (emphasized):

“AARP is strongly opposed to any deficit reduction proposal that makes harmful cuts to vital Social Security and Medicare benefits,” Rand said.

I’d have much preferred that word not have been in there at all. There’s a big potential difference between “harmful cuts” and just plain “cuts.” There’s no demonstrated need to make any cuts whatsoever.

Looks like at least some of the House Progressives are standing firm. We need to encourage them to keep it up.

The gist of [Pelosi’s] remarks: “Members of her caucus won’t vote for a grand bargain to raise the debt limit and reduce future deficits if the final deal includes cuts to Medicare and Social Security benefits—and that means it probably won’t pass.”

Fortunately, no deal has been reached as of yet, but Sunday (10 July) is the next day for negotiations.

Way behind the curve

June 27th, 2011

Very little and very late. The Democratic leadership finally wakes up to the need for more economic stimulus. Sure would have been nice if they had never taken their eyes off of the ball, but it’s good to see that they’ve finally realized that their political future depends on getting the economy working again.

By the way, the plan to get corporations to bring their profits back home needs lots and LOTS of work! Not a good plan at the moment, though the idea is a good one. I remember reading that Enron had been keeping offshore accounts and thinking “Offshore accounts? Isn’t that what, like, drug dealers and terrorists do? Why in the bloody heck is an American company keeping offshore accounts?” The piece indicates that a lot of these offshore profits that companies wish to repatriate are from profits made from doing business overseas, but I wouldn’t be at all surprised to learn that Enron-style money movements were also involved.

Good piece on how President Obama relates to his liberal base voters.  The President has leaned heavily towards trying to “reach across the aisle” and to find common cause with Republicans (Pretty much the whole raison d’etre for Blue Dog Democrats to exists in the first place) but, y’know, it really would help his case for doing that if he had been successful in peeling off any Republican votes for his policies. As it is, he’d be much better off by taking hard-line progressive stances.