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Tom Friedman’s Fantasy Dream Is America’s Nightmare

9:30 pm in Uncategorized by Scarecrow

Tom Friedman seems to alternate between days with provocative ideas that challenge conventional wisdom, for better or worse, and days with fantasies built on absurd notions, massive ignorance or delusion, which if implemented would be catastrophic. He’s equally certain and proud of both, so you have to be careful.

Judging by today’s New York Times column, today is Tom Friedman’s catastrophic fantasy day.

In a column in which he fantasizes a joint media appearance with Speaker Boehner and President Obama, Friedman dreams of the two men making humble concessions, then walking hand in hand into the White House to negotiate a “grand bargain” that resolves all the country’s outstanding budget deficit/debt issues. Everything’s on the table, and both sides are earnestly committed to bargain in good faith and reach a reasonable compromise. On seeing this, the market immediately rises a zillion points.

There’s only one problem. The deal Friedman assumes these men would likely produce could wreck the economy and harm millions of people.

Like all too many in Washington, Friedman believes that a grand bargain that dramatically reduced near- and medium term deficits and long run debt would actually help the economy and benefit the nation’s citizens. But instead, it would do exactly the opposite. That’s because the prevailing ideas for what goes into this grand bargain do not include solving any of the nation’s actual problems. And though the debt crisis is phony, the proposals are only superficially about reducing debt. But they have everything to do with crippling the federal government’s ability to function in the public interest.

What Mr. Boehner’s Republicans want is not a trimmer, more efficient government; they want a government that can only support a much smaller public sector and is significantly weaker in dealing with the private economy and those it affects. They want a government so weak it cannot threaten the ability of the financial sector to continue looting the economy and so politically constrained and captured it cannot induce industries to internalize the costs of health, safety and environmental measures needed to protect the public from harm; it would function only to enable what industries want. They want to protect the rich from taxation and do nothing to prevent the relentless transfer, through unfettered non-competitive markets, of the nation’s income and wealth from the bottom 90 percent or so to the extreme wealthiest individuals and corporations, whose actions would become essentially unaccountable to consumers, shareholders and investors.

Against this massive looting, wealth transfer, and frontal assault on the public interest, it’s not clear what values President Obama wants to protect, even assuming he’s competent to do so. He doesn’t seem committed to tax equity, seems little concerned about massive inequality, has rarely if ever mentioned the near 15 percent poverty (nearly 20 percent of America’s children relying on government assistance). He clearly does not favor reducing the power or influence of the financial sector that has ravaged the economy, nor has he fought to check other politically powerful industries and corporations that continue to victimize the public.

Further, Mr. Obama refused to consider any form of universal health care that could effectively challenge rising private health care costs. That’s a principal driver of long-run spending. Mr. Boehner’s Party, of course, regards such solutions as evil socialism. So their “compromise” could remove people from the program by making them wait longer.

On top of this, neither Mr. Obama’s team nor Mr. Boehner’s Party has an intellectually coherent grasp of economics, a credible framework for understanding the nature of our current economic problems nor any affinity for the only solutions known to be workable. Indeed, almost every statement both men make on the economy is wrong-headed and often absurd.

In short, any negotiation between Mr. Obama and Mr. Boehner is highly likely to produce a worse mess, as best, or possibly a calamity. Their deal would likely harm the economy or even produce a recession.

If their grand bargain succeeds in reducing government spending by $4 trillion or more over the next decade, it will slow growth, increase unemployment, cause even more foreclosures, throw more people into poverty, increase the number of uninsured, decimate state and local governments. It would leave the country’s future poorer from a serious deficit in investments in everything a country needs to prosper. And the huge inequities in American life will remain, with an even weaker government available to address them.

Dear Tom: Be careful what you ask for. There’s no one protecting the public interest in that grand bargain. So please use your next alternate day to point this out. — John Chandley (Scarecrow).

Update: Dean Baker has a dream.

