iCount

Tom Bozzo



John "Don't Say" Boehner makes (or should make) Greg Mankiw cry:

Mr. Boehner likewise criticized Mr. Obama’Äôs cap-and-trade emissions permits proposal, saying, ’ÄúCap-and-trade is code for increasing taxes and killing American jobs, and that’Äôs the last thing we need to do during these troubled economic times.’Äù

As the NYT reports, the Obama budget actually would (mostly) rebate the proceeds of selling the credits via the 'Making Work Pay' credit, so Boehner is (mostly) lying about the tax increase part of the proposal. The administration should be concerned that the implicit tax will be passed on for fairness and political reasons, and a conceptually good way to deal with that is to make people approximately whole in a way that doesn't take away the price signal to reduce carbon emissions.



As for the job-killing business, I'd like to see any other job that Boehner would save in the name of inefficiency; jobs whose existence depends on free carbon emissions are being subsidized by the rest of society. Of course it's the net job creation or destruction that really matters. Insofar as there's not much net tax increase, usual arguments regarding incentive distortion of taxes don't really apply, and the net proceeds would go to low-carbon energy infrastructure and R&D that would be reasonably calculated to have substantial long-range returns, the job-killing claim looks histrionic. But if you don't have ideas, then I suppose there's not much to do but try to pound the table.

by Tom Bozzo (noreply@blogger.com) on February 26, 2009 01:57 PM

Robert Waldmann



In this post, I mentioned something which I have been thinking about. It seems to me that many strategies of financial market participants are based on simultaneously believing that financial markets are efficient and inefficient. If financial markets are efficient, then the way to maximize risk adjusted returns is to buy and hold the market. If one is forced to bear some risk, say I bear the risk that I will get sick, then I might rationally hold another portfollio including health insurance, but I can't gain by delegating management of my portfolio to someone who doesn't know anything about my personal unavoidable risks.



Therefore much employment in the financial services sector must be based on the conviction that markets aren't efficient.



On the other hand, many decisions seem to be made based on the assumption that financial markets are efficient. For example, incentive contracts for traders reward them for short term risk adjusted returns. Outsiders argue that it would be better to reward traders in restricted shares of the firm (which they can't sell for a fixed period) so that they don't sacrifice the long term interests of the firm in order to obtain high cash bonuses. Silly outsiders, say the financiers, Samuelson proved decades ago that the optimal trading strategy doesn't depend on the planning horizon. Indeed he did under the assumption that the objective is the log of end of horizon wealth *and* that financial markets are efficient. The logarithmic assumption can be relaced to any CRRA function so long as assets are geometric brownian motions so returns over all horizons are log normal. The assumption that markets are efficient is absolutely necessary to the result.



But if markets are efficient, the optimal incentive contract for a trader is "Your fired" and, if necessary, "If you are not out of the building in 15 minutes I will call the police."



A blindingly obvious example, a maybe less obvious example, and some effort to understand how we managed to get to this doubleplusungood blackwhite after the jump.





The example is the case of a speculative bubble which is bound to burst but has a small chance of bursting in any brief interval of time. Let's say that each period there is a 99% chance that the bubble continues to inflate and returns on the asset are higher than the safe interest rate. In contrast 1% of the time the bubble bursts and returns on the asset are very large and negative so the expected return on the asset is always lower than the safe interest rate. A rational investor would short the asset, although a rational risk averse investor may take a very small short position.



Now let's assume that there are professional traders who understand all this and investors who don't.



An investor who rewards traders in cash equal to the greater of performance minus market performance and zero will with probability 99% pay a positive reward after 1 period to a trader who goes long the asset. If the investor fires the trader after 1 period in which the trader underperforms the market, then a rational risk averse trader will always buy more of the risky than its share of the market portfolio. This for two reasons. The return if she goes short has huge variance and the chance of keeping the valuable job is 99 times as high if she goes long. The same result holds If the investor fires the trader after a few underperforming periods in a row.



Hiring a sophisticated trader and writing a short term incentive contract is a worse strategy than buying the market.



Now this is not an obscure example, so why were investors willing to accept short term incentive contracts. Part of it, of course, is that the contracts are really written by managers, but why did people ever buy shares of investment banks ? Didn't they notice how incentives changes when partners became managers ?



I think the reason is that many people manage to simultaneously believe that markets are efficient and that smart traders can beat the market.



How could such beliefs co-exist ? Well first it is really necessary to believe that the efficient markets hypothesis is a good enough approximation that incentive contracts which would be optimal if it were true are not horribly bad, but not a good enough approximation that the conclusion that all traders are inferior to buying and holding the market. This is not a logical contradiction, but people didn't even feel the need to write down a model in which both are true and decide if it seemed reasonable.



My guess is that the cognitive dissonance is caused by the desire people have to believe that they are doing well and doing good. The claim that financial markets are inefficient is associated with the idea that speculators hurt non speculators. Speculators are therefore sympathetic to the idea that financial markets are efficient, even though they have to believe that they aren't perfectly efficient.



More crudely, active investors are restrained by regulations and have a perceived interest in reduced regulation. Therefore they see efficient markets fanatics as political allies and take advice from them on, say, incentive contracts. Thus two groups with diametrically opposite beliefs who both, to put it crudely, vote Republican, imagine that they agree even though they don't.



Another example of shizzo finance is the use of the Black and Scholes formula to detect miss pricing of options. One of the many assumptions needed for the original formula, and one that has not, to my knowledge, been relaxed, is that the price of the underlying asset is a martingale. This is a reasonable assumption if markets are efficient. The formula can be used to test the efficient markets hypothesis along with a bunch of clearly false auxiliary hypotheses. It can't be used to find miss pricing under the assumption that financial markets aren't efficient. This strategy makes sense if one assumes that underlying assets must be efficiently priced but that options might or might not be efficiently priced. That was a bold guess back when options were new. It has become a silly idea now that they aren't.

by Robert (noreply@blogger.com) on February 26, 2009 03:15 AM

Brad, at Sadly No:

I just don’Äôt get it.

During Bush’Äôs presidency people like me were called traitors on a fairly regular basis because we didn’Äôt show Bush the proper deference when he’Äôd do some goofy shit like choke on a pretzel. Now we have guys on the teevee that are openly talking about armed insurrection against a democratically elected government and it’Äôs considered the most patriotic and pro-American thing a feller could do with hisself.

This sort of thing doesn’Äôt really offend me because I think most of Beck’Äôs viewers would back down from starting a new civil war once they learned that it would likely lead to Cheeto rationing. But I am amazed at the sheer cognitive dissonance involved in simultaneously believing that it’Äôs treasonous to peacefully oppose an unjustified war but that it’Äôs patriotic to lead an armed insurrection against the government because they want to pay you unemployment benefits. If there’Äôs a weirder political movement than American conservatism, I’Äôve yet to see it.

by tgirsch on February 25, 2009 10:57 PM

When even Fox News thinks you stunk up the joint, that’Äôs saying something.

UPDATE: Via Sadly, No, the Readers’Äô Digest version of Jindal’Äôs response:

Hey, look at me. Both my parents were from a foreign country, not just my father. Neither, however, were from Africa. The stimulus bill doesn’Äôt create jobs because the new cars bought for the government will be built by elves and fairies, not real workers. Also, that train to Las Vegas, it will be built by elves and fairies too. How else do you think it will ’Äúlevitate’Äù? And who do you think is going to monitor the volcanoes? Elves and fairies, I tell you. Oh, and another thing, tax cuts don’Äôt create deficits. Vote for me in 2012. God bless Louisiana.

by tgirsch on February 25, 2009 10:55 PM

At ObWi:

The problem with the modern GOP is that it takes an absolutist position on the role of government in terms of providing services to the people: government is the problem, and never the solution. Bobby Jindal even went as far as to critique disaster prevention provisions in his rebuttal last night! The lesson from Katrina being, according to him, that we can’Äôt expect the government to perform such functions.

Democrats, at least the modern variation thereof, do not take the inverse position, however: that government is always the solution in every context. Quite the opposite. The modern Democratic Party (especially since Clinton) crafts policies under the presumption that the private sector works best in most settings. The Dems are rather corporate friendly - with a healthy appreciation for free trade, tax cuts and other big money items.

This is a huge advantage: Because the Democrats aren’Äôt tied to an absolutist ideology with respect to the public/private dichotomy, they can pick and choose which approaches work best in different contexts: private sector in most instances, public sector for health insurance, social security, education, environmental protection, disaster prevention, etc. The GOP, on the other hand, can’Äôt even conceive of a situation - such as the provision of health insurance - in which free market incentives lead to less than ideal outcomes in terms of providing health care to individuals (insurance companies look to limit coverage and reimbursement to their customers because such expenditures impact the bottom line). Instead, we get the simplistic suggestions that the panacea known in the abstract as ’Äúthe market’Äù will somehow produce the ideal outcome.

Similarly, most Republicans (save the heretics) can’Äôt appreciate the fact that - as Hilzoy pointed out - while pre-privatization of the failing banks may be a government solution, it’Äôs one that is based on, and one that seeks to preserve, market principles. At least, more so than the other proposed government solution that the GOP has rallied behind: straight taxpayer subsidies.

by tgirsch on February 25, 2009 10:36 PM

Via Larison, we have this Derbyshire essay:

I repeat: There is nothing wrong with lowbrow conservatism. Ideas must be marketed, and right-wing talk radio captures a big and useful market segment. However, if there is no thoughtful, rigorous presentation of conservative ideas, then conservatism by default becomes the raucous parochialism of Limbaugh, Savage, Hannity, and company. That loses us a market segment at least as useful, if perhaps not as big.

Conservatives have never had, and never should have, a problem with elitism. Why have we allowed carny barkers to run away with the Right?

Ahh, this infighting will be fun to watch. The coalition of the shrill grows every day, it seems.

by tgirsch on February 25, 2009 10:23 PM

Krugman:

The party of ideas has become the party of Beavis and Butthead.

by tgirsch on February 25, 2009 09:15 PM

reader Sammy guest post





Suspend Mark-to-Market?



Section 132 of the Emergency Economic Stabilization Act of 2008 ("restates the SEC's authority to suspend the application of FASB 157 if the SEC determines that it is in the public interest and protects investors"), is an important part of the solution to the current financial crisis, and may lessen the need for nationalization or taxpayer support.



FASB 157, which only came into effect on Nov 15, 2007, is the mark-to-market accounting rule that requires financial assets to be adjusted based on their market value - "the price in an orderly transaction between market particpants to sell the asset or transfer the liability...." The intention of FASB is theoretically good - to increase transparency and information for investors, but its practical application has created serious problems.



1) Banks are reluctant to, or can't, sell impaired assets at a discount as those prices then become the basis for marking down the value of other assets in their portfolio, which directly reduces the Equity portion of the balance sheet, tri ggering all sorts of regulatory and market risk events. This is a major impediment to setting up a Bad Bank.



2) Is the market for impaired mortgage debt "orderly" defined as Any market in which the supply and demand are reasonably equal? I would argue no, as the supply of impaired mortgage debt ($1T?)far outstrips the available pools of capital with an appetite for this debt. Mortgage securities, in particular the more exotic types, are often described "no one knows what the value is." That is bull; give me, Sammy, the security and I would be able to price it using NPV of future cash flow. The problem is there is so much uncertainty regarding the Probalitity of Default, and the Average Loss per Default that I would assign a very high discount rate to the cash flow, resulting in a low price for the security. So the bank might now sell the asset strictly as a business decision.



It is important to remember that we have recently faced a situation where the major money-center banks would have been (we didn't have FASB 157) insolvent on a mark-to-market accounting basis (liabilities exceed book value of equity), that is theLatin American Debt crises of the 1980's. What solved that problem?

Two things are absolutely essential when fixing financial market problems: time and growth. Time to work things out and growth to make working those things out easier. Mark-to-market accounting takes both of these away......Because these accounting rules force banks to write off losses before they even happen, we lose time.

So if we allow the banks not to write down assets, what will this look like?

Banking is a unique industry. Unlike virtually any other industry on earth, banks deal in a product that never goes out of style - money. As long as a bank maintains adequate technology and human capital to compete in the marketplace, long-term profitability is virtually assured, because demand is assured. As long as a bank can generate positive cash flows, and as long as the NPV of these cash flows exceeds the NPV of the losses from the defaulted assets, then the present intrinsic value of that bank’Äôs common equity is positive. A bank can therefore have a very negative net worth and still have a highly positive net present value

So is allowing the banks to operate with negative equity in HTM terms a free lunch? No. Carrying the non-earning toxic assets on their balance sheets will cause US banks to earn a lower return on assets over the next few years; this reduces the NPV of their common equity.

by rdan (noreply@blogger.com) on February 25, 2009 08:09 PM

Robert Waldmann



Felix Salmon has a fascinating article on the Gaussian Copula. Obviously I had noticed that financial market participants had made some mistakes in the recent past, but I had no idea how crazy they had been.



I'd say that one implication of Salmon's article is that the invention of the CDS was very unfortunate event. Oddly I recall him arguing the opposite position. I don't see how he can after writing

For five years, Li's formula, known as a Gaussian copula function, looked like an unambiguously positive breakthrough,



[snip]



Then the model fell apart. Cracks started appearing early on, when financial markets began behaving in ways that users of Li's formula hadn't expected. The cracks became full-fledged canyons in 2008’Äîwhen ruptures in the financial system's foundation swallowed up trillions of dollars and put the survival of the global banking system in serious peril.

and

When the price of a credit default swap goes up, that indicates that default risk has risen. Li's breakthrough was that instead of waiting to assemble enough historical data about actual defaults, which are rare in the real world, he used historical prices from the CDS market.

Foolish reliance on Li's model lead to disaster and it was made possible by CDS markets which convinced participants that they had many observations on the probability of default. They were convinced that prices revealed these probabilities because they had an insane mystical faith in the strong form efficient markets hypothesis and a schizophrenic simultaneous belief that they could beat the market.



If the only problem with CDSs is that they supplied those nut cases with the prices which they missused in calculations, that would, I think, be enough to show that the world would have been better off if CDSs had been banned.



I rant more after the jump.





here and there on the web, I typed that I think that high trading volume leads to volatility, that liquid markets are a bad thing and, in particular, that the fact that the market for CDSs has higher trading volume than the market for the underlying bonds is a very bad thing. I forget where someone asks me if I reject the "price revelation" argument in general. I do.



Financial market participants managed to convince themselves that they could beat efficient markets (already a logical contradition) because the market price of a CDS was an accurate enough measure of the probability of defaults that correlations in the changes in the prices of 2 CDSs could be used to estimate the (assumed to be constant) correlation between two (assumed to be normal) latent variables making it possible to estimate the probability that two bonds would both default.



That is they assumed that market prices contained information which no one even claimed to be able to obtain any other way. So how did the information get into the prices. One hypothesis is that the Zeitgeist exists and has rational expectations. I can't think of another explanation.



Now given what market participants did with a whole lot of prices which changed very often, I think it is a bad thing to give them a whole lot of prices which change often. That is one reason why it would have been better if the CDS had never been invented.



My comment over at "Wired"



Felix



I recall a aol instant messenger debate we had about CDSs. You position was that they were useful since the CDS market is more liquid than the underlying bond markets. It seems to me that this article is demolishes your position. Liquid markets generate a huge number of numbers. They are used by traders to price assets and control risk. According to this article such use has recently destroyed the financial system. One of the many many problems is that Li assumed that the CDS market was efficient. This means that without a CDS market, people recognised that they couldn't calculate the probability of default exactly, but once there were CDS they thought the market price contained that information. Where did it come from ? Why the magic of the strong form efficient markets hypothesis.



If no one can learn something, then it can't be reflected in the market price. Not a subtle point. To believe that CDS prices are probabilities one has to abandone methodological individualism, that is believe in the rationality of the Zeitgeist or something. I can believe that I don't know something, but other people do and they trade on markets so the market price will tell me something about their secret information. I can't believe that no one knows something but it is still equal to the price at which markets populated by the ignorant people trade.



Traders were not only mystical, they were schizophrenic. They assume that markets are efficient and then try to beat the market. If the market is efficient, the best trading strategy is to buy and hold the market. If it is inefficient, then CDS prices are not probabilities. The trading strategies which brought down the system are only rational if some prices but not others are known to be rational. How can anyone have claimed with a straight face to believe such a thing.



The assumption that correlations are constant is another quite separate gross error as is the assumption that the distribution of something is normal, because it would be nice if it was. Both mean that the number "99%" which you type while noting that it is not 100% was not the true probability.



In any case, liquid markets were very damaging, because without them, people could not have made the same mistakes. Price revelation had huge negative social value because beliefs based on the prices were further from the truth than those people would have had without the prices. Traders might have been equally wrong about the expected value, but, if they had known they were ignorant, their subjective probabilities would have been close to true probabilities and we would all be much richer.

by Robert (noreply@blogger.com) on February 25, 2009 07:48 PM

by Bruce Webb



Not in any real world sense. And before shaking your head in sorrow at the fact that Bruce seemingly has lost it given the numbers in Table IV.B6.’ÄîUnfunded OASDI Obligations for 1935 (Program Inception)Through the Infinite Horizon which clearly show a $4.3 trillion dollar gap over the 75 year window and a $13.6 trillion gap over 'Infinite Horizon', consider that obviously I know the Table exists, in fact here it is.



Plus its brother which throws a $17.4 trillion and a $15.6 trillion at us. Meaning that depending on how you define it and what time period you chose the Trustees tell us the unfunded obligation runs somewhere between $4.3 trillion and $17.4 trillion (source of the '$17.4 trillion backwards transfer). Table IV.B7.’ÄîPresent Values of OASDI Cost Less Tax Revenue and Unfunded Obligations for Program Participant

Click to enlarge either table.

Given that how can I possibly claim that the 'Unfunded Liability' doesn't exist? Because unless you are the Commissioner of Social Security or one of the Trustees it just doesn't equate to a real life event. To understand why you would need to follow me under the fold.



The key is to understand that the Commissioner and the Trustees are constrained by current law. While the Trustees tend to talk about events at depletion as being automatic

If no action were taken until the combined trust funds become exhausted in 2041, then the effects of changes would be more concentrated on fewer years and fewer cohorts:

’Ä¢

For example, payroll taxes could be raised to finance scheduled benefits fully in every year starting in 2041. In this case, the payroll tax would be increased to 15.94 percent at the point of trust fund exhaustion in 2041 and continue rising to 16.60 percent in 2082.

’Ä¢

Similarly, benefits could be reduced to the level that is payable with scheduled tax rates in each year beginning in 2041. Under this scenario, benefits would be reduced 22 percent at the point of trust fund exhaus tion in 2041, with reductions reaching 25 percent in 2082.

in fact they are not, the Commissioner and the Trustees having neither the authority to change the benefit schedule or the FICA rate, that being reserved to Congress. Which one way or another will simply eliminate some or most of the so-called 'unfunded liability'.



Currently Social Security is faced with certain 'inflection' points. One is Shortfall, the date that income excluding interest (i.e. tax) falls behind total cost. Under Intermediate Cost projections that is set at 2017. At that point some of the accrued interest on the Trust Fund which heretofore had simply been 'funded' by crediting the TF with Special Treasuries (which are not funded with current year borrowing) instead has to come from the General Fund. Initially the effect is small, the Trust Fund continuing to grow right to the point that all interest has to be funded by current year borrowing. This point which I call 'Peak' is projected for 2023. After Peak funding full benefits means redeeming the accumulated Special Treasuries until they are gone. This event is called TF Depletion and under SSA projections is set for 2041. (The CBO uses somewhat different calculations and gets different dates but that is immaterial for the purposes of this discussion).



Now people vary on whether we should see Shortfall or Peak or Depletion as the key date for 'Crisis' but come what may under Intermediate Cost assumptions at some point Congress has to act, precisely because the Trustees are constrained by current law. Lets say Congress just decides to procrastinate right to Depletion. At this point they have some choices. They could raise FICA by 3.54% points or they could cut benefits by 22% or they could do some combination or they could do what the Greenspan Commission did and just do enough to kick the problem down the road for another 30 or 40 years. But whatever they do at a stroke they eliminate most to all of the 'unfunded liability'. Because tax increases serve to fund the liability while benefit cuts serve to eliminate it and there is no third alternative being that the Commissioner has no ability to borrow money.



Seen properly 'unfunded liability' is just a fictive artifact stemming from the Trustees having to assume current law. If they are able to pay full benefits they are obligated to do so, to that extent there is a liability. But it is limited, if Congress decides to fund that liability it will be paid, if Congress deliberately decides not to the liability goes away.



It is useful and even crucially important to understand the gap between projected revenue and projected cost at the point of Trust Fund depletion. It is equally useful but not particularly important to examine that gap in some future year. What is not useful is to sum up those amounts and hang them like the Sword of Damocles over our heads. The summed gaps are not legal liabilities because Congress is free to eliminate them. Now some might consider them moral liabilities and potentially the needed changes would lead to some political liabilities for that future Congress, but the notion that every child born in America automatically inherits $150,000 in unfunded debt is hooey. Because before 2041 actions will be taken to either fund that debt or write it off and poof that 'Unfunded Liability' vanishes.



_________________

On a somewhat different note I would ask you to take a look at Table IV.B7. First it tells us there is a $17.4 trillion dollar gap between future tax revenues and future costs for 'Current participants'. This is the source of the claim that the problem is do to over generosity to people in the past. This is just not true, examination of the Tables shows that every penny of that $17.4 trillion is 'owed' to a subset of retirees projected to be drawing benefits between 2041 and 2108. The Report puts it as follows:

The first line of table IV.B7 shows that the present value of future cost less future taxes over the next 100 years for all current participants equals $17.4 trillion. For this purpose, current participants are defined as individuals who attain age 15 or older in 2008. Subtracting the current value of the trust fund (the accumulated value of past OASDI taxes less cost) gives a closed group (excluding all future participants) unfunded obligation of $15.2 trillion. This value represents the shortfall of lifetime contributions for all past and current participants relative to the lifetime costs associated with their generations. For a fully’Äëadvance’Äëfunded program this value would be equal to zero.

This may be the most political passage in the main body of the Report which by and large is pretty straightforward. Then again the whole notion of 'Infinite Future Horizon' wasn't introduced until the 2003 Report and it is hard to not suspect that the motivation was political. Because the language is carefully crafted to put the blame on 'past and current participants' while giving 'future participants' a pass, leaving of course Gen-Xers to bath in their sense of being persecuted by Boomers. But in point of fact no Gen-Xer is a 'future participant' instead they are all classified as 'current participants' and the vast bulk of the projected gap is due to them not being able to fund their own benefits after 2041 and before 2108. A fact that is shown that once you subtract out the excess contributions of 'past and current participants' (i.e. the current Trust Fund) the gap drops to $15.2 trillion.



Which brings up a second point. 'Past participants' (i.e. dead people) are clearly paid up, those checks already cashed. And those 'current participants' who will be dead by 2041 are also paid up. Now those Boomers who will be living for some years after 2041 are on the hook for some portion of the $4.3 trillion of 'unfunded liability' over the 2041-2082 but not that much being that the total gap between 2008-2057 is just .94% of payroll and not all of that due to us. Instead most of the gap coming in that third 25 year window Table IV.B4.’ÄîComponents of Summarized Income Rates and Cost Rates, Calendar Years 2008-82[As a percentage of taxable payroll]. Further lets look at the significance of these numbers:

$2.2 trillion = Trust Fund i.e excess contributions by past and current participants (including all Boomers)

-$4.3 trillion = Gap between tax and cost between 2041 and 2082 less credit for the TF (partially due to Boomers)

-$6.5 trillion = Total gap between tax and cost between 2041 and 2082 for all participants (including some future participants born between 1993 and 2015)



-$17.4 trillion = Total gap between tax and cost between 2041 and 2108 for current participants

-$15.2 trillion = Total gap between tax and cost between 2041 and 2108 less credit for the TF

-$13.6 trillion = Total gap between tax and cost between 2041 and Infinite Future after including the $1.5 trillion surplus from future participants.



So future participants are responsible for a small portion of the $6.5 trillion gap between 2041 and 2082. As are Boomers. But mostly you are talking about Gen-X and leading edge Millenials not paying their way.



Similarly future participants are not at all responsible for that $17.4 gap for current and past participants between 2041 and 2108. Nor are past participants, indeed many of them contributed to the Trust Fund that reduces that gap to $15.2 trillion. And by 2041 Boomers will range from old to dead. Meaning once again we are talking about Gen-X and leading edge Millenials not paying their way.



So when you add it all up almost all of this liability derives from the retirees of 2058-2108 not including any of those born after 1993. The very youngest Boomer will be 94 in 2058. And any of our grandkids born after 1993 will actually be contributing to a long term surplus. Meaning almost all of the problem derives from Gen-Xers and leading Millenials scheduled to get some $14+ trillion or so of extra benefits over contributions.



'Backwards transfer' my ass. Instead Boomers not only paid benefits for the Greatest Generation, we are projected to pay almost all of our own benefits and now are asked to take cuts so that Gen-X doesn't feel aggrieved by adjustments to benefits after around 2029. Whereas if they just got off the couch and grew the economy like Boomers and our parents and grandparents did everybody gets paid in full.



But I guess it is more fun to whine about 'Selfish Boomers' than to do the actual arithmetic.

by Bruce Webb (noreply@blogger.com) on February 25, 2009 07:46 PM

reader Sammy



Suspend Mark-to-Market?



