How Did We Get so Callous?

Mark Thoma focuses on the unemployment issue. Even the Wall Street Journal is beginning to realize that this is a problem that goes beyond people's willingness to work. The prevailing conservative view seems to be that if we'd just stop giving these people benefits, they'd get off their duffs and find a job. I'm sure there is a percentage of the unemployed who are happy to accept benefits and have no intention of looking for a job. But current estimates of the unemployed--that is people who are actually without a job, not the current definition of unemployed* is just south of 15% of the workforce. Does anyone really believe that we have that many deadbeats in this country? The people who are receiving benefits that are too small to pay their mortgages and other debts and who are running through their retirement savings just to keep their heads above water are not lazy--they are desperate. This, it seems to me, is a hidden time bomb in our long term social health. People who were saving on a path to retire comfortably, are now never going to be able to make up the loss of their savings. They'll either have to work longer or have a standard of living way below what they expected in retirement. The unemployment of today will be a deadweight loss to the economy for years to come.

* unemployment is defined as those people who are looking for a job and can't find one. It doesn't include people who couldn't find a job and gave up or people who are working part-time, even thought they'd rather be working full time.

Can You Balance the Budget?

A while ago the NYT presented a budget puzzle for its readers. The puzzle allows the reader to choose among the various proposals to reduce the deficit over the next 4 years and the next 19 years (it was 5 and 20, but some time has passed). The puzzle shows that anyone who wants to balance the budget has some hard choices. For example it is impossible to balance without cutting some programs you might not want to cut. It is harder to balance without raising taxes. This shows how dishonest some politicians are being when they promise to balance the budget and cut taxes at the same time.

Here's my plan: Craig's choices.

From "Birthers" to "Transcripters" to ...

James Fallows on President Obama's birth certificate press conference. It's as much an indictment of the media as it is of the "birthers."

Let's Face It--Paul Ryan Is a Liar

He continually misrepresents his budget plan. Sometimes he simply evades the question. Sometimes he just says things that are not true. People are beginning to call him out. One hopes it continues, until people realize what a disaster his plan really is--for everyone but the rich. I'm really torn between believing that he is nothing more than another lying frontman for the wealthy or a simpleton who has been duped by them.

Why Now, "Paper of Record?"

From the NYT today-- years late and millions of jobs short. The horse is gone.

The Limits of Fed Policy

For too long policy decisions by the Federal Reserve were cloaked in secrecy and Alan Greenspan, the longtime chairman, was notoriously Delphic. So it was good to see the current chairman, Ben Bernanke, meeting the press on Wednesday, in the first of what are to be quarterly question-and-answer sessions. It shows that the Fed has learned, albeit the hard way, that it must build understanding and support for its policies.

For all the talk, there is little Mr. Bernanke can say, or do, to alter today’s grim economic realities. The tools the Fed has to raise or lower interest rates, are not, by themselves, going to fix what most ails the economy today: continued high unemployment; falling home prices; weak income growth; the erosion of the manufacturing sector.

Only fiscal policy can directly address those crushing problems. That requires Congress and the White House to agree on ways to raise and invest taxpayer dollars for specific programs, projects and recovery efforts.

That is not to imply, as Fed critics contend, that current Fed policy has failed. Its most controversial action — a $600 billion bond-buying program intended to keep long-term interest rates low — has succeeded in preventing a deflationary spiral and has correlated with more robust job growth. The Fed’s decision on Wednesday to continue the bond-buying program as scheduled through June, together with its decision to keep interest rates near zero for the foreseeable future, represent sensible support for a still fragile economy.

So long as fiscal policy is off the table, the economy is likely to limp along for years. The White House has some good ideas, including proposals to boost educational achievement and, importantly, to raise taxes for needed spending. A bipartisan group of senators have recently proposed creating an infrastructure bank to lend out seed money — and attract private capital — for major public works projects. But most Congressional Republicans are fixated solely on cutting federal spending as quickly as possible, and have successfully dominated debate and policy-making.

In his press conference, Mr. Bernanke emphasized the need to control the long-term budget deficit. Just as clearly, he emphasized that the best approach would be to enact a credible plan soon — to be implemented over time. If only Congress would take heed.

It is important that the Fed not prematurely raise interest rates or otherwise tighten its policy. The Fed’s ability to boost economic activity is limited. Unfortunately for now, monetary policy is the only game in town.