Dear Working People: You Are All Expendable Jawas [Update with Jane Hamsher on Cenk]

2:59 pm in Economy, Government by Scarecrow

I’ve been reading numerous articles on the wholesale, meat axe spending cuts in the House funding bills and similar apparently indiscriminate slashing of state budgets, such as Wisconsin’s. But what looks like indiscriminate slashing is actually concealing a more calculated agenda.

There is a scene in the original Star Wars where Luke and Obi wan encounter a disabled Jawa transport, and all the little Jawas have been slaughtered. Luke suspects Sand People, but Obi wan says, “that is what we are meant to think.”

photo: ewen and donabel via Flickr

“These blast points are too precise to be Sand People. They were made by Imperial Storm Troopers” . . . with a deeper agenda than just slaughtering Jawas. They were after something else.

In the budget fights, we too are meant to believe there is universal consensus on the need for radical spending cuts to reduce the deficits, but the budget deficits and the manufactured hysteria around them are a pretext for something else. The Tea-GOPers, just like mindless Storm Troopers wiping out Jawas, can be told that everything must be slashed, and so they will mindlessly slash everything.

Without the slightest concern or even explanations, they are slashing programs that will harm millions of Americans, damage the economy, and cripple the nation’s future. But that doesn’t matter, because those who direct them are after other, more specific targets.

The real targets are the government programs and regulatory authorities that can check the extremes of unbridled wealth and pose a threat to corporate power. If you go through the budgets, you’ll realize the real targets are things like this:

1. Funding for the EPA and its authority to adopt regulations that might impact costs or profits by limiting toxic pollutants and emissions that harm public health and welfare;

2. Funding for the Department of Human/Health Services to enact rules that affect profits of health insurers by regulating how they treat their customers and patients;

3. Funding for the SEC, CFTC and other financial regulators to implement the dozens of regulations called for in the financial reform bill that might check reckless behavior and affect the banks’ bottom line;

4. Funding for legal enforcement activities that might check illegal corporate behavior, including labor and union protection, stopping tax evasion, anti-trust actions and the ability of victims to sue on their own behalf;

5. Funding for any agencies that can independently test, research, publicize or limit the environmental hazards or health risks of the petro-chemical/agra industry;

6. Funding for any community/social services groups that provide assistance to groups that traditionally vote more Democratic and who, if they were empowered, could fight back — such as the poor, legal services, or women who need family planning services, etc.

Those are the precise “blast points,” and the millions of Americans who get harmed with wholesale cuts everywhere else are just Jawas. They’re just expendable cover and collateral damage.  . . . Read the rest of this entry →

Obama Ignores Actual State of the Union, Makes Nice Speech

7:17 pm in Economy, Executive Branch, Government, Politics by Scarecrow

If you ignore virtually every major problem facing America, particularly those posing immediate crises for unemployed families, broken communities and struggling states, and focus only on what a country would normally do in ordinary times, then you’ll find some things to like in the President’s address to Congress. Yeah, we should invest in education, and energy, and infrastructure.

But after listening to and reading his speech, I’m struck by how disconnected that speech is from the harsh realities facing the country. To be sure, the President notes that in some areas, America is falling behind China or India and is ranked 9th, or umpteenth, or something other than “we’re number one!” So what? Is that really the problem we should worry about?

You would never know from the President’s speech that there are 15 million Americans out of work. He never mentioned it. Think about that. America’s unemployment rate — from 9.4 percent to over 17 percent when you count underemployed and those who’ve given up — is still at crisis levels we’ve rarely seen since the Great Depression. Sure, this President wants us to improve investments and education to provide better jobs for the future, but there wasn’t a single word from a supposedly Democratic President that would address today’s actual emergency. . . . Read the rest of this entry →

Mindless NYT Story on Weakened Jobs Bill Stirs More Deficit Hysteria

6:33 am in Uncategorized by Scarecrow

"Panicked Congress Tells Unemployed and About To Be Fired Teachers to Stuff It."

That should have been the headline for this mindless New York Times article, "Currently in Vogue: Ringing the Deficit Alarm," by Carl Hulse, who claims "Deficits finally matter."

