Those Damned Socialists Are Everywhere

Even at Goldman Sachs, where the research department just released its analysis of the proposed Republican tax cuts on US economic growth. For purposes of comparison, the OMB just revised the 4th quarter growth rate to an annualized 2.8%. So much for austerity.

How Long Are We Willing to Let Politics Create Economic Pain?

Or maybe more pointedly, is there any way to stop it? Brad DeLong talks about what is standing in the way of addressing our most important economic issue (and no, it's not the deficit).

Nobody Goes to Jail (Adult Content)

I always enjoy Matt Taibbi, even when he's sometimes over the top (he's not this time). I get really outraged whenever I think about how Wall Street CEO and their minions have escaped any but the most "slap-on-the-wrist" punishment over their roles in the financial crisis and subsequent recession. They took deregulation and lax regulation and made literal fortunes while ordinary people are struggling through the worst times since the Great Depression. The best line in the article is one I wholeheartedly agree with:

"You put Lloyd Blankfein in pound-me-in-the-ass prison for one six-month term, and all this bullshit would stop, all over Wall Street," says a former congressional aide. "That's all it would take. Just once."

If you read the rest of the article, prepared to become incensed.

We Have Choices

From Scientific American: "Four Companies You Love to Hate." The Facebook summary is most telling. The Internet doesn't know anything about us we didn't tell it, but people get all bent out of shape about privacy. We all trade pieces of ourselves for convenience or information we want.

What's Happening in Wisconsin?

It might not be what you think. Here's a report from a reporter on the ground in Madison.

Song and Photos from Wisconsin

14 Senators.

Hard Facts for Some People to Swallow

The budget debate is front and center now. As usual, people are arguing about all the wrong things. It's clear we have a budget deficit and that it poses a long run problem if we don't do something about it. It should be equally clear that we are going about a solution in the wrong way. There are some hard facts that a lot of people (including some who should know better) are finding hard to swallow.

1. The deficit is not due to run away government spending. It is due to the Bush recession. GDP has fallen so government revenue has fallen. This is the source of the bulk of the deficit. The only real measure of a problem with the deficit is relative to GDP. We have a problem now because so much productive capacity is currently unused.

2. This makes dealing with the recession by cutting spending the wrong solution. The medical profession gave up bloodletting centuries ago. How long will it take before politicians give up austerity as a solution to an economic downturn? Just like bloodletting, this makes the problem worse. History over the past 80 years shows clearly that fiscal stimulus backed by appropriate monetary policy will stimulate the economy. It also shows that taking them away has the opposite effect. The stimulus over the past few years worked--otherwise things would have been much worse--but it wasn't large enough to have a major impact on GDP due to the severity of the recession.

3. The government is not a business and can't be run like one in the large sense. The government exists largely because it supplies things that private enterprise can't--national defense, environmental protections, protection from discrimination... the list goes on. We'd all like to have maximum efficiency out of any enterprise--private or public. The government is an easy target, but there's not much evidence (outside of defense) that the government is any more poorly run than most large corporations. Cutting things like IRS enforcements--sure to reduce revenue-- and Social Security Administration--long known to be one of the most efficiently run agencies--is just dumb.

Until we wake up and start treating the disease rather than the symptoms, things are not going to get better. If the current drive towards austerity succeeds, we'll look back at this decade and wonder how we could have screwed up so badly. I, for one, don't want Congressional Republicans and Tea Partiers to learn a lesson through experience. That will be too hard on too many of us. I want them to study a little history, economics and politics before they start thinking they know how to make policy.

The Real Mandate on the Environment

This new information on public attitudes relating to the Environmental Protection Agency and its work to clean up the atmosphere is a welcome exposure of the posturing of Congressional Republicans about their "mandate." It's also welcome in Texas where the state is trying to block EPA attempts to clean up some of the dirtiest cites in America. I wish that there were state by state breakdowns for this poll.

More on the Budget Follies

Ryan Avent in The Economist.

Obama--the Real (not Fake) Deficit Hawk

Brad DeLong explains why and how Obama's proposed budget is way better than anything the Republicans have proposed.

What Do They Really Believe?

Conservatives have become so accustomed to saying outrageous things that it makes one wonder at their sanity sometimes. Here's some speculation on this phenomenon from the New Republic. Is exhibiting such willful ignorance merely an admissions ticket to the group--to prove one is a "conservative?" I know some conservatives who I don't think believe these things, but they and their fellows in the conservative press seem strangely quiet. The last conservative blogger who challenged these beliefs (David Frum at AEI) got run out of town.

Are Republicans Soft on Terror or Just Soft in the Head?

In their rush to cut the Federal budget, the Republicans in the House either don't know what they are cutting or they don't think we need to worry about nuclear terrorism any more. Some of the cuts they have proposed will sharply reduce our ability to protect ourselves from serious terrorism--not explosive shoes on airplanes, but dirty bombs in Times Square.

