Damn but just when I reach a point where I think things can’t get any stoopider inside the Beltway, we have a week like this one with the release of President Obama’s “budget” and once again the reality of stoopid is even worse than imagined.

Word leaked last Friday (April 5) that Chained CPI was going to be part of President Obama’s budget, prompting me to point out a simple truth, “A Bad Idea Is a Bad Idea, No Matter Who Proposes It.” Of course, starting Monday, all the usual suspects and even a few somewhat surprising suspects started pushing the idea as a wonderful thing, maybe even as good as sliced bread.

The first cheers I saw, came from the Wall Street Journal. It is difficult to detail all the errors in this piece but it starts with the idea that Social Security has any bearing on the Budget in the first place the goes on to “explain” why Chained CPI is just such a good idea:

The chain-weighted CPI registers slower inflation than the usual CPI because it allows for the substitution effect of price changes. When the cost of one item rises, consumers switch to a similar product that has not risen in price (or not increased as much). The substitution can occur intra-item (whole wheat bread instead of white bread) and inter-item (beer versus wine). The chained CPI takes the shifts into its calculation; the traditional CPI does not.

Of course, these types of discussions never point out how the folks who are already “substituting” are supposed to pay for price increases, just as it fails to recognize the basic facts of Social Security, including the fact that the average monthly benefit is $1,264 per month, which is barely more than a minimum wage job pays and we all know how richly you can live on minimum wage. (Yes, that’s snark.)

Scrap the Cap on Social Security

The Washington Post also is on the bandwagon and loving them some Chained CPI, once again pretending that Social Security is a part of the overall Federal Budget:

Most important, the president committed himself in writing to more than $100 billion in Social Security spending restraint over the next decade, along with $400 billion in health program reductions.

Ruth Marcus yesterday earned her WaPo0 money by being oh so very concerned with how the Republicans react to the President:

The conundrum of President Obama’s budget is that he has produced a “come let us reason together” proposal aimed at a Republican Party that has demonstrated no interest in being reasonable.

On Tuesday, Jared Bernstein of the Center on Budget and Policy Priorities wrote a blog post comparing Paul Ryan’s “budget” with the President’s by stating that if Ryan’s budget is (self-described) as visionary, then the president’s is “strategic.” Bernstein quotes his colleague, Robert Greenstein (President of CBPP) who produced a statement in favor of President Obama’s budget, and specifically, in favor of Chained CPI.

I can’t begin to detail all the errors in Greenstein’s statement but will try to address the most egregious ones. First off:

As it stands, the package makes tough policy choices while largely adhering to the principle, as enunciated by the Bowles-Simpson commission, that deficit reduction should not increase poverty or inequality. Nevertheless, the budget’s substantial spending cuts, both in entitlements and discretionary programs, would have real-world consequences for millions of individuals and families.

While there was a Bowles-Simpson commission, there was nothing “enunciated” by the commission as there was no report since the recommendations could not achieve the necessary vote count to be accepted as official. And once again, we have someone who should know better (and most likely does) trying to conflate Social Security as part of the overall Federal Budget.

Then there’s:

Experts widely regard the chained CPI as a more accurate measure of inflation for the population as a whole. It may well be, however, less accurate for elderly individuals and many low-income people and, thus, understate the inflation that they face.

What experts are saying this? The best I have found is that the NY Times had an article claiming this that they would later correct as Dean Baker points out here.

Reuters presents it as The Grand Bargain while the Christian Science Monitor presents it as a great idea because liberals are angry so that must mean it is bi-partisany or something.

Tiger Beat On the Potomac (h/t Mr Pierce) of all people, actually gets to the nut in their lede:

President Barack Obama says he’ll protect the most vulnerable seniors from his “chained CPI” proposal – but he’s not going to protect everyone. Not even all seniors.

The White House, fighting back against liberal critics who say he’s giving away too much, released details Wednesday of the protections Obama would include to make sure older seniors and low-income people don’t get hurt by lower benefits.

There it is. As I said the other day and will say many more times I’m sure, IF YOU HAVE TO MAKE SPECIAL PROVISIONS TO ASSURE PEOPLE ARE NOT HURT, YOU ARE DOING IT WRONG.

Such a simple damn concept. But of course, with all the people doing the cheerleading, none of them are people who actually have to live on Social Security so for them, it is only an intellectual exercise, not reality.