Section 132 of the Emergency Economic Stabilization Act of 2008 ("restates the SEC's authority to suspend the application of FASB 157 if the SEC determines that it is in the public interest and protects investors"), is an important part of the solution to the current financial crisis, and may lessen the need for nationalization or taxpayer support.



FASB 157, which only came into effect on Nov 15, 2007, is the mark-to-market accounting rule that requires financial assets to be adjusted based on their market value - "the price in an orderly transaction between market particpants to sell the asset or transfer the liability...." The intention of FASB is theoretically good - to increase transparency and information for investors, but its practical application has created serious problems.



1) Banks are reluctant to, or can't, sell impaired assets at a discount as those prices then become the basis for marking down the value of other assets in their portfolio, which directly reduces the Equity portion of the balance sheet, triggering all sorts of regulatory and market risk events. This is a major impediment to setting up a Bad Bank.



2) Is the market for impaired mortgage debt "orderly" defined as Latin American Debt crises of the 1980's. What solved that problem?

Two things are absolutely essential when fixing financial market problems: time and growth. Time to work things out and growth to make working those things out easier. Mark-to-market accounting takes both of these away......Because these accounting rules force banks to write off losses before they even happen, we lose time.

So if we allow the banks not to write down assets, what will this look like?

Banking is a unique industry. Unlike virtually any other industry on earth, banks deal in a product that never goes out of style - money. As long as a bank maintains adequate technology and human capital to compete in the marketplace, long-term profitability is virtually assured, because demand is assured. As long as a bank can generate positive cash flows, and as long as the NPV of these cash flows exceeds the NPV of the losses from the defaulted assets, then the present intrinsic value of that bank’Äôs common equity is positive. A bank can therefore have a very negative net worth and still have a highly positive net present value

So is allowing the banks to operate with negative equity in HTM terms a free lunch? No. Carrying the non-earning toxic assets on their balance sheets will cause US banks to earn a lower return on assets over the next few years; this reduces the NPV of their common equity.

by rdan (noreply@blogger.com) on February 25, 2009 07:36 PM

Robert Waldmann



is still trying to learn journalistic arithmetic.

Recently I learned that 500,000 = 0 Now I learn from CNN that I got to restudy fractions or division or something as it seems that "two thirds" is equal to 92%

A new national poll indicates that two-thirds of those who watched President Obama's address to a joint session of Congress reacted favorably to his speech.



Sixty-eight percent of speech-watchers questioned in a CNN/Opinion Research Corporation survey Tuesday night had a very positive reaction to the president's address, with 24 percent suggesting they had a somewhat positive response and 8 percent indicating they had a negative reaction.

Now when I was learned percent and fractions 68% + 24% = 92% > 2/3.



I know that it is not ballanced to report the simple fact that 92% of people in the poll had a positive reaction, but better an unballanced fact than a ballanced falsehood.





CNN would have been approximately correct if they were to have written "A new national poll indicates that two-thirds of those who watched President Obama's address to a joint session of Congress reacted [very] favorably to his speech," although it would still be unclear to me why the phrase in the question "very positive reaction" should be replaced by something else "reacted very favorably." I know there is a rule of style that words are not to be repeated, but given the importance of exact wording in polls I think that rule of style demands inaccuracy.

by Robert (noreply@blogger.com) on February 25, 2009 02:57 PM

by divorced one like Bush



Ok, here are my basic issues with the substance of President Obama's speech. First, may I remind everyone that as of 11/08 I declared my divorce successful. Has it become my mission accomplish moment?



I heard this:

’ÄúAnd we will expand our commitment to charter schools. but as a father when I say that responsibility for our children's education must begin at home.’Äù

And thought: 2 tier education system/vouchers, no thank you. Education begins at home when home means one parent has the time to spend at home oppose to both working.



I heard this:

’ÄúAnd we must also begin a conversation on how to do the same for Social Security, while creating tax-free universal savings accounts for all Americans.’Äù

And thought: Are you freak'n kidding me! In this time of financial collapse we're still going to talk about turning an insurance for the masses against the follies of finance into some form to include finance? The entire reason we want to create jobs is because we have suddenly realized that the vast, vast majority do not earn their money from money. Tax free? Has he not heard of 401K, IRA and all it's versions, HSA, higher education accounts? Italy?



I heard this:

’ÄúYesterday, I held a fiscal summit where I pledged to cut the deficit in half by the end of my first term in office.’Äù

And thought: Yeah, how'd that work for the last administration who made such a declaration? Did he have to say ’Äúin half’Äù? Has his advisors not taught him about the blip during the FDR recovery? Only one way I can think of doing this: Raise taxes where the money is and whack the defense budget in half and I mean take a swipe at all moneys related to security. Are we really $1 trillion dollars worth of paranoid?

by Divorced one like Bush (noreply@blogger.com) on February 25, 2009 12:41 PM

rdan



Slightly left of center with gracious charm and strength.



Whitehouse press office



Remarks of President Barack Obama -- Address to Joint Session of Congress



Remarks of President Barack Obama ’Äì As Prepared for Delivery

Address to Joint Session of Congress

Tuesday, February 24th, 2009

Madame Speaker, Mr. Vice President, Members of Congress, and the First Lady of the United States:



I’Äôve come here tonight not only to address the distinguished men and women in this great chamber, but to speak frankly and directly to the men and women who sent us here.



I know that for many Americans watching right now, the state of our economy is a concern that rises above all others. And rightly so. If you haven’Äôt been personally affected by this recession, you probably know someone who has ’Äì a friend; a neighbor; a member of your family. You don’Äôt need to hear another list of statistics to know that our economy is in crisis, because you live it every day. It’Äôs the worry you wake up with and the source of sleepless nights. It’Äôs the job you thought you’Äôd retire from but now have lost; the business you built your dreams upon that’Äôs now hanging by a thread; the college acceptance letter your child had to put back in the envelope. The impact of this recession is real, and it is everywhere.



But while our economy may be weakened and our confidence shaken; though we are living through difficult and uncertain times, tonight I want every American to know this:



We will rebuild, we will recover, and the United States of America will emerge stronger than before.



The weight of this crisis will not determine the destiny of this nation. The answers to our problems don’Äôt lie beyond our reach. They exist in our laboratories and universities; in our fields and our factories; in the imaginations of our entrepreneurs and the pride of the hardest-working people on Earth. Those qualities that have made America the greatest force of progress and prosperity in human history we still possess in ample measure. What is required now is for this country to pull together, confront boldly the challenges we face, and take responsibility for our future once more.



Now, if we’Äôre honest with ourselves, we’Äôll admit that for too long, we have not always met these responsibilities ’Äì as a government or as a people. I say this not to lay blame or look backwards, but because it is only by understanding how we arrived at this moment that we’Äôll be able to lift ourselves out of this predicament.



The fact is, our economy did not fall into decline overnight. Nor did all of our problems begin when the housing market collapsed or the stock market sank. We have known for decades that our survival depends on finding new sources of energy. Yet we import more oil today than ever before. The cost of health care eats up more and more of our savings each year, yet we keep delaying reform. Our children will compete for jobs in a global economy that too many of our schools do not prepare them for. And though all these challenges went unsolved, we still managed to spend more money and pile up more debt, both as individuals and through our government, than ever before.



In other words, we have lived through an era where too often, short-term gains were prized over long-term prosperity; where we failed to look beyond the next payment, the next quarter, or the next election. A surplus became an excuse to transfer wealth to the wealthy instead of an opportunity to invest in our future. Regulations were gutted for the sake of a quick profit at the expense of a healthy market. People bought homes they knew they couldn’Äôt afford from banks and lenders who pushed those bad loans anyway. And all the while, critical debates and difficult decisions were put off for some other time on some other day.



Well that day of reckoning has arrived, and the time to take charge of our future is here.



Now is the time to act boldly and wisely ’Äì to not only revive this economy, but to build a new foundation for lasting prosperity. Now is the time to jumpstart job creation, re-start lending, and invest in areas like energy, health care, and education that will grow our economy, even as we make hard choices to bring our deficit down. That is what my economic agenda is designed to do, and that’Äôs what I’Äôd like to talk to you about tonight.



It’Äôs an agenda that begins with jobs.



As soon as I took office, I asked this Congress to send me a recovery plan by President’Äôs Day that would put people back to work and put money in their pockets. Not because I believe in bigger government ’Äì I don’Äôt. Not because I’Äôm not mindful of the massive debt we’Äôve inherited ’Äì I am. I called for action because the failure to do so would have cost more jobs and caused more hardships. In fact, a failure to act would have worsened our long-term deficit by assuring weak economic growth for years. That’Äôs why I pushed for quick action. And tonight, I am grateful that this Congress delivered, and pleased to say that the American Recovery and Reinvestment Act is now law.



Over the next two years, this plan will save or create 3.5 million jobs. More than 90% of these jobs will be in the private sector ’Äì jobs rebuilding our roads and bridges; constructing wind turbines and solar panels; laying broadband and expanding mass transit.



Because of this plan, there are teachers who can now keep their jobs and educate our kids. Health care professionals can continue caring for our sick. There are 57 police officers who are still on the streets of Minneapolis tonight because this plan prevented the layoffs their department was about to make.



Because of this plan, 95% of the working households in America will receive a tax cut ’Äì a tax cut that you will see in your paychecks beginning on April 1st.



Because of this plan, families who are struggling to pay tuition costs will receive a $2,500 tax credit for all four years of college. And Americans who have lost their jobs in this recession will be able to receive extended unemployment benefits and continued health care coverage to help them weather this storm.



I know there are some in this chamber and watching at home who are skeptical of whether this plan will work. I understand that skepticism. Here in Washington, we’Äôve all seen how quickly good intentions can turn into broken promises and wasteful spending. And with a plan of this scale comes enormous responsibility to get it right.



That is why I have asked Vice President Biden to lead a tough, unprecedented oversight effort ’Äì because nobody messes with Joe. I have told each member of my Cabinet as well as mayors and governors across the country that they will be held accountable by me and the American people for every dollar they spend. I have appointed a proven and aggressive Inspector General to ferret out any and all cases of waste and fraud. And we have created a new website called recovery.gov so that every American can find out how and where their money is being spent.



So the recovery plan we passed is the first step in getting our economy back on track. But it is just the first step. Because even if we manage this plan flawlessly, there will be no real recovery unless we clean up the credit crisis that has severely weakened our financial system.



I want to speak plainly and candidly about this issue tonight, because every American should know that it directly affects you and your family’Äôs well-being. You should also know that the money you’Äôve deposited in banks across the country is safe; your insurance is secure; and you can rely on the continued operation of our financial system. That is not the source of concern.



The concern is that if we do not re-start lending in this country, our recovery will be choked off before it even begins.



You see, the flow of credit is the lifeblood of our economy. The ability to get a loan is how you finance the purchase of everything from a home to a car to a college education; how stores stock their shelves, farms buy equipment, and businesses make payroll.



But credit has stopped flowing the way it should. Too many bad loans from the housing crisis have made their way onto the books of too many banks. With so much debt and so little confidence, these banks are now fearful of lending out any more money to households, to businesses, or to each other. When there is no lending, families can’Äôt afford to buy homes or cars. So businesses are forced to make layoffs. Our economy suffers even more, and credit dries up even further.



That is why this administration is moving swiftly and aggressively to break this destructive cycle, restore confidence, and re-start lending.



We will do so in several ways. First, we are creating a new lending fund that represents the largest effort ever to help provide auto loans, college loans, and small business loans to the consumers and entrepreneurs who keep this economy running.



Second, we have launched a housing plan that will help responsible families facing the threat of foreclosure lower their monthly payments and re-finance their mortgages. It’Äôs a plan that won’Äôt help speculators or that neighbor down the street who bought a house he could never hope to afford, but it will help millions of Americans who are struggling with declining home values ’Äì Americans who will now be able to take advantage of the lower interest rates that this plan has already helped bring about. In fact, the average family who re-finances today can save nearly $2000 per year on their mortgage.



Third, we will act with the full force of the federal government to ensure that the major banks that Americans depend on have enough confidence and enough money to lend even in more difficult times. And when we learn that a major bank has serious problems, we will hold accountable those responsible, force the necessary adjustments, provide the support to clean up their balance sheets, and assure the continuity of a strong, viable institution that can serve our people and our economy.



I understand that on any given day, Wall Street may be more comforted by an approach that gives banks bailouts with no strings attached, and that holds nobody accountable for their reckless decisions. But such an approach won’Äôt solve the problem. And our goal is to quicken the day when we re-start lending to the American people and American business and end this crisis once and for all.



I intend to hold these banks fully accountable for the assistance they receive, and this time, they will have to clearly demonstrate how taxpayer dollars result in more lending for the American taxpayer. This time, CEOs won’Äôt be able to use taxpayer money to pad their paychecks or buy fancy drapes or disappear on a private jet. Those days are over.



Still, this plan will require significant resources from the federal government ’Äì and yes, probably more than we’Äôve already set aside. But while the cost of action will be great, I can assure you that the cost of inaction will be far greater, for it could result in an economy that sputters along for not months or years, but perhaps a decade. That would be worse for our deficit, worse for business, worse for you, and worse for the next generation. And I refuse to let that happen.



I understand that when the last administration asked this Congress to provide assistance for struggling banks, Democrats and Republicans alike were infuriated by the mismanagement and results that followed. So were the American taxpayers. So was I.



So I know how unpopular it is to be seen as helping banks right now, especially when everyone is suffering in part from their bad decisions. I promise you ’Äì I get it.



But I also know that in a time of crisis, we cannot afford to govern out of anger, or yield to the politics of the moment. My job ’Äì our job ’Äì is to solve the problem. Our job is to govern with a sense of responsibility. I will not spend a single penny for the purpose of rewarding a single Wall Street executive, but I will do whatever it takes to help the small business that can’Äôt pay its workers or the family that has saved and still can’Äôt get a mortgage.



That’Äôs what this is about. It’Äôs not about helping banks ’Äì it’Äôs about helping people. Because when credit is available again, that young family can finally buy a new home. And then some company will hire workers to build it. And then those workers will have money to spend, and if they can get a loan too, maybe they’Äôll finally buy that car, or open their own business. Investors will return to the market, and American families will see their retirement secured once more. Slowly, but surely, confidence will return, and our economy will recover.



So I ask this Congress to join me in doing whatever proves necessary. Because we cannot consign our nation to an open-ended recession. And to ensure that a crisis of this magnitude never happens again, I ask Congress to move quickly on legislation that will finally reform our outdated regulatory system. It is time to put in place tough, new common-sense rules of the road so that our financial market rewards drive and innovation, and punishes short-cuts and abuse.



The recovery plan and the financial stability plan are the immediate steps we’Äôre taking to revive our economy in the short-term. But the only way to fully restore America’Äôs economic strength is to make the long-term investments that will lead to new jobs, new industries, and a renewed ability to compete with the rest of the world. The only way this century will be another American century is if we confront at last the price of our dependence on oil and the high cost of health care; the schools that aren’Äôt preparing our children and the mountain of debt they stand to inherit. That is our responsibility.



In the next few days, I will submit a budget to Congress. So often, we have come to view these documents as simply numbers on a page or laundry lists of programs. I see this document differently. I see it as a vision for America ’Äì as a blueprint for our future.



My budget does not attempt to solve every problem or address every issue. It reflects the stark reality of what we’Äôve inherited ’Äì a trillion dollar deficit, a financial crisis, and a costly recession.



Given these realities, everyone in this chamber ’Äì Democrats and Republicans ’Äì will have to sacrifice some worthy priorities for which there are no dollars. And that includes me.



But that does not mean we can afford to ignore our long-term challenges. I reject the view that says our problems will simply take care of themselves; that says government has no role in laying the foundation for our common prosperity.



For history tells a different story. History reminds us that at every moment of economic upheaval and transformation, this nation has responded with bold action and big ideas. In the midst of civil war, we laid railroad tracks from one coast to another that spurred commerce and industry. From the turmoil of the Industrial Revolution came a system of public high schools that prepared our citizens for a new age. In the wake of war and depression, the GI Bill sent a generation to college and created the largest middle-class in history. And a twilight struggle for freedom led to a nation of highways, an American on the moon, and an explosion of technology that still shapes our world.



In each case, government didn’Äôt supplant private enterprise; it catalyzed private enterprise. It created the conditions for thousands of entrepreneurs and new businesses to adapt and to thrive.



We are a nation that has seen promise amid peril, and claimed opportunity from ordeal. Now we must be that nation again. That is why, even as it cuts back on the programs we don’Äôt need, the budget I submit will invest in the three areas that are absolutely critical to our economic future: energy, health care, and education.



It begins with energy.



We know the country that harnesses the power of clean, renewable energy will lead the 21st century. And yet, it is China that has launched the largest effort in history to make their economy energy efficient. We invented solar technology, but we’Äôve fallen behind countries like Germany and Japan in producing it. New plug-in hybrids roll off our assembly lines, but they will run on batteries made in Korea.



Well I do not accept a future where the jobs and industries of tomorrow take root beyond our borders ’Äì and I know you don’Äôt either. It is time for America to lead again.



Thanks to our recovery plan, we will double this nation’Äôs supply of renewable energy in the next three years. We have also made the largest investment in basic research funding in American history ’Äì an investment that will spur not only new discoveries in energy, but breakthroughs in medicine, science, and technology.



We will soon lay down thousands of miles of power lines that can carry new energy to cities and towns across this country. And we will put Americans to work making our homes and buildings more efficient so that we can save billions of dollars on our energy bills.



But to truly transform our economy, protect our security, and save our planet from the ravages of climate change, we need to ultimately make clean, renewable energy the profitable kind of energy. So I ask this Congress to send me legislation that places a market-based cap on carbon pollution and drives the production of more renewable energy in America. And to support that innovation, we will invest fifteen billion dollars a year to develop technologies like wind power and solar power; advanced biofuels, clean coal, and more fuel-efficient cars and trucks built right here in America.



As for our auto industry, everyone recognizes that years of bad decision-making and a global recession have pushed our automakers to the brink. We should not, and will not, protect them from their own bad practices. But we are committed to the goal of a re-tooled, re-imagined auto industry that can compete and win. Millions of jobs depend on it. Scores of communities depend on it. And I believe the nation that invented the automobile cannot walk away from it.



None of this will come without cost, nor will it be easy. But this is America. We don’Äôt do what’Äôs easy. We do what is necessary to move this country forward.



For that same reason, we must also address the crushing cost of health care.



This is a cost that now causes a bankruptcy in America every thirty seconds. By the end of the year, it could cause 1.5 million Americans to lose their homes. In the last eight years, premiums have grown four times faster than wages. And in each of these years, one million more Americans have lost their health insurance. It is one of the major reasons why small businesses close their doors and corporations ship jobs overseas. And it’Äôs one of the largest and fastest-growing parts of our budget.



Given these facts, we can no longer afford to put health care reform on hold.



Already, we have done more to advance the cause of health care reform in the last thirty days than we have in the last decade. When it was days old, this Congress passed a law to provide and protect health insurance for eleven million American children whose parents work full-time. Our recovery plan will invest in electronic health records and new technology that will reduce errors, bring down costs, ensure privacy, and save lives. It will launch a new effort to conquer a disease that has touched the life of nearly every American by seeking a cure for cancer in our time. And it makes the largest investment ever in preventive care, because that is one of the best ways to keep our people healthy and our costs under control.



This budget builds on these reforms. It includes an historic commitment to comprehensive health care reform ’Äì a down-payment on the principle that we must have quality, affordable health care for every American. It’Äôs a commitment that’Äôs paid for in part by efficiencies in our system that are long overdue. And it’Äôs a step we must take if we hope to bring down our deficit in the years to come.



Now, there will be many different opinions and ideas about how to achieve reform, and that is why I’Äôm bringing together businesses and workers, doctors and health care providers, Democrats and Republicans to begin work on this issue next week.



I suffer no illusions that this will be an easy process. It will be hard. But I also know that nearly a century after Teddy Roosevelt first called for reform, the cost of our health care has weighed down our economy and the conscience of our nation long enough. So let there be no doubt: health care reform cannot wait, it must not wait, and it will not wait another year.



The third challenge we must address is the urgent need to expand the promise of education in America.



In a global economy where the most valuable skill you can sell is your knowledge, a good education is no longer just a pathway to opportunity ’Äì it is a pre-requisite.



Right now, three-quarters of the fastest-growing occupations require more than a high school diploma. And yet, just over half of our citizens have that level of education. We have one of the highest high school dropout rates of any industrialized nation. And half of the students who begin college never finish.



This is a prescription for economic decline, because we know the countries that out-teach us today will out-compete us tomorrow. That is why it will be the goal of this administration to ensure that every child has access to a complete and competitive education ’Äì from the day they are born to the day they begin a career.



Already, we have made an historic investment in education through the economic recovery plan. We have dramatically expanded early childhood education and will continue to improve its quality, because we know that the most formative learning comes in those first years of life. We have made college affordable for nearly seven million more students. And we have provided the resources necessary to prevent painful cuts and teacher layoffs that would set back our children’Äôs progress.



But we know that our schools don’Äôt just need more resources. They need more reform. That is why this budget creates new incentives for teacher performance; pathways for advancement, and rewards for success. We’Äôll invest in innovative programs that are already helping schools meet high standards and close achievement gaps. And we will expand our commitment to charter schools.



It is our responsibility as lawmakers and educators to make this system work. But it is the responsibility of every citizen to participate in it. And so tonight, I ask every American to commit to at least one year or more of higher education or career training. This can be community college or a four-year school; vocational training or an apprenticeship. But whatever the training may be, every American will need to get more than a high school diploma. And dropping out of high school is no longer an option. It’Äôs not just quitting on yourself, it’Äôs quitting on your country ’Äì and this country needs and values the talents of every American. That is why we will provide the support necessary for you to complete college and meet a new goal: by 2020, America will once again have the highest proportion of college graduates in the world.



I know that the price of tuition is higher than ever, which is why if you are willing to volunteer in your neighborhood or give back to your community or serve your country, we will make sure that you can afford a higher education. And to encourage a renewed spirit of national service for this and future generations, I ask this Congress to send me the bipartisan legislation that bears the name of Senator Orrin Hatch as well as an American who has never stopped asking what he can do for his country ’Äì Senator Edward Kennedy.



These education policies will open the doors of opportunity for our children. But it is up to us to ensure they walk through them. In the end, there is no program or policy that can substitute for a mother or father who will attend those parent/teacher conferences, or help with homework after dinner, or turn off the TV, put away the video games, and read to their child. I speak to you not just as a President, but as a father when I say that responsibility for our children's education must begin at home.



There is, of course, another responsibility we have to our children. And that is the responsibility to ensure that we do not pass on to them a debt they cannot pay. With the deficit we inherited, the cost of the crisis we face, and the long-term challenges we must meet, it has never been more important to ensure that as our economy recovers, we do what it takes to bring this deficit down.



I’Äôm proud that we passed the recovery plan free of earmarks, and I want to pass a budget next year that ensures that each dollar we spend reflects only our most important national priorities.



Yesterday, I held a fiscal summit where I pledged to cut the deficit in half by the end of my first term in office. My administration has also begun to go line by line through the federal budget in order to eliminate wasteful and ineffective programs. As you can imagine, this is a process that will take some time. But we’Äôre starting with the biggest lines. We have already identified two trillion dollars in savings over the next decade.



In this budget, we will end education programs that don’Äôt work and end direct payments to large agribusinesses that don’Äôt need them. We’Äôll eliminate the no-bid contracts that have wasted billions in Iraq, and reform our defense budget so that we’Äôre not paying for Cold War-era weapons systems we don’Äôt use. We will root out the waste, fraud, and abuse in our Medicare program that doesn’Äôt make our seniors any healthier, and we will restore a sense of fairness and balance to our tax code by finally ending the tax breaks for corporations that ship our jobs overseas.



In order to save our children from a future of debt, we will also end the tax breaks for the wealthiest 2% of Americans. But let me perfectly clear, because I know you’Äôll hear the same old claims that rolling back these tax breaks means a massive tax increase on the American people: if your family earns less than $250,000 a year, you will not see your taxes increased a single dime. I repeat: not one single dime. In fact, the recovery plan provides a tax cut ’Äì that’Äôs right, a tax cut ’Äì for 95% of working families. And these checks are on the way.



To preserve our long-term fiscal health, we must also address the growing costs in Medicare and Social Security. Comprehensive health care reform is the best way to strengthen Medicare for years to come. And we must also begin a conversation on how to do the same for Social Security, while creating tax-free universal savings accounts for all Americans.



Finally, because we’Äôre also suffering from a deficit of trust, I am committed to restoring a sense of honesty and accountability to our budget. That is why this budget looks ahead ten years and accounts for spending that was left out under the old rules ’Äì and for the first time, that includes the full cost of fighting in Iraq and Afghanistan. For seven years, we have been a nation at war. No longer will we hide its price.



We are now carefully reviewing our policies in both wars, and I will soon announce a way forward in Iraq that leaves Iraq to its people and responsibly ends this war.



And with our friends and allies, we will forge a new and comprehensive strategy for Afghanistan and Pakistan to defeat al Qaeda and combat extremism. Because I will not allow terrorists to plot against the American people from safe havens half a world away.



