Henry Blodget’s piece on Yahoo! Finance, IT’S OFFICIAL: Keynes Was Right, is the almost perfect antidote to Mort Zuckerman’s nonsense that I highlighted in my previous post Mort Zuckerman: President Obama’s Economic Programs Have Failed.

This morning brings news that Europe may finally be beginning to soften on the “austerity” philosophy that has brought it nothing but misery over the past several years.

The “austerity” idea, you’ll remember, was that the continent’s huge debt and deficit problem had ushered in a “crisis of confidence” and that, once business-people saw that governments were serious about debt reduction, they’d get confident and start spending again.

That hasn’t worked.

Instead, spending cuts have led to cuts in GDP which has led to greater deficits and the need for more spending cuts. And so on.

I said almost perfect except for the following:

And, by the way, I don’t think this “stimulus” necessarily needs to come from just the government. Our corporations are as profitable now as they have ever been. So I’d like to see a lot of them voluntarily decide to invest more and pay their low-wage employees more and hire more employees. They can afford it, and “cash flow” isn’t the sole objective or reward of running a business.

Perhaps Blodget should have saved the following statement till just before the quote above:

Now, I’m not an economist, and I’m not born of a particular economic school that I’ve bet my life’s work on, so I have observed the global economic events of the past five years with a fairly open mind.

Now, I am no economist either, but I do know enough about Keynes’ theories, and can see the logic of saying that the death spiral that Blodget talks about is almost impossible to stop except by government action.  Any business that is considering taking actions on its own is faced with several problems.  First, no single business is large enough to make a significant impact with the resources it has at hand.  So the money it spent to solve the problem would be largely ineffective and would put the company at risk in the continuing down turn by using up its cash reserves.  Second, in a financial crisis it is the fiduciary duty of officers of the company to concentrate on ensuring the survival of the company and protecting the stock holders’ assets.

Only a large federal government has the staying power, confidence, and resources to make the investments in stimulating the economy.  It is only sensible for individuals and individual companies to try to protect themselves from the impending disaster.  That was the paradox that Keynes uncovered.  Only the government, whose responsibility is the entire country, can take the chance to save the whole economy.

If you want to see how little Republicans pretend to know about business and economics, read Mort Zuckerman: President Obama’s Economic Programs Have Failed.

What can we do to get out of this? How can we regenerate the high-paying jobs in service industries with sophisticated intellectual content such as entertainment, digital media, education, and financial services?

Perhaps Mort Zuckerman doesn’t know that the huge increase in the share of GDP that is now in the Financial Services industry and is unprecedented in US history is the proximate cause of our current woes. We need to cut the size of the Financial Services industry back down to a reasonable size. Is he aware that there is so little purchasing power left in middle-class consumers’ hands that the Financial Services industry has taken to speculating in the essential commodities futures markets in the hopes of wringing out what little money is left for them to grab? Making consumers pay for essential commodities allows the banks to make their profits in the commodities and lets them ease their way out of investing in what’s left of the messy and jobs producing businesses that actually make something useful.

Perhaps if the Republicans had not prevented a federal stimulus package from supporting state budgets in this time of crisis, the massive layoff of teachers could have been avoided, and we would still have those jobs with “sophisticated intellectual content such as … education…”

1. Push students to a higher level of education, if necessary by mandating at least a year of higher education or vocational training at the public’s expense.

With college student loan debt at over $1 trillion, how do we encorage these students to take on more debt to get a higher level of education when there are no jobs for them to earn an income to pay off this debt? Oh, sorry, he wants to pay for this extra year at public expense. Is he going to tax away more money from the middle class to pay for this? Or is he finally going to allow us to raise taxes on the ultra-rich? Don’t tell me he would allow us to increase the deficit to pay for this.

2. Increase the number of H-1B visas for foreign graduate students in the hard sciences. Crazily, we reduced them from 195,000 in 2003 to 65,000 today. This intellectual firepower is critical to growing industries that focus on the world of high tech.

In the good old Republican world of supply and demand, bringing in more workers when we have massive unemployment will put people back to work and raise wages. I’d like to see the supply/demand curves that will make this dream come true.

3. Revise the tax system to encourage growth, not hamper job creation.

Does he mean he wants the Republicans to stop blocking the elimination of business tax breaks that encourage outsourcing?

4. Create financial incentives for businesses to invest in America, rather than provoking American companies to reap greater rewards by laying off U.S. workers and outsourcing production to foreign countries that have lower environmental standards.

The only incentives to create jobs that businesses need is to have customers. If a business has closed a factory and or laid off employees because they don’t have enough work for them, then lowering taxes won’t encourage them to invest some of the trillions of dollars they already hold in cash and use it to produce more goods for which there are no customers.

5. Focus on the problems of infrastructure and industrial policy.

Does Zuckerman want the Republicans to stop blocking these efforts that President Obama has called for? I mean the ones that they threaten to filibuster because they might require raising taxes on the ultra-rich 1% who own 80% of the wealth in this country.

Why does Mort Zuckerman pretend that he doesn’t know this?

How does Mort Zuckerman expect us to believe these ideas which are silly on their face?

Does he care if he writes ridiculous editorial pieces? Does he care about his own reputation?

My response to the video was, “Elizabeth Warren For Senate, Yeah!!! The campaign listens. It’s about time the logo started telling people what office she is running for.”

As Deadline Looms for Student Loan Increase, Warren says America needs to invest in “Kids Like Me” is the press release announcing this video.