Hulse manages both to describe and legitimize Congress’ growing hysteria about the size of US deficits/debts. But he doesn’t bother to ask or quote a single economist, let alone the many who have been explaining for months, now screaming, that deficit spending now is not only not a serious problem but absolutely necessary to deal with lingering effects of the Great Recession.

All Hulse had to do was check with the Times Nobel economist or any of the Times’ stable of economic/business writers. Paul Krugman, along with Brad DeLong, Joe Stiglitz, Jaime Galbraith, Dean Baker, or if you prefer, Mark Zandi and many, many other serious economists, have been calling out the fraudulent arguments of the Pete Peterson deficit hawks for months and telling us we need more, not less spending to help the economy.

Every one of these reputable economists refutes the assumed premises of Hulse’ article and the prevailing ignorant mindset of too many in Congress that our debt/deficits are too high for the conditions we’re in. Instead, Hulse just takes for granted the false view, spread by deficit hawks, that deficit spending is irresponsible, an unfair burden on our children and a risk of inflation. No, it’s not.

Any of the Times economic/business reporters could have told him the core inflation rate is barely 1 percent, only half the Federal Reserve’s 2 percent target, and that an even higher target rate for the near future could help to stimulate growth and reduce unemployment under current conditions. But since Ben Bernanke has ruled that out, fiscal expansion of some sort is necessary.

Or Hulse might have asked what happened to the US economy in 1937-38 when FDR was talked by that era’s deficit hawks into letting up on fiscal expansion and instead balance the budget, only to see that strategy thrust the country back into depression and massive unemployment.

The article might have explained that reducing the deficit now would stifle economic growth and increase unemployment. To illustrate that, Hulse might at least have given us the views of prominent non-stupid Democrats who are appalled that Congress can’t pony up a paltry $23 billion to prevent budget-stressed states from laying off 300,000 teachers, or authorize a few billions to cover expiring unemployment benefits, increased Medicaid costs or continue COBRA subsidies for states dealing with high unemployment. Did Hulse and his editors even wonder what effects denying these funds will have?

But no, all we get is quotes from a panicked, misinformed Blue Dog Democrat, Jim Cooper, and Alabama’s Republican Senator Jeff Sessions, one of the stupidest men in the Senate but sadly representative of his party’s appalling economic ignorance.

“We have to stop spending money we don’t have,” said Representative Jim Cooper, a Tennessee Democrat who voted against the bill. “I hope deficit reduction fever is catching.” . . . [yes, there is a sickness here]

“Are we in denial in this body?” asked Senator Jeff Sessions, Republican of Alabama and another opponent. “Do we think it’s just business as usual, that we can just continue to spend, spend, spend and borrow, borrow, borrow?”

No, it’s not "business as usual." We have nearly 10 percent unemployed. We’re trying to get a seriously underperforming economy and 15 million people out of a deep recession, and yes, spend, spend, spend is exactly the right thing to do.

Carl Hulse’s homework assignment:
Paul Krugman, Bad analysis at the deficit commission; Conventional madness; We’re not Greece.
Brad DeLong, The Group of 30 has lost it’s collective mind; On Harold Meyerson and Washington’s Pathology

Doug Elmendorf, Estimated Impact of the ARRA (stimulus)

Dean Baker, Congressional deficit hawks act to slow growth and destroy jobs; Do you have to be clueless about the economy to talk about fiscal responsibility?; and Looniness in the cause of deficit reduction at the NYT.
Mark Zandi, The US cannot afford to not have a second stimulus package
Bruce Bartlett, Is Obama repeating the mistake of 1937?

Jamie Galbraith (Ezra Klein interview) on panicky deficit hawks
Joseph Stiglitz, Obama must resist "deficit fetish"
Mark Thoma, linking Robert Reich, Why deficit hawks are killing the recovery

Krugman Condemns Budget Deficit Fear Mongering

2:23 am in Uncategorized by Scarecrow

Paul Krugman has a must read column, Fiscal Scare Tactics, on the irresponsible and harmful fear mongering over the federal budget deficit.