We Don't Eat Wheat--We Eat Bread

One example why rising commodity prices don't affect inflation as much as one might expect. (Also why the scare mongers who point to rising commodity prices as a sign of inflation armageddon don't understand how an economy works.)

The Perils of Using the Bible for Political Purposes

Stephen Suh (a evangelical seminary graduate) writes about the selective use of the Bible (in this case Leviticus) for political purposes. Not having read Leviticus in a very long time, I was struck by its relevance to the immigration and banking issues we face today. It seems to me that the conservatives who use Leviticus to rail about gay marriage and pre-marital sex need to read the rest of the book. Would it change their views about illegal immigration and fraudulent CDOs? This is selective use of religious teachings at its worst.

More on the Spectre of Inflation

From Matt Yglesias: Ron Paul on how to ignore facts. I'm trying to figure out how to cash in on this kind of behavior. The same goes for the weirdos who have predicted the end of the world later this spring. I'd offer them $1000 right now in exchange for title to all their worldly goods a day after they have predicted Armageddon. For Ron Paul, maybe I can concoct a swap based on the TIPS spread.

The Mortgage Interest Deduction

Ed Dolan explains why we should consider doing away with the mortgage interest deduction.

The Trend in Incomes

Here's a link to a very interesting interactive graph on the trend in income distribution over the last 90 years. Comparisons between different points in time are very instructive. For example, between 1969 (the year I graduated from college) and 2008 (the last year in the data sample), the entire increase in average income went to the top 10% of earners. All of it! Try to convince yourself that the other 90% had nothing to do with the increase in average income, but that's what the results suggest--if you are naive enough to believe that economic rewards haven't become skewed to favor the already wealthy.

Republicans Posture on Inflation

while Americans suffer through the worst recession in 75 years. Inflation is not increasing, nor are there any signs that it will in the near future. As Keynes famously said, "They fear that for which they dare not hope."

More Evidence of the Cupidity of Wall Street CEOs

From Simon Johnson, who reports on a new study of CEO behavior.

New Music on the Left

Governor Perry's World

Rick Perry lives in a fantasy land supported by his fat cat, ethically challenged cronies. He has plenty of money to give to his friends and campaign supporters, but nothing for ordinary Texans. The Burnt Orange Report has juxtaposed Perry's view of the state of the State with responses from politicians and interest groups.

Republicans Attack Medicare

If you are a senior or are about to be one, you better up your savings rate. If the Republicans get their way and change the Medicare rules, your current level of care is going to cost more out of your pocket. Republican "freedom of choice" means you are free to choose a lower level of care or free to choose to pay more for the same level of care.

Top Economics Articles in the Last 100 Years

This list comprises the top 20 articles in the economics profession's main scholarly journal. The list is interesting for a number of reasons. But for me, chief among them is the fact that Peter Diamond is cited twice for articles on public debt and taxation. This is the same Peter Diamond on whom chief Senate moron Richard Shelby put a hold as a nominee to the Federal Reserve Board because he didn't think he was qualified. Of course, public debt and taxation are not currently important economic issues. Yes, this is the same Peter Diamond who just won the Nobel Prize in Economics. Who elects these Republican yahoos anyway?

We May All Need This Soon

Shelter From the Storm

A Climate Change Primer

To help explain why a cold January in Texas (and less golf for Craig) doesn't mean global warming isn't happening. The probability distribution of weather events.

Speculation and Markets

Paul Krugman supplies the clearest explanation why speculators can't move commodity prices--unless they are willing to actually take delivery. Commodity prices are driven by actual supply and demand. What many people don't understand is that it often takes significant price changes to reduce the quantity demanded of some commodities (price inelasticity).

Simple Gifts

Simple Gifts

Photos from a Shaker village in Massachusetts. I took these in 2005 when we visited western Massachusetts. This post was inspired by a recent post from Paul Krugman.

And the beautiful movement from Aaron Copeland's "Appalachian Spring," with photos from Ansel Adams.

Thought Experiments in Economics

It seems too many economists (or economist wannabes) don't even engage in thought, much less thought experiments. Here's a piece by Paul Krugman on some simple economic thought experiments that can lead to clear economic insights.

The Rich Get Richer (Compared to the Rest of Us)

This seems a contentious issue. While there can no longer be any doubt that income is becoming increasingly skewed in the US, a significant number of us seem to think that this is OK. Maybe it's a belief that we can preserve an opportunity for each of us to climb into the top ranks. Aside from winning the lottery, this seems a vain hope for anyone over 40 and a decreasing likelihood for most people under 40, given the declining amounts we seem willing to spend on things (like education) that are most likely to provide opportunity. For myself, I have a feeling that the increase in disparity is due to factors that reflect poor social allocation of resources.

For those who don't believe this trend is real, here are some data.