New Economic Perspectives has the Joe Firestone article How to Restore the Good Name of Government.

Nor will they legislate anything useful after it unless 1) Democrats get a majority in both Houses and 2) Democrats who constitute those majorities are willing to move away from corporatism and legislate in the interests of people. So, if something can be done in this area, it must be done by the President. There are four very important things he can do before the elections of 2014 that would help to restore some faith in Government and, as a by-product, at least tentative trust in the possibility that renewed Government deficit spending may help people.

1. The President can re-institute the rule of law in the area of national security and secrecy by ending mass surveillance of the US population immediately, ceasing all investigations and attempts at prosecutions of journalists who have been trying to tell the public about the overreach of our intelligence agencies, beginning investigations and prosecutions of intelligence operatives who have broken existing laws in gathering intelligence, ending current prosecutions of whistle blowers, and issuing pardons for those who already have been tried, convicted, and jailed.

2. The President can re-institute the rule of law in the area of FIRE sector control and mortgage frauds by beginning investigations and prosecutions of high level executives at too big to fail FIRE sector organizations who have committed fraud including those that caused the financial collapse of 2008, which, in turn, led to the Great Recession and the destruction of so much middle class wealth.

These first two initiatives are supremely important because they will deliver a very visible presidential message that the Government is re-instituting honest government and a single system of law, which, in turn, will give people some reason to believe that renewed spending by the Government will be carried out honestly for the benefit of people, and not for the benefit of FIRE, health care, energy and other elite corporations.

I leave it to you to read the other two things that can be done.

I chose to respond to the following statement from the article:

Finally, these Democratic promises will surely be met with a campaign emphasizing the bogeyman of hyperinflation. Democratic promises will be estimated in a primitive way totaling up what will they cost over the two year period. The assumption will be made that they won’t be countered by automatic stabilizers producing increasing fiscal drag as the US approaches full recovery.

The trouble with the cut in tax rates during the Reagan/Bush/Bush era is that it severely weakened the automatic stabilizers that prevent inflation from happening when the economy is in full recovery.  A marginal tax rate of 80% to 90% then in effect is a far cry from top rate in the 30’s that is now prevailing.  If we cannot get these tax rates restored now, then when inflation comes along, the stabilizers won’t be automatic.  They will require legislation that takes a long time to get approved at just the time when they need to immediately and gradually start kicking in before inflation can take hold.

There is a real reason to have high nominal tax rates with loopholes that kick in in times of recession.  Nobody is explaining this to people.  When the Republicans emphasize the high nominal corporate tax rates compared to other countries, the Democrats only explain that the effective tax rate is actually very low.  They never explain why this method is advantageous.  So you get all these calls to simplify the tax system with no explanation of what would be lost if we enact some of the simplifications.

There are probably very few politicians that even think about this and would be in a situation to provide an explanation.

New Economics Perspectives has the William Black post If New York Times Reporters Won’t Read Krugman about Austerity Will they Read Brooks?

I have written repeatedly about the New York Times’ needs to create a prize in incompetence in macroeconomic reporting (IMR) and suggested that the paper award the IMR prize to its reporters.  I suggested that the prize consist of a two hour lunch with Paul Krugman in which he will provide them with a remedial lecture on why austerity is an economically illiterate response to a recession.

I dedicate the above link to all who hold The New York Times in such high regard for their honesty in reporting all the news that fits in print.

To bolster my confirmation bias in what stories I choose to emphasize, Black goes on to say,

Notice that Shear treats the “looming debt crisis” and desirability of deficit reduction as facts so obviously true that they require no analysis.  There is no “looming debt crisis” for the U.S. government and the deficit has been reduced too quickly.  Notice that Shear implicitly treats federal budget deficits as harmful.  There are circumstances where that could be true due to inflation and very high capacity utilization.  We are not remotely in those circumstances.

I have emphasized the last two sentences, so that people won’t try to raise the false argument about inflation and crowding out private investment.  To get what Bill Black and I are saying, refer to the video below.

For everything there is a season, and this is not the season for austerity. Could it be more plain?

The Daily Kos has the story Exxon CEO Joins Lawsuit to Stop Fracking Near His Home.

Exxon CEO Rex Tillerson may be the world’s biggest fracker (Exxon is the biggest natural gas producer in the U.S.) but he isn’t stupid. He’ll frack my backyard and tell me it’s good for me and he’ll frack your place too, but don’t let any frackers near his home. He knows damn well that fracking lowers property values, but he wouldn’t admit it until the frackers came to his place. He just joined a lawsuit to stop the fracking because it would lower the value of his property.