As we meet here tonight, our men and women in uniform stand watch abroad and more are readying to deploy. To each and every one of them, and to the families who bear the quiet burden of their absence, Americans are united in sending one message: we honor your service, we are inspired by your sacrifice, and you have our unyielding support. To relieve the strain on our forces, my budget increases the number of our soldiers and Marines. And to keep our sacred trust with those who serve, we will raise their pay, and give our veterans the expanded health care and benefits that they have earned.



To overcome extremism, we must also be vigilant in upholding the values our troops defend ’Äì because there is no force in the world more powerful than the example of America. That is why I have ordered the closing of the detention center at Guantanamo Bay, and will seek swift and certain justice for captured terrorists ’Äì because living our values doesn’Äôt make us weaker, it makes us safer and it makes us stronger. And that is why I can stand here tonight and say without exception or equivocation that the United States of America does not torture.



In words and deeds, we are showing the world that a new era of engagement has begun. For we know that America cannot meet the threats of this century alone, but the world cannot meet them without America. We cannot shun the negotiating table, nor ignore the foes or forces that could do us harm. We are instead called to move forward with the sense of confidence and candor that serious times demand.



To seek progress toward a secure and lasting peace between Israel and her neighbors, we have appointed an envoy to sustain our effort. To meet the challenges of the 21st century ’Äì from terrorism to nuclear proliferation; from pandemic disease to cyber threats to crushing poverty ’Äì we will strengthen old alliances, forge new ones, and use all elements of our national power.



And to respond to an economic crisis that is global in scope, we are working with the nations of the G-20 to restore confidence in our financial system, avoid the possibility of escalating protectionism, and spur demand for American goods in markets across the globe. For the world depends on us to have a strong economy, just as our economy depends on the strength of the world’Äôs.



As we stand at this crossroads of history, the eyes of all people in all nations are once again upon us ’Äì watching to see what we do with this moment; waiting for us to lead.



Those of us gathered here tonight have been called to govern in extraordinary times. It is a tremendous burden, but also a great privilege ’Äì one that has been entrusted to few generations of Americans. For in our hands lies the ability to shape our world for good or for ill.



I know that it is easy to lose sight of this truth ’Äì to become cynical and doubtful; consumed with the petty and the trivial.



But in my life, I have also learned that hope is found in unlikely places; that inspiration often comes not from those with the most power or celebrity, but from the dreams and aspirations of Americans who are anything but ordinary.



I think about Leonard Abess, the bank president from Miami who reportedly cashed out of his company, took a $60 million bonus, and gave it out to all 399 people who worked for him, plus another 72 who used to work for him. He didn’Äôt tell anyone, but when the local newspaper found out, he simply said, ''I knew some of these people since I was 7 years old. I didn't feel right getting the money myself."



I think about Greensburg, Kansas, a town that was completely destroyed by a tornado, but is being rebuilt by its residents as a global example of how clean energy can power an entire community ’Äì how it can bring jobs and businesses to a place where piles of bricks and rubble once lay. "The tragedy was terrible," said one of the men who helped them rebuild. "But the folks here know that it also provided an incredible opportunity."



And I think about Ty’ÄôSheoma Bethea, the young girl from that school I visited in Dillon, South Carolina ’Äì a place where the ceilings leak, the paint peels off the walls, and they have to stop teaching six times a day because the train barrels by their classroom. She has been told that her school is hopeless, but the other day after class she went to the public library and typed up a letter to the people sitting in this room. She even asked her principal for the money to buy a stamp. The letter asks us for help, and says, "We are just students trying to become lawyers, doctors, congressmen like yourself and one day president, so we can make a change to not just the state of South Carolina but also the world. We are not quitters."



We are not quitters.



These words and these stories tell us something about the spirit of the people who sent us here. They tell us that even in the most trying times, amid the most difficult circumstances, there is a generosity, a resilience, a decency, and a determination that perseveres; a willingness to take responsibility for our future and for posterity.



Their resolve must be our inspiration. Their concerns must be our cause. And we must show them and all our people that we are equal to the task before us.



I know that we haven’Äôt agreed on every issue thus far, and there are surely times in the future when we will part ways. But I also know that every American who is sitting here tonight loves this country and wants it to succeed. That must be the starting point for every debate we have in the coming months, and where we return after those debates are done. That is the foundation on which the American people expect us to build common ground.



And if we do ’Äì if we come together and lift this nation from the depths of this crisis; if we put our people back to work and restart the engine of our prosperity; if we confront without fear the challenges of our time and summon that enduring spirit of an America that does not quit, then someday years from now our children can tell their children that this was the time when we performed, in the words that are carved into this very chamber, "something worthy to be remembered." Thank you, God Bless you, and may God Bless the United States of America.

by rdan (noreply@blogger.com) on February 25, 2009 03:17 AM

By Spencer,



In the 1990s Greg Mankiw said that the Clinton tax increases would cause a major recession.



In fact, the tax increases were followed by a major boom.



In the early 2000s Greg Mankiw said the Bush tax cuts would cause an economic boom.



In fact, the tax cut was followed by the weakest economic expansion on record where the GDP Gap was never closed and for the first time in over 50 years the share of the working age population employed failed to surpass the previous peak.



Now, Greg Mankiw tells us to ignore our lying eyes and act on some obscure academic research that finds that Keynesian fiscal stimulus does not work.



I always believed in the old Samuelson statement that any economic concept you can not explain to your father-in-law will eventually be proved wrong. My father-in -law was a truck driver with an 8th grade education. I wonder if Mankiw, or others taking the same position, would care to explain in ways my father-in-law would understand why we should ignore the last 20 year history and follow his advice.

by spencer (noreply@blogger.com) on February 24, 2009 10:02 PM

By Spencer



The Conference Board Index of Consumer Confidence fell to an all time low of 25 in February-- 1985=100.

.



While many economist debate about the how much of a leading indicator consumer confidence is,

I find it to be a very good concurrent indicator. I use it to model real retail sales and have long felt that consumer confidence captured the wealth effect on consumer behavior.

by spencer (noreply@blogger.com) on February 24, 2009 08:43 PM

by divorced one like Bush



Via Multi Medium comes a link to Boston.com for an article regarding another Obama appointment.

President Obama late this afternoon nominated Harvard professor Ashton B. Carter, a leading authority on arms control, to take on a surprising new role, according to top administration officials -- as the Pentagon's chief weapons buyer.



Instead, from his perch at Harvard's Kennedy School, Carter has been criticizing the Pentagon for buying too many armaments it doesn't need, decrying what he calls a lack of discipline and "failure to take account of cost growth in weapons systems and defense services."

Of course the battle lines are being drawn.



There is a brief on Professor Carter's qualifications. He has worked to clean up the nuclear proliferation, establishing relations with old Russian countries and involving Russia in the Bosnia Peace Plan, not to mention experience with the issue of terrorism.

by Divorced one like Bush (noreply@blogger.com) on February 24, 2009 08:31 PM

rdan

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by rdan (noreply@blogger.com) on February 24, 2009 03:36 PM

By Stormy



One of the few economists who have kept a consistent eye on trade, Professor Peter Morici, properly observes that if the U.S. relies only on a stimulus package and banking reform, then

the economy will fall back into recession once the spending has run its course. A pattern of false recoveries, much as occurred during the Great Depression, will likely emerge.

As the present crisis was picking up steam in April, 2008, a number of commentators ventured their predictions as to the course of the "recession." Disagreeing with Nouriel Roubini prediction of a prolonged "U" recession, Calculated Risk suggested a double dip recession:

And a double dip is very possible.

But to say this will be the "most severe recession" in decades suggests job losses - and a corresponding increase in the unemployment rate - that I don't see on the horizon. The good news is that manufacturing employment is holding up better than usual in a recession due to a combination of a weak dollar (strong exports) and relatively strong global growth.

My view at the time was something a bit worse than either a W, a U, or an L.

I suggest we may be in for something worse. No letter in the alphabet quite captures it. The only image that comes to mind is that of a slinky sliding down stairs, each deeper fall accompanied by a short rise.

At the time, I asked: "What will be the engine of our recovery?" Or to put the horse before the cart, I asked:

What is it that we can trade? In order to compete globally, we must have something to offer the rest of the world, something to trade.



The latest surge in the trade deficit was a result of computers, pharmaceuticals, and foreign cars. Slowly but surely we have less and less to trade in terms of finished goods. Agriculture is not enough.

As the crisis deepened, all eyes turned to stimulating aggregate demand. Then it turned to rescuing the financial system.



But, as I said, at some time a horse must draw this cart. To date, there is no horse, no engine of recovery. Like sheep, we follow the latest tinkling bell as we struggle to fix and restore an old order.



Peter Morici is one of the few world-class economists that has repeatedly kept an eye closely on trade.

In 2008, the United States had a $144.1 billion surplus on trade in services. This was hardly enough to offset the massive $821.2 billion deficit on trade in goods.



The deficit on petroleum products was $386.3 billion, up from $293.2 billion in 2007. The average price for imported crude oil rose to $95.23 from $64.28 percent from 2007, while the volume of petroleum imports fell 4.0 percent.



Also, the American appetite for inexpensive imported consumer goods and cars is a huge factor driving up the trade deficit. The trade deficit with China was $266.3 billion, a new record and up from $256.2 billion in 2007.



The deficit on motor vehicle products was $107.1 billion. Ford and GM continue to push their procurement offshore and cede market share to Japanese and Korean companies. However, the automotive trade deficit was down from $120.9, as Asian automakers continued to expand production in North America and demand for autos fell with the recession.



The trade deficit should ease in 2009 with lower oil prices and as the recession bears down on consumer spending. However, China is not permitting its currency to rise in value, despite its trade surplus and has beefed up subsidies on its exports in an effort to export its unemployment to the United States and other industrialized countries. China’Äôs beggar-thy-neighbor protectionism threatens to ignite a global trade war of devastating proportions.

When everyone's back is to the wall, expect trade to rise to the top of the agenda. The global pie is shrinking; everyone will fight for keeping or improving his share. That Hillary went first to Japan and China is no accident. That she asked the China to continue to purchase U.S. bonds confirms that fact that the U.S. is now China's impoverished Siamese twin.



Even if China continues that game, a consequence of its burgeoning trade surplus, China and much of Asia is protecting its share of the global pie:

The dollar remains at least 40 to 50 percent overvalued against the Chinese yuan and other Asian currencies. Although China adjusted the yuan from 8.28 per dollar to 8.11 in July 2005 and permitted it to rise gradually to 6.84 by July 2008, the value of the yuan has not changed since.

To sustain an undervalued currency in 2008, China purchased approximately $600 billion in U.S. and other foreign securities, creating a 40 percent subsidy on its exports of goods and services. Other Asian governments align their currency policies with China to avoid losing competitiveness to Chinese products in lucrative U.S. and EU markets.

Another aspect of this disturbing game is the quiet, resigned acceptance that he who has the cash can now find fire sale prices everywhere. Sovereign wealth funds, flush with the wealth only lucrative trade can bring, now prowl among distressed companies. While I have noted many of these sales--especially in resources--, you should take note of how they are being greeted. I watch CTV commentators wrestle with the sale of NOVA chemicals to Abu Dhabi for $499 million (U.S. dollars).

The price is reasonable, analyst Hassan Ahmed of HSBC Holdings PLC told Bloomberg News.

’ÄúIt's a bit on the lower side, but keeping in mind the current economic environment and their debt situation, I think this was the right thing to do,’Äù he said.

A profound malaise now blankets many companies. They are ripe for the taking. Take the cash and let the credit go. Do not heed the rumble of a distant hope.



Unfortunately, in the final analysis, we are all in this boat together. For the past ten years, I have watched various players wrestle to see who could put a bigger hole in the global boat. Most economists have merely sat back and admired the handiwork.



I think we need a new boat.

by Stormy (noreply@blogger.com) on February 24, 2009 03:16 PM

Posts with the same title from this guy and this guy. And what’Äôs with the ’Äúˆßa,’Äù anyway?

by tgirsch on February 24, 2009 04:30 AM

Just a little fyi. 13 shots of the inventory of autos.

divorced one like Bush

by Divorced one like Bush (noreply@blogger.com) on February 23, 2009 09:05 PM

Vinny:

Any parent who catches their high school aged son reading [Atlas Shrugged] should seriously consider disabling the internet porn filters.

by tgirsch on February 23, 2009 08:39 PM

Trouble in River City? Courtesy of the St. Louis Fed:







What do we have at the end of the tunnel?

by Stormy (noreply@blogger.com) on February 23, 2009 08:02 PM

Fiscal Responsibility Summit Attendees: (noted without comment. Except for those of us who follow

Social Security-Dean Baker made the cut)



ADMINISTRATION

Secretary of the Treasury, Tim Geithner

Secretary of Transportation, Ray LaHood

Secretary of Homeland Security, Janet Napolitano

Deputy Secretary of State, Jack Lew

Treasury Department, Gene Sperling



White House Chief of Staff, Rahm Emanuel

OMB Director, Peter Orszag

National Economic Council, Larry Summers

Domestic Policy Council, Melody Barnes

Council on Economic Advisors, Christina Romer

Deputy OMB Director, Rob Nabors



SENATE



Leadership

Senator Mitch McConnell (R), Minority Leader - will not join break-out sessions

Senator Dick Durbin (D), Assistant Majority Leader

Senator Jon Kyl (R), Assistant Minority Leader - arriving at 2:30

Senator Lamar Alexander (R), Republican Conference Chairman

Senator John Cornyn (R), Chairman, National Republican Senatorial Committee



Other Senators (in alphabetical order with Chairs and Ranking Members noted)

Senator Evan Bayh (D)

Senator Max Baucus (D), Chairman of Committee on Finance

Senator Tom Carper (D)

Senator Thad Cochran (R), Ranking Member of Committee on Appropriations

Senator Susan Collins (R), Ranking Member of Committee on Homeland Security

Senator Kent Conrad (D), Chairman of Committee on the Budget

Senator Chris Dodd (D), Chairman of Committee on Banking, Ranking Democrat on HELP

Senator Mike Enzi (R), Ranking Member of Committee on HELP

Senator Lindsey Graham (R)

Senator Judd Gregg (R), Ranking Member of Committee on Budget

Senator Daniel Inouye (D), Chairman of Committee on Appropriations

Senator Amy Klobuchar (D)

Senator Carl Levin (D), Chairman of Committee on Armed Services

Senator Joseph Lieberman (D), Chairman of Committee on Homeland Security

Senator John McCain (R), Ranking Member of Committee on Armed Services

Senator Claire McCaskill (D)

Senator Ben Nelson (D)

Senator Olympia Snowe (R), Ranking Member of Small Business Committee

Senator Arlen Specter (R), Ranking Member of Judiciary Committee



HOUSE



Leadership

The Honorable Nancy Pelosi (D), Speaker of the House of Representatives (will not join breakout sessions)

The Honorable Steny H. Hoyer (D), Majority Leader

The Honorable John A. Boehner (R), Minority Leader

The Honorable James E. Clyburn (D), Majority Whip

The Honorable Eric Cantor (R), Minority Whip

The Honorable Thaddeus G. McCotter (R), Chairman of the Republican Policy Committee

The Honorable Chris Van Hollen (D), Chairman of the Democratic Congressional Campaign Committee



Other Members (in alphabetical order with Chairs and Ranking Members noted)

The Honorable Joe Barton (R), Ranking Member of the Committee on Energy and Commerce

The Honorable Allen Boyd (D)

The Honorable Dave Camp (R), Ranking Member of the Committee on Ways and Means

The Honorable Michael N. Castle (R)

The Honorable Raˆ†l M. Grijalva (D)

The Honorable Darrell E. Issa (R), Ranking Member the Committee on Oversight and Government Reform

The Honorable Ron Kind (D)

The Honorable Barbara Lee (D), Chairwoman of the Congressional Black Caucus,

The Honorable Jim Matheson (D)

The Honorable George Miller (D), Chairman of the Committee on Education and Labor

The Honorable David R. Obey (D), Chairman of the Committee on Appropriations

The Honorable David E. Price (D) - late arrival - approx 1:30/2:00 PM

The Honorable Tom Price (R), Chairman of the Republican Study Committee

The Honorable Charles B. Rangel (D), Chairman of the Committee on Ways and Means

The Honorable Paul Ryan (R), Ranking Member of the Committee on the Budget

The Honorable Stephanie Herseth Sandlin (D), Chairwoman of the Blue Dog Coalition

The Honorable John M. Spratt (D), Chairman of Committee on the Budget

The Honorable John S. Tanner (D)

The Honorable Ellen O. Tauscher (D)

The Honorable Edolphus Towns (D), Chairman of the Committee on Oversight and Government Reform

The Honorable Nydia M. Velazquez (D), Chairwoman of the Committee on Small Business

The Honorable Henry A. Waxman (D), Chairman of the Committee on Energy and Commerce



Community Leaders and Stakeholders Also Attending



(in alphabetical order by organization name)



Bill Novelli, AARP

John Gage, AFGE

John Sweeney, AFL-CIO

Gerry McEntee, AFSCME

Randi Weingarten, AFT

Ed Coyle, Alliance for Retired Americans

Kevin Hassitt, American Enterprise Institute

Richard Umbdenstock, American Hospital Association

Nancy Neilson , American Medical Association

Becky Patton, American Nurses Association

Karen Narasaki, Asian American Justice Center (AAJC)

Dr. Ho Tran, Asian Pacific Islanders American Health Forum (APIAHF)

Gary Flowers, Black Leadership Forum

Eleanor Hinton Hoytt, Black Women's Health Imperative

Alice Rivlin, Brookings Institution

John Castellani, Business Roundtable

Roger Hickey, Campaign for America's Future

John Podesta, Center for American Progress

Larry Korb, Center for American Progress

Dean Baker, Center for Economic and Policy Research

Joe Minarek, Center for Economic Development

Robert Greenstein, Center on Budget and Policy Priorities

Anna Burger, Change to Win

Maya MacGuinneas, Committee for a Responsible Federal Budget

Karen Davis, Common Wealth Fund

Bob Bixby, Concord Coalition

Maya Rockeymoore, Congressional Black Caucus Foundation

Doug Elmendorf, Congressional Budget Office

Marty Ford, Consortium for Citizens with Disabilities

Lawrence Mishel, Economic Policy Institute

Ron Pollack, Families USA

Ellie Smeal, Feminist Majority

Stewart Butler, Heritage Foundation

Bill Spriggs, Howard University

Joe Salomonese, Human Rights Campaign

John Cavanagh, Institue for Policy Studies

Heidi Hartmann, Institute for Women's Policy

Drew Altman, Kaiser Family Foundation

Douglas Holtz-Eakin, McCain Economic Advisor

Hilary Shelton, NAACP

Todd Stottlemyer, National Association of Independent Businesses

Barbara B. Kennelly, National Committee to Preserve Social Security and Medicare

Jackie Johnson Pata, National Congress of American Indians

Janet Murguia, National Council of La Raza

Marc Morial, National Urban League (NY)

Dennis Van Roekel, NEA

David Walker, Peter G. Peterson Foundation

Peter Peterson, Peter G. Peterson Foundation

Al From, Progressive Policy Institute

Andy Stern, SEIU

Fred Goldberg, Skadden

Roger Ferguson, TIAA-CREF CEO

Martin Regalia, U.S. Chamber of Commerce

Fernando Torres-Gil, UCLA

Robert Reischauer, Urban Institute

Michael Graetz, Yale

by Bruce Webb (noreply@blogger.com) on February 23, 2009 07:43 PM

cross posted by Rusty



Health Care Think Tank



Stimulus Bill Part II

Why is the stimulus bill (H.R. 1) more than 1000 pages?



More than 200 of those pages are health care reform, including a massive health care IT plan.



How much time was spent debating the largest health care reform plan of the past two decades?



None.



Also included are updates on HIPAA security and privacy, and perhaps the provisions that will shape the future of U.S. health care, the "effectiveness review" plan. I just reread Tom Daschle's book, and his brief stint as almost-Secretary allowed him to have immense influence.



In front of me is a full 3" ring binder, perhaps containing the future of our health care system, perhaps not.



First, a few days with the grandchildren. Then, the work continues in earnest.



Update: I was curious. Printed in pieces from the Thomas site, I have 261 pages.





Vtcodger says in update: I take the main points -- and they are good ones -- to be:



1. Hardly anyone actually read the stimulus package.

2. We have somehow possibly restructured US Healthcare with no discussion or debate

by rdan (noreply@blogger.com) on February 23, 2009 05:15 PM

by cactus



Foreclosures Are Not the Problem. Those Who Build Financial Time Bombs, and Those Who Pick Them Up, Are the Problem



I hesitate to disagree with Hilzoy - she may not be an economist but she's very smart is usually right - but she has two posts (here and here) which I think are based on a faulty premise. This is the last paragraph from the first one:

Under normal circumstances, I'd be opposed to the government stepping in to encourage banks to modify these loans, except in cases of fraud. But these are not normal circumstances. The economy is melting down, and foreclosures are a big part of the reason why. Foreclosures always impact people other than the people foreclosed on, for instance by driving down neighborhood property values. But now, of all times, they are having massive impacts on the rest of us. And the Obama plan, which does not just wave a magic wand and make people's excess debt disappear, seems to me like a good start on addressing them.

cactus says

Foreclosures are not a big part of the reason the economy is melting down. Foreclosures are a symptom on the one hand, and part of the necessary cure on the other. Home prices are simply too high right now. My wife and are in a position to buy a house. There are, in fact, a few homes for sale in the neighborhood my wife and I want to buy in, and we have enough money squirreled away to pay cash for any of 'em if we chose. I hasten to add that we're not rolling in the dough - assuming we wanted any of those houses, we'd be stupid to pay cash. Right now we're down to one source of income, and my wife is starting a new business (for a long time, I expect 0 < profits < epsilon where epsilon is very, very close to zero), so should that one source of income disappear or be greatly reduced, we'd need to live on the money we've put away. So all that means is that by having a good but not great income, and by not buying big screen tvs and ipods and new vehicles and the like (we did go on an what would otherwise be an expensive vacation in the past year, but we did it using frequent flier miles accumulated over a long time), and keeping our hobbies very cheap, we've got a small cushion to work with.



But we've done the analysis... Where we live, its still cheaper to rent than to buy, and that's before you add a premium to take into account the fact that buying increasing your risk and reduces your mobility relative to renting. That little detail means that either rents have to rise, or home prices have to fall.



But wait, there's more! You can get a nice summary factsheet for anyplace in the US from the Census. In our area, homes are considered affordable, but when I look at the median household income and the median value of a home in the area, it occurs to me that most households would have a hard time making ends meet. Given incomes in this area, and assuming a 20% (responsible) downpayment, throw in income and property taxes, and assuming a 4% interest rate, and I have a hard time seeing how all that many people could afford the payments on a house. They certainly can't simultaneously pay the mortgage and save money for a rainy day, and they probably have to forego niceties like health insurance or dental work or any expenses at all on maintenance of the house along the way.



And there's part of the problem - people bought homes they couldn't afford. Debt was easy for a while, and home prices were assumed to be going to infinity ("buy now or be forever priced out of the market!") but those days have come to an end, so fewer people are willing (or allowed to) buy homes they can't afford now.



All of that means - either home prices are going to have to drop more, or incomes in the area are going to have to rise, or we're going to institute a permanent class of homeowners and a permanent class of renters. I'm betting on the first option right now. And I'm also betting that Obama's plan is just going to drag out the day that prices become affordable.



But the real problem, the cause of this whole mess, is simple: every few decades, our economic system morphs into a structure that rewards making things less than it rewards creating financial time bombs with multi-year fuses. We've been rewarding the financial time bomb makers more and more since Reagan took office. And this is also the second time since Reagan took office we've been bailing out the financial time bomb makers at great cost to the rest of us - the previous time was during the S&L crisis.



Things have now evolved to the point where for some reason, when the market for time bombs disappears its considered some sort of a tragedy. This time around, we've already helped out the grifters, including many investment banks, commercial banks, derivatives traders, and now we've moved on to helping the marks. And rewarding any of them, the grifters or the marks, is a problem for several reasons. It rewards the bad behavior of the financial time bomb makers and reduces the incentives the rest of us have to watch out for the crooks. (And yes, I know, people living next to foreclosed homes suffer too. But externalities come in both positive and negative varieties, and folks who benefited from home prices rising for no reason don't have a complaint when the home prices drop back in value because people found out the rise happened shouldn't have happened in the first place.) It also keeps an unviable system going, and it does so at great cost.



But there's one more thing. Since this whole thought process, this current iteration of the art of rewarding of the financial time bomb makers, dates back to Reagan, it pays to go back to Reagan... And when Reagan conjured up images of the Cadillac-driving welfare queen, it pissed people off not because there were people who needed help, but because supposedly many people who were getting help were, according Reagan, living better than the people being taxed to help them. And while I for one have never had a problem with seeing some of my tax money go toward helping the unfortunate, and I've never had a problem with welfare, at this moment in time, I know with absolute certainty that more most of the new-fangled welfare from the last six months is directed to helping people who are better off than I or have lived much better than I in recent years (investment banks, commercial banks, derivatives traders, and now homeowners) than the poor. I resent it. Does Obama really want a country where the folks who make and pick up time bombs are rewarded at the expense of those who are too honest to make time bombs or were smart enough (and in some cases, lucky enough) not to pick them up?