This is Just Wrong

From Reuters--a word cloud of Bernanke's comments at his press conference. Where is "jobs?"

Samuelson, Et Al. Were Right

To no one's surprise (at least it shouldn't be) the things we teach in Econ 101 at most universities turns out to be correct. "Contractionary economic policy is contractionary."

The recent experience in the UK, the first of the major world economies to explicitly and straightforwardly say that contractionary policy would be expansionary, is proving that nonsense remains nonsense. The ratings agencies scared the Brits into slashing government in order to "increase confidence in the government's ability to manage the economy." But the confidence fairies didn't show up. UK growth has been zero over the past six months--no bump from austerity. Appeasing the ratings gods doesn't seem to have helped the UK economy.

Further, the lack of any market response to the agencies' threats to lower the US Government's credit rating shows that confidence faires remain in Never-Never Land where they belong.

New Music--Arcade Fire

Global Warming and the Energy Infrastructure

Even if one does not believe that humans have caused global warming, recent history shows that it is a real threat. An energy risk analysis from the National Wildlife Federation shows that the threat of climate change to our energy supplies is real and potentially disastrous. We need to end the neglect of our infrastructure and begin now to protect our energy supplies.

A Budget Proposal that Reflects the Will of the People

Not the wealthy, not the Tea Party, but the expressed desires of ordinary Americans. We know from multiple polls where ordinary Americans stand on fiscal issues--leave Social Security, Medicare and Medicaid alone, raise taxes on the top income earners, eliminate government handouts to oil companies--the list goes on. Only one of the budget proposals now before Congress deals with these issues in a way that reflects the wishes of ordinary Americans. That's the proposal put forth by the Congressional Progressive Congress. Why is this proposal not getting as much attention as the Ryan proposal, which is aimed at giving a windfall tax cut to the wealthy and ending Medicare and Medicaid as effective programs?

Why the American View of Religion Confuses Me

I confess to be on the outside with a lot of religious discussion. So much of it seems contradictory to me--an almighty, loving and omnipotent God who can be swayed by prayer, as if we have some better plan than his own or that He needs the validation prayer provides. This was all brought home to me this week by our Governor's reaction to the terrible fires that have been sweeping Texas during a significan drought. Paul Waldman in the New Prospect:

Stand back, folks. the governor has everything under control (via Ben Smith):

NOW, THEREFORE, I, RICK PERRY, Governor of Texas, under the authority vested in me by the Constitution and Statutes of the State of Texas, do hereby proclaim the three-day period from Friday, April 22, 2011, to Sunday, April 24, 2011, as Days of Prayer for Rain in the State of Texas. I urge Texans of all faiths and traditions to offer prayers on that day for the healing of our land, the rebuilding of our communities and the restoration of our normal and robust way of life.

America is a religious country by Western standards. And it's well known that many religious people would refuse to vote for someone who didn't believe in God, while nonreligious people don't have any choice but to vote for people who do believe in God. But do our politicians have to have such an infantile view of the way this just and loving deity's universe is supposed to be ordered?

The theory here seems to be that up until now God has been angry at Texas, or perhaps indifferent to Texas' plight, water-wise. So if enough Texans pray over the next three days, it'll basically be like everyone waving at once, saying, "Hey, God! A little help here!" Whereupon, God will say, "Oh -- Texas! I forgot you guys were there!" And then he'll say, "Well, I had this plan that stretches from here until the end of time, and the drought played a small but significant part in that plan...but heck, since you all prayed so nicely, here's some rain."

Thus my confusion. It seems to me that prayers of thanksgiving are consistent with the standard view of God and his power, but prayers for things are presumptuous. Is any of us powerful enough to change God's plan? Are we presumptuous enough to think that we can?

And the Rich don't Pay a Disproportionate Share of Taxes

A lot has been written lately about how the wealthy pay most of the taxes collected by the government. This tired old lie gets trotted out every couple of months and is one of those zombie lies that is hard to kill. The wealthy do pay a larger share of income taxes. But what's wrong with that--would anyone reasonably argue that people who earn more money shouldn't pay more in taxes? Well, I guess Rep Ryan would.

The problem with this argument is that it doesn't include all taxes. Wealthy people are shielded from paying payroll taxes that are any greater than the rest of us by the cap on contributions. There are other regressive taxes where the wealthy get a break. By way of Ezra Klein, here's a graphic on the share of total taxes paid by each quintile.