And because I can:

Cross posted from Just A Small Town Country Boy by Richard Taylor
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Ben Bernanke, Vampire Chairman by DonkeyHotey

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Yesterday (Wednesday July 13), Federal Reserve Chair Ben Bernanke was once again before Congress, testifying on the economy. Buried way down in the Reuters coverage of the hearing was this little nugget:

After recovering from the steepest recession in generations beginning in the summer of 2009, the U.S. economy has lost momentum in recent months. Gross domestic product expanded just 1.9 percent in the first three months of the year, and the second quarter does not look to have been much better. 

Bernanke held to the view that recent weakness was due in part to temporary factors like energy costs and the effects on global industry from Japan’s earthquake and tsunami.

But he acknowledged the labor market remains weaker than the Fed would like.

The labor market also remains weaker than the 14M unemployed and the 25M – 30M un and underemployed would like as well. While part of the stated Fed mission is “pursuit of maximum employment,” the actions of the Fed over these last few years seem to have been more along the lines of “we’ll pretend to do something and maybe the miracle will occur.” As far as Bernanke’s “…view that recent weakness was due in part to temporary factors…,” as I’ve stated before, there are always “temporary factors” that are going to have an effect on life. It is part of life and should be part of his work to be anticipating and dealing with those “temporary factors” as they occur rather than using them as an excuse.
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Well, instead of being “surprised” by the June (lack of) Jobs Report, it seems the economists were “stunned” by the numbers (via Bloomberg):

Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said he was “stunned” by today’s U.S. employment report.

He wasn’t the only one.

Not a single economist among 85 surveyed by Bloomberg News correctly forecast the 18,000 increase in payrolls in June reported by the Labor Department. Estimates ranged from a low of 60,000 to a high of 175,000. The median was 105,000 — almost six times the actual number.

…snip…

It’s not unusual for payroll figures to fall outside of the range of economists’ forecasts. The same thing happened last month, as well as in October, November and December of last year.

That last paragraph should become a mantra for economists looking for excuses, but it most likely will not. As I’ve mentioned in earlier posts, there are always extraneous reasons for things happening within the economy. Like bad weather. And there will always be extraneous impacts that should be accounted for in any economic forecasting.

There have been a number of other articles/opinion pieces from yesterday and today that I have found interesting. While Bloomberg reported here that Warren Buffett is betting ‘very heavily’ against a “double-dip” recession (and that kinda scares me a little as I’ve predicted that there will be an official double-dip), the Wall Street Journal seems to be considering a double-dip quite possible.

Washington Beltway Villagers are still in the austerity mode with all the talk of the debt ceiling increase needing drastic cuts to accompany the increase. At least officially, although CNN points out that the GOP is once again claiming tax cuts as the route to employment Nirvana. But there are a few signs that the problems faced by millions just might be penetrating the consciousness of a few folks inside the Beltway. Today’s Washington Post had this opinion piece from Pete Peterson himself pointing out:

Immediate spending cuts and revenue increases could be counterproductive in the context of today’s grim employment outlook, but we need to reach a grand bargain fast to prove to the world that America is back in business.

Mr Austerity “how can we destroy save Social Security” himself recognizes that government does have a role and unfettered and unconstrained slashing is the worst thing that can be done.

Dave Leonhardt in the NY Times Economix points out the austerity trap by invoking Hoover, Roosevelt, and Japan:

In all kinds of ways — consumer demand, the federal deficit, even the weather — the medium-term future is highly uncertain. But this uncertainty, while the main problem, is not the only problem. We are also committing an unforced economic error. We’re cutting government at the same time that the private sector is cutting.

It is the classic mistake to make after a financial crisis. Hoover and even Roosevelt made a version of it in the 1930s. The Japanese made a version of it in the 1990s. Now we are making it.

Reuters has an analysis reaching the same conclusion:

Data on Friday showed hiring ground to a near halt last month, driving the jobless rate up to 9.2 percent and casting doubt on whether a sluggish U.S. recovery would soon pick up steam.

This all but ensures the Federal Reserve will keep interest rates at record lows well into 2012. But help probably won’t be as forthcoming from Congress and the White House, which are locked in battle over cutting a $1.4 trillion budget deficit.

The problem is one of timing: Economists and investors fear that with weak labor and housing markets causing consumers to tighten their own belts, the last thing the economy needs is an aggressive dose of austerity from the federal government.