In closing, I do have a suggestion - if for some reason its considered necessary to dump big piles of money into the economy, why not give it to folks who are neither grifters nor marks? After all, the goal seems to be to get people to spend. And those who are neither grifters nor marks are more likely to spend extra funds than the marks are, given the hole so many marks are in. They're also less likely to spend the money figuring out how to build the next generation of time-bomb.

____________________________________

by cactus

by rdan (noreply@blogger.com) on February 23, 2009 10:00 AM

by rdan (noreply@blogger.com) on February 23, 2009 02:19 AM

rdan









No fat tail. Nor black swan. Nor once every 100 year occurrence.



(Hat tip reader CMike) Forbes has Volcker's complete remarks below the fold, lifted directly from Forbes and brought here:

Paul Volcker: It's clear to everyone that we are in the midst of a massive economic and financial crisis. It's big in the United States, but it is characterized by being very international, and we're going to hear the reverberations about this for a long time. I do not agree with those--this is part of the 20% I don't agree with--that somehow [believe] we may get through this crisis, it will be forgotten about and revert to the same financial system we had before the crisis. I don't think that's going to happen--too many weaknesses and flaws have been exposed.



I do think it's appropriate, I've never quite known what the center of capitalism and society was about, but I now realize there are challenges to capitalism and society, and I want it known that I think capitalism will survive this crisis, in most respects.



This isn't any ordinary crisis. One of the things that kind of shocked me--"shocked" me is the right word--is the extent to which it's become international. We could sit here, we sat here a year ago, I would have made a few comments that this is a pretty bad crisis, maybe the mother of all financial crises in the U.S., but the rest of the world is doing pretty well, and so long as the rest of the world holds up, for various reasons, including great growth of American exports, maybe we'll get through this without too much damage.



Well that may have been correct if the rest of the world held up. The rest of the world has not held up, as you well know.



Amazing to look at some of the figures. Industrial production in most countries is going down faster than in the United States--and it's been going down very fast in the United States in recent months, down 10% or more. The world in the last six months--I don't remember any time, maybe even the Great Depression, when things went down quite so fast, quite so uniformly around the world. Obviously [we're at] a level way above where we were in the 1930s.



We've reached the point where one aspect of capitalism, which I will call relatively unbridled financial markets operating on a global basis, has broken down. And it has broken down in [such a] way that I don't think it can be replicated in the form that it took earlier. It's broken down right in the face of almost all policy and intellectual analysis.



Now I hear and you hear that this is, well, kind of dismissed: This is a terrible thing that happens every once, every hundred years--or it's a Black Swan or Fat Tail. For reasons maybe I don't want to go into, the description of fat tail reflects the kind of analysis that isn't appropriate. They think that financial markets follow natural distributions, and, I won't go into this forever, but one remark I will leave with you is the financial world follows a normal distribution pattern. If you think that you're a financial engineer, you're not a very good financial analyst.



It's not like earlier crises. Earlier crises were all invented by the Federal Reserve. The Federal Reserve tightened money, the economy went down, and they ease money [and] the economy goes up. I don't know-- the implication is the Federal Reserve is some kind of serial killer. I mean it's a psychopath. You would have thought business cycles never existed before there was a Federal Reserve or a central bank.



Let me just say, for the record: Business cycles reflect imbalances in the economy, and as time passes it takes different forms. It used to be inventory excesses, equipment excesses, sometimes housing excesses, sometimes all of them. Money got tight because of the imbalances of the economy and implications of that for the future, and if you didn't do something to deal with it, you'd have a worse recession.



That brings me back to the present. Nobody did anything about imbalances. The U.S. spent too much--5% or more than we were producing. China exported too much; they sent the money back here. It was all kind of nice--we got cheap goods, kept the inflation rate down, production up--but it was [an] unsustainable phenomenon [and] nobody wanted to do anything about it.



You could even rationalize it. You could talk about monetary policy, or, likely, you talk about fiscal policy. We were over-spending all this time, what about exchange-rate policy, what about Chinese policy? They're all kinds of contributors to the problem.



We poured out so many financial engineers that succeeded in obscuring the weakness in the credits that the crisis went on for some years longer than it had to go on. You know the circumstances.



This is one recession that cannot--a very serious one that cannot--be traced to tight money. The ready availability of money, low interest rates, the imbalance, confidence in price stability, confidence in a strong dollar--all that contributed to the excesses and the imbalances to set the stage for these unfortunate events.



Now what are we going to do about it in terms of financial reform? As I suggested, I think the very rapid and sweeping changes we've had in financial markets in recent decades helped prolong the imbalances in the real economy but in a very overall way. In the past 20 to 30 years, banks have gone from the major suppliers of credit at the heart of the financial system to just another supplier of credit, maybe accounting for a quarter to 20% instead of 60% or 70%.



The open market, however you define that, with a lot of securitization, supplied the rest, and this really went forward with enormous rapidity. The whole of subprime mortgages--what do I know, I'm just sitting there reading the newspaper--but subprime mortgages went from virtually nothing to close to a trillion and a half dollars in the space of maybe two and a half years. What an enormously rapid change--just reflecting the change in general developments in the market toward reliance on open market securitization and all the rest.



Statistically you can measure that. I think there's also a behavioral personality kind of aspect which should not be overlooked. We went from banks to the open market, and in the process we went from a financial system that was largely, not entirely, devoted to what might be called relationships.



It was important to a bank to make a loan to a customer, and he had other interests in that customer, other than lending money typically. He may lend money because he had other interests. You went to a very impersonal kind of market where there was no real customer relationship--everything was a deal. It was a deal maybe several times a day in a foreign-exchange market, or a deal in [mergers and acquisitions] or some other bigger-sized transaction, but they were arms-length transactions without any continuing customer interest. Maybe a bit, but not too much. I think that has added to the problems in the market that we have.



In this environment, regulation and supervision didn't quite wither away, but it's fair to say they lost support and lost potency, partly as a matter of ideology but partly because the banks that were the most heavily regulated lost relative importance in the market so there was overall less regulation. Now we have the crisis, we have the breakdown; a lot of rethinking is in order.



The first priority is to restore some semblance of stability and order in the market and restore the flow of credit. I'm not going to talk about that. I haven't got--if I had the answer I might talk about it, but I'm not sure I have it, so I think we'll neglect that for the moment.



And then we'll be faced--if we get through this crisis--with how we undo the type of emergency actions that have been taken in a way that doesn't leave us with another problem. In particular one that people worry about is the resurgence of inflation, but there are other aftermaths that we have to worry about. What I want to talk about is the kind of financial system that we want to have in the future when we get through this.



I guess I'm in the "George Soros School" of saying I'm not so sure how fast we want to go in instituting actual changes until we have a better sense of where we want to go and how this crisis is going to work its way out. But I don't think that's inconsistent with saying [that] the more international agreement we have on where we want to get to, the better off we'll be.



Now let me just lay out one possible vision for the future, which by some odd coincidence will be what was incorporated in the G30 report recently that I had something to do with. I will just describe what I take as the philosophy behind that report, because I certainly share it. I'll talk about the vision rather than the detail.



The basic point of departure, the foundation of the approach taken in that report, is that inevitably the banking system in general is going to be protected. That is nothing new, but there will be some very sizable, systemically important banking institutions that will certainly be protected by all governments in all circumstances, and with that must go a certain extra attention to the supervision of those institutions.



All banks must be supervised and regulated, but those of systemic significance around the world, which, almost inevitably, not every case but most, those institutions are international, they're not just national, will be subject to a particular layer of supervision.



In this vision, those banks will be the heart of the system. I think they become more important in the provision of credit rather than less in the future. It's the reverse of what's happened recently. I think of those as relationship-oriented, service-oriented institutions. Their function is to deal with individuals, businesses, nonprofits, universities, whatever provides certain necessary services. They provide a depository on the one side for savings, on the one side, of course, they provide stability for your funds, and they provide credit on the other side, and they provide a lot of ancillary services. That can be done without enormous risk, but there are risks.



I at least would prohibit those institutions from sponsoring hedge funds and equity funds and from engaging in a great volume of proprietary trading--those things that their management has loved to do in recent years. And it got them in trouble.



Because they involve great risk, those managements got enormous reward for these innovative activities. All those innovative activities over time produce losses rather than gains, but the incentives were not well-designed, so let's have some stable, strong banking institutions responsible for the backbone of the infrastructure, the payment system, clearing arrangements, [those kinds] of things. Let's prohibit them from really high-risk activity.



The old investment banks, when they existed as free-standing institutions, could engage in no activity that didn't present a conflict with other customer interests. That is a very difficult thing to manage.



Now we do worry about innovation and flexibility. Maybe innovation is a little overrated. I find little correlation between the sophistication of the banking system and the rate of the productivity growth. I think the whole [gross national product] was inflated because bankers got paid so much: You measured GNP and value added by their incomes, and while their incomes went up the more the GNP went up. But it was not exactly something that penetrated down to the ordinary person.



When it comes to innovation I'll raise a question with you: What is the most important financial innovation in the past 20 or 30 years for the average person? I think it's the automatic teller machine. It's not any high-class financial operation, it's a technical improvement, which sure has changed banking. I have more connection with my automatic teller machine that any other part of the financial market.



So you have a two-tier financial system, and then you have a series of issues that I would put in a general label of market infrastructure--and this includes some really difficult issues: Accounting is a matter of great controversy. The credit rating agencies--how you deal with those, and is there any substitute? Clearing and settlement arrangements. A particularly important one now is credit-default swaps. And there are other elements of infrastructure that need attention.



If there is ever an opportunity to get a more uniform approach internationally on some critical issues or regulation and supervision, it is now, in the aftermath of this crisis. And I don't think the crisis will be forgotten quickly. It is just so overwhelmingly apparent, in a world [where] the large international financial systems are themselves international--and that the scope of international regulation and national assistance--when they go bad just demands closer international coordination. And I think we'll get it.



There is a lot of progress towards international consistency. It's now, in fact, under a degree of attack because of the complaints about mark-to-market accounting. I think we have to get through that, and there's legitimate questions there, but the overwhelming need is not to have different accounting systems in Europe and the U.S. and Japan and wherever. And I think we can see our way through that.



It's only touched upon lightly in the G30 report, but it is evident that in the U.S. the central bank is taking on a role that is way beyond any traditional conception of what a central bank should be doing.



We have to stop quoting Walter Badget on what a central bank does--so far from the reality of what the central bank is doing today that it raises a question about the very name central bank. I was visiting with a Chinese friend at breakfast this morning--I said in a way you know the Chinese have moved from state-control to credit to private banks. We're moving from private banks to state control of credit, where we meet in the middle someplace.



The explanation for this expansion of the central bank is obvious: Faced with crisis in concerns in the market and the economy, they felt they had to do what they could do (not just central bank but the Treasury as well, to take action to stop deterioration and promote stability). But ... is that a permanent change in the role of the central banks in the future? And if not, how do we roll back the calendar and deal with the expectation that whatever we say, if we did it once and it was successful, that we'll do it again?



I don't know fully the answer to that question, but I think it's something we ought to worry about. Which in turn raises the question that many of us think is rather basic in terms of future economic instability, and that is about the independence of the central bank. Because it's a little hard to make the usual grounds for central bank independence when they are actively intervening so heavily in particular sectors.



As for the outcome of this crisis, we will come out with a feeling that maybe a little inflation isn't so bad, I think a little inflation is bad, because I think a little inflation leads to more inflation, and I don't think there is any argument for a little inflation solving our problems in any realistic sense, so I don't want to lose what I think has been an accomplishment of the last 30 years of the central importance of price stability and the central bank role--the role of an independent central bank in maintaining their price stability. So I just would leave you with that thought and the hope and expectation that that kind of question will be front and center in thinking as we do redesign the financial system as we should.

by rdan (noreply@blogger.com) on February 22, 2009 11:44 PM

rdan



NYT reports on the thinking of the Obama team on our budget deficit concerns.

The budget will provide the first clues to how Mr. Obama will reassert fiscal discipline after signing into law a $787 billion economic recovery plan. As difficult as cutting the deficits will be, much of the reduction by the end of his term will simply reflect an end to spending from the two-year stimulus package and ’Äî assuming the economy recovers ’Äî higher tax revenues and lower expenditures for safety-net programs like unemployment compensation.



Mr. Obama will propose cutting a variety of programs, including the Medicare Advantage subsidies for insurance companies that cover seniors who can otherwise acquire health coverage directly from the government. Another target is spending on private contractors, especially for defense, which spiked during the Bush administration. And he will scale back some promises, including his proposal to double money for foreign aid.



The budget on Thursday will come amid a week of reminders of the nation’Äôs fiscal plight. On Monday Mr. Obama will hold a ’Äúfiscal responsibility summit’Äù at the White House with members of Congress from both parties, economists, union leaders and business representatives. On Tuesday he will make a televised address to a joint session of Congress ’Äî the equivalent of a State of the Union speech for a new president ’Äî that advisers said would focus on the economy. Meanwhile, Congress will debate $410 billion in overdue appropriations for this fiscal year.



Yet Mr. Obama will inflate his challenge by forsaking several gimmicks that President Bush used to make deficits look smaller. He will include war costs in the budget; Mr. Bush did not, and instead sought supplemental money from Congress each year. Mr. Obama also will not count savings from laws that establish lower Medicare payments for doctors and expand the alternative minimum tax to hit more taxpayers ’Äî both of which Mr. Bush and Congress routinely took credit for, while knowing they would later waive the laws to raise doctors’Äô payments and limit the reach of the tax.



Full details of Mr. Obama’Äôs budget for the 2010 fiscal year will be released in April. The outline on Thursday will make clear that he intends to push ahead on promises to contain health care costs and expand insurance coverage, and to move toward an energy cap-and-trade system for controlling emissions of gases blamed for climate change.

(italics mine)



Getting the yearly deficit back to $533 billion for the year 2013 is difficult to imagine as possible.

by rdan (noreply@blogger.com) on February 22, 2009 06:21 PM

guest post by coberly



WILL YOU STILL FEED ME IN 2041?



I use rounded numbers below. The point will not change if someone wants to use the precise numbers.



It has been argued that by the time the Trust Fund runs out of money, Social Security can continue to pay benefits without a tax raise because even the reduced benefits would be more in "real value" than today's: "Projected benefits will be 40% higher in real value; after a 25% cut caused by the projected shortfall, they would still be more in real value than today's." Let us see what this means.



Today the average income is 3000 dollars per month. . In 2040 average income is predicted to be about 4300 dollars per month... a 40% increase in real income.



Current Social Security tax is 6% (rounded remember?) for about 180 dollars per month. In 2040 this would be 6% of 4300, or about 260 dollars without a tax raise.



Current Social Security benefits are targeted to replace 40% of lifetime real average income. So an "average" worker today would expect to get 40% of 3000, or 1200 per month.



In 2040, if nothing changed, he would expect to get 40% of 4300, or 1720 per month. But something will have changed: that worker in 2040 is expected to live about 33% longer than the worker today... from fifteen years in retirement to twenty. In order to make his contribution to Social Security last for his whole expected retirement, the monthly benefit has to be cut by 25% to 1290.





Aha, they say, 1290 is more than 1200, so the retired worker in 2040 is "better off" than the retired worker today. So there is no need to raise the tax. And we all know that how well off a person is has nothing to do with the standards of the people around him.



But consider, if we were to raise the tax by 2% to about 8%, or a tax increase of about 86 dollars per month, we would also increase the money available for benefits by 33%, raising that 1290 back up to 1720 per month. So that is the trade off, give up 86 dollars a month when you are making 4300, or give up 430 per month when you are retired, and try to live on 1290 when you could have had 1720.



Now those were for the "average" worker. For a low income worker, consider:



Let our low income worker go from 7 dollars per hour today to about 10 dollars per hour in 2040, or say from 14000 per year to 20,000, or from 1200 per month to 1700 per month. Today that low income worker pays 72 dollars per month payroll tax. In 2040 they would pay 100 dollars per month with no change in the tax rate.



Now the expected retirement benefit for that low income worker would be about 600 plus .3 times (1200 - 600) or 780 dollars per month today, or about 930 dollars per month in 2040 (600 plus .3 times (1700 minus 600)). Notice this is not the 40% increase expected, because the payroll benefit rate is progressive and our poor person has gone from a 65% replacement rate to a 54% replacement rate. And since our lower income worker is expected to live about 33% longer than today, his benefit would have to be cut 25% per month in order to stretch to cover his life expectancy. So he could only get about 700 per month in benefits (75% of 930). This is in fact less in real value than the lower income worker gets today.



Okay, well, ahem, lets rejigger the benefit formula and pretend that the worker will get that 40% real increase and go from a 780 per month benefit today to a 1092 benefit before we adjust for life expectancy by cutting it 25% to 819 dollars per month... more in real value than the worker today. (I hope you have noticed the increase in real value of pensions is a function of the increase in real value of wages.)



But wait, he could have kept the 1092 just by paying an extra 2% tax. That would be an extra 34 dollars per month or about 8 dollars per week. So we see that the low income worker can save himself 8 dollars per week at the cost of 273 dollars per month when he is retired, lowering his retirement income from 1092 a month to 819 a month.



And we know there is no way that a lower income person could ever get another 8 dollars per week, by a raise, say, of 20 cents per hour, or an extra 8 dollars in food stamps.. or get by on 1666 per month when he was used to living on 1200.



So that, essentially, is the trade off. In order to avoid noticing that we have come around to agreeing with the bad guys that Social Security should be indexed to the CPI, we can hang on to our notions of diverting 300 dollars a month from the elderly poor and use the money to pay for universal health care... because, of course there is no other way to pay for universal health care.



Only we better not tell that working poor person that we are not going to even give him the chance to decide if he would rather give up 8 dollars a week today in order to have 273 dollars more per month when he is old and trying to live on 800 dollars a month. After all, we have our principles to think of.

______________________________________

by coberly

by rdan (noreply@blogger.com) on February 22, 2009 02:22 PM

by divorced one like Bush



Let's talk jazz: Still cashing the income inequality

berries, clams, dough, heavy sugar, jack, kale, mazuma, rubes, simoelan, voot. It's all money.



I started this series to develop a simple model of income inequality so that I wouldn't sound like I was chewing gum and people wouldn't get all balled up on the heavy sugar.



The first one presented the model. 100 people, $1000 of total income. 1976: 8.7% of the dough to the One, all the rest of the jack to the Many. 2005: 23% of the sugar to the One, the rest of the voot to the Many. Basically, it showed why income inequality ain't allowing the Many to by orchids. Also, maybe it'll help you know one's onions.



The second post addressed the concerns that the model was to simple. The sugar was heavier, the times were percolating I'm told. Except that the only real issue for my model was that the population would have to increase against the 1000 clams for the model to reflect the coffee made. There was less mazuma for everyone. Oh, and the total dollars to be made up with a tax cut to duplicate the take of 1976 is $1.4 trillion dollars.



In the end, none of this bodes well for the concern about multiplier effects and money velocity. Yet here we are all these plans being put into action to get people spending 'cause that's the problem and the issue still gets no respect. We want to get more kale into the hands of the many, but we aren't taking about anything related to increasing the share of income to the many (which would include the trade issue as Stormy has been hammering it).



HELLO! The reason people have no money is not because their taxes are too high, their health care is too high, their interest rates are too high; THEY NEVER HAD IT TO BEGIN WITH!



So, let's see how much the 99 people of the Many would need in 2005 to have stayed even with their position in 1976.



First here is what the $1000 should be in 2005:

$3,429.93 using the Consumer Price Index

$2,811.66 using the GDP deflator

$3,891.74 using the value of consumer bundle

$3,296.90 using the unskilled wage

$5,013.86 using the nominal GDP per capita

$6,805.40 using the relative share of GDP

My model using actual income data came up with $6940 total, but based on per capita, it was only $5130.



Each of the 99 people had $9.22. In 2005 they would need the following:

$31.62 using the Consumer Price Index

$25.92 using the GDP deflator

$35.88 using the value of consumer bundle

$30.40 using the unskilled wage

$46.23 using the nominal GDP per capita

$62.75 using the relative share of GDP

My model, using per capita income resulted in $39.90.



Interesting No? The total personal income in the model comes out to be pretty close to the GDP per capita and relative share. So, the percolating of the economy did result in the same economic coffee in 2005 as in 1976. Unfortunately for the Many, the semoelan handled is less than the per capita and relative share of GDP. Can you say SCREWED?



My model also resulted in the number of $47.31 for each of the 99. That is the number to make up for the share of income lost to the One. It is essentially the number calculated based on nominal GDP per capita. Or, the unscewed number.



But, these numbers just show that using the percentage split, the One stayed even with the percolating economy and the Many dropped down to something less. It does not show the loss of purchasing. For that, we need to reverse calculate.

For the Many, they have $39.90 each in 2005. In 1976 it looks like this:

$11.63 using the Consumer Price Index

$14.19 using the GDP deflator

$10.25 using the value of consumer bundle

$12.10 using the unskilled wage

$7.96 using the nominal GDP per capita

$5.86 using the relative share of GDP



I think what we are seeing here by looking forward and then backward, is that the Many are earning more for their labor (wage went up), but they are not earning wages comparable to the contribution made to the rising GDP by their laboring. Who knew, Slave Wages is a real wage!

by Divorced one like Bush (noreply@blogger.com) on February 22, 2009 02:00 PM

rdan



The item below was sent to me to consider. I was unsure what to do about it, as it is done by a banking PR firm. However, as a springboard to conversation, it can be useful. The post itself can start a conversation, and I will save my thoughts for the conversation.

Gap Between Consumer & Financial Service Executive Perceptions Threatens Industry’Äôs Future



New Survey Shows Financial Service Industry is More Optimistic About the Economy while Consumers are Overwhelming Pessimistic



New York ’Äì February 10, 2009 ’Äì Most top financial service executives are worried about their companies’Äô reputations, but are failing to make changes consumers want to increase public trust in the organizations. The first study to compare attitudes of consumers and financial service employees, conducted by the global communications company Cohn & Wolfe, shows a big gap between consumer expectations and the behaviors of financial service companies.



The study of more than 1,000 U.S. consumers and more than 200 financial service employees showed dramatic disagreement between the two groups about the economic forecast, the services these companies should of fer to help their customers and what financial service companies should do to restore consumer trust.



When asked to characterize their financial outlook for 2009, 64.2 percent of consumers said they were pessimistic. Conversely, a majority of financial service employees are optimistic about the economy. Meanwhile, only 20 percent of financial service respondents said their companies have made significant business strategy changes to reflect the economic downturn. And almost 60 percent of financial service employees said their companies have done nothing formal or systematic to explain their strategic approach during the recession.





’ÄúThe financial industry is in crisis and consumers don’Äôt understand why it doesn’Äôt behave like it’Äôs under the same pressures as the rest of the country,’Äù said Matt Wolfrom, head of Cohn & Wolfe’Äôs Corporate Practice. ’ÄúFinancial service companies must change the way they act and communicate during these challenging=2 0times of crisis, to explain to their customers what these businesses are doing to protect their interests. Crisis situations offer enormous opportunities to strengthen stakeholder relationships, but they require companies to communicate much more aggressively and to create communications that reflect conditions confronting the audiences.’Äù



For example, nearly 65 percent of consumers said they have not been contacted by their financial services providers to offer help in surviving the recession, though most financial service employees indicate their companies have attempted to communicate ’Äì largely through traditional channels, such as newsletters.



One striking disparity identified by the survey was the difference between consumers and industry employees on what must be done to restore trust in financial service companies:



’Ä¢ Consumers say companies must stop excessive bonuses (51.9 percent), pass along savings from lowered interest rates (44.72 percent), increase transparency (29.9 percent) and abolish charges (20.2 percent).



’Ä¢ Financial service executives say they must improve customer service (64.4 percent), increase transparency (41.6 percent), provide better access to financial planning (21.8 percent) and make senior management more visible (20.8 percent).



And the study shows that consumers (29.9 percent) are nearly twice as likely as financial service employees (16.3 percent) to believe that increased regulation will be the significant driver of change.



The striking divergence between financial service industry employees and consumers fuels a growing distrust of these companies:



’Ä¢ Four out of ten consumers (39.2 percent) say they do not believe their bank is looking out for their best interest, and only 6 in 10 consumers say banks are the most trustworthy financial service.



’Ä¢ Less than two in 10 consumers (18.4 percent) say financial advisors are most trustworthy.



’Ä¢ Approximately one in 10 consumers (11 percent) say insurers are most trustworthy.



’ÄúIn crisis situations like this, over-communication to consumers and key stakeholders is critical,’Äù said Wolfrom. ’ÄúA successful approach starts with executives and flows through the workforce directly to consumers. Communication tools take many forms, including digital outreach and grassroots campaigns. In these trying times the industry has an opportunity to strengthen and personalize relationships that will translate into renewed trust and ultimately more business.’Äù



Currently, relationships are being frayed as consumer trust in financial service companies erodes. Four in 10 consumers (41.1 percent) reported their trust in financial institutions had declined in the last 18 months. And when asked which words best describe their perceptions of their financial institution, consumers said ’Äúgreedy’Äù (33.2 percent), ’Äúimpersonal’Äô (30.7 percent) and ’Äúopportunistic’Äù (26.6 percent). Positive descriptions like ’Äúethical’Äù (6.5 percent), ’Äútransparent0 (3.8 percent) and ’Äúsympathetic’Äù (3.4 percent) were much less frequently cited.