The share of income paid as taxes is very similar to the share of total income except for the lowest income classes.

America Is not a High Tax Country

Maybe we are a bunch of whiners and maybe it's because we don't get good value for the taxes we pay, but the US is not a high tax country. Maybe we need to stop spending our tax dollars on excessive defense outlays, ethanol subsidies, oil depletion allowances and corporate farm subsidies and a wealth of earmarks that do nothing but help the same old incompetent politicians get re-elected. Matt Iglesias supplies us with this chart of developed economies and their relative tax burdens.

No wonder we have a deficit. We are unwilling to pay for even the low level of public services we get.

Why Are Democrats Inept Politically?

I remain frustrated that the President hasn't been more forceful in laying out the differences between the Democratic budget proposal and the Republican alternative. The Republican proposal is so at odds with what Americans say they want and so mean spirited that it's shocking that Congressional Democrats aren't making hay out of the impact of Rep. Ryan's budget plan. Why the silence? The Republicans have gone so far around the bend that it should be easy for the Democrats to expose them as the party of the wealthy, who are willing to sacrifice the poor, the elderly and even the middle class to make life easier for people who already have more money than they know what to do with.

Alan Blinder in the WSJ--Reverse Robin Hood

It's hard to believe that any decent human being can take the Republican budget plan seriously. I posted earlier about the mean-spirited nature of Rep. Ryan's budget plan. This morning Alan Blinder, a professor at Princeton and former Vice Chairman of the Federal Reserve weighed in with his analysis of the plan--on the Wall Street Journal's editorial page. This doesn't mean of course that the WSJ agrees with Professor Blinder, but at least criticisms of the Ryan plan are now appearing in conservative outlets.

The nerve of the Republicans is shown by their pretending that the Ryan plan was the first proposal to deal seriously with the budget deficit. They have already forgotten the "bipartisan" Simpson-Bowles plan and the Domenici-Rivlin plan, both of which are much more comprehensive and serious approaches to dealing with the budget deficit (even if they are not what some of us would like them to be).

I hope that Americans finally wake up and see what the Republican Party (now that it has been captured or cowed by the Tea Party wing nuts) is trying to do. Surely American voters will not continue to act against their own economic interests. What we often fail to realize is that the US is a very low tax country. We can afford to do more for the less fortunate and for our infrastructure. Cutting taxes for the rich as the Republicans want to do is not the best thing for America's future.

New Music on the Left

I just discovered Grace Potter and the Nocturnals. It's hard to believe that I'd never heard of someone this good. I guess it just shows how many talented people there are out there, who for some reason never get the attention they deserve. When you think of Katy Perry, Lady Gaga and the other lesser talents who dominate Rolling Stone, it's confounding.

It's a New World

If you're reading this you've probably realized that I've changed things a bit. I have dropped my Facebook account and this blog will no longer appear there through networkedblogs. I had too many experiences that I didn't like and the angst became too great. When I lost several nights sleep over the last negative experience, I just gave up. I have always tried to stay general in my comments and avoid any ad hominem content, but that doesn't seem to work for everyone.

I don't know if anyone will continue to read my blog now that it's not on Facebook, but that's OK. I'm going to try to blog less and speak my own mind more, rather than mainly reposting other people's thoughts.

Robin Hood, Robin Hood..Riding Through the Congress.

A spot on review of the "Prosperity Plan" by Amitai Etzioni, professor at GWU.

New music on the left.

A good Discussion on the Competing Views of Inflation Prospects

Tim Duy explains how to analyze what policymakers are saying about the prospects for inflation over the next couple of years. The key takeaway is that regardless of who is right, there will be inflation. It is a necessary part of recovering to a full employment economy. Some will seize on that as a failure of policy, when in fact it's what the economy needs to send proper signals to producers. For those critics, Keynes' comment in 1936 when told that the government was following a contractionary policy because they were afraid of inflation holds true today: "They fear that for which they dare not hope."

Henry Aaron on Ryan's Budget Plan

Henry Aaron has been one of the most incisive analysts of federal budgeting for over 40 years. His recent column in the NY Daily News talks about the key pieces of Rep. Ryan's plan.