Ezra Klein at the Washington Post had this blog post on long term effects of unemployment including:

It makes you permanently poorer: In 2009, Till von Wachter, Jae Song, and Joyce Manchester released a study on what happened to the long-term earnings of laid-off workers after the 1982 recession. Immediately, laid-off workers experienced annual earnings 30 percent lower than those of workers who hadn’t lost their jobs. But even 15 to 20 years on, these workers experienced 20 percent lower wages than people who had kept their jobs decades previous

…snip…

It makes you sicker: Being laid off has serious long-term health effects. William Gallo of Yale Medical School has found that people who are laid off near retirement are twice as likely to have a stroke or heart attack. Gallo, along with Jennie Brand and Becca Levy, have also found that being laid off or part of a branch closing increases one’s likelihood of depression.

So here we sit with more than 14M unemployed and between 25M – 30M (at least) un and underemployed, watching as the White House and Congress continue to dance in their stylized way around the real economic needs, here are a few other articles, pointing out some rather obvious things. However, as one who has seen obvious points be ignored by the folks in the bubble, it can’t hurt to point things out for even the most willfully obtuse politicians. Things such as “Wages fall in sagging job market.” Or “Job seekers get left out of the recovery.” “More consumers getting behind on their bills” and “After ‘mancession,’ women getting left out of recovery.”

The recovery has rolled into Wall Street and corporate profits. It has lifted the financial industry which created much of the original problem. But for those who aren’t MOTU or Members of Congress able to pop for a $350 bottle of wine, we keep falling further and further behind. Which I guess, just means we get to sacrifice more rather than those poor poor rich people.

And because I can:

Cross posted from Just A Small Town Country Boy

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This morning (Wednesday, June 22) David Dayen at FDL News reports that the entire Senate Democratic leadership is getting behind a jobs/stimulus push:

The Senate Democratic leadership – all of them, Harry Reid, Chuck Schumer, Dick Durbin, Patty Murray, Debbie Stabenow and Mark Begich – planned a morning press conference today where they will call for job creation measures, or stimulus, to be included in any debt limit deal.

This follows a report from Politico on Sunday:

Fearing the economy may be getting worse, Democrats plan to soon unveil what they’ll call a “Jobs First” agenda — and the stakes are high. A bleak economic outlook, like the May jobs report, could cost Democrats their thin Senate majority and even the White House if they can’t make a strong case to an anxious electorate that their policies will create jobs.

Senate Democrats are now grappling with ways to gain an edge in the economic debate dominated by budget talk. For instance, in an attempt to woo Republicans, Sen. Chuck Schumer (D-N.Y.) and the White House are open to extending a payroll tax break to stimulate the economy, but that has spawned unease from Democratic senators such as Maryland’s Ben Cardin who worry that it would drive up the deficit and unnerve liberals such as Vermont’s Bernie Sanders, who are concerned it would deplete the Social Security trust fund.

While the Politico piece reinforces for me the idea of the Dems actions as just so much posturing, so does this, also from the Dayen piece:

There’s a sense that this is mainly rhetorical. Democrats have seen Republicans obstruct even the most piddling of jobs bills in the Senate. Yesterday the reauthorization of the Economic Development Administration, an old Great Society program, failed to break a filibuster.

This article from today’s Washington Post on Senate Budget Committee Chair Kent Conrad’s claim that $2 trillion in spending cuts is not enough tends to reinforce the believe that it is posturing:

The debt-reduction package emerging in talks between the White House and congressional leaders would not “fundamentally change” the alarming rate of growth in the national debt, the chairman of the Senate Budget Committee said Tuesday.

Sen. Kent Conrad (D-N.D.) said the goal of slicing more than $2 trillion from the federal budget by 2021 falls far short of the savings needed to stabilize borrowing, reenergize the economy and avert the threat of a debt crisis.

As we all know, Conrad is one of the Gang of Six Five Thieves Deficit Hawks who doesn’t quite seem to comprehend that creating jobs would go a long way to addressing those long term deficit problems through increased tax revenues across all aspects of the economy. Even Wall St Journal and Bloomberg/Business Week columnists have come out this week and stated that jobs are the most serious issue of all today. Now, I don’t know of anyone who would perceive that the folks at either of these as being “card carrying members of the professional left” yet both are pointing out the fallacies of the current political discourse.
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2010-04-22 by bgottsab, on Flickr

The past couple of days there have been all sorts of stories in the news about “OMG! The budget deficit!!11!!1! Whatever shall we do?” From the news that Standard & Poor is threatening forecasting a need to “downgrade” long term US debt to Sen Dick Durbin whining about Bernie Sanders introducing a resolution vowing that Social Security should not be cut to Treasury Secretary Geithner declaring that an “agreement is near” for long term deficit reduction, the Beltway Villagers are all in a tizzy.

