Archive for category Economy
First, Reinhart and Rogoff excluded the post-war years for certain countries that enjoyed robust economic growth despite debt levels well over 90 percent. They also chose a skewed method of weighting the data: for example, New Zealand’s single year of terrible growth while over the 90 percent threshold wound up counting just as much as Britain’s 19 years of healthy growth. And they even incorrectly input at least one Excel spreadsheet formula, wrongly excluding several countries form their calculations.
In short, the central argument in support of austerity — cited by MSNBC’s Joe Scarborough, the New York Times’ David Brooks, and multiple times by House Budget Committee Chairman Rep. Paul Ryan (R-WI) — is now defunct. No one disputes that a country should avoid a big build-up in debt over the long-term. But every concrete signal we’re getting from the American economy — our high unemployment, our low inflation, our extraordinarily low interest rates, and our negative real interest rates — are a signal that more debt spending in the short term to fight the depression is perfectly appropriate. Thanks to the austerity drive that was heavily influenced by Reinhart and Rogoff’s study, American lawmakers ignored those signals (and plenty of others) and cut spending, delivering the most destructive fiscal policy we’ve had in any recession since at least 1980.
Why do we take these people seriously again?
Paul Krugman tries to understand the right-wing Glenn Beck gold craze:
So how can we rationalize the modern goldbug position? Basically, it depends on the claim that runaway inflation is just around the corner.
Why have so many people found this claim persuasive? John Maynard Keynes famously dismissed the gold standard as a “barbarous relic,” noting the absurdity of yoking the fortunes of a modern industrial society to the supply of a decorative metal. But he also acknowledged that “gold has become part of the apparatus of conservatism and is one of the matters which we cannot expect to see handled without prejudice.”
And so it remains to this day. Conservative-minded people tend to support a gold standard — and to buy gold — because they’re very easily persuaded that “fiat money,” money created on a discretionary basis in an attempt to stabilize the economy, is really just part of the larger plot to take away their hard-earned wealth and give it to you-know-who.
But the runaway inflation that was supposed to follow reckless money-printing — inflation that the usual suspects have been declaring imminent for four years and more — keeps not happening.
New York Times: Gold, Long a Secure Investment, Loses Its Luster
The Obama administration’s latest budget, which will be introduced on Wednesday, is expected to include cuts to Social Security, Medicare, and other earned benefit and social safety net programs. The proposal is a pre-compromise designed to placate the 1 Percent, who are not happy about having to pay back the Trust Fund after “borrowing” from it to provide tax cuts for the rich. “The president has no mandate to cut these benefits, and progressives will do everything possible to stop him,” said Stephanie Taylor, co-founder of the Progressive Change Campaign Committee.
Now is a good time to review the facts about Social Security, which some may have forgotten. From the Center on Budget and Policy Priorities (see link for more info):
Fact #1: Social Security is more than just a retirement program. It provides important life insurance and disability insurance protection as well.
In June 2012, 56 million people, or about one in every six U.S. residents, collected Social Security benefits. While three-quarters of them received benefits as retirees or elderly widow(er)s, another 11 million (19 percent) received disability insurance benefits, and 2 million (4 percent) received benefits as young survivors of deceased workers.
Fact #2: Social Security provides a guaranteed, progressive benefit that keeps up with increases in the cost of living.
Social Security benefits are progressive: they represent a higher proportion of a worker’s previous earnings for workers at lower earnings levels.
…In recent years, fewer employers have offered defined-benefit pension plans, which guarantee a certain benefit level upon retirement, and more have offered defined-contribution plans, which pay a benefit based on a worker’s contributions and the rate of return they earn. Thus, for most workers, Social Security will be their only source of guaranteed retirement income that is not subject to investment risk or financial market fluctuations.
Once someone starts receiving Social Security, his or her benefits automatically increase each year to keep pace with inflation, helping to ensure that people do not fall into poverty as they age. In contrast, most private pensions and annuities are not adjusted for inflation or are only partly adjusted.
Media Matters gives us the short version: Liz Cheney: Get Over 2012 And Start Embracing Romneyism. Of course, it was President George W. Bush who originally said “We ought to make the pie higher.”