Well, if you read the story on which The Daily Kos article is commenting, the path from the lawsuit to fracking is not quite as direct as the comment would imply.  However, “it is close enough for government work” as we used to say in the Army.

The step between the lawsuit and the fracking is really a pretty thin veil, in my opinion as well as the opinion of the article.

I don’t know who is being quoted here, but this shows you the indirection used.

Tillerson has joined a lawsuit that cites fracking’s consequences in order to block the construction of a 160-foot water tower next to his and his wife’s Texas home.

The Wall Street Journal reports the tower would supply water to a nearby fracking site, and the plaintiffs argue the project would cause too much noise and traffic from hauling the water from the tower to the drilling site.

If noise and traffic is a legitimate cause for legal action, you would think that poisoning wells and causing earthquakes would be legitimate causes for action, too.  Poisoned wells and earthquakes are the more typical reasons for objecting to fracking.

Motherboard has the article The Math That Predicted the Revolutions Sweeping the Globe Right Now.

Just over a year ago, complex systems theorists at the New England Complex Systems Institute warned us that if food prices continued to climb, so too would the likelihood that there would be riots across the globe. Sure enough, we’re seeing them now. The paper’s author, Yaneer Bar-Yam, charted the rise in the FAO food price index—a measure the UN uses to map the cost of food over time—and found that whenever it rose above 210, riots broke out worldwide. It happened in 2008 after the economic collapse, and again in 2011, when a Tunisian street vendor who could no longer feed his family set himself on fire in protest.

To judge this article, it helps to know the definition of the Food Price Index.

The FAO (Food and Agriculture Organization of the United Nations) Food Price Index is a measure of the monthly change in international prices of a basket of food commodities. It is not a measure of the height of food prices, but it is a measure of how quickly the prices change.

I have been wondering what it takes to drive people to start the kind of uprising that can overthrow a government.  This article provides an answer that I had not thought about.  I doubt the Republicans know what fire they are playing with when they cut back on food stamps in this country.  Should we tell them, or should we let them dig themselves a hole they will never get out of?  If it weren’t for the suffering of the people who cannot afford to buy food for their families, the answer to the previous question would be more obvious.

The Real News Network has the interview Why Is The 2008 Crisis Taking So Long To Resolve?

Economist Yilmaz Akyüz on how excessive reliance on the US Federal Reserve created more problems than it has solved

Here is an excerpt to get you started.

AKYÜZ: The top 1 percent actually got the entire increase in income in the United States since 2009. And, in fact, the share of the rest of the population has been falling. So inequality is increasing in Europe too because of the austerity policies. So we have actually [incompr.] a bigger deflationary gap, because the workers are unable to afford the goods and services they are producing.

Now, how are we going to grow again brings you to the fundamental problem. Are we going back to business as usual? That means we’re going to have debt-driven bubbles in the United States or in Europe, or we’re going to be stuck in a long stagnation

FRIES: And what other policy shortcomings do you see in the U.S. and Europe post-crisis?

AKYÜZ: Well, one problem I mentioned in the crisis intervention was fiscal austerity after the initial expansion. A second shock coming in the policy response was actually the inability, and, in fact, unwillingness, of the governments to remove debt overhang by timely, orderly, and comprehensive debt restructuring.

Some people have had trouble understanding the interviewee. If you have such trouble, you might want to read the transcript at The Real News Network web site.

The paper that the interviewee discusses in this video is The Uncertain Future of the World Economy.

The world economy suffers from an under-consumption bias because of low and declining share of wages in the gross domestic product (GDP) in all major advanced economies including the U.S., Germany and Japan, as well as China.

Still, until 2008-2009 the threat of global deflation was avoided thanks to consumption binges and property booms driven by credit and asset bubbles, particularly in the U.S. and the European periphery.

The crisis has not removed but reallocated global trade imbalances.

Longer-term global prospects depend a lot on the U.S. due to its central position in the world economy and the international reserves system. It is highly unlikely that the U.S. can move to wage-led growth in the near future.

The end of this short paper speaks about an issue for the emerging economies.

The normalisation of monetary policy in the U.S. will also cause problems for emerging economies. Despite occasional complaints about the “currency war” entailed by liquidity expansion in several major advanced economies simultaneously, the policy of ultra-easy money has generally been benign for emerging economies.

It has been a major factor in the sharp recovery of capital inflows after the sudden stop caused by the Lehman Bank collapse in September 2008.

Many major emerging economies such as India, Brazil, South Africa and Turkey have come to depend on such inflows as their current accounts started to deteriorate. They have invariably welcomed the asset bubbles that such inflows have helped generate and often ignored the financial fragilities caused by increased exposure to interest rate and exchange rate risks by private borrowers abroad.