Research was conducted by Lightspeed, using an online methodology. 1204 respondents were polled: 1002 consumers and 202 from the financial sector. The sample is nationally representative of the United States. Cohn and Wolf is an established player...Rdan

by rdan (noreply@blogger.com) on February 22, 2009 01:00 PM

By Spencer,



Earlier I showed how the sharp drop in industrial production compared to other cycles, but did not point out that the factory operating rate moved down 1.7 percentage points, to 68.0 percent, the lowest rate of utilization since this series began in 1948.



Normally, capacity utilization leads inflation and this implies we

should see more disinflation or even deflation.



One other thing you can do with the industrial production data is combine it with the hours worked data released in the BLS employment report to generate a rough estimate of monthly manufacturing productivity. This calculation implies that the sharp drop in manufacturing productivity late last year is continuing and that the originally reported drop in fourth quarter manufacturing productivity should be revised down.



The falling productivity is reflected in the Conference Board's estimate of Manufacturing Unit Labor Cost included in the Lagging Index. It shows that manufacturing unit labor cost is rising at almost a 10% rate while the PPI for Finished Goods is 1% below its year ago level.



This combination of rising unit labor cost and falling PPI generates the largest spread on record between these two variables. But this spread is the dominant factor driving manufacturing profit margins and together with falling output implies that manufacturing profits are under severe downward pressure. So it is not just financial write offs that are causing estimates of S&P 500 earnings to be revised down sharply and firms are implementing widespread layoffs to bring costs and prices back into line and restore profit margins.



This severe pressure on profits implies that the economic bottom is not on the immediate horizon.

by spencer (noreply@blogger.com) on February 22, 2009 02:43 AM

Paul Krugman has an interesting speculative comment on today’Äôs WSJ article on the difficulty former Bush henchmen are having in finding work. Putting aside the gleeful chortling (him, I mean - not me), he suggests that this could be one of the signs of cracks in the right-wing bulwark, and the impending breakup of the vast right-wing conspiracy:

As an economist, I’Äôm supposed to believe in incentives; and the remarkable cohesiveness of conservatives has a lot to do with incentives.

Show some independence, and you’Äôll face a lavishly financed primary challenge from the Club for Growth. Be a loyal soldier, and you will be taken care of ’Äî through what’Äôs commonly referred to as ’Äúwingnut welfare.’Äù

Thus, lose an election, and a think tank with the usual funding sources will create an America’Äôs Enemies program for you to direct. Mess up the occupation of Iraq, and you’Äôll be appointed to run the World Bank; mess up there, and there’Äôs still a chair waiting for you at AEI.

But it appears that wingnut welfare is breaking down when it comes to former Bush officials. Is this the beginning of the end for movement conservatism?

We can only hope so. There certainly are hopeful signs of the GOP beginning to fracture, especially of a re-thinking of the relationship between ’Äúfiscal conservatives’Äù and the religious ultra-nutters. The fingerpointing has in no way died down after the election debacle, and the Republicans still in elective office are simply acting insane over the stimulus and the economy generally. There’Äôs a lot of hurting still to be done on the right wing, and we can only hope it goes on as long and as deeply as possible.

But all that is too obvious. What interests me about this post by Krugman is that he would go out on that kind of a limb. To be sure, he’Äôs not risking anything, and it’Äôs not an important story by itself, but he’Äôs not someone who makes wild predictions. That someone who generally shows sensible and considered judgment would speculate on consequences as far-ranging as he does above gives pause for thought. (Gleeful, savagely joyful, and much relieved thought!)

by KTK on February 22, 2009 12:56 AM

Robert Waldmann



In my childhood and teens I counted on The Washington Post (motto "All the President's Men. If you liked the movie, you'll love the newspaper," so now I guess I will have to relearn mathematics to adapt to the fact that 500,000 = 0.



Via DeLong Via Hilzoy



In defense of George Will's claim "According to the University of Illinois' Arctic Climate Research Center, global sea ice levels now equal those of 1979." Post ombudsman Andy Alexander provided this link http://arctic.atmos.uiuc.edu/cryosphere/global.sea.ice.area.pdf** to a *one page* document which includes the text



"However, observed N. Hemisphere sea ice area is almost one million sq. km below values seen in late 1979 and S. Hemisphere sea ice area is about 0.5 million sq. km above that seen in late 1979, partly offsetting the N.Hemisphere reduction." Now I thought that 1 million - 0.5 million = -500,000 != 0.





update: notes added and link made clickable. also one zpelling correction.



* There is an engraved bronze bell in the Washington Post building which refers in bronze to the post and it's editor or something.



** The link is now clickable thanks to cursed in comments.



update II pulled back from comments



2slugbaits says:

Yesterday, 5:53:58 PM

’ÄúGeorge Will has a problem getting basic facts right. This isn't the first time. For example, a few months ago he had a column about government salaries. He got the numbers wrong. A simple fact to verify. I sent him a link to the Office of Personnel Management site that showed government wages and salaries by region. He never corrected his post. He never even sent a private thank you. He just collected his paycheck from the WaPo and went about writing even more fact challenged editorials.



See also this mediamatters article on Will.





I explain the arithmetic subtleties of whether 0 = 500,000,000 after the jump.







The Washington Post is resting it's* credibility on the claim that 500,000 = 0, that is, that one half is approximately one -- the difference between the magnitude of estimated changes in the North and the South, which the Post asserts is zero, is equal to the estimated change in the South, which is Will's only point. This means the Post is saying both that 500,000 sq miles is insignificant and negligible and that it is important evidence.



In context the cited document argues that, even if, global sea ice areas were constant, the decrease in the Northern Hemisphere would be strong evidence of global warming and the increase in the Southern Hemisphere would be what is predictedy by some models of global warming (presumably not all models and presumably those some models were written after the fact was noted). That is, the cited publication argued that world wide sea ice levels are neither a useful statistic to test models of global warming against the alternative that climatologists are full of it nor a useful statistic to test the null that the climate isn't warming. A clause from that argument, taken out of context, was used by Will to falsely assert "According to the University of Illinois' Arctic Climate Research Center, global sea ice levels now equal those of 1979" even though that specific claim of fact is inconsistent with text in the cited document.



Now I understand that the cited document is a whole page long (with only one picture) but couldn't Mssrs Alexander and Will have read it before claiming that it said the opposite of what it said ?

by Robert (noreply@blogger.com) on February 21, 2009 11:40 PM

The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.

by tgirsch on February 21, 2009 05:36 PM

Robert Waldmann



Michael Kinsley suspects that the US government might decide to inflate its debt away.



"Just three or four years of currency erosion at, say, 10 percent a year would slice the real value of our debt ’Äî public and private, U.S. bonds and jumbo mortgages ’Äî in half."



Notice how "log(2)/log(1.1) = 7.25 becomes "three or four". To cut real debt in half the price level has to double not increase by 50%. OK maybe he meant the real value would be multiplied by 0.9 in a year (not the price level multiplied by 1.1) then the calculation is "log(0.5)/log(0.9) = 6.58 years.



Kevin Drum wonders if this is possible as expected inflation should be incorporated in interest rates.





It depends on the date of maturity of outstanding debt.



An increase in interest rates is a decline in the price of bonds, including those that have already been sold. The rest of the world would lose massively if the US inflated. The point is that the price of outstanding bonds is a problem for their owners not for the treasury. The amount that can be effectively defaulted via inflation depends on the maturity of the outstanding debt. If all US debt were 1 month t-bills only inflation over one month would necessarily be a problem for holders of current debt. Kinsley's calculation implicitly assumes that no debt will mature in the next "three or four" or 7.25 years. That is very far from true.



Some details after the jump.

update: absolutely humiliating innumeracy after the jump corrected thanks to anonymous in comments.







As of January the US Treasury owed $ 1,792,889 million on T-bills which, when issued mature within a year. There are also $ 516,209 million in inflation protected securities. The only way to default on them is to default openly or to fiddle with the price indices (nella gloriosa tradizione italiana non attuale). There are also $ 2,825,174 million in Treasury notes (mature 2 to 10 years after issue) some of which are nearing maturity. The holders of Treasury bonds (10 or 30 years) are trusting the treasury with a mere $ 591,890 million.



There is much detail on outstanding by maturity date. For those willing to do some calculations, the data are also available in excel format.



My calculations (don't trust them) are that there are 591,833 million in notes payable in 5 or more years sum(r199..r218) plus $ 594,641 million of Treasury bonds which won't mature within 5 years (means I don't understand how they code as they seem to rename bonds payable in less than 5 years notes or something). So little more than a mere trillion vulnerable to Kinsley's scheme.



However 10% inflation is for pikers. We collectively owe $ 2,145,201 thousands maturing in more than 2 years. Now that is tempting.

by Robert (noreply@blogger.com) on February 21, 2009 12:35 PM

For reasons that aren’Äôt entirely clear to me, Mikero.com is offering these and similar designs as T-shirts.

Clever and funny.

by KTK on February 21, 2009 09:58 AM

By Stormy



Trade is never simple; never straightforward. Countries use whatever means they can to keep critical commodities for themselves and they use whatever means they can to build export platforms to reap the rewards of trade.



Trade surpluses are always a measure of national wealth, despite how that wealth is shared, or not shared, among the citizens of a country. For the purposes of this post, I want to examine two taxation devices that are used to build trade surpluses. Rarely do you ever hear an economist discuss the details of the latest round of trade talks. Knee-jerk responses demand that they approve whatever agreement is on the table--all in the name of "free" trade, of course.



But with the present Depression moving like a hungry wolf around the planet, the U.S. must address the issue of jobs. No longer can it be content merely priming aggregate demand; anyone with half a brain has to understand that supply is the other half of that equation. But even half-brains have been in short supply these last few years. Trade has been on the back burner; monetary policy has been everything. No one gave a thought to job creation as long as easy credit kept the party going.



If this Long or Second Great Depression is going to be with us for a few years, as many now believe, then we must give some thought not only to the engine of our recovery but also to the shape of a new world order that is certain to arise.





Export taxes and Export Tax Rebates



Export taxes: Some countries employ them to reduce exports of key commodities. For example, China raised export taxes from 34% to 135% on urea, an important fertilizer; thus, driving the world price of fertilizer up in 2007. Russia has export taxes on petroleum; Malaysia on palm oil. The U.S. does not use export taxes; they are unconstitutional, apparently.



Export tax rebates: In a VAT tax system, export tax rebates are used to increase trade in given commodities or items. Increasing the rebate makes the good cheaper to export.



What few U.S. economists will acknowledge:

"China's foreign trade imbalance is driven by brisk global demand for China-made products and the ongoing migration of industries from developed to developing nations," said Mei Xinyu of the Trade Research Institute of the Ministry of Commerce.

In the 1980s and 1990s, attracted by cheap labor costs, multinational companies began shifting their manufacturing to China, opening factories in East China to process materials and export the processed products.

"The fact is most exports by these multinationals have been included in China's trade figures, and China's trade surplus mainly comes from processing trade. A high proportion of export profits in fact stay in the pockets of multinationals," said Mei Xinyu.

(The entire above article is well-worth reading.)



Between export taxes and export tax rebates on VAT taxation, China can easily fine-tune what products it wishes to export and what products it wants for home use. Export taxes can easily create world shortages of a given commodity; thus driving prices higher. Export tax rebates can easily act as subsidies, creating an unfair advantage for corporations within a country using them.



WTO position



How does the WTO treat the issue of export taxes? They are not prohibited per se--many countries use them, with the exception of the U.S.

How does the WTO treat the issue of export tax rebates? In 2006,

the WTO Secretariat, in the Trade Policy Review for China, directly criticized China’Äôs use of export tax rebates as an industrial policy tool, arguing that this was an implicit subsidy.

Despite the Secretariat's protestations that export tax rebates are an implicit export subsidy, the problem remains unresolved--and rarely do esteem American economist ever raise the issue.



Export tax rebates remain an essential part of China's 2008-2009 mercantile strategy:

BEIJING, Nov 12 (Reuters) - China moved on Wednesday to boost its export sector by increasing tax refunds applicable to more than 3,700 items as from next month.



The announcement, carried by the official Xinhua news agency, did not say what sectors or product lines would benefit.



The decision was taken by the State Council, China's cabinet.



China announced an increase in rebates of value added tax for more than a quarter of tariff lines on Oct. 21.



The government had already increased export tax breaks for the garment sector in July.

U.S. Confused Response



Right now the U.S. is struggling with the issue of trade.



President Obama's "Made in America" backfired.



Robert Reich correctly observes that it is a question of American jobs not the nationality of the company creating those jobs. For the moment, Robert has ridden to the rescue.



But, alas, Robert's neat verbal twist does not begin to unravel the issue of jobs, especially those jobs that produce goods and services that are indeed tradable. The reason is simple: U.S. mainstream economists simply are not interested in trade details.



The U.S. is constitutionally prohibited from export taxation. What if we had a shortage of a key material? Would we trade that material away if another country could pay a better price? What tax mechanism does the U.S. have to improve its own trade advantage? How do we compete with cheap labor buoyed by export tax rebates? How can it support its own industries, industries that are here on its own shores, not those that have already fled to Asia and elsewhere?



Let's take Robert's observation one step further. Granted it is a question of American jobs, not the nationality of the company. Now consider: Why would any company come to the U.S. to create American jobs when choicer locations lie elsewhere? What inducements are we going to offer? Tax advantages? Lower wages? Are we going to argue that Americans must now compete with impoverished Asians for jobs? I think so. We can build all the infrastructure we want; Japan did that in its lost decade. Finally, we must be making stuff that we want to buy. Robert's piece sounds nice, but it lacks details.



Beginnings of an Appropriate Response



Already, each country is struggling with the issue of jobs--and when they talk of jobs, they mean trade. The question is: How do we create those jobs while still bringing impoverished nations into the fold? How do we make globalization work for everyone?



I suggest that each country has the right to exercise financial and tax oversight of its corporations, corporations it nourished, even if those companies fled elsewhere.



Being a command economy and owning its important corporations, China has a distinct advantage. For the U.S. the problem is more difficult.



I am not suggesting ownership--although I do think a national bank is in order.



It goes without saying that any help a corporation gets from the U.S. government must be tied to creating jobs here in the states. I would extend a form of that principal to American companies using cheap labor or subsidies elsewhere to re-export goods or services back to the U.S. We may not be able to retrieve the jobs; we can retrieve some of the wealth they are creating for themselves while at the same time rectifying some of the global imbalances that have grown direfully dangerous.



Place a tax on goods or services our companies re-export to the states. Doing so does not in any way disadvantage real foreign competition, competition from firms of other countries, China included. All we are doing is penalizing flight elsewhere if that flight is used for re-export. We are, in effect, asserting that our corporations have U.S. responsibilities. While that responsibility may be a startling assertion to some, I find it quite a reasonable position.



I hear already the cries of "Impossible! Too hard to administer! Protectionist!" Hard to administer? I think not. Protectionist? Not really. The tax can be adjusted so that it does not entirely disadvantage cheaper locales. In short, as impoverished countries climb the consumer ladder, such taxation can be slowly relaxed. The world needs a way to grow in a balanced way, not this misshapen monstrosity that stands in the way of any reasonable development.



If my approach seems too bizarre, too other-worldy, then I put it to all those clamoring for American jobs: How are you going to create lasting jobs? What industries are you going to create that cannot be done cheaper elsewhere?



How are you going to keep them "down on the farm" when they love to sing Beijing?

by Stormy (noreply@blogger.com) on February 21, 2009 07:34 AM

In the past two minutes of checking out Coates's latest’Äîwell worth reading, otherwise’Äîthere have been banner and frame adverts for:

1. The Atlantic Business, edited by Megan McArdle, "Decoding the Mysteries of Today's Economic Order" or McMegan Explains Modern Business Models (a.k.a. "Built to Flip") All to You and
   
   
2. "Need Advice? Ask Jeffrey Goldberg"

Sorry, but from now on, I'll depend on Brad DeLong to do the heavy lifting.

by Ken Houghton (noreply@blogger.com) on February 21, 2009 02:35 AM

There is now an Angry Bear Chat Room facility, accessible from the lower-right corner of the blog.



Does anyone want to use it? Do you need/want posters and others to schedule regular times in there?

by Ken Houghton (noreply@blogger.com) on February 21, 2009 01:51 AM

Roubini speak, you listen. Everyone should read it.

H/T: E-Mart.

by tgirsch on February 20, 2009 10:13 PM

Prince of Darkness Denies Own Existence

"There is no such thing as a neoconservative foreign policy," Perle informed the gathering, hosted by National Interest magazine. "It is a left critique of what is believed by the commentator to be a right-wing policy."

&

"I see a number of people here who believe and have expressed themselves abundantly that there is a neoconservative foreign policy and it was the policy that dominated the Bush administration, and they ascribe to it responsibility for the deplorable state of the world," Perle told the foreign policy luminaries at yesterday's lunch. "None of that is true, of course."

Sorry this can't be allowed to stand. The Neo-Conservatives openly and jointed outlined their principles in the Project for a New American Century: Statement of Principles and then signed it. Their website disappeared before so I will put a full copy of the statement and its signatories below the fold so that people can decide for themselves whether Perle is deluded or lying here. Because I don't see a third alternative.Bolding is mine. June 3rd 1997

American foreign and defense policy is adrift. Conservatives have criticized the incoherent policies of the Clinton Administration. They have also resisted isolationist impulses from within their own ranks. But conservatives have not confidently advanced a strategic vision of America's role in the world. They have not set forth guiding principles for American foreign policy. They have allowed differences over tactics to obscure potential agreement on strategic objectives. And they have not fought for a defense budget that would maintain American security and advance American interests in the new century.



We aim to change this. We aim to make the case and rally support for American global leadership.



As the 20th century draws to a close, the United States stands as the world's preeminent power. Having led the West to victory in the Cold War, America faces an opportunity and a challenge: Does the United States have the vision to build upon the achievements of past decades? Does the United States have the resolve to shape a new century favorable to American principles and interests?



We are in danger of squandering the opportunity and failing the challenge. We are living off the capital -- both the military investments and the foreign policy achievements -- built up by past administrations. Cuts in foreign affairs and defense spending, inattention to the tools of statecraft, and inconstant leadership are making it increasingly difficult to sustain American influence around the world. And the promise of short-term commercial benefits threatens to override strategic considerations. As a consequence, we are jeopardizing the nation's ability to meet present threats and to deal with potentially greater challenges that lie ahead.



We seem to have forgotten the essential elements of the Reagan Administration's success: a military that is strong and ready to meet both present and future challenges; a foreign policy that boldly and purposefully promotes American principles abroad; and national leadership that accepts the United States' global responsibilities.



Of course, the United States must be prudent in how it exercises its power. But we cannot safely avoid the responsibilities of global leadership or the costs that are associated with its exercise. America has a vital role in maintaining peace and security in Europe, Asia, and the Middle East. If we shirk our responsibilities, we invite challenges to our fundamental interests. The history of the 20th century should have taught us that it is important to shape circumstances before crises emerge, and to meet threats before they become dire. The history of this century should have taught us to embrace the cause of American leadership.



Our aim is to remind Americans of these lessons and to draw their consequences for today. Here are four consequences:



’Ä¢ we need to increase defense spending significantly if we are to carry out our global

responsibilities today and modernize our armed forces for the future;



’Ä¢ we need to strengthen our ties to democratic allies and to challenge regimes hostile to our interests and values;



’Ä¢ we need to promote the cause of political and economic freedom abroad;



’Ä¢ we need to accept responsibility for America's unique role in preserving and extending an international order friendly to our security, our prosperity, and our principles.



Such a Reaganite policy of military strength and moral clarity may not be fashionable today. But it is necessary if the United States is to build on the successes of this past century and to ensure our security and our greatness in the next.



Elliott Abrams Gary Bauer William J. Bennett Jeb Bush



Dick Cheney Eliot A. Cohen Midge Decter Paula Dobriansky Steve Forbes



Aaron Friedberg Francis Fukuyama Frank Gaffney Fred C. Ikle



Donald Kagan Zalmay Khalilzad I. Lewis Libby Norman Podhoretz



Dan Quayle Peter W. Rodman Stephen P. Rosen Henry S. Rowen



Donald Rumsfeld Vin Weber George Weigel Paul Wolfowitz

Sorry Dick that is a Neo-Conservative foreign policy and signed by what would be the top national security officials of the Bush White House and Pentagon. But where is Dick? Well his name shows up in another document, this one the Letter to President Clinton on Iraq

Jan 28, 1998

The Honorable William J. Clinton

President of the United States

Washington, DC



Dear Mr. President:



We are writing you because we are convinced that current American policy toward Iraq is not succeeding, and that we may soon face a threat in the Middle East more serious than any we have known since the end of the Cold War. In your upcoming State of the Union Address, you have an opportunity to chart a clear and determined course for meeting this threat. We urge you to seize that opportunity, and to enunciate a new strategy that would secure the interests of the U.S. and our friends and allies around the world. That strategy should aim, above all, at the removal of Saddam Hussein’Äôs regime from power. We stand ready to offer our full support in this difficult but necessary endeavor.



The policy of ’Äúcontainment’Äù of Saddam Hussein has been steadily eroding over the past several months. As recent events have demonstrated, we can no longer depend on our partners in the Gulf War coalition to continue to uphold the sanctions or to punish Saddam when he blocks or evades UN inspections. Our ability to ensure that Saddam Hussein is not producing weapons of mass destruction, therefore, has substantially diminished. Even if full inspections were eventually to resume, which now seems highly unlikely, experience has shown that it is difficult if not impossible to monitor Iraq’Äôs chemical and biological weapons production. The lengthy period during which the inspectors will have been unable to enter many Iraqi facilities has made it even less likely that they will be able to uncover all of Saddam’Äôs secrets. As a result, in the not-too-distant future we will be unable to determine with any reasonable level of confidence whether Iraq does or does not possess such weapons.



Such uncertainty will, by itself, have a seriously destabilizing effect on the entire Middle East. It hardly needs to be added that if Saddam does acquire the capability to deliver weapons of mass destruction, as he is almost certain to do if we continue along the present course, the safety of American troops in the region, of our friends and allies like Israel and the moderate Arab states, and a significant portion of the world’Äôs supply of oil will all be put at hazard. As you have rightly declared, Mr. President, the security of the world in the first part of the 21st century will be determined largely by how we handle this threat.



Given the magnitude of the threat, the current policy, which depends for its success upon the steadfastness of our coalition partners and upon the cooperation of Saddam Hussein, is dangerously inadequate. The only acceptable strategy is one that eliminates the possibility that Iraq will be able to use or threaten to use weapons of mass destruction. In the near term, this means a willingness to undertake military action as diplomacy is clearly failing. In the long term, it means removing Saddam Hussein and his regime from power. That now needs to become the aim of American foreign policy.



We urge you to articulate this aim, and to turn your Administration's attention to implementing a strategy for removing Saddam's regime from power. This will require a full complement of diplomatic, political and military efforts. Although we are fully aware of the dangers and difficulties in implementing this policy, we believe the dangers of failing to do so are far greater. We believe the U.S. has the authority under existing UN resolutions to take the necessary steps, including military steps, to protect our vital interests in the Gulf. In any case, American policy cannot continue to be crippled by a misguided insistence on unanimity in the UN Security Council.



We urge you to act decisively. If you act now to end the threat of weapons of mass destruction against the U.S. or its allies, you will be acting in the most fundamental national security interests of the country. If we accept a course of weakness and drift, we put our interests and our future at risk.



Sincerely,



Elliott Abrams Richard L. Armitage William J. Bennett



Jeffrey Bergner John Bolton Paula Dobriansky



Francis Fukuyama Robert Kagan Zalmay Khalilzad



William Kristol Richard Perle Peter W. Rodman



Donald Rumsfeld William Schneider, Jr. Vin Weber



Paul Wolfowitz R. James Woolsey Robert B. Zoellick

I could have bolded more names. But what really can't be denied is that with the notable exceptions of Rice and Powell (who were largely side-lined by the people around Cheney) pretty much the entirety of what would become the Bush National Security team had already banded together and formulated a plan to invade Iraq. In 1997.



Sorry Dick. Neo-Conservatives can try to write themselves and their role in Bush Administration policy out of history. But maybe you should have taken the PNAC website down first. You wanted a war, you got a war, too bad it didn't work out for you. But man up here.

by Bruce Webb (noreply@blogger.com) on February 20, 2009 09:20 PM

rdan

David Altig at Atlanta Fed provides visuals for the stimulus spending.



Update2: Another good visual (h/t Mcwop) from Wapo

Update:

Yglesias makes a statement on past recessions and how long they lasted. Gilded does not mean Golden using this information. And that post-WWII expansion beat the pants off any other increase in the standard of living for the normal citizen of the the US of A.

by rdan (noreply@blogger.com) on February 20, 2009 06:34 PM

rdan



Politico reports the schedule for the fiscal summit. Does anyone know what it is supposed to do?

FORMAT: Approximately 100 guests will gather at the White House to participate in a summit on fiscal issues. The group will be composed of the President and Vice President, Members of Congress, members of the Cabinet and senior Administration officials, and various other experts in the field. The group of Members will be bipartisan and bicameral.



Session 1: The President and Vice President will each deliver remarks in an opening session in the State Dining Room. Open press.



Session 2: Breakout discussion groups led by members of the Cabinet and senior Administration officials on key fiscal issues. Pooled press.