Cheney’s Wall Street Journal op-ed on Thursday un-apologetically recycles just about everything that voters rejected in 2012, and claims, without evidence, that “President Obama is the most radical man ever to occupy the Oval Office.”
This is from someone who was part of the Worst Administration Ever, that brought about truly radical right-wing policies from massive tax cuts for the rich to the torture of detainees and an outright war of aggression in Iraq. The Bush administration came close to wiping out the American middle class when the collapse of the financial sector caused U.S. households to lose about $16.4 trillion of net worth.
Jonathan Chait: Liz Cheney Is Even More Bonkers Than We Suspected
Even after four years of bug-eyed right-wing paranoia, Cheney’s op-ed stands out for its utter dearth of the slightest whiff of perspective or factual grounding.
This stuff is getting old. We had legitimate criticisms of the Bush administration’s actual radicalism, and Republicans dismissed it all as “Bush derangement syndrome.” Now prominent Republicans won’t stop ranting about their imaginary “radical” President Obama despite the fact he’s been center-right all along, even to the point of implementing Republican policies. At last year’s GOP convention Clint Eastwood presented a prime-time portrayal of the right-wing, yelling at an empty chair.
The Congressional Progressive Caucus budget promises to create 7 million new jobs in one year, and includes $4.4 trillion in deficit reduction and $112 billion in infrastructure investment. That beats any other budget proposal in Washington, by far – including the Obama administration’s yet-to-be-released budget. And it won’t cut Medicare benefits to pay for more tax breaks for millionaires and billionaires.
[T]alk of a fiscal crisis has subsided. Yet the deficit scolds haven’t given up on their determination to bully the nation into slashing Social Security and Medicare. So they have a new line: We must bring down the deficit right away because it’s “generational warfare,” imposing a crippling burden on the next generation. …
…Yet there is, as I said, a lot of truth to the charge that we’re cheating our children. How? By neglecting public investment and failing to provide jobs.
My initial response to that question was to say, “Huh?”
But we’re talking about complex, interconnected systems. The argument goes something like this:
Start by recognizing that international economics and politics are a set of networks. Each national economy is a network connected to a larger, international network. These networks have key nodes. In terms of finances, the US and UK are two nodes whose influence is outsized simply because they are connected to so many other networks. The more links a network has to other networks, the easier it is to spread problems.
. . . if contagion spreads across links, network topology will have important consequences for the likelihood of spread. As it turns out, there is strong reason to believe that the international financial system is one of the latter kinds of networks rather than one of the former. On two measures of financial ties, most countries on the periphery of the network have few links to other peripheral countries, but pretty well everyone has links to the US, and many have links to the UK too.
In other words, the US exported its economic downturn to the rest of the world when our financial system crashed. What does that have to do with Iraq?
Military Keynesianism, says Thomas Oatley.
Now consider the Iraqi case. The sharp increase of military spending sparked by 9/11 and Iraq followed a massive tax cut (and coincidentally, we had a massive tax cut in 1964). Like Vietnam, therefore, the US borrowed to pay for the War on Terror. If the Vietnam War experience is any guide, this budget deficit must have had consequences for US macroeconomic and financial performance. The deficit was larger and persisted for longer than the Vietnam case. I argue that the choice to finance the War on Terror by borrowing rather than by raising taxes worsened the US external imbalance and the resulting “capital flow bonanza” triggered the US credit boom. The credit boom generated the asset bubble the deflation of which generated the great global crisis from which we are still recovering. Obviously, it takes a lot of heavy lifting to get from the war-related budget deficit to the global financial and economic crisis.
Oatley is writing a book exploring this theory.
In a less networked, less connection international economy, the effects of the US economic crash might have been limited to the US. Instead, however, the distortions of the US economy caused by the spending for the War on Terror in general and the Iraq war specifically, and the massive tax cuts that caused us to pay for it through borrowing, created ripples in the US economy the ultimately caused a US crash which, through our connection to all the networks, casued a worldwide economic crash.