Such exposures are on the rise since the beginning of 2012. As funds have started to be withdrawn from domestic securities markets, emerging economies have increasingly relied on international debt contracted in reserve currencies, which reached, in net amounts, 600 billion dollars between the beginning of 2012 and mid-2013.

As the Fed has got closer to ending the QE3 and the long-term U.S. rates have edged up, strong downward pressures have started to build up on the currencies, stocks and bonds of several emerging economies such as Brazil, India, South Africa and Turkey, which were widely seen as rising stars only a couple of years ago.

And the longer-term prospects of the eurozone are even less encouraging than the situation in the U.S. Deleveraging and recovery are likely to remain extremely slow in the periphery and many countries cannot expect to recuperate the output losses incurred after 2008 for several years to come.

This explanation answers some of the questions I had about an interview featured in a previous post Tapering of Quantitative Easing Is Throwing Emerging Markets into Chaos.

February 23, 2014

Part 2 has been published – Wage Shares Fall in the US, Germany and Many Other Countries While Financial Shocks Hit Emerging Economies

I received an email about this news, so I went searching for an article with the details.  I found that ABC News had the article Obama Budget to Drop Benefit Cost-of-Living Trims.  I place ABC News only a fraction of a step above Faux Noise, but I’ll give you a few quotes from the story so you get the gist.

President Barack Obama will propose an election-year budget that would drop reductions he had previously embraced in federal benefits, officials disclosed Thursday. He also will ask Congress to approve about $56 billion in new or expanded programs, stepping back from aggressive efforts to tackle long-term government deficits and debt.
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Republicans promptly portrayed the White House move as abandoning any commitment to fiscal discipline.

“The one and only idea the president has to offer is even more job-destroying tax hikes, and that non-starter won’t do anything to save the entitlement programs that are critical to so many Americans,” said Brendan Buck, a spokesman for House Speaker John Boehner.

I suppose you can’t blame ABC News for repeating what Speaker Boner had to say.  So I wish that the Obama administration would come out first about how these tax cuts are destroying jobs and need to be stopped.  The reason why the tax cuts are job destroying is that they take money away from government that would spend it on buying stuff that creates jobs, but instead the money is retained by the wealthy who can’t possibly spend all the money they already have.  So the wealthy put the money from the tax cuts into bogus Wall Street gambling schemes that don’t put anybody to work.

Now here is one that you can blame ABC News for.

The proposed cost-of-living trims, supported by many Republicans and now put aside by Obama, would use a different inflation index to adjust annual benefit payments. Many economists believe the alternative formula, called a “chained consumer price index,” better reflects consumer spending behavior.

What ABC News doesn’t tell you is that there may be more economists that believe the current inflation index underestimates the impact of inflation on the elderly.  If there needs to be an inflation index to determine cost of living adjustments, there should be a special one for how seniors spend their money.  (Well, there actually already is one.)  Using this index would give seniors even higher cost of living adjustments than they currently get.

See the Bureau of Labor Statistics web page Consumer Price Index for the elderly.

BLS also calculates an experimental CPI for the elderly, or CPI-E, by using households whose reference person or spouse is 62 years of age or older.

Could ABC News be so ignorant that they are unaware of this index and the economists who promote it?  For that matter, one has to wonder if President Obama is also ignorant of this index.  What about the Republicans in Congress?  Anyone who is unaware of the this BLS index ought not be making budget decisions for our government.

I found a more reliable source to misrepresent the story. The Los Angeles Times story is Obama backs away from a Republican budget priority.

The president’s now-abandoned proposal to replace the consumer price index with a new formula for cost-of-living increases called “chained CPI” would probably have resulted in savings in programs such as Social Security and Medicare. Obama had indicated his support for chained CPI in battles with Republicans over the debt ceiling and government funding, starting in 2011.

Why no mention of the CPI-E, the Bureau of Labor Statistics’ Consumer price Index For the Elderly?  Not only is chained CPI not a better measure of elderly spending compared to what is used now, it is actually a worse measure than what we use now – see CPI-E above.

Does the media have any responsibility to educate its readers?  Or does it only have to report what a few sides of the argument are?  Is this what is called balanced reporting?

When the President is wrong and the Republicans are wrong and this newspaper knows it, is it really being a newspaper to keep this a secret?

Do you ever ask yourself, how come I know more about these matters than the professional reporters seem to know? What am I paying them for anyway? Well, of course, I am reading this on the web so I am not paying them anything for the shoddy reporting. And they are getting everything from me that their reporting is worth.