Session 3: Plenary discussion led by the President regarding results of the five breakout groups. Pooled press.



Breakout sessions.



Health: Orszag, Melody Barnes, Sec. Shinseki



Tax: Geithner, Volcker



Social Security: Romer, Summers



Contracting & Procurement: LaHood, Napolitano, Bill Lynn



Budget: Nabors, Panetta

by rdan (noreply@blogger.com) on February 20, 2009 06:18 PM

guest post by Coberly



A few years ago the Social Security Trustees began publishing a warning that went something like this: "After the year 2040 Social Security will only be able to meet 75% of promised benefits."



You may have gotten this message in the mail, or heard it while waiting to talk to Social Security on the telephone. But look at what it really says.



If Social Security can meet 3/4 of promised benefits with the existing tax, it could meet ALL promised benefits with a 33% tax raise. 3/4 times 4/3 equals One.



But the current tax is 6.2% of payroll. 33% of 6.2 is 2.1. So a 2% raise in the payroll tax would enable Social Security to meet all promised benefits.



Current average income is 700 dollars per week. 2% of 700 is 14 dollars. (For a low wage worker, the tax increase would be about 7 dollars per week.)



Projected average income in 2040 is 1000 dollars per week. 2% of 1000 is 20 dollars per week.



So Social Security can be "saved" by a 20 dollar increase in tax on an income that has increased by 300 dollars by the time the raise is needed. The reason the raise will be needed is to pay for the six extra years of life expectancy those future tax payers will have compared to us. The 20 dollar raise will preserve their benefits at current replacement value and allow them to retire at the normal age.



This is not a crisis.



I can say a great deal more about this. But this is enough for lesson one. Except to point out that Peter Peterson has convinced everyone, including some bi-partisan experts and possibly Barack Obama that 20 dollars times 2 (boss's share) times 52 weeks times 200 million taxpayers times 75 years is an "Unfunded Deficit of 31 Trillion Dollars!!" Which of course it is. He hopes you will not do the arithmetic and realize it is still only 20 dollars a week. Or realize that it is "unfunded" because we don't need to pay for it in advance.

__________________________

guest post by Coberly.



Update: Walker's reply to Greiders "Looting of Social Security" article. Note the appeal to current deficit spending making the Trust fund a budget buster par excellence. Learn the accurate numbers here at Angry Bear.



Update 2: Coberly's previous contributions on SS at AB are indexed at Coberly on Social Security at Angry Bear

by rdan (noreply@blogger.com) on February 20, 2009 04:50 PM

rdan

(hat tip stormy)

Robert Hirsch notes the following in Energy Bulletin:

The world is now in a period of epic economic chaos. People are disoriented and unsure of what it will take to restore their economies. Many serious economists, financiers, and executives are loath to even forecast when an economic recovery might begin. It's easier for me now to understand how my parents and grandparents must have felt during the 1930s.

...

But the peak oil problem has not gone away. World liquid fuels production reached a plateau in mid-2004 and has fluctuated within a relatively narrow range in spite of mighty efforts to increase world production. In mid-2008, benefitting from the work of Campbell, Laherrere, Skrebowski, Aleklett, Simmons, Robelius, Gilbert, Bentley, Al Husseini, Deffeyes, Koppelaar, Birol, and others, I came to believe that world liquids production might stay on the existing plateau for the next 2-5 years and then go into a 3-5% per year decline.

...

Recently, OPEC cut back oil production in an attempt to stem the oil price decline. How much might their cutbacks delay the onset of world liquid fuels production decline? Assuming the plateau model and five years to the onset of decline, each million barrels per day of oil production withholding buys roughly three weeks delay, so a steady, continuing reduction of say four million barrels per day over five years might result in a delay in the onset of world oil production decline by maybe three months. That's not very much. We've now in a period of major human disorientation, but geology does not become disoriented on the human timescale.

by rdan (noreply@blogger.com) on February 20, 2009 02:37 PM

rdan



Boston Review carries an article by Dean Baker that frames regulation in a much more interesting way than is typical to media and political punditry. In my opinion, of course. But it makes talking to my conservative friends much easier when we discuss reality.



Dean Baker says:

The extraordinary financial collapse of recent months has been commonly described as a testament to the failure of deregulation. The events are indeed testament to a failure’Äîa failure of public policy. Blaming deregulation is misleading.



In general, political debates over regulation have been wrongly cast as disputes over the extent of regulation, with conservatives assumed to prefer less regulation, while liberals prefer more. In fact conservatives do not necessarily desire less regulation, nor do liberals necessarily desire more. Conservatives support regulatory structures that cause income to flow upward, while liberals support regulatory structures that promote equality. ’ÄúLess’Äù regulation does not imply greater inequality, nor is the reverse true.



Framing regulation debates in terms of more and less is not only inaccurate; it hugely biases the argument toward conservative positions by characterizing an extremely intrusive structure of, for example, patent and copyright rules, as the free market. In the realm of insurance and finance over the last two decades, calls for deregulation have been cover for rules tilted starkly toward corporate interests. And the recent change in bankruptcy law, hailed by conservatives, requires much greater government involvement in the economy.



False ideological claims have circumscribed the public debate over regulation and blinded us to the wide range of choices we can make. Without these claims, what would guide regulatory policy? What kinds of choices would we have?

by rdan (noreply@blogger.com) on February 20, 2009 12:18 PM

I keep wondering what the deal is with Megan McArdle. A more or less self-taught libertarian economics blogger who turned that into some big-league writing gigs, she shows much more facility with the technical aspects of the issues she discusses than most bloggers, which still leaves a lot of room for improvement. My impression has been that her posts are generally coherent (in the sense of being understandable - the first hurdle for most bloggers and many libertarians), but not especially well thought-out. In particular, I think she pretends to a degree of technical sophistication that she doesn’Äôt fully command.

Today’Äôs post - arguing for a ’Äúscientific’Äù approach to the bailout debate - seems to me illustrative of that phenomenon. She throws around some technical terminology, misapplies technical concepts, and adopts an artificial neutrality in places where it isn’Äôt justified, in order to position herself as rational and disinterested. I think there’Äôs a lot less there there than it looks.

Here’Äôs my position on what ended the Great Depression: ¬ÝI don’Äôt know. ¬ÝThere are a whole lot of theories out there, but with an ’Äún’Äù of 1, no overwhelming evidence in favor of any of them.

Misapplication of Theory The size of your ’Äún’Äù - the number of data points measured in a study - is relevant to statistical analysis. A larger ’Äún’Äù usually gives a smaller standard deviation and thus more reliable conclusions from whatever statistical tests you perform. Having an ’Äún’Äù of 1 is the classic mistake of assuming one example proves some sort of rule or trend. But this concept applies only to statistical analysis. The events of the Great Depression are historical, and reasonably well-documented. To get the answer we need, we merely have to trace out the events in question - what happened, and what consequences it had, and what happened from those consequences. The story is complex, and that’Äôs why people still argue over it, but the size of the ’Äún’Äù (there was only one Great Depression) has nothing to do with it. To treat distinct historical events as unanalyzable statistical problems is essentially to say that we can never know what caused any historical event. It doesn’Äôt even make sense to treat this as a problem of sample size: sample size merely affects the mathematics of the statistics (standard deviation and confidence interval) - but this isn’Äôt a mathematical problem. She’Äôs borrowing the supposed sophistication of mathematical economics to bolster her conclusion about a purely descriptive study. And she’Äôs not being metaphorical - she really means it (see below). But it’Äôs nonsense.

There are a few that I think most economists agree are not true, like that the spending portion of the New Deal ended the Great Depression through the magic of fiscal stimulus; a few percent of GDP in stimulus are not, at any reasonable multiplier, enough to produce high single-digit economic growth, which is why economists from Friedman to Tobin generally concluded that the decisive moment was either the monetary expansion of the late 1930s, while others credit the massive fiscal stimulus of World War II.

False Example, Artificial Neutrality I suppose most economists would agree on that if you asked them, but since that forms no part of the pro-FDR side of the argument, there’Äôs little point in asking them. This is classic straw-opponent argumentation: holding up a thesis that nobody entertains, and then demonstrating that the debate has to be conducted on her terms by demolishing the stupid claim while implicitly letting it stand in for the reasonable claim her opponents really do hold. (Nobody says that New Deal spending alone ended the Great Depression - especially since the Depression is generally held to have lasted at least until some time into WWII. But many people claim that the New Deal helped greatly ease the effects of the Depression, and that the problem with the New Deal was that spending was not high enough, not that the plan in concept was wrong-headed.) McArdle moves on to two alternate theories that leave the New Deal out of the picture after grandly dismissing an absurdly simplistic cartoon version of the pro-New-Deal theory; but she does so while pretending that she is being mainstream and uncontroversial, and that all economists agree with her. She thus positions herself as both neutral and among the anointed of economic theorists, when in fact she is, simultaneously, radical, revisionist, and wrong.

But which of those two theories is correct? ¬ÝNo idea. ¬ÝThe stimulus story and the monetary story both track the time frame reasonably well, and much depends on a counterfactual we can’Äôt test about what would have happened if America hadn’Äôt gotten into the war in 1941.

Misapplication of Theory Here she’Äôs back to the faux-science thing again. This time it’Äôs not statistics, but ’Äúexperiemental method’Äù, that provides the cloak of sophistication she’Äôs hoping nobody will notice she’Äôs not actually wearing. She wants to set up a ’Äúcontrolled experiment’Äù - have a whole bunch of Great Depressions in which we could try different economic theories (and presumably a control in which we’Äôd do nothing at all and simply watch people starve). That would be the ’Äúscientific’Äù way - because obviously you test a theory of global economics the same way you test a new drug, by setting up parallel test cases and observing them remotely. Without that, we just have ’Äúno idea’Äù which economic theory might be best. Somehow, it never seems to occur to her that there might be other ways of validating economic theories besides full-scale testing to destruction. It also seems never to have occurred to her that it has never occurred to any other economists - including the ones she quotes - that that is how you’Äôd do it. Nobody has performed multiple-Depression comparative studies under controlled conditions (or even imagined that it was sane to consider doing so), yet that did not stop her fellow Ayn-Randite Milton Friedman from developing his own theory on what ended the Depression - which she quotes just one line above! She claims that the New Deal hypothesis has been decisively eliminated without the benefit of comparative testing, and she also notes that celebrated economists, including ones she admires, have not considered such testing was necessary for their own theories, but this suggests nothing to her about whether her own ’Äúscientific’Äù approach to macroeconomics makes any sense.

[When a recession ends, it can take some time for complete recovery, because if] your economy drops by 33%, it takes four and a half years at 10% annual growth just to return to where you were before the crisis; meanwhile, your labor force and productive capacity have presumably grown somewhat, so you need to go even further to close the output gap.

Pretended Sophistication She knows math and everything! Sort of. The growth-rate calculation is correct as far as it goes; the ’Äúoutput gap’Äù remark is wrong. If ’Äúoutput’Äù means only total production, then obviously a growth rate of . . . whatever . . . in output will generate exactly as much of an increase in total output over a given time as the same growth rate in ’Äúthe economy’Äù produces an increase in ’Äúthe economy’Äù, whether or not the population, or total manufacturing capacity, have increased. If it is true that the population and manufacturing capacity have both increased in that time, then after the recovery back to pre-depression levels you will have the same total output being generated by a larger number of workers, using more equipment. This will mean you have, on average, lower output per worker and per machine. But there are technical terms for output per worker and output compared to productive capacity: they are ’Äúproductivity’Äù and ’Äúcapacity utilization’Äù, respectively. It’Äôs true that you would have to grow above the pre-Depression output level to accommodate increased workforce and capacity at their former levels of productivity and capacity utilization, but that is not what she said. It is not true simply to achieve the former level of GDP, or whatever your measure of raw output may be, which is what she did say. This is McArdle trying to be too clever by half. But the real point is that it’Äôs totally unnecessary: the time to recovery has virtually nothing to do with the rest of her article, and the output/productivity point was entirely out of left field - it has nothing to do with anything. She throws it in gratuitously, just to sound like a real economist - and gets it wrong.

I post about these things as, hopefully, something close to a matter of science.

Thank you, Megan! Thank you for showing us the light of . . . science!

It is an empirical question whether the multiplier for government spending is greater or less than one. It is an empirical question whether the multiplier for the spending we just did is greater or less than one. ¬ÝIt is an empirical question whether the sorts of crises we are now in produce liquidity traps such that fiscal shock therapy can result in a permanently higher level of growth.

I do not say that we will know the answer to these empirical questions; I daresay we won’Äôt, at least not to a certainty. ¬ÝBut there *is* an answer out there in the ether, yet most of the public debate about these questions is not much tied to empirics. ¬ÝThey are being debated as emotionally as if the topic were the relative virtues of the debaters’Äô spouses.

Once again, I am driven to quote the immortal Charles Murtaugh: ¬Ýthe universe is not here to please you

Misapplication of Theory So if you thought it was, or you thought that related in any way to economics . . . you’Äôre wrong. She makes a good point about the mistake of treating factual issues ideologically. That point needs to be made again and again, in so many circumstances. But not by Megan McArdle. In repeating over and over that ’Äúit is an empirical question’Äù how certain economics phenomena take place, she underscores her previous ’Äúscientific’Äù view of them. But this seems strangely incompatible with her original claim that scientific methods can’Äôt be brought to bear on phenomena where ’Äún = 1’Ä„. It is also oblivious to any notion that ’Äúempirical’Äù and ’Äúscientific’Äù are not really the same thing. We use scientific methods to investigate empirical phenomena, but there are other ways of doing so, especially when those phenomena - though ’Äúempirical’Äù - are not in their most significant aspects material or procedural, but rather historical or sociological. This article just takes a weird swing that makes it hard to draw out any coherent point: she starts out by emphasizing how opague economic events are, then cites authorities who have pretty definite points of view on the same events she says cannot be rigorously characterized, then emphasizes ’Äúscientific’Äù methods of studying them, and then insists repeatedly that they are ’Äúempirical’Äù and the answers to questions about them are ’Äúout there’Äù (’Äùin the ether’Äù - ironically, a quintessential modern example of a theoretical phenomenon science has abandoned; I wonder if she thinks the stimulus multiplier effect is ’Äúin the phlogiston’Äù?). In the end she decides again that ’Äúwe may never know’Äù most of these answers.

I doubt I’Äôm the only one who is wearied by the way so many of the participants in the debate seem to already know the answer they want, and are merely looking for a set of questions that will get them there most expeditiously. ¬ÝWas there ever a time when people didn’Äôt think that tricky economic conundrums could, or should, be used to ’Äúprove’Äù that their personal values about the level of taxation and spending are a scientific fact?

Artificial Neutrality This also is a reasonable point, though hardly an original one. But I think that, again, here, she’Äôs adopting a tortured stance of neutrality on what is far from a neutral question. Of course there are intellectually dishonest arguments on all sides of any controversial issue, and of course you can find liberal examples as well as others. But it’Äôs far more than a mere matter of opinion where those arguments are mostly found, and which side of many debates they mostly characterize. Whether it is flattering to their reputation or not, it is no more than simple truth to say that conservatives make a political tool of distorted falsehoods, in technical or scientific matters as much as purely ideological ones. Never mind the stupid artificial controversies they constantly drum up: does Obama wear a flag pin?; how much does John Edwards pay for a haircut?; what color are Al Gore’Äôs suits? That surely detracts from reasoned debate as much as their outright lies, but we can put that down to a basically childish mentality. But beyond that, they cannot, and by choice and by temperament will not, present basic facts in a straightforward, honest, and accurate manner. There is no neutrality to be had on the question of distorting facts to fit pre-determined conclusions: that is utterly and overwhelmingly a conservative practice. It is not even an error or mistake on their part - it is a deliberate strategy. Conservatives actively and knowingly embrace factual falsehood as a tactic and a general approach to fact-based issues. Conservatism is the root of creationism, of all things - an explicit denial of the scientific and empirical approach to knowledge that McArdle demands; some of its practitioners have explicit creeds openly stating that they reject facts in favor of pre-ordained dogma. It is the source of persistent, obsessive attempts to remove books from school (and often public) libraries, ban words, plays, movies, or music in broadcast media, restrict what can be shown in movies and TV, and to meddle in virtually every aspect of education from a religious and ideological point of view - in short, it is a movement that approaches education and knowledge as things to be prohibited and restricted. Conservatism is the source of sex education that doesn’Äôt actually discuss bodily functions and prohibits any reference to contraception or abortion. And in public policy discourse, conservative lies and distortions are legion, and well-documented. (There have been, literally, entire books devoted to the basic factual errors of Rush Limbaugh, Ann Coulter, and even so-called ’Äúscholars’Äù like Dinesh D’ÄôSouza, Thomas Sowell, and the ’ÄúBell Curve’Äù clowns.) The right-wing treatment of global warming, oil availability, conservation policy, and any other factual issue you care to name is simply thoroughly dishonest. And all this not even to mention the incredible dishonesty of their political campaigns and policy debates. There are mistakes, or even distortions, on all sides, but the right wing practices deliberate and open lying persistently, obsessively, and as a standard part of their political repertoire. It is another exercise in artificial neutrality to pretend otherwise - in this case perhaps not directly self-serving on McArdle’Äôs part, but indirectly so, as evidence of the supposed independence of ideology she enjoys as a libertarian rather than one of those ideologues on the political extremes. In fact, she makes herself partisan by ignoring the gross imbalance in partisanship along the left-right continuum.

In the end, this is all very confused and overwrought. If her only point is that we should treat debates over economic policy rationally, and with as much rigor as we can muster, that goes without saying. Elevating that to some kind of high-level theory about the nature of science and economics is just grandstanding. Larding it with all sorts of technical terminology, and even mathematical calculations, that add nothing whatsoever to the actual substance of the point being made, is self-aggrandizing bluster - putting on a show of technical knowledge to make herself seem sophisticated and authoritative. And when she gets the terminology wrong, bungles the calculations, and cites inapplicable statistical and experimental methods as necessary to the knowledge she seeks, her whole self-satisfied dramatic display goes hilariously off the rails.

by KTK on February 20, 2009 02:39 AM

There’Äôs no other word.

by tgirsch on February 19, 2009 09:55 PM

Heritage lets fly on the dumbest idea yet to emerge from the Democrat majority’Äîmortgage cramdowns:

Allowing bankruptcy judges to modify mortgages would:

Raise mortgage costs. Cramdowns would add additional risk that mortgages will not be repaid as the contract requires. Lenders must charge for that added risk, and experts estimate that the additional costs would raise mortgage rates by as much as two full percentage points or substantially increase required down payments.

These added costs would fall hardest on moderate-income and first-time homebuyers, who have a higher risk of defaulting on a mortgage. This will price many families out of the housing market.

Further undermine the value of mortgage-backed securities. Banks and other investors are already facing heavy losses because mortgage-backed securities have lost much of their value because of uncertainties about whether the mortgages will be paid. The language in H.R. 1106 increases this uncertainty. Investors will be at risk of both foreclosure and cramdowns that reduce the earnings of these securities. Many cramdown mortgages will later go into foreclosure. Since investors have no idea what this new provision will do to the value of their securities, prices will drop further.

Those would be the mortgage-backed securities that are at the heart of the meltdown.

Fail to help many homeowners. Only one-third of all Chapter 13 filers complete the process successfully and get the fresh start that bankruptcy promises. The other two-thirds ’Äúpay court fees, pay attorney’Äôs fees, pay fees to the bankruptcy trustee, invest time and money to restructure their financial affairs, and then wind up with nothing more than temporary relief. It is therefore not surprising that a substantial number of Chapter 13 filers’Äînearly one-third’Äîgo on to file for bankruptcy again.’Äù

There’Äôs, of course, more to the stupid bill. Here’Äôs my favorite:

Trying to fix the Hope for Homeowners program. Last summer, Congress created Hope for Homeowners, an FHA-based program that it originally claimed would help up to 2 million homeowners. To date, according to the FHA, it has actually helped about 500. The legislation makes a number of changes that will raise the cost of it by $2.3 billion but is unlikely to otherwise improve it. This would throw good money after bad.

In sum.

Mortgage cramdowns would further destabilize an already damaged housing market while increasing mortgage costs for future borrowers. This is the essence of bad policy at the wrong time, and it should be avoided at all costs. Adding a couple of good provisions to a huge policy mistake does not make it better. Changing the bankruptcy code in this manner is extremely misguided.

The Democrats’Äîsome of them, at least, most be cognizant of this.¬Ý But cramdowns sound good.

So, GOP, where are you guys?¬Ý Why are you not on TV talking about cramdowns?¬Ý Why are you not having a press conference on Capitol Hill saying that, while you can support much of the package, the cramdown provision is a no-go?¬Ý Oh, I’Äôm sorry.¬Ý You’Äôre too busy bitching about volcano monitoring, fruit fly and tattoo removal earmarks.¬Ý Well, at least you’Äôll save a few million bucks while the housing market goes to hell again.

My mistake.¬Ý I thought the purpose of the GOP was to act as a conservative counterweight to the Democrats. I didn’Äôt realize the purpose was to make snarky remarks on the evening news.¬Ý Carry on fiddling while Rome burns.

by Hal_10000

February 26, 2009 10:50 PM

One of the things that’Äôs been driving me fucking nuts about the GOP lately is their tendency to denounce various science projects as ridiculous government spending.¬Ý Putting aside any scientific merit’Äîjust assuming, for the moment, that these are wasteful programs’Äîtalking about them is stupid snarking that’Äôs more suitable to ... um ... a Right Wing blog.¬Ý Politicians should be focusing on the big picture, like the Entitlement Apocalypse closing in on us or the serious dangers of the mortgage cramdown, not wasting breath on projects that cost less than Congress’Äôs cloakroom budget.

Moreover, going after science projects that sound wasteful (but often aren’Äôt) just makes them look stupid.¬Ý You had Sarah Palin denouncing fruit fly research (and damn you Sarah, for making me link to Pharyngula).¬Ý Fruit fly research is the basis of much genetic research.¬Ý Just like week, I mentioned how critical genetic research could be toward stopping the rust fungus currently ravaging African crops.¬Ý We shouldn’Äôt be cutting off funds because ’Äúfruit fly’Äù sounds funny.

Then you had John McCain snarking about an expensive ’Äúoverhead projector’Äù’Äîi.e., a planetarium.¬Ý Because God forbid the public should learn something about the Universe we live in or get some positive return for the treasure they willingly pour into astrophysical research.

Now you have Bobby Jindal, in what is sure to be an iconic moment, denouncing volcano monitoring to make a very unclever joke about Washington spending.¬Ý But’Äîand damn you Jindal for making me link to fucking Krugman’Äîthis is beyond absurd:

Traditionally, the division between conservatives and liberals has been over the role and size of the welfare state: liberals think that the government should play a large role in sanding off the market economy’Äôs rough edges, conservatives believe that time and chance happen to us all, and that’Äôs that.

But both sides, I thought, agreed that the government should provide public goods ’Äî goods that are nonrival (they benefit everyone) and nonexcludable (there’Äôs no way to restrict the benefits to people who pay.) The classic examples are things like lighthouses and national defense, but there are many others. For example, knowing when a volcano is likely to erupt can save many lives; but there’Äôs no private incentive to spend money on monitoring, since even people who didn’Äôt contribute to maintaining the monitoring system can still benefit from the warning. So that’Äôs the sort of activity that should be undertaken by government.

That formulation Krugman uses’Äîthat government should fund things that benefit the public in general but are not profitable enough for private industry’Äîshould sound familiar.¬Ý Adam Smith used it too.

Monitoring volcanos’Äîlike the ever-dangerous Yellowstone caldera’Äîis one of those things government should be doing.¬Ý It’Äôs one of those things government could be doing, no problem, if it weren’Äôt so busy rewriting everyone’Äôs mortgage and backing up a bunch of slapnut bankers.

But apart from that, where has the sense of proportion gone? For fuck’Äôs sake, have the Republicans seen the budget, lately?¬Ý $140 million for volcano monitoring’Äîeven if we agree that it’Äôs a waste’Äîis pennies compared to the $1.5 trillion we’Äôve poured into stimulus and bailouts just in the last six months.¬Ý The forest is on fire and they’Äôre pissing on a smoldering dandelion.

Wake up, assholes!

PS - I’Äôm putting aside, for the moment, that these projects were funded through earmarks.¬Ý I oppose earmarks, even for science.¬Ý If these projects have scientific merit, they can go through the regular NSF/NIH/etc. peer-reviewed funding process just like everyone else.¬Ý Funding science through earmarks is a really bad idea, since science will get funded not on merit, put political pull.

But it’Äôs one thing to point out that science projects should be funded through regular channels; it’Äôs another to mock legitimate and important scientific research to score cheap points on the 6 o’Äôclock news.

by Hal_10000

February 26, 2009 10:29 PM

WASHINGTON (AP) -- Governments that receive donations of Ten Commandments displays and other monuments for public parks are not compelled to take everything they are offered, a unanimous Supreme Court ruled Wednesday.

February 26, 2009 02:18 PM

WASHINGTON (AP) -- They long ago pledged honor and duty to country, but this year their spoken word was not enough.

February 26, 2009 02:18 PM

WASHINGTON (AP) -- President Barack Obama may limit the countries to which the U.S. sends alleged terrorists to those with good human-rights records, and will be less inclined to hand prisoners over in general, to help make sure they are not tortured or abused, CIA Director Leon Panetta said Wednesday.