Everything is connected to everything else. We’re talking aobut complex systems here, systems playing out in unexpected ways. It’s a prime example of the levels of complexity Adam Kahane talks about – social, dynamic and generative complexity working concurrently in crazy making ways. Tax cuts in 2001 and 2003 causing a crash in 2008? The Iraq war causing a global economic meltdown? It seems daft until you start thinking about interlocking parts connected to other interlocking parts. So, in a way, you can start building a case that the 2001 Bush Tax cuts are ultimately responsible for the economic problems in Greece, Spain and Cyprus.
One of Oatley’s colleagues explores the idea further, arguing that there’s a distinction between core and peripheral nodes and their crises. A peripheral node crisis is unlikely to spread further while a core node crisis will spread further:
Or take the examples of Iceland and Ireland. Iceland repudiated the debt of its banks, imposed capital controls, and told international investors to take a hike. Once again, this is a recipe for contagion yet systemic crisis did not result. Ireland did the opposite: it guaranteed the debt of its banks, did not institute capital controls, and paid off international investors. Systemic crisis also did not result. The opposite local policy response produced the same global outcome. Only the local outcome varied.
Contrast those cases (and all the other eurozone cases, and Argentina, and E Asia, and etc.) with the US in the Fall of 2008. A couple days of dithering — of the sort that the eurozone has made its speciality — lead to an immediate and profound downturn in global markets, including the largest single-day evaporation of wealth in absolute terms in history. The US tried to kick the can down the road, but couldn’t because it is the core node; the EU has been able to repeatedly kick the can down the road because those crises are in the periphery.
I conclude from this that policy always matters locally, but it only matters systemically when the crisis is in a core node. No matter what the policy response to peripheral crises is, systemic contagion is exceedingly unlikely.
This is a fascinating intellectual exploration. The part that should have been predictable but apparently wasn’t is the transmittability of economic problems throughout the network designed to facilitate capital flows. The US exported its financial crash to the rest of the world.
Worst. King. Ever. “Game of Thrones” Joffrey Baratheon. “You can’t talk to me like that. The king can do as he likes!”
HBO’s “Game of Thrones” is the best show on TV. Unfortunately, powerful people behaving badly isn’t only the stuff of fiction.
Out of 141 countries, the U.S. has the 4th-highest degree of wealth inequality in the world, trailing only Russia, Ukraine, and Lebanon.
In 1983 the poorest 47% of America had $15,000 per family, 2.5 percent of the nation’s wealth.
In 2009 the poorest 47% of America owned ZERO PERCENT of the nation’s wealth (their debt exceeded their assets).
Inequality is stifling our economy, because the customers business depends on are broke. The Consumer Confidence Index dropped 8 points this month, as Washington politicians imposed austerity and higher taxes on what’s left of the middle class. There are still 12 million Americans who need jobs. Most Americans have experienced unemployment at some level in the past five years. Yale Economist Robert Shiller warns that the massive losses suffered in the housing market won’t be made good anytime soon.
We need jobs and a stable economy. All we’re getting from Washington is budget cuts and more talk of dismantling Social Security, Medicare, and Medicaid. The “Affordable Care Act” is going to make health insurance less affordable.
Certainly part of the reason why today’s Conservative Republicans come off as so stupid is due in large part to Bill O’Reilly’s bullshit “Talking Points Memo.” Recently Bill said:
Bill O’Reilly: Greece, Italy, Spain, Portugal, Ireland, now Cypress, all broke. And other European nations are close. Why? Because they are nanny states. And there are not enough workers to support all the entitlements these progressive paradises are handing out.
Economics professor Richard Wolff punished Bill O’Reilly. Here’s his smackdown on Democracy Now on Monday.
Economic Professor Richard Wolff: You know he gets away with saying things which no undergraduate in the United States with a responsible economic professor could ever get away with. If you want to refer to things as nanny states, then the place you go to in Europe is not the southern tier, Portugal, Spain, and Italy. The places you go are Germany and Scandinavia, because they provide more social services to their people than anybody else.
And guess what, not only are they not in trouble economically, they are the winners of the current situation. The unemployment rate in Germany is now below five percent. Ours is pushing between seven and eight percent.
So, ah, please get your facts right Mr. O’Reilly. The nanny state you call it; the program of countries like Germany and Scandinavia who tax their people heavily by all means, but who provide them with social services that would be the envy of the United States, a national health program that takes care of you whether you are employed or not and gives you proper healthcare.