The Real News Network has the 4 part series starting with I Was Born a Rebel – Code Pink Co-Founder Medea Benjamin on Reality Asserts Itself (1/4).

You may know Code Punk only from some of their visible protests at various congressional hearings or appearances of politicians. If so, you may or may not have an entirely favorable opinion of Code Pink. However, when you hear the story of how Medea Benjamin came by her opinions, you may change your mind somewhat. When I found out the things she has experienced first-hand about U.S. and multi-national corporate power, and even her experiences in Cuba, I couldn’t imagine her taking any different stands from the ones I have seen on TV (and the ones shown in the interviews).

An Apology From Fidel – Medea Benjamin on Reality Asserts Itself (2/4).

Obama Sucked the Steam Out of the Anti-War Movement – Medea Benjamin on Reality Asserts Itself (3/4).

As of this writing, part 4 has not been published.

February 23, 2014

Part 4 has been published.
The Movement is in Silos – Medea Benjamin on Reality Asserts Itself (4/4)

Naked Capitalism (NC not meaning North Carolina) has the article NC Reader Smacks Down Consumer Reports on Medicaid Clawback Advice.

But the bigger point for showing this example is that if you have the time and energy, it really is worth it to let various pundits and officials know when it’s clear they are hawking some sort of official party line and how what they have written discredits them. You may not always get the gratification of having them respond, but most writers read reactions to their articles, and in the case of a subscription-dependent publication like Consumer Reports, subscriber reactions are particularly important. And it also sharpens your argumentation skills for dealing with friends, family, and colleagues. We’re all chipping away at a bad orthodoxy, and continued probing will help find the fault lines.

This is a good description of why I have taken to blogging now that I am retired.  Besides, as a computer geek, it is a way to have my say without having to deal with actual people on a face-to-face basis.

Also implied in this blog is that you shouldn’t just read it, you should also make your views known.

Seeking Alpha has the article Did The Fiscal Stimulus From 2009 Work? by Cullen Roche.

First, I don’t know why conservatives have such a big beef with the fiscal stimulus. After all, it was mostly tax cuts. I consider myself a centrist who tends to lean slightly towards the fiscal conservative side and I can’t figure out when so many conservatives started suddenly hating tax cuts so much?
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During a de-leveraging a government deficit adds net financial assets that helps support balance sheets. Anyone who says the deficit didn’t help at all either doesn’t understand basic accounting or must reject the idea that this was a credit crisis

I am glad to see that someone who claims to be somewhat conservative hasn’t lost the ability to do basic accounting. For a stimulus that was too small by at least a factor of 2 or 3, was ended way too soon, and was too focused on tax cuts, it did do a pretty good job. Imagine if we had actually tried a well designed stimulus package.

When you consider the size of monetary stimulus tried by the Fed compared to the size of the fiscal stimulus, the fiscal stimulus effect per dollar was much larger. Still that doesn’t convince some people that we should use the policy that actually works instead of the least effective policy that is available.

Is this any way to run a business?

The Daily Kos has the article Actual photo of the moment Democrats lost the white working class vote. The picture is exactly the picture you think it is.

However, the paper the article quotes explains why the title of the article is misleading.

In a paper (PDF) published on the eve of the 2012 election, political scientist Elisabeth Jacobs presented compelling data pointing to that exact conclusion:

On average, Democratic presidential candidates prospects with self-identified white working class voters have diminished somewhat over time. … Yet, the downward trend in Democratic presidential vote choice between 1956 and 2008 is concentrated amongst the Southern white working class. … White working class presidential party vote choice for non-Southerners is remarkably stable over time; if anything, the period between 1984 and 2008 has been one of improvement for the Democrats amongst this group. The opposite is true in the South. Prior to the 1960s rights revolutions (including, most notably for the South, the major upheavals of the Civil Rights Movement), a strong majority of the Southern white working class voted for Democratic candidates. Southern white working class voting appears to have settled into a basic equilibrium with Reagan’s 1984 election, with the notable exception of an uptick for Clinton’s first election in 1992, and again for Obama’s 2008 election gambit.

Obviously the more accurate title would be “Actual photo of the moment Democrats lost the southern white working class vote”.

So I suppose the Southern strategy of the current Republican party is the same one the plantation owners used before The Civil War. They convinced the white working class that they had it so good because at least they weren’t slaves.

When the white working class in the south finally finds out that they now are slaves to the 1%, do you suppose they will change their voting habits? Is this a strategy that Democrats could use? Those are rather shocking words. If you think it is going overboard, tell me why.