February 26, 2009 02:18 PM

WASHINGTON (AP) -- Republican Sen. John McCain said Wednesday that security gains in Iraq could be lost if the new administration pulls troops out too quickly, but he didn't dismiss the feasibility of President Barack Obama's 19-month timetable.

February 26, 2009 02:18 PM

WASHINGTON (AP) -- After devoting money and time in search of a rescue for the ailing banking sector, President Barack Obama on Wednesday demanded tough new regulations to keep financial institutions in check and avoid future Wall Street meltdowns.

February 26, 2009 02:18 PM

WASHINGTON (AP) -- Federal agents have rounded up more than 750 suspects in a wide-ranging crackdown on Mexican drug cartels operating inside the United States.

February 26, 2009 02:18 PM

WASHINGTON (AP) -- Mexican drug cartels are shipping more than massive quantities of drugs north of the border. Increasingly, they're also exporting bloody mayhem.

February 26, 2009 02:18 PM

WASHINGTON (AP) -- Sen. Roland Burris went back to work Wednesday, giving a speech on the Senate floor and presiding over a body he's been told by many that he should quit.

February 26, 2009 02:18 PM

WASHINGTON (AP) -- A Republican family feud in Kentucky is creating headaches for GOP leaders struggling to position themselves for a congressional comeback in 2010, a year that already seems aligned against them.

February 26, 2009 02:18 PM

WASHINGTON (AP) -- President Barack Obama is sending Congress a budget Thursday that projects the government's deficit for this year will soar to $1.75 trillion, reflecting efforts to pull the nation out of a deep recession and a severe financial crisis.

February 26, 2009 02:18 PM

WASHINGTON (AP) -- The detention center at the U.S. naval base at Guantanamo Bay, Cuba, has to be closed because of the damage it has done to America's reputation and to its ability to achieve foreign policy goals, the top U.S. intelligence officer told a House panel on Wednesday.

February 26, 2009 02:18 PM

WASHINGTON (AP) -- President Barack Obama may be in familiar company when he sits down for his first White House meeting with the Congressional Black Caucus, but it won't be a clubby reunion.

February 26, 2009 02:18 PM

President Obama unveils his proposed budget for FY 2010 on Thursday. Several news outlets already have summaries, and the bullet items paint a grim picture of massive government spending and the return of higher taxes. Obama will be pushing his plan for universal health care. That means the taxpayers will now be in the business of providing health care for all.



It's just too much for me to take today, so I'm going to take a different turn. We hear about these spending plans and the tremendous amount of money that Obama is planning to spend. But what about the real cost of freedom? I'm talking about the men and women who have given their lives to keep this country free. They have paid the ultimate price so that you and I can live in this great country. In the new HBO film, "Taking Chance," we are reminded of that sacrifice and how a fallen Marine still touches the lives of those around him, even after he has passed from this world.

February 26, 2009 02:11 PM

Why do so many people hate Gail Trimble?



Britain has a TV quiz show called "University Challenge", in which teams from various universities compete against each other to answer some very obscure questions. The team from Oxford's Corpus Christi college has just won. They won because one member of their team, Gail Trimble, seemed to know just about everything. As a much-published academic, I think I have some claim to being bright and knowing a lot but I would not have been able to answer a single one of the questions that Miss Trimble answered even before the question was finished.



Knowledge and intelligence are not the same but her prodigious knowledge is a byproduct of stratospheric IQ. She was reading at age one. And early language mastery is one of the best indices of IQ. Confirming the disjunction between knowledge and IQ, however, Miss Trimble failed utterly at answering "Pub Quiz" questions about film stars, TV shows and the like. She knows as little about popular entertainment as she knows a lot about academic things.



Since it is high IQ people who are responsible for the many scientific and technical advancements that have made our lives so much easier than the "nasty, brutish and short" lives of our ancestors, one would think that high IQ people would always be celebrated and admired. And they do often get recognition of various sorts, the Swedish (as distinct from the Norwegian) Nobel prizes, for instance. But I guess it will be no surprise that high IQ people also attract dislike and hatred. Envy is a very common human trait and it is not only higher incomes that are envied but many other things as well. And Miss Trimble has certainly attracted lots of dislike and abuse as a result of her abilities. See the insert below.







And that ties in with politics. The nonsensical and incoherent claim that underlies so much Leftist discourse is "all men are equal". And that is the envier's gospel. It makes not a scrap of sense and shows no contact with reality but it is something that enviers resort to as a way of soothing their envious feelings. They deny the very differences that give them so much heartburn. "Denial" was long ago indentified by Freud as a maladaptive psychological defence mechanism and "All men are equal" is a prize example of that. Whatever one thinks of his theories, Freud was undoubtedly an acute observer of people and very few psychologists today would doubt the maladaptive nature of denial as described by Freud.



So Gail Trimble by her very existence offends Leftists. Her existence pushes down their throats the falsity of their central dogma. Reality is SUCH a problem for Leftists! And because their central dogma is not rational, they can only respond to inconvenient reality by hatred and abuse. Conservative bloggers know from their email and the comments that they get on their blogs how most Leftists respond to any presentation of facts that are inconvenient to them. A rational comment backed up by facts is very rare. It is almost all assertion and abuse. If you are very lucky you may get selective attention to the facts but that is all.



Envy has always been with us and the envier's gospel has therefore had many outings throughout history. One thinks of the "Levellers" of Cromwell's day, for instance. And it also appears in the American Declaration of Independence, of course. There were enviers among the American revolutionaries too. But the declaration was of course a compromise document and Jefferson inserted into the envier's creed the word "created" ("all men are created equal"), which removed it from everyday reality and made it clear that the dogma was a matter of faith, not fact.



I think it must be because of that one word "created" in the Declaration that some Christians claim that God suffers from poor sight. They say "all men are equal in the sight of God". As the Leftist FDR said in his January 6, 1942 State of the Union address: "We are fighting, as our fathers have fought, to uphold the doctrine that all men are equal in the sight of God."



That is, however, very poor theology. The Bible makes it clear that God treats saints and sinners very differently. Homosexuals are accursed and condemned to death, for instance (Romans chapter 1). All men are NOT equal in God's eyes. I have seen Galatians 3:28 quoted in support of the equality myth but that text quite clearly refers to committed Christians, not to all men.



More about the brilliant Miss Trimble here and here



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REASONS FOR GLOOM



Looming ahead of us-- and our children and their children-- are dangers that can utterly destroy American society. Worse yet, there are moral corrosions within ourselves that weaken our ability to face the challenges ahead. One of the many symptoms of this decay from within is that we are preoccupied with the pay of corporate executives while the leading terrorist-sponsoring nation on earth is moving steadily toward creating nuclear bombs. Does anyone imagine that we will care what anyone's paycheck is when we see an American city in radioactive ruins?



Yet the only serious obstacle to that happening is that the Israelis may disregard the lofty blather coming out of the White House and destroy Iran's nuclear facilities before the Iranian fanatics can destroy Israel. If by some miracle we manage to avoid the fatal dangers of a nuclear Iran, there will no doubt be others, including a nuclear North Korea.



Although, in some sense, the United States of America is still the militarily strongest nation on earth, that means absolutely nothing if our enemies are willing to die and we are not. It took only two nuclear bombs to get Japan to surrender-- and the Japanese of that era were far tougher than most Americans today. Just one bomb-- dropped on New York, Chicago or Los Angeles-- might be enough to get us to surrender. If we are still made of sterner stuff than it looks like, then it might take two or maybe even three or four nuclear bombs, but we will surrender.



It doesn't matter if we retaliate and kill millions of innocent Iranian civilians-- at least it will not matter to the fanatics in charge of Iran or the fanatics in charge of the international terrorist organizations that Iran supplies. Ultimately, it all comes down to who is willing to die and who is not.



How did we get to this point? It was no single thing. The dumbing down of our education, the undermining of moral values with the fad of "non-judgmental" affectations, the denigration of our nation through poisonous propaganda from the movies to the universities. The list goes on and on.



The trajectory of our course leads to a fate that would fully justify despair. The only saving grace is that even the trajectory of a bullet can be changed by the wind. We have been saved by miraculous good fortune before in our history. The overwhelming military and naval expedition that Britain sent to New York to annihilate George Washington's army was totally immobilized by a vast impenetrable fog that allowed the Americans to escape. That is how they ended up in Valley Forge.



In the World War II naval battle of Midway, if things had not happened just the way they did, at just the time they did, the American naval force would not only have lost, but could have been wiped out by the far larger Japanese fleet. Over the years, we have had our share of miraculous deliverances. But that our fate today depends on yet another miracle is what can turn pessimism to despair.



Source



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BrookesNews Update



Dark clouds gather as Obama spooks the markets: Business men are not going to invest if they believe they will be punished for their success. They are not going to invest if they believe some blustering thug like Pelosi, Schumer or Barney Frank is going to start telling them how to run their businesses. When this kind of situation emerges the wisest thing for business to do is batten down the hatches. And this is just what might be happening

Central banks, including the Fed, are cranking up the money supply like crazy : We live in an age of grave economic ignorance, if central-bank policy is an indication of prevailing economic theory. It is apparent that we've learned nothing from centuries of monetary destruction. The persistent demonstration that capital, not paper, is the basis for prosperity has fallen on deaf ears. Daily, we face the sad spectacle of government officials, pundits, and even Nobel laureates telling us that printing money is the answer to an economic downturn

The economy tanks and the government resorts to snake-oil policies : It very much looks like the Reserve is counting on monetary policy to boost the economy. If this is so then we can expect it to continue cutting the cash rate until it detects signs of recovery or in its opinion prudence demands a halt to the expansion. No bank can expand the money supply at these rates without generating inflation

The fallacies behind Keynesian dogma: The global economic crisis that the reckless monetary policies of the world's central banks visited upon us has led to many mislabelling the situation as on of 'classic Keynesianism'. That vulgar Keynesian thinking contributed mightily to the crisis never enters the heads of these economic commentators - but then very little ever does

The New York Times vs. accurate Cuban history : The ACLU and the New York Times are outraged. A book filled with lies that extolled the virtues of Castro's bloodstained regime and treated the sadistic Che Guevara as a hero was withdrawn, at the insistence of parents, from Miami's public school libraries. A federal appeals panel supported the action. In doing so noted the gross dishonesty of the book. That also outraged the ACLU and the New York Times. How dare anyone expose their heroes as the murderous thugs they are

The People's Democratic Republic of Victoria: Premier Bracks and his fellow leftwing extremists have been gradually imposing draconian regulations and laws on Victorians that are rapidly eroding their democratic rights. This is the same despicable crew whose green policies savaged capital accumulation and recently killed more than 200 Victorians. One move is to bar from hospitals doctors who refuse to submit to the government's abortion laws. The thuggish and cowarly Bracks believes that acting according to one's conscience is a privilege that only Australian-hating leftists should be allowed to enjoy

Venezuela's bright side : The referendum results confirm that Chavez's base in the major urban centers, where Venezuela's biggest slums are concentrated, has been seriously eroded: His power is increasingly reliant on the more rural or provincial parts of the country. The symbolism of Chavez's defeat in Petare, a major slum in Caracas, cannot be overstated. Chavez still does not command enough power to achieve his totalitarian dream

Israel: the Time of NO Alternative: The only winner in the Israely election is the current 'lame duck' Prime Minister of Israel, Olmert, who will be able to stay in power and avoid corruption charges for a bit longer while this charade of forming a new Israeli government progresses

What we are not told about oil prices: The media is not telling the truth about oil prices. Is this because they want people think the worst of business make it look like a racket? By painting business as corrupt the media hope to get Americans to look to government to solve their problems. This way the people will more readily accept the socialist paradigm

Obama's Presidency: Is it any wonder the market continues to sink?: Obama's economic policies and his administrations constant attacks and threats again business have created an atmosphere of fear and uncertainty that has helped drive down the markets. If he continues with reckless behaviour we can also expect to see investment drying up. This would create a very ugly picture for unemployment and growth

Obama's 700 billion dollars: Obama's 700 billion dollars, one on top of the other, will be 233,333,333 feet high. That equals about 44,000 miles. New York City and Los Angeles are about 3,000 miles apart. This means that Obama's 700 billion dollar stack, if laid on the ground, would go from New York to LA and back to New York over 7 times. Now that's a fur piece!



For more postings from me, see TONGUE-TIED, EDUCATION WATCH INTERNATIONAL, GREENIE WATCH, POLITICAL CORRECTNESS WATCH, GUN WATCH, SOCIALIZED MEDICINE, FOOD & HEALTH SKEPTIC, AUSTRALIAN POLITICS, IMMIGRATION WATCH INTERNATIONAL, EYE ON BRITAIN and Paralipomena



List of backup or "mirror" sites here or here -- for readers in China or for everyone when blogspot is "down" or failing to update. Email me here (Hotmail address). My Home Pages are here or here or here



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The Big Lie of the late 20th century was that Nazism was Rightist. It was in fact typical of the Leftism of its day. It was only to the Right of Stalin's Communism. The very word "Nazi" is a German abbreviation for "National Socialist" (Nationalsozialist) and the full name of Hitler's political party (translated) was "The National Socialist German Workers' Party" (In German: Nationalsozialistische Deutsche Arbeiterpartei)



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by JR (noreply@blogger.com) on February 26, 2009 12:50 PM

By Thomas D. Segel -- There is a lot of hand wringing and moaning going on across the American landscape. The political prevaricators proclaim we are facing such dire times and such agony that it is almost the end of days. Pardon me, but what a bunch of crap!

February 26, 2009 12:46 PM

By Matt Towery -- You have to hand it to him. Barack Obama's speech before Congress was, from a presentation standpoint, incredibly strong. It needed to be, because what he likely did not know was that a new poll shows that 37 percent of all Americans, and nearly 50 percent of Democrats, believe the nation's economy is not in a recession, but rather a depression.

February 26, 2009 12:46 PM

By Michelle Malkin -- It shouldn't be long before ACORN recruits "Octomom" Nadya Suleman to serve as the radical left-wing group's foreclosure poster child. The jobless, unmarried mother of 14 faces eviction from her home in two weeks. Suleman's mother, who owns the residence, hasn't sent a mortgage check in 10 months and owes $23,000 in back payments.

February 26, 2009 12:46 PM

By Debra Saunders -- A couple of years ago, when speaking to a local group, I mentioned that The Chronicle was losing money. A couple in the back of the room rudely applauded. How thrilled those two must have felt when -- if -- they learned of San Francisco Chronicle Publisher Frank Vega's announcement Tuesday that the Hearst Corp. will implement "significant" workforce cuts. If the cuts don't pay off, then the Hearst Corp. will "offer the newspaper for sale or close it altogether."

February 26, 2009 12:46 PM

By Dick Morris -- With a speech to match the most eloquent of State of the Union Addresses, with strains of FDR and JFK and a touch of Winston Churchill thrown in, President Obama has clearly staked his presidency on the outcome of the economic crisis.

February 26, 2009 12:46 PM

Rather than turn Lee’Äôs blog into the Hal_10000 Healthcare Bleat, I’Äôve decide to put my full healthcare posts on my own site and smaller excerpts here.¬Ý I was going to post about the myth that our healthcare system’Äôs performance is poor.¬Ý But I’Äôve been overtaken by Obama announcements:

The Myth: Medicare does a better job than the private sector in controlling healthcare costs.¬Ý Over the last 35 years, Medicare costs have grown 1-2% more slowly than private care costs.

Bad Policy Based On The Myth: Barack Obama wants to expand Medicare coverage to millions more Americans, including making it optional for anyone over 55.¬Ý Obama is further proposing a ’Äúdown payment’Äù on health care reform financed by reducing provider fees that Medicare provides.

The Reality: [The politicians] have essentially frozen provider fees.¬Ý The fee schedule has been frozen, slashed and reconfigured so dramatically that many procedures pay no more than they did a generation ago.¬Ý In essence, every time a doctor or hospital treats a Medicare patient, they lose money.

Providers have only been able to make ends meet by (1) increasing volume; i.e. providing more healthcare than strictly necessary; (2) cost-shifting; i.e, charging non-Medicare patients more (which is why private insurance spending outpaces Medicare); (3) gaming the system.

The last is particularly noteworthy.¬Ý By discharging patients before they are fully healed, then re-admitting them for later procedures, doctors and hospitals can make up the revenue loss.¬Ý Obama’Äôs proposal is supposed to crack down on this practice.¬Ý But providers wouldn’Äôt be engaging in the practice in the first place if they didn’Äôt have to.¬Ý Contrary to popular belief, health care providers are not, generally speaking, unethical.

If (and it’Äôs a big if) Medicare closes off the system gaming, that will leave volume.¬Ý But providers are near their limit and Congress restricts volume.

So that leaves us with cost-shifting.¬Ý Doctors simply raise the fees on non-Medicare patients to keep their practices going.¬Ý So if it costs $100 to do a procedure and Medicare only reimburse $75, you bill your non-Medicare patients $125. This is Medicare as a pyramid scheme’Äîeven beyond the payroll tax pyramid.¬Ý Providers raise medical fees on young people so the government can finance the care of old people.

But like all pyramid schemes, it collapses if you run out of suckers.¬Ý And the current proposals dramatically increase the pressure on the sucker pool.¬Ý Every patient going into the Medicare system increases the costs of those not on the system.

And of course, if, as many Democrats want, we shift the entire population to something like Medicare, there’Äôs no one left to cost-shift to.¬Ý All the options for making up Medicare fees are lost.¬Ý Doctors will make dramatically less money and, pretty soon, your doctor will be, at best, a medical student hoping to get his education in the United States before practing somewhere’Äîlike wherever our politicans get their care’Äîthat pays a decent wage.

Medicare is not the model we want to build a healthcare system on.¬Ý I can outline numerous problems but this is the biggest and the most relevant.¬Ý The proposals to expand Medicare’Äîand shrink payments to providers’Äîare merely going to hasten the toppling of the pyramid.

And we’Äôre all in the shadow of this one.

Our government has become so used to pyramid schemes, that I think our leaders have become blind to them.¬Ý It honestly doesn’Äôt occur to them that Medicare’Äôs supposed efficiency indicates a problem, not a solution.

by Hal_10000

February 26, 2009 10:37 AM

Krugman has a point:

Traditionally, the division between conservatives and liberals has been over the role and size of the welfare state: liberals think that the government should play a large role in sanding off the market economy’Äôs rough edges, conservatives believe that time and chance happen to us all, and that’Äôs that.

But both sides, I thought, agreed that the government should provide public goods ’Äî goods that are nonrival (they benefit everyone) and nonexcludable (there’Äôs no way to restrict the benefits to people who pay.) The classic examples are things like lighthouses and national defense, but there are many others. For example, knowing when a volcano is likely to erupt can save many lives; but there’Äôs no private incentive to spend money on monitoring, since even people who didn’Äôt contribute to maintaining the monitoring system can still benefit from the warning. So that’Äôs the sort of activity that should be undertaken by government.

So what did Bobby Jindal choose to ridicule in this response to Obama last night? Volcano monitoring, of course.

And leaving aside the chutzpah of casting the failure of his own party’Äôs governance as proof that government can’Äôt work, does he really think that the response to natural disasters like Katrina is best undertaken by uncoordinated private action? Hey, why bother having an army? Let’Äôs just rely on self-defense by armed citizens.

Both sides used to agree on disaster preparedness when Republicans were reasonable, but that day is past. I’Äôm all for less government intrusion in our lives. But that doesn’Äôt mean that there’Äôs no role for government at all in a natural disaster-or, for that matter, a major terrorist attack. This is why I can’Äôt go along with the ’ÄúGet the hell off my lawn’Äù crowd, who are really anarchists in libertarian clothing. The government is not needed in all emergency situations, but some people do need Federal help after a disaster. The fact that a Republican administration bungled its response to one doesn’Äôt mean that it can’Äôt be done.

by West Virginia Rebel

February 26, 2009 10:23 AM

Halperin offers his take:

4. The president has a good ear for the level of populist outrage he needs to exhibit to satisfy the public’Äôs anger over Wall Street shenanigans.

5. If Republicans weren’Äôt sufficiently worried about the size and reach of Obama’Äôs megaphone before Tuesday night, they should ramp up their concern now.

6. Obama truly believes he is at the beginning of four-year teaching moment for the American people ’Äì and that his students are mature enough and interested enough to actually learn.

7. He’Äôs Mr. Cool, then, now and forever.

8. He knows that confidence is key ’Äì as much for him as for the country.

9.¬Ý Like his predecessor, he feels no need to be loved by members of the Washington political power structure (but unlike his predecessor, he’Äôs not hostile to it).

....

13. He seems genuinely inspired by the power and opportunities of the presidency (and has not become overwhelmed by the responsibilities, despite the overwhelming circumstances).

14. Youth + competence = a refreshing antidote to these exhausting times.

15. The man can give a heck of a speech ’Äì and has a close to perfect record of delivering at big moments.

I think it’Äôs safe to say that, while it might have been grandstanding, it was effective grandstanding, and Obama has created a political shift that the Republicans will finally have to learn how to deal with. And maybe they are:

I just got off the phone with a very plugged-in Republican strategist who told me that Republican reaction to President Obama’Äôs speech, which the party will roll out in the next few days, will mark the beginning of a new GOP approach to opposing the president’Äôs initiatives.¬Ý (No, Bobby Jindal’Äôs ineffective response was not part of that new approach’Äîeveryone seems a little embarrassed about that.) The Republican leadership in the House has concluded that in the stimulus debate, the GOP succeeded in dominating a number of news cycles but failed to score any points on actual policy.¬Ý That, the leaders believe, has got to change.

’ÄúYou’Äôre seeing a major doctrinal shift in how Republicans are going to focus all these debates,’Äù the strategist told me.¬Ý ’ÄúThe key is to focus on winning the issue as opposed to winning the political moment.¬Ý If you win the issue, people will think you are ready to govern.’Äù

I asked him to elaborate a little.¬Ý ’ÄúWith the political moment, it’Äôs how can you find the one thing that gives you the momentary upper hand in terms of the coverage for the next six hours’Äîas opposed to engaging the electorate in creating a structural change in their opinion on which party is better able to handle an issue.’Äù

....

So now Republicans want to try something new.¬Ý They point to last year’Äôs debate over energy, in which the GOP got the upper hand on the issue of drilling’Äîso much so that majority Democrats were forced to retreat from their position.¬Ý That, the strategist says, was the kind of clearly-articulated policy alternative that Republicans will be seeking to put forward today.

The change is already happening.¬Ý Last night on Fox, Sean Hannity asked House Republican Whip Eric Cantor whether the president’Äôs ’Äúmassive amount of spending’Ķis capable of getting us out of the economic downturn we now find ourselves in?’Äù It was a perfect opportunity for Cantor to tee off on the spending excesses in the stimulus.¬Ý Instead, he said, ’ÄúWell, Sean, if you’Äôre talking about the stimulus plan that was passed, I’Äôm trying to put the debate behind us.¬Ý We are where we are’Ķ’Äù

Just a few weeks ago, House Republicans cheered and high-fived each other for unanimously opposing the stimulus.¬Ý Now, having realized they won the soundbite contest but lost the war, they don’Äôt want to talk about it.

I think this is the key point here-the Republicans may still be good at getting their base all worked up over spending, but if even Cantor realizes that they need a new argument that goes beyond the talk-show circuit, then it’Äôs time for a change.

by West Virginia Rebel

February 26, 2009 07:04 AM

Jamie Dupree has a long list of the 9,000 earmarks that are in the Omnibus budget bill Barack ’Äúno earmarks’Äù Obama is about to sign.¬Ý Some of these might be worth funding’Äîin the regular budget process.

The President said he was going to cut spending. Vetoing this thing would be a good first step.

by Hal_10000

February 26, 2009 01:56 AM

Supreme Court strikes down casino plan in MassachusettsAncillary to the efforts of Governor Deval Patrick to create a new Sin City in the Bay State, the Mashpee Wampanoag had been trying to gain federal land around Middleborough for their own casino. Well, they came up double-zero when the Supreme Court ruled 6-3 that the government can't carve out land for them. From the Boston Globe "Ruling

by Eric (noreply@blogger.com) on February 26, 2009 01:51 AM

Fonts may not be WYSIWYG - Every time I cut and paste text from my Google Chrome browser, it looks all weird the next day.

by Eric (noreply@blogger.com) on February 26, 2009 01:49 AM

I didn’Äôt watch, partially for reasons Gene Healy gets at here:

Our founding fathers didn’Äôt want a president who’Äôd perpetually pound the bully pulpit.¬Ý They viewed presidential speechifying as a sign of demagoguery, and thought Congress should take the lead on most matters of national policy.¬Ý They expected the nation’Äôs chief executive to pipe down, mind his constitutional business, and keep his hands to himself.

The ’Äúpermanent campaign’Äù that dominates modern presidential politics would have appalled our forefathers. Accepting the 1844 Democratic nomination, James K. Polk described the custom of the time: ’Äúthe office of president of the United States should neither be sought nor declined.’Äù

When 19th-century candidates spoke publicly, they sometimes felt compelled to apologize, as 1872 Democratic contender Horace Greeley did, for breaking ’Äúthe unwritten law of our country that a candidate for President may not make speeches.’Äù

From Washington to Jackson, presidents gave about three speeches a year on average. In his first year in office, President Clinton gave over 600. Things have changed, but it’Äôs not clear they’Äôve changed for the better.