In France for example the law says when you go to work you get five weeks paid vacation. That’s not an option, that’s the law. You get support when you are a new parent, childcare and so forth.
They provide services and they are successful in Germany and Scandinavia, much more than we are in the United States; and much more than those countries in the south.
So they are not broke in the south because they are nanny states, since the nanny states par excellence are doing better than everyone. The actual truth of Mr. O’Reilly is the opposite of what he says. The more you do nanny state, the better off you are during a crisis, and to minimize the cost of the crisis. That’s what the European economic situation actually teaches. He is just making it up as he goes along to conform to an ideological position that is harder and harder for folks like him to sustain so he has to reach further and further into fantasy.
Tax time is coming in less than a month. Unless you’re with the 1 Percent, it will cost you. Paul Buchheit on AlterNet:
Corporations have simply stopped paying their taxes, perhaps using the 2008 recession as an excuse to plead hardship, but then never restoring their tax obligations when business got better. The facts are indisputable. For over 20 years, from 1987 to 2008, corporations paid an average of 22.5% in federal taxes. Since the recession, this has dropped to 10% — even though their profits have doubled in less than ten years.
We’re in “a golden age for corporate profits,” according to the New York Times. But not a golden age of job creation. In fact, some of the biggest and most profitable corporations are dodging taxes while cutting jobs. The list includes: General Electric, Boeing, Exxon Mobil, Verizon, Kraft Foods, Citigroup, Dow Chemical, IBM, Chevron, FedEx, Honeywell, Apple, Pfizer, Google, and Microsoft.
N.J. taxpayers protest corporate ‘dodgers’
UPDATE: It’s a fake.
‘How Americans Live Today’: Fake North Korean Propaganda Video Punks The Internet
This North Korean news report, titled “How Americans Live Today,” may be in need of a little bit of fact-checking.
“This is how Americans live today- drinking coffee made from snow and living in tents, and buying guns to kill each other, especially children. Some people complain about the guns…”
Kim Jong-un has a serious problem – how to keep his people convinced that their country is a relatively nice place to live, despite starvation, prison camps, power shortages, and a leader who clearly doesn’t know what he’s doing. Possession of foreign-made video CDs is a serious crime in North Korea.
Despite the propaganda, some people have a clue.
Defectors have told U.S. officials that the North Korean people—probably not a majority, but still a growing number—are aware of the glaring contrast between their own lives and the rest of the world.
Of course, if Paul Ryan gets his way maybe we can reduce the contrast between us and North Korea…
When you see the word “grand” in front of the word “bargain,” look out. They are trying to cut Social Security, Medicare, and Medicaid. This is why President Obama is treating right-wingers to lunch and dinner, while ignoring progressives.
After first making nearly all the Bush-Obama Tax Cuts For The Rich permanent, key members of Congress and the White House now say there is a deficit problem that can only be solved by austerity budgets. Well, the last election wasn’t about dismantling our earned benefits programs and the social safety net that Americans have relied on since the New Deal. President Obama is proposing a BAD bargain.
Sign Senator Bernie Sanders’ petition today.
Send a Message to President Obama, Senate Majority Leader Reid and House Speaker Boehner: No Budget Deal on Backs of the Elderly, the Children, the Sick and the Poor.
At a time when the middle class is disappearing, poverty is increasing and the gap between the rich and everyone else is growing wider, we demand that the federal budget not be balanced on the backs of the most vulnerable people in our country.
A federal budget that reduces the deficit by cutting cost-of-living adjustments for Social Security and disabled veterans, raising the Medicare eligibility age and lowering tax rates for the most profitable corporations in this country is not a grand bargain. It is a bad bargain.
We oppose the chained-CPI, a new way to measure inflation and consumer prices designed to cut benefits for Social Security recipients, disabled veterans and their survivors.
We demand a budget that puts millions of Americans back to work in decent paying jobs.
We demand a budget that makes sure that the wealthiest Americans and most profitable corporations pay their fair share.
UPDATE: Rep. Ryan, announcing his budget plan today:
“This to us is something that we’re not going to give up on, because we’re not going to give up on destroying the health care system for the American people.”
Definition of a Bushism: when a right-winger accidentally tells us what he really wants to do.