In the name of cutting the deficit, by $1.6 trillion over the next decade, Ryan's program would:

• Cut spending on just about everything the government does, not including Social Security, Medicare and Medicaid. By 2050, government spending would be a smaller share of the economy than in any year since the presidency of Herbert Hoover. Among the programs that would suffer drastic reductions would be national defense, housing, education, agriculture, the environment and veterans affairs.

• Double the share of health care spending for which Medicare enrollees would be responsible. This added burden would not be in the name of cost reduction, since the plan would move people into private plans that the Congressional Budget Office estimates would cost from 44% to 67% more than traditional Medicare, from which people turning 65 starting in 2022 would be barred.

• Halve Medicaid grants to states by 2022 and cut them by 75% by 2040. Nor would the grants be increased for any reason - even if enrollment might rise during recessions or health emergencies. Thus, the Ryan plan would effectively repeal a program that now provides acute and long-term care benefits to more than 50 million Americans.

• Deny coverage to the 32 million Americans now without health insurance who are slated to become insured under the Affordable Care Act. They would remain uninsured, boosting the number of people without health insurance to an all-time high of more than 50 million.

Ryan justifies such cuts in the name of deficit reduction. In fact, deficit reduction would be minimal. Most of the savings from spending reductions would go to finance tax cuts - including cuts in the top tax rates from 39.6% to 25% for those who make $375,000 or more.

And most of the rest of the claimed savings are illusory. Ryan's baseline assumes that military ventures in Afghanistan and Iraq will continue indefinitely. If one recognizes that these ventures will end, deficit reduction over the next decade would be just $155 billion, a tenth of what Ryan claims.

All of the recent deficit reduction commissions have recommended large spending cuts, but they have also recognized that tax increases are necessary as well to minimize cuts in health care, food and housing assistance and other services essential to the well-being of millions of Americans.

Once again, it comes down to tax cuts for the wealthy--the Republicans have no other policy that figures as large in their budget proposals.

A Competing Public Option for Health Care

Unnoticed and unappreciated by health care pundits, the VA health care system has become a model for cheap, effective health care. The drawback--it doesn't fit with the argument that the government can't effectively deliver services more cheaply than the private sector. Philip Longman's book on the VA system, now in its second edition describes how the VA system has emerged as the most promising model for future health care in the US.

If we are serious about solving our health care mess, we need to look at solutions that are actually working.

Macroeconomics and the History of Economic Thought

Why we'd be better able to explain what's happening in the economy if macroeconomists had taken the last 60 years off.

More Evidence that the Inmates Have Taken over the Asylum

The right wing-nuts (Tea Party if you will) have so cowed the Republican party that it no longer knows what it stands (stood) for. Virtually all Republicans from Nixon on (including John Boehner) have repeatedly supported funding for Planned Parenthood. Planned Parenthood has not changed over the past 40 years--it's the Republican Party that has lost its way. Steve Benen in the Washington Monthly.

Neither Brave nor Serious

James Fallows on the Ryan Plan.

If You're not in the Top 10% of Income Earners..

the Republicans want to stick it to you again. If you're in the bottom 25% you're really going to get the shaft. From Paul Krugman a link to a summary from the Tax Policy Center of Rep. Ryan's tax plan. The sheer meanness of the proposal is unbelievable. All the tax cuts given to rich come right out of programs to help the less fortunate.

Texas--Education. Are these Two Terms Mutually Exclusive?

Texas prides itself on its technological prowess. Governor Perry wants to make Austin the next "Silicon Valley." Yet Governor Perry and the Republican legislature have slashed education spending in the state's budget for the next two years. This morning John Kelso had some comments about the current direction of education in Texas.

More Unicorns

Another housing bubble? Rep. Ryan's plan depends on it.

Budget Unicorn Sighting

On closer inspection, Rep. Ryan's deficit reducing program has little to do with Medicare and Medicaid cuts. It depends on cutting the parts of the budget other than Social Security and Medicare/Medicaid by about two-thirds. That's defense, homeland security, support for research, etc. How about buying that bridge in Brooklyn? The Medicare debate is really not about the deficit at all, it's about giving the shaft to ordinary Americans by giving tax cuts to the richest 10% and reducing benefits for senior and our poorer fellow citizens.

More on Paul Ryan's Medicare "Reform" from the Economist

You put the load right on me.