The press release has the transcript of the video:

I grew up in a family hanging on by our fingertips to a place in the middle class.

But back then, America invested in kids like me. We had lots of opportunities.

Today, Washington lets big corporations like GE pay nothing — zero — in taxes, while kids are left drowning in debt to get an education. This isn’t about economics. It’s about our values.

I’m Elizabeth Warren. I approve this message because Washington has to get its priorities straight.

This is part 4, the final part, of the interview with James K. Galbraith. Previously I posted Inequality and Instability, Inequality and Instability – Part 2, and Inequality and Instability – Part 3.

This is a conclusion that is much less disappointing than most. Usually, I read strong books like this one that are full of surprising and valuable insights, and the last chapter about what to do with these insights falls completely flat.

This conclusion strongly stated the lessons learned and what needs to be done. Sadly, the final statement that we need to reclaim one of the parties from the grips of the financial sector is still missing a “how to” that we can implement.

In Massachusetts, the election of Elizabeth Warren to the Senate instead of returning Scott Brown to the Senate is the best chance that we have to start the process of getting control of the situation. Elizabeth Warren has studied the damage the financial sector has done, and has actually had a role in trying to bring the financial sector to heel. Scott Brown is not even aware of the issue.

This is part 3 of the interview with James K. Galbraith. Previously I posted Inequality and Instability and Inequality and Instability – Part 2.

I will post Part 4 when it becomes available. You may find part 4 before I do if you go to The Real News web page that provides a link to all the pieces of the multipart Inequality and Instability interview.

At the conclusion of this part of the interview we find out why the Democratic party is so ineffective at changing these policies. Even more sadly we find out why the labor unions are not contending for power in the current system.

Here is the second part of the interview with Jame K Gakbraith.  The first part is in the post Inequality and Instability.  There will be at least two more parts to follow the current one.

There is a trememndous amount of clarification in these interviews about the role that Equality did or did not play in the difference in economic growth and unemployment between Europe and The United States. The actual relation is quite different from what you have been lead to believe. Again, an indication that what seems like a logically consistent theory in books and academic papers can be turned on its head when you look at the data in a realistic way. The data is where you find the factors that you forgot to include in the theoretical analsysis.

In the article, The Republican Brain on the Republican Brain, author Chris Mooney discusses the reaction to his book The Republican Brain.  The following quote gives you a hint as to the material in the book:

… I further argue, you realize that there are some psychological traits that tend to accompany conservatism – especially in its current form in the United States – that naturally conflict with the nuanced, uncertainty-laden thinking style of scientists and liberals alike (members of the “reality based community”). These traits include authoritarianism – seeing the world in black and white, intolerant of uncertainty – but also a lack of openness to experience (a personality trait), a higher need for closure and so on.
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In fact, all the researchers I interviewed for the book stressed that conservative psychology is perfectly normal and has many advantages to it (although also, of course, some disadvantages). The conservative critics either seemed not to have actually read the research in question, or were, for some other reason, unable to take such a nuanced view of it.

At the end of the article, the author describes an experiment which was intended to measure the extent to which the book’s thesis could be proven scientifically.  One surprising outcome for the researchers is described as:

The conservatives in the study were spending a lot less time reading our essays than liberals.

The author advises caution in interpreting these results until it is replicated by other experiments. I see another reason to be cautious about jumping to conclusions as to what this observation proves.  Perhaps conservatives are faster readers than liberals.  Maybe they are all graduates of Evelyn Woods’ Speed Reading classes.  (Of course they could be faster readers because they skip over nuance in what they are reading.  This is one of the main ideas of the book.  The psychologists need to devise an experiment where they see which explanation is more likely to be the main one.)

You can contribute to this ongoing research by adding your comments about your reaction to this story.

Elizabeth Warren was interviewed on The Morning Joe television show on MSNBC.

She talked about the huge issue of the contraction of opportunities for middle-class people. People have been forced to take on huge debt to get a
college education that was supposed to be a ticket to open the doors to opportunity. Instead, after graduation, they cannot get a job and they are saddled with this huge debt without the means to pay it off, let alone get ahead.

You can also see the video below on Warren’s web page, Call on Congress Not to Double Student Loan Rates, but more importantly you can see she puts her efforts behind solving the big problems..

After the interview, you can stick around for the interview with Scott Brown. He talked all about the value of his bipartisanship and solving small problems. It was as if he were completely unaware of the huge problems in this country that his small problem attitude is just not enough to fix. If you add on his support for tax breaks for the ultra-wealthy and already successful while cutting back on the opportunities for the middle-class, that the few problems he solves pale in comparison to the huge problems he helps cause.

Scott Brown struggled in his young life to get a college education. Is he even aware of how much more difficult it is now then when he went through the process? No mention of this issue in this interview. I guess it’s just not on his radar screen. Would he have had an answer if the interviewers had just asked?

Truth-Out has this wonderful short excerpt of an early Fall 2011 interview with Bill Ayers on the Coming Revolution.

I am starting to be a believer that electoral politics is only a small part of what it will take to turn this country around. My involvement with the Elizabeth Warren campaign is only reinforcing this view. I am encouraging people in this area to get involved in this campaign to make it the kind of campaign we want despite what the officials in the campaign may do to screw it up. I hope we can remain active long after the campaign is over.

This interview with Rachel Maddow explains why we need the Consumer Financial Protection Bureau. Elizabeth Warren explains that this is also part of a bigger picture.