Earth to the Villagers – decent paying jobs with good benefits would go a long way to resolving much of the “crisis” that has so many of you twisted in knots. And that is not to be defined as McDonald’s level jobs or other primarily minimum wage service jobs. I’m talking here about jobs that can allow a family to do more than survive and jobs where the wage earner can pay a rent or mortgage, purchase new clothing, maybe even buy a new car. If the jobs actually have benefits rather than being Perma-Temp, all the better.

This morning saw a press release from the Bureau of Labor Statistics on the national unemployment rate:

Regional and state unemployment rates were generally little changed in March. Thirty-four states recorded unemployment rate decreases, seven states registered rate increases, and nine states and the District of Columbia had no change, the U.S. Bureau of Labor Statistics reported today. Forty-four states and the District of Columbia posted unemployment rate decreases from a year earlier, five states reported increases, and one state had no change. The national jobless rate was 8.8 percent in March, little changed from February but 0.9 percentage point lower than a year earlier.

Again I ask, what kind of jobs are these that are “lowering” the official unemployment rate? Since today is the big, nationwide McDonald’s Job Fair that was trumpeted a couple of weeks ago, will this push the Unemployment rate down another tenth of a point? If so, it probably won’t do much for the Underemployment (U6 in linked chart) numbers at all.
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A few months ago, I offered my services — only half facetiously — to British Petroleum as CEO after I had read about and watched bits of Tony Hayward’s testimony before Congress. He’d acted like the Sergeant Schultz character (I know nothing, nothing!) on the old sitcom Hogan’s Heroes; I figured I could do at least as good a job as Hayward for a lot less money. Win-win all the way around for everyone!

The Sergeant Schultz defense seems to be fairly common among CEOs and upper management for many companies, even though they are paid to be aware of what is going on. I would imagine that there are many of us among the millions of long term un and underemployed who could do the jobs of CEOs and so-called Masters of the Universe and be not only more honest in our dealings with others but also more empathetic for those who are struggling.

Instead, we get to see Goldman Sachs CEO Lloyd Blankfein’s salary and other compensation jump again in 2010:

The firm’s board granted restricted stock valued at $12.6 million to Mr. Blankfein and other senior executives, including Gary D. Cohn, the firm’s president. The board also approved a new annual base salary of $2 million for its chief executive, up from $600,000. Mr. Cohn and others will see their base salaries increase to $1.85 million, according to the filing on Friday.

With his previous salary of $600,000, Mr. Blankfein’s 2010 compensation comes to $13.2 million. Senior executives often receive part of their compensation in cash, but Goldman did not release details on this component of Mr. Blankfein’s compensation.

Surprisingly, this does not sit well with all corners of the business world. This is from a Fortune Mag (via CNN blog):

How might you compensate management for a year in which profits plunged, you spent $550 million of shareholder money to settle a fraud investigation and your stock ended up more or less exactly where it started (see chart, right)?

You might be tempted to nix raises or withhold bonuses to send a responsible message about linking pay to performance. But if so, you wouldn’t be Goldman Sachs (GS).

It just had the year described above – and responded by tripling everyone’s base salary while boosting bonuses by 40%. Is this a great country or what?

Turns out, Bank of America is doing similar and is also not winning fans for doing so (via Wall Street Journal):

Bank of America Corp. intends to give some investment bankers a greater share of their bonuses in cash, the latest Wall Street compensation move roiling banking chieftains as they meet in Davos, Switzerland.

Last year the highest-paid bankers at the nation’s largest bank by assets received as little as 5% of their payout in cash. Now bankers and traders making more than $5 million are getting as much as 30% of their 2010 compensation in cash and at least 70% in deferred stock, according to people familiar with the situation. Some could see a stock award of as much as 80% and 20% in cash.

Of course, the bankers love to send mixed messages. Read the rest of this entry →

As I tend to do most morning after I’ve checked the jobs sites in my attempt to find full employment, I came across this piece of gibberish written by Arthur Laffer for the Wall St Journal (via Google). For those too young or too memory impaired, Laffer was the "author" of the "Laffer Curve" which was used by the Reaganauts and subsequent Republican politicians to justify massive tax cuts for the rich.

It’s hard to know where to begin in tackling the various strawman and out right fallacious arguments Laffer uses in this opinion piece.

On the face of it, the idea that higher unemployment benefits won’t lead to more unemployment doesn’t make much sense. Imagine what the unemployment rate would look like if unemployment benefits were universally $150,000 per year.

First off, few people are actually calling for higher Unemployment compensation, although with an average weekly payment of $293 per week, with only a few states maxing out their Unemployment payments over $500 per week, it surely would not be a bad thing to raise the compensation a bit.

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