Truth About Social Security and Medicare

There are so many misleading statements about Social Security and Medicare, it's sometimes easy to lose sight of some fundamental facts--funding Social Security and Medicare has nothing whatsoever to do with the budget deficit. They are funded separately from all the rest of government spending by dedicated payroll taxes. Now under the guise of reducing the deficit, the Republicans want to gut Medicare. Stephen Suh has more.

Republican Unemployment Fairies

The Heritage Foundation has presented a projection for Rep. Ryan's health care proposal showing how the economy will prosper over the next decade. The plan is based on the projection that unemployment will fall below 4% by 2016. Let me assure you, if unemployment goes below 4%, you'll see inflation equal to the 1970s and the Fed will have no choice but to put the brakes on. For a party dominated by inflation hawks who are worrying about inflation now with nearly 9% unemployment, this transcends the ridiculous. This kind of trash is --I almost said unbelievable, but with the Republicans, it's all too believable. The data are here.

Read the Comments on the Post

Paul Krugman on the Republican Medicare/Medicaid proposal. The comments by readers are priceless! One hopes that others are beginning to see the scam.

Republicans Just Won't Give Up Trying to Fool People

Matt Yglesias and Paul Krugman on the unworkability of Rep Ryan's Medicare proposal. Is Ryan an idiot or just a political opportunist? For a party that claims to be saving America in the long run, the Republicans are remarkably short sighted. I wonder if they can once again get people to vote against their own best interests. The fact remains if we want these programs, we have to pay for them. No amount of charlatanism is going to change that. I hope what Lincoln said is true:

"You can fool all the people some of the time, and some of the people all the time, but you cannot fool all the people all the time."

One has to hope that the time is up for Ryan and his ilk.

At Least the Earth Stopped Spinning for a Picosecond

Steve Benen in the Washington Monthly.

Jenny and Johnny--Big Wave

New (economic) protest rock for the 'teens. From Sir Charles on Cogitamus.

Living your life in the gray
Is the new American way
We're spending what we haven't made

And we save our money in good faith
And we work hard for our living wage
But still the banks got a break

Because the dream's a lie
And the snake, it bit you
When you were awake
And the books all fried
You are bankrupted
Because all the loans you take

Apparently Republican Senators Are Required to Give Up All Reason upon Election

Bruce Bartlett on the balanced budget amendment proposed by the Republicans.

How Rhetoric Gets in the Way of Reason

There's been a lot of commentary on Senator Ron Johnson's criticism of the Affordable Care Act, too much of it needlessly vituperous. Uwe Reinhardt, probably the most thoughtful writer on health care policy, provides a more reasoned response. Both Johnson and his critics miss the most important points within the health care debate. Simply put the current approach to health care in the US has left too many people uninsured and has provided no limits of the escalating cost of our health care. Our health care costs more than it ought to and is less effective than health care elsewhere. There are many different models in other industrialized countries that achieve results superior to ours. Those of us with access to good care at a "reasonable" cost sometimes seem to forget that the care Senator Johnson's daughter received is not available to a large fraction of Americans, especially children. The Affordable Care Act is aimed at helping children who, unlike Senator Johnson's daughter, don't have access to life saving procedures. The response of Republicans to the Affordable Care Act is especially troubling, given that it is consistent with a host of past Republican proposals, including most recently, the health care legislation in Massachusetts. Are Republicans willing to sacrifice the health of American children for partisan political gain?

Why US Drug Policy Is a Subsidy for the Drug Cartels

Ed Dolan explains why the war on drugs is a losing proposition. We need to lose the puritanical approach to drugs, just like we eventually got over prohibition (how well did that work?). America finally got tired of financing organized crime and the bootlegging business. Why do we seem to forget the lessons history teaches us?

Notably Rare Exceptions

Alan Greenspan was a distinguished Chairman of the Federal Reserve until he stopped bring an empiricist and started believing the free market drivel that pases for economic theory in some parts of academia (mostly around the southern tip of Lake Michigan). Instead of doing a mea culpa regarding the tremendous misread on the financial sector (what housing crisis?) he is now engaged in a incredibly ridiculous attack on Dodd Frank because it might stifle the financial sector's ability to "capture financial rents" and thus hurt the economy. This despite the fact that it was the financial sector's grasping after those same rents that caused the crisis in the first place. Greenspan is a continuing master at double speak, where if you look deeply into what he says, it means nothing. Remember, after all, if he seems clear we must have misunderstood what he said.