The deficit threatens economic recovery, we’re told; it puts American economic stability at risk; it will undermine our influence in the world. These claims generally aren’t stated as opinions, as views held by some analysts but disputed by others. Instead, they’re reported as if they were facts, plain and simple.

These aren’t the facts.
. . .
To me — and I’m not alone in this — the sudden outbreak of deficit hysteria brings back memories of the groupthink that took hold during the run-up to the Iraq war. Now, as then, dubious allegations, not backed by hard evidence, are being reported as if they have been established beyond a shadow of a doubt. Now, as then, much of the political and media establishments have bought into the notion that we must take drastic action quickly, even though there hasn’t been any new information to justify this sudden urgency. Now, as then, those who challenge the prevailing narrative, no matter how strong their case and no matter how solid their background, are being marginalized.

And fear-mongering on the deficit may end up doing as much harm as the fear-mongering on weapons of mass destruction.

Last year, during the debates over the American Recovery and Reinvestment Act ("stimulus bill") so-called "centrist" Democrats and Republicans, including Evan Bayh, Olympia Snowe and Susan Collins, forced major reductions in the economic stimulus because of misplaced fears we shouldn’t increase budget deficits.

The result was a stimulus package that was only half the size responsible economists said was needed to make a sizeable dent in the projected unemployment levels. Then the unemployment levels got even worse than Administration forecasts, so today we’re left with 10 to 17 percent unemployment and only modest reductions expected over the next several years.

The misguided demands by centrist Senators hurt the country. They needlessly left millions of people unemployed; they forced budget-strapped states to lay off more teachers, firemen, police and public health and safety workers and to curtail or end important public services. They postponed needed investments in public infrastructure at precisely the time when that investment would be cheapest and do the most good.

And yet when President Obama spoke to Senate Democrats on Wednesday, one of the designated questions came from clueless Evan Bayh, wondering what the President and Congress should do to get those awful deficits under control. Unfortunately, the President gave the stock answer that he inherited most of the deficit, while part was necessitated by the recession and he’s working to fix the rest. All true, but he should have told Bayh to get a grip and then addressed the misconception, explaining why we need more, not less deficit spending now to achieve not just a "statistical recovery" but a human recovery.

The conservative, anti-government campaign to create fear about budget deficits has been relentless. It has been fostered by the Peterson Institute, founded by a billionaire whose goal is to slash Social Security. It’s become the favorite scare message of the Republican party and, as Dean Baker keeps pointing out, it’s been pushed dishonestly on the front pages of the Washington Post and Wall Street Journal. Krugman concludes:

The main difference between last summer, when we were mostly (and appropriately) taking deficits in stride, and the current sense of panic is that deficit fear-mongering has become a key part of Republican political strategy, doing double duty: it damages President Obama’s image even as it cripples his policy agenda. And if the hypocrisy is breathtaking — politicians who voted for budget-busting tax cuts posing as apostles of fiscal rectitude, politicians demonizing attempts to rein in Medicare costs one day (death panels!), then denouncing excessive government spending the next — well, what else is new?

The trouble, however, is that it’s apparently hard for many people to tell the difference between cynical posturing and serious economic argument. And that is having tragic consequences.

For the fact is that thanks to deficit hysteria, Washington now has its priorities all wrong: all the talk is about how to shave a few billion dollars off government spending, while there’s hardly any willingness to tackle mass unemployment. Policy is headed in the wrong direction — and millions of Americans will pay the price.

NYT: Jobless rate down to 9.7%, but revisions to previous months show deeper recession that thought.

Update II: Need a picture of the unemployment problem? See this.

Brad DeLong, When will it be morning in America? (unemployment projections graph), and Barack Grover Cleveland Obama
Harold Meyerson, A jobs lesson from the New Dealers
Baseline Scenario/James Kwak, Budget Sense and Nonsense
Paul Krugman, Romer and Bernstein on stimulus