Obama’Äôs address tonight isn’Äôt technically a State of the Union (SOTU) address, purists insist, since he’Äôs only been in office a month.¬Ý But with members of both Houses and the Supreme Court in attendance - standing to clap for every outsized promise - it will look and quack like one.

I did react to the written version in a rambling collection of random neural firings.¬Ý But the speech was too all-encompassing and too lacking in specifics to be worth a true fisking.¬Ý The State of the Union Address is the political version of the Oscars’Äîself-congratulatory, full of unnecessary pomp and circumstance and about twice as long as it needs to be.¬Ý Only Obama wasn’Äôt going to do anything unexpected like one-handed pushups or denouncing zionist hoodlums.

There are more tasty fish to fry.

by Hal_10000

February 25, 2009 11:01 PM

WASHINGTON (AP) -- President Barack Obama plans to remove all U.S. combat troops from Iraq by August of next year, administration officials said Tuesday, ending the war that helped define his upstart presidential campaign -- although a little more slowly than he promised.

February 25, 2009 03:05 PM

WASHINGTON (AP) -- California Rep. Hilda Solis won confirmation Tuesday as President Barack Obama's labor secretary, giving the agency a decidedly pro-worker tilt after years of business-friendly leadership under the Bush administration.

February 25, 2009 03:05 PM

WASHINGTON (AP) -- The Supreme Court on Tuesday upheld a state law banning local governments from letting workers use payroll deductions to fund their union's political activities, a decision that could strike at organized labor's ability to raise funds at local levels.

February 25, 2009 03:05 PM

WASHINGTON (AP) -- Standing before the nation on a "day of reckoning," President Barack Obama summoned politicians and public alike Tuesday night to forge a path out of the worst economic disaster in a quarter-century by embracing shared sacrifice and costly new endeavors to improve health care, schools and the environment.

February 25, 2009 03:05 PM

WASHINGTON (AP) -- Homeland Security Secretary Janet Napolitano avoids the terms "terrorism" or "9/11" in remarks prepared for her first congressional testimony since taking office, signaling a sharp change in tone from her predecessors.

February 25, 2009 03:05 PM

WASHINGTON (AP) -- Republican leaders continued their attacks on President Barack Obama's handling of the economy Tuesday, calling it irresponsible and certain to increase taxes and federal debt.

February 25, 2009 03:05 PM

WASHINGTON (AP) -- President Barack Obama's assurance Tuesday that his mortgage-relief plan will only benefit deserving homeowners appears to be a stretch.

February 25, 2009 03:05 PM

WASHINGTON (AP) -- Executives of the biggest oil companies are taking their case for expanded offshore drilling to Congress, even as Democratic congressional leaders and the Obama administration promise to put some limits on energy development along the nation's coasts.

February 25, 2009 03:05 PM

WASHINGTON (AP) -- With one of their own in the White House, Democrats in Congress are moving to give domestic government agencies 8 percent more money, on average, to spend this year atop the whopping $787 billion in economic stimulus funds.

February 25, 2009 03:05 PM

WASHINGTON (AP) -- The people of the District of Columbia were closer Tuesday to gaining the voting rights they were deprived of more than two centuries ago after the Senate agreed to take up a bill giving them a fully vested representative in Congress.

February 25, 2009 03:05 PM

WASHINGTON (AP) -- Secretary of State Hillary Rodham Clinton is preparing to plunge into one of the toughest foreign policy issues facing the Obama administration -- the Israeli-Palestinian conflict, with personal diplomacy aimed at blunting what Washington sees as malign Iranian influence in the region.

February 25, 2009 03:05 PM

WASHINGTON (AP) -- Two members of Vice President Joe Biden's family own the company that oversees an investment fund linked to Texas financier R. Allen Stanford.

February 25, 2009 03:05 PM

Did anyone else watch it? For my own part, I think this sums it up pretty well:

It’Äôs both grand and pedestrian; grand, from the perspective of history, which is that a Democratic president is making an unapologetic case for activist government, for comprehensive, integrated, values-based expensive solutions to major problems, and, indeed, is asserting that the times themselves require that effort.¬Ý Pedestrian’Äîbecause’Äîbasically’Äîthe speech reads as a President justifying his plans to expand government.

Since that expansion is coming whether we like it or not, I think Obama did an effective job of making his case. At least he said there would be responsibility and accountability-but can there be, with something as big as Obama wants? High points: Obama saying ’ÄúThose days are over’Äù with regards to crooked CEOs; pledging to raise pay and health benefits for those in the military, promising to end subsidies for big agri-businesses, the banker who gave away his money to his employees, and stating again that America’Äôs ideals and working with other countries matters. Not so great: promising more money for biofuels and wind farms, and this part:

I just heard Obama guarantee that no one making less than $250,000 a year will pay a dime in higher taxes for the budgets he is proposing. He said he would be rolling back the tax cuts for the wealthiest 2% of the American people. The top 1% of all taxpayers currently pay about 40% of the income taxes. So what Obama is saying is that that is not enough. The wealthy need to pay more. And he is also saying that the other 98%, who are getting all the goodies are going to get it for free.

It’Äôs great that he’Äôs against taxes for ’ÄúMain street’Äù, but Obama can’Äôt both support American industry and business and yet expect those who run the businesses on Main Street to pay for the rest of his goodies and call it ’ÄúFair’Äù. And finally, there’Äôs Jindal’Äôs response, to which I think this might be the best reaction:

If it sounds like Jindal is targeting his speech to a room full of fourth graders, that’Äôs because he is. They might be the next people to actually vote for Republicans again.

If Obama doesn’Äôt manage to screw things up too badly, that’Äôs probably about right.

by West Virginia Rebel

February 25, 2009 02:41 PM

On Tuesday night, Barack Obama delivered his first address to a joint session of Congress. Standing before the legislators and the American people, Obama presented a laundry list of spending programs and made the call for even more government intervention. What ever happened to capitalism and the American way of life?



Yes, the speech was everything I thought it might be. But, I'm not sure what made me more angry and frustrated: Obama's tour de force of socialism or the Republican response. Republicans are supposed to offer an alternative to the Democrats, right? We are the party of smaller government, lower taxes, equal opportunity, and freedom. I heard none of that. How are Republicans supposed to win back seats if America can't tell the difference between the two?

February 25, 2009 02:08 PM

By Walter E. Williams -- Attorney General Eric Holder said the United States is "a nation of cowards" when it comes to race relations. In one sense, he is absolutely right. Many whites, from university administrators and professors, schoolteachers to employers and public officials accept behavior from black people that they wouldn't begin to accept from whites.

February 25, 2009 01:22 PM

By Thomas Sowell -- If Barack Obama has been the most remarkable phenomenon of the recent political scene, Sarah Palin must be second. The emotional responses to each-- especially by the media and the intelligentsia -- go beyond anything that can be explained by the usual political differences of opinion on issues of the day.

February 25, 2009 01:22 PM

By Tony Blankley -- I hate to admit it, but I miss Bill Clinton. At least that lecherous old charmer was more amusing than his successor as a Democratic president, our new mortician in chief, Barack "End of the World" Obama.

February 25, 2009 01:22 PM

By Brent Bozell -- We've endured two years of endless journalistic jawboning about Barack Obama, the great racial healer who would bind us together, the man who would get everyone singing on a sun-soaked hilltop with a bottle of Coke and a smile. So now that he's in, what has he got?

February 25, 2009 01:22 PM

A great point:

Only churlish Language Nazis would quibble with those bold new definitions of common sense and responsibility, much less note the extraordinary resemblance between Obama’Äôs mortgage-lending practices and those of the reptilian bankers he denounced so often during his presidential campaign:

’Ä¢ Down payments? We don’Äôt need no stinking down payments! Just like the bankers, who lured customers with deals that required no money upfront (at the height of the mortgage boom in 2005, 43 percent of first-time buyers didn’Äôt put down a single penny), Obama’Äôs plan doesn’Äôt call for the traditional 20 percent down. Instead, homeowners will be allowed to borrow more than their houses are actually worth. Just a week ago, being upside down’Äîowing more on your loan than the market value of your house’Äîwas considered economically debilitating; now it makes you a prime customer.

’Ä¢ Hey kid, wanna smoke some mortgage crack? The first rock is free! Through a combination of government subsidies and arm-twisting of banks, the Obama plan will slash interest rates’Äîin some cases, probably to less than 3 percent’Äîuntil a borrower’Äôs payments are no more than 31 percent of his gross income . . . for the first five years. Then the interest rate jumps to market levels. A week ago, that was known as an ’Äò’Äôexploding adjustable-rate mortgage,’Äô’Äô because so many of the people who took them got financially blown up.

...

I hope Obama keeps his checkbook handy, because it’Äôs almost certain he’Äôll be needing it again soon. We already know that trying to raise delinquent borrowers from the dead doesn’Äôt work, because banks have been trying like crazy to do it, with practically no success.

Contrary to what you see in old Frank Capra movies like It’Äôs a Wonderful Life, banks don’Äôt like to foreclose on homeowners. It’Äôs messy, expensive and time-consuming, and they almost always lose money when they re-sell the house. In 2007, when the mortgage crisis began, banks immediately began trying to keep their customers from defaulting, offering better interest rates, lower payments over a longer period, and sometimes even reducing the principals of loans.

Result: The government’Äôs own statistics show that, of the borrowers whose loans were adjusted in the first six months of 2008, half were delinquent again within six months. By eight months, the figure was up to 58 percent.

Well, those problems are easily solved.¬Ý We’Äôll just have another bailout in five years.

by Hal_10000

February 25, 2009 01:20 PM

Financial Stability, or Fascist Decline?



Increased state control in response to economic turmoil is nothing new. After the First World War, the resultant economic depression in Europe was used as a springboard by both Germany and Italy to embrace a fascist form of government. While the word "fascist" has fallen into disuse today (except as a political insult invariably hurled by the Left at the Right) its corporatist methodologies are front-and-center stage in the nation's capital. And it's time to reexamine their origins-and impact.



While most Americans are no doubt familiar with the militaristic facet of fascism, the economic side tends to be neglected-likely in part because those principles are shared by many in government today. The primary economic principles behind fascism focus on state intervention in private industry. In fascist economies, private individuals continue to run private industry, but only under the firm control of the government. This differs from socialism, where the state actually owns the industry.



A quick glance at history may make the pattern clear: As the inter-war economy worsened, so too did statist policies that destroyed innovation and initiative. In the mid-1920s, Italy's monarchical government was confronted with the rise of fascism, partly spurred by a fear of the rise of communism and partly from festering discontent over the way Italians perceived they had been slighted after WWI. Benito Mussolini, the leader of the Italian fascists, began to introduce state-centric policies. Il Duce (sound familiar?) was particularly infatuated with large public works projects to cope with the worldwide depression that hit.



In the early 1930s, he founded the Institute for the Industrial Reconstruction, whose purpose was to bail out debt-laden corporations. By the end of the 1930s, the Institute for Industrial Reconstruction had become a tool for the state to push its policies amongst the industries. Columnist Michael Ledeen, in his chilling piece, "We are all Fascists Now," states that fascism's "most durable consequence was the expansion of the ability of the state to give orders to more and more citizens, in more and more corners of their lives."



Similarly, in the late 1980s, Congress created the Resolution Trust Corporation (RTC), as a result of the savings and loan crisis. The RTC was a government agency intended to temporarily bail out bad assets. Its role, however, was taken over by the Federal Deposit Insurance Corporation (FDIC) in the mid-1990s, which has had to continue doling out cash to failing banks, as seen over the past year. The FDIC's individual account coverage rose from $100,000 to $250,000 last year, thanks to the TARP, putting taxpayers on the hook that much more. As ALG News previously reported, in the aggregate FDIC assurances rose some $2 Trillion in 2008.



And this same state-centric philosophy is behind President Obama's recently announced $2.8 Trillion Financial "Stability" Plan-a plan that demonstrates a strong affinity towards state control of private industry. In the fine print, firms that take TARP dollars will be forced to prove that they will use it to lend money. Yet such a policy does not learn the lessons of history. Mandatory lending and excessive credit by the Fed, the exact problem that put America into the current economic mess, is now proposed as the solution-and the government's prying hand will reach farther than ever into the nation's economic engine.



Already, Citigroup and Bank of America are rumored to be considered for nationalization. Investors are not taking the rumors kindly, and have responded by selling off as much stock as possible. The banks have been given a combined $95 billion since September, according to OpenSecrets.org, yet now they appear to be coming back for more. And the stock market is continuing to plunge with each new intervention.



So why is this government subsidy not working? The reason is that, as the government becomes more and more involved with the financial institutions, investors show less and less inclination to throw good money after bad. In short, they do not want to invest in companies that will be run by the federal government, for fear of failure. That in turn forces the federal government to purchase yet more shares to keep companies from going under. Ultimately, the government ends up owning the entire corporation. Corporatist fascism leads to socialism, in that sense.



History is not on the side of state-centric economic systems. Yet as long as those in Washington continue to insist on a government solution, so long will the market continue to flounder and corporations fail. And the blame will rest securely on a government which will have manipulated the economic crisis for its own benefit. After all, as President Obama's Chief of Staff Rahm Emanuel stated so eloquently, "You never want a serious crisis to go to waste. And what I mean by that is an opportunity to do things you think you could not do before." Unfortunately, it has all been done before. And thereby hangs a tale of woe.



SOURCE



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Taxpayer-fed fat cats



Last year, crippling pension and benefits costs caused the city of Vallejo, California to declare bankruptcy. In this year of compounded economic crisis, more towns and cities may follow Vallejo's lead, pushed over the edge by an accounting and financial-reporting provision known as GASB (pronounced "gaz-bee") 45. "It's a perfect storm of pension liabilities hitting us at a time when the economy is tanking and revenues are tanking," says David Edwards, the senior policy advisor to Atlanta's mayor. "It's unprecedented."



Localities that have already complied with GASB 45 have had to disclose the compromising long-term costs of lifetime health care and other retiree benefits. In New York City, which began compliance in 2007, the accounting measure has placed a new $63 billion liability on the books. Atlanta's pension- and benefit-related expenses exploded from $44.5 million in 2005 to $118 million today, even while the city cut its personnel headcount by 8.6 percent. In Vallejo's case, the city's declaration of bankruptcy last May was due to the fact that it was spending 74 percent of its $80 million general-fund budget on public-sector salaries and benefits. Police captains were entitled to receive $306,000 annually in pay and benefits, while 21 firefighters earned more than $200,000 a year, including overtime. After five years on the job, all were entitled to lifetime health benefits.



The culprit, of course, isn't GASB 45 itself but the ugly reality that it exposes. There are 22.5 million public-sector employees in the United States. The average state and local government employee now makes 46 percent more in combined salary and benefits than his private-sector counterpart does, according to the Employee Benefit Research Institute-including 128 percent more on health care and 162 percent more on retirement benefits. Four out of five public-sector workers have lifetime pensions. Paying for such lavish treatment is difficult; in 2007, Credit Suisse estimated that state and local governments owed more than $1.5 trillion in unfunded health-care and non-pension benefits. Further, the market meltdown has erased $1 trillion from municipal pension funds, according to Boston College's Center for Retirement Research.



New York City now spends an average of $107,000 for each of its 281,000 current employees-a whopping 63 percent increase since 2000. At the same time, its direct pension expenses each year have increased from $615 million to $5.6 billion. And New York isn't alone. Forty states estimate that their liabilities for public-sector health-care and other benefits exceed $400 billion-more than their entire public debt, according to Standard and Poor's. New Jersey has dug a particularly deep hole for itself. Its state pension fund lost half its value in 2008 but pays out $5.2 billion each year in benefits. "The state of New Jersey is insolvent," writes bond analyst Mike Shedlock. "Bankrupt might be a better word."



More here



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ELSEWHERE



Private sector wisdom: Koch Industries is a legend in modern American enterprise. It is the the largest private company in America, based in the heartland at Wichita, Kansas (originally an agricultural business). Activities include refining and chemicals; process and pollution control equipment and technologies; minerals and fertilizers; polymers and fibers; commodity and financial trading and services; and forest and consumer products. The companies have branches in nearly 60 countries and employ about 70,000 people. Two of the things that make Koch different. First, they put many millions into the free enterprise movement at the level of teaching and research at universities, notably the George Mason Uni. Second, they have an explicit committment to the moral values of classical liberalism. "At Koch Industries, we are firmly focused on long-term success. We believe in creating real value, rather than just the illusion of value. To do so, we strive to live by core values and guiding principles that include integrity, humility, respect and Principled Entrepreneurship". Their current newsletter has two striking pieces, one on the steps that they took twelve months ago to prepare for the disaster that they could see was coming. The other is a statement on the dangers of government intervention."



Winners in Life's Lottery: "Dick Gephardt was famous for calling the rich the "winners in life's lottery". He was of course implying that all those that were rich were simply undeserving trust-fund leeches, and that of course is unfair to the other 95% of America. Never mind that most of these 'winners' worked hard to get where they were...that gets in the way of the meme... Interestingly though, we now have a new class of folks who are more deserving of the label "winners in life's lottery." I refer of course to those 9 million mortgage defaulters who will be the beneficiaries of President Obama's Mortgage plan. Lets see.....get a mortgage you can't afford, get nailed by a nasty financial downturn, and get bailed out and keep your home. Wow! I can't think of anyone else who might be worthy of being called "winners in life's lottery". Talk about something that is is unfair to the other 95% of America...."



Jindal calls stimulus `irresponsible' in GOP response : "Tapped by the Republican party to deliver the GOP's response to President Barack Obama's congressional address Tuesday night, Louisiana Gov. Bobby Jindal took on the massive stimulus package and big government - and pledged that his party would regain the nation's trust. `In the end, it comes down to an honest and fundamental disagreement about the proper role of government,' Jindal said."



Brown vs. monkey: Where's the outrage?: "A political cartoon is misinterpreted and African-American organizations and their talking heads immediately see an opportunity to make noise. Meanwhile, a famous black woman is beaten down by her equally famous black boyfriend and commentary in the black community centers around, `What did she do to cause it?' Why are some African-Americans so cowardly when it comes to addressing black-on-black violence? . Rupert Murdoch may be public enemy number one for the progressive community, but he and his posse at The New York Post are not sanctioning the abuse and killing of black women. The beating Rihanna experienced at the hands of Chris Brown was tragic, but definitely not uncommon. . Where is the outrage? Where is the boycott? Where is the speech?"



ALG Hails Supreme Court Ruling Upholding Idaho Law Prohibiting Union Payroll Deductions from Being Used for Political Purposes: "Bill Wilson, President of Americans for Limited Government, hailed the Supreme Court's 7-2 decision in Ysursa v. Pocatello Education Association. "We at ALG are extremely gratified that the Supreme Court agreed with us," said Wilson. "This a victory for taxpayers who do not wish to be forced to fund union politics," he added. The decision determined that a state government may prohibit its counties, cities, and towns from subsidizing union political activities via its government payroll systems. "This is a great win. The First Amendment does not require government to devote taxpayer resources to facilitating the speech of its workers, their preferred political organizations, or anyone else," said Wilson. "This sets the table for states across the nation to set up similar prohibitions," Wilson added.



Democrats Halted Recovery, Derailed Economy Last Summer: "January's [1] Employment Situation Report from Uncle Sam's Bureau of Labor Statistics (BLS) was even worse than expected. Seasonally adjusted employment fell by 598,000 jobs and the unemployment rate rose to 7.6%. In [2] his Saturday address that followed this news, President Barack Obama was correct in pointing out that 3.6 million jobs have been lost since the recession, at least as "defined" [3] by the National Bureau of Economic Research (NBER), began. The recession, [4] as normal people define it ("a decline in gross domestic product [GDP] for two or more consecutive quarters"), began in the third quarter of 2008 and became official late last month when [5] the fourth quarter came in negative. What Mr. Obama "somehow" forgot to tell us is that almost 1.8 million of those seasonally adjusted job losses have occurred since his election, when his non-stop economic [6] no-confidence game went into high gear, and that 2.8 million jobs have gone away during the seven months that began in July 2008, the first full month of [7] the POR (Pelosi-Obama-Reid) economy. Beyond that, in comparing the raw month-to-month figures, i.e., before seasonal adjustment, it's clear that conditions on the ground in the real economy are in a worse state of decay than the seasonally adjusted data would indicate. The November 2008 to January 2009 economy underperformed the same months of the previous year by over 2.2 million jobs"



For more postings from me, see TONGUE-TIED, EDUCATION WATCH INTERNATIONAL, GREENIE WATCH, POLITICAL CORRECTNESS WATCH, GUN WATCH, SOCIALIZED MEDICINE, FOOD & HEALTH SKEPTIC, AUSTRALIAN POLITICS, IMMIGRATION WATCH INTERNATIONAL, EYE ON BRITAIN and Paralipomena



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The Big Lie of the late 20th century was that Nazism was Rightist. It was in fact typical of the Leftism of its day. It was only to the Right of Stalin's Communism. The very word "Nazi" is a German abbreviation for "National Socialist" (Nationalsozialist) and the full name of Hitler's political party (translated) was "The National Socialist German Workers' Party" (In German: Nationalsozialistische Deutsche Arbeiterpartei)



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by JR (noreply@blogger.com) on February 25, 2009 12:36 PM

I’Äôm seeing this sort of thing more and more these days. And it’Äôs pissing me off something royal.

Only a fool can not see the writing on the wall- we are going to have to move to single-payer at some point, because businesses can not compete and the largest problem for Detroit is’Ķ their health care obligations and other retiree benefits. Likewise, we spend an enormous amount of our GDP on health care yet have rankings that look third world on issues like infant mortality. Something has to give.

Ignore, for the moment, that unions and politicians will probably be exempted from the wonderful world of socialized medicine.¬Ý Everything about that sentence is wrong, except perhaps the idea that we will have a single-payer system.¬Ý Businesses competed fine without socialized medicine up until ... 2008.¬Ý We spend an enormous amount of our GDP on healthcare because’Äîwith all the shooting, dope smoking, McDonald’Äôs gobbling, teenage baby having and drinking we do’Äîwe present our healthcare system with tremendous challenges.

And our performance on healthcare isn’Äôt anywhere close to third world conditions.¬Ý That’Äôs just ignorance talking.¬Ý Our infant mortality rate is 6.3 per thousand deaths according to the CIA Factbook.¬Ý There are 179 countries and localities with worse rates, including 40 that are ten times worse.¬Ý Europe’Äôs rate is 5.8.¬Ý Canada’Äôs is 5.1.¬Ý Neither of those areas has the rate of teen pregnancy and substance abuse we have.¬Ý And much of the competition does not count severely underweight babies (<1 lb) in the statistics.¬Ý We do.

The forces of socialized medicine are rallying, sensing that their moment has come.¬Ý Perhaps they’Äôre right.¬Ý Earlier this evening, I thought I should give up the fight and just acquiesce.¬Ý But the more I think about it, the more I’Äôm determined not to give up without a fight.¬Ý They may drag me into socialized medicine, but I’Äôll be kicking and screaming the whole way.

But rather than respond to the Left’Äôs nonsense piecemeal, I’Äôm going to be systematic.¬Ý Over the next couple of weeks, in addition to my regularly scheduled snarking, I’Äôll be putting up some regular posts responding to various myths about healthcare being spread by the Left.¬Ý I’Äôll start sometime tomorrow night by addressing the notion that we are over-paying for our healthcare performance.

by Hal_10000

February 25, 2009 07:59 AM

A disturbing, yet also hopeful, look at honor killings in the West:

The press has reported a number of honor killings in the United States, Canada, and Europe. These cases show the killings to be primarily a Muslim-on-Muslim crime...The victims are largely teenage daughters or young women. Wives are victims but to a lesser extent. And, unlike most Western domestic violence, honor killings are carefully planned. The perpetrator’Äôs family may warn the victim repeatedly over a period of years that she will be killed if she dishonors her family by refusing to veil, rebuffing an arranged marriage, or becoming too Westernized. Most important, only honor killings involve multiple family members.

In other words, it’Äôs not seen as a crime by Muslim husbands and fathers, which is part of the problem. It’Äôs more like a mob hit-"Step out of line and you’Äôll get whacked.’Äù But in the West, at least, there are ways of fighting back:

90 percent of honor murders in the West are committed by Muslims against Muslims. The perpetrators may interpret the Qur’Äôan and Islam incorrectly, either for malicious reasons or simply because they are ignorant of more tolerant Muslim exegesis or conflate local customs with religion.

Here, Muslim-American and Muslim-Canadian associations might play a role so long as they cease obfuscation and recognize the religious roots of the problem. Now is the time for sheikhs in the United States and Canada to state without qualification that killing daughters, sisters, wives, and cousins is against Islam. A number of feminist lawyers who work with battered women have credited pro-women sheikhs with helping them enormously. Sheikhs should publicly identify, condemn, and shame honor killers. Those sheikhs who resist doing so should be challenged.

Women’Äôs rights are literally in the dark ages as far as many Muslim men are concerned. Often these men come from the most radical sects. In America we rightfully hail the idea of the strong, independent woman. Liberals could do themselves a great service by extending this view towards Muslim women, instead of the politically correct silence they too often receive in the name of multiculturalism.

by West Virginia Rebel

February 25, 2009 07:25 AM