Sunday, January 31, 2010

Krugman Chases Fox Up a Tree

Here's Paul Krugman making a point about Fox News that gets Roger Ailes up in arms:

Watch closely as Krugman points out to Ailes how Fox News deliberately misquoted Obama. Obama asked a rhetorical question "Why aren't we going to do a health care plan like the Europeans have" and then proceeded to describe how his plan differed. But Fox News reported this as Obama asking for a "European style socialized health care system".

How Bad Will It Be?

The US (and the world as a consequence) is in a recession/depression that is worse than most people believe. It is called The Great Recession because it most closely resembles the disaster of the Great Depression (caused by a bubble, a credit crunch, and their ineffective government action... worse then but similar to today).

Here's a picture from the Calculated Risk web site that makes it pretty obvious that this is both deeper and longer than any post Great Depression recession experienced in the US:

You can immediately see that the post-WWII recessions were deeper and recovered more quickly. That's because the US was more of an industrial nation. With the US mostly a services economy, recessions start more slowly and last longer as can be seen from the graph. On top of that, this is the deepest loss of jobs since the immediate post-WWII readjustment as industry switched from military production to civilian production.

Politics as Showmanship

Obama has now claimed "jobs" as his job #1. Funny... he never finished healthcare as his job #1.

So the question becomes: how well will 'stick-it-out-and-finish-the-job' Obama do with his pledged new seriousness about jobs? Here's an estimate by Keith Hennessey in his blog. I worry about the accuracy of these numbers because Hennessey is a Republican and worked for Bush, two bad strikes against him in my books. But I believe the overall thrust of what he is saying is correct, i.e. Obama is "all hat and no cattle":
If enacted quickly, the President’s new Small Business Jobs and Wages tax credit proposal will therefore create fewer (and maybe far fewer) than 165,000 – 297,000 jobs this year. For comparison, remember that the U.S. economy has lost 2.7 million jobs since a year ago, and 7.2 million jobs since the beginning of the recession in December 2007. 297,000 is 4.1% of 7.2 million, so you’re talking about a policy change that at best would restore fewer than 1 out of 25 jobs lost since the recession began.
I find tax subsidies to be a big waste. If you want to create jobs, then cut out the middle man and create them directly. Do a WPA-style jobs program to build infrastructure, clean up streets, and fix the potholes. There is more than enough work that needs to be done and the easy-to-organize WPA-style get them out and get them busy is fast to organize and immediately puts money in the hands of people with a proclivity to spend 110% of their income, so you get really big bang for the buck.

The thing that kills me about tax inducements or capital gains cuts or across the board tax cuts is that they badly target the people who need the jobs. So you end up spending a fortune for each job "created". For example:
CBO estimates that for each million dollars of budgetary cost for this kind of tax credit, full-time employment in 2010 will increase by five to nine years. I’ll explain the difference between increased years of employment and increased jobs in a moment. That works out to $111,000 to $200,000 of taxpayer money (or deficit increase) per new employment-year, and more than that range per new job created this year.
That's crazy. My back-of-the-envelope estimate for a WPA-style jobs program says that for every 20 jobs you create at $25,000/year you need one manager type at $50,000/year and maybe $100,000 of back office clerical help and one manager of managers at $100,000/year for every 20 managers and another $100,000 of backoffice clerical expenditure. In short, you can create good WPA-style jobs for $32,500 per job. Not $111,000 or $200,000 per job!!!

The Reality of War and Lessons Unlearned

Here is a bit from an excellent posting by Thomas E. Ricks on his blog The Best Defense:
Just before dawn last July 13, Taliban fighters attacked an outpost in eastern Afghanistan being established by U.S. Army soldiers and fought a short, sharp battle that left many American dead -- and many questions. But the U.S. military establishment, I've found after reviewing the Army investigation, dozens of statements given by soldiers to investigators, and interviews with knowledgeable sources, simply has not wanted to confront some bad mistakes on this obscure Afghan battlefield -- especially tragic because, as the interviews make clear, some of the doomed soldiers knew they were headed for potential disaster.


Indeed, one way to honor them would be to look at what might have been done better to help them. But the Army seems positively determined not to study the Wanat incident. A few weeks ago, two interviews about the battle were posted on Fort Leavenworth's very good series of Operational Leadership Interviews -- but then were removed.

Screwups are inevitable in war. But there are serious questions to be addressed here -- and I hope to do so over the next few days on this blog, drawing on the investigation itself and other sources who have raised concerns with me about the painful, and so far unlearned, lessons of the battle. As one Army source put it to me, "The paratroopers sent to Wanat knew they were in big trouble. Although the battalion HQ was only 7km away, these guys lacked class 4 [construction and fortification materials], ran out of water and had little material to build up their defensive positions." Indeed, some of the statements made by those who fought raise the question of whether their concerns are being heard by their superiors.


Taking corrective steps is, of course, what the chain of command should be doing, but doesn't appear to have done. "I would not characterize this as anything more than the standard fighting that happens in this area in good weather that the summer provides," Col. Charles Preysler, commander of the 173rd Airborne Brigade Combat Team, told Stars & Stripes about a week after the battle. In other words, nothing to see here, move on.
War is tragic enough. Fighting and dying because of incompetence of superiors is even more tragic. Fighting and dying for bad policy is even worse. Vietnam was fought because of the 'domino theory' and the fact that no American president was willing to admit the truth that the South Vietnamese were less loyal to puppet US regimes than they were to North Vietnam's Communist leaders. Iraq was fought under false pretenses of "weapons of mass destruction". Afghanistan was started for the right reason -- strike back at attackers -- but was orphaned for the idiotic war in Iraq. Obama promised to bring the idiocy to an end, but he is sounding more and more like "I've got a secret peace plan" Nixon to me every day since he is sending more troops in rather than pulling them out.

From a Canadian perspective, the tragedy is that our government is pressured to "go along" with US wishes even when it is obvious that the US is making bad mistakes. We don't have leaders here with the guts to go toe-to-toe with the Americans and tell them to "go jump in a lake".

High Praise for Canada

I got a chuckle out of reading this bit from an article by Chrystia Freeland in the Financial Times:
The first argument you are likely to hear when you start asking what made Canada different is cultural. Depending on your degree of fondness for Canucks, this thesis comes down to the notion that Canadians are either too nice or too dull to indulge in the no-holds-barred, plundering capitalism that created such a spectacular boom, and eventual bust, in more aggressive societies. A senior official in Ottawa likes to say that Canadian bankers are “boring, but in a good way. They are more interested in balance sheets than in high society. They don’t go to the opera.” Some of them – including the chief executive of the Royal Bank of Canada, the country’s largest bank – have never even been to Davos. According to Matt Winkler, editor-in-chief of Bloomberg News, “Canadians are like hobbits. They are just not as rapacious as Americans.” And Paul Volcker, the legendary inflation-slaying former head of the US Federal Reserve and an adviser to Obama, told me that Canada’s strength is “partly a cultural thing – they are more conservative”.


Ed Clark, CEO of TD, Canada’s second-largest bank, works from a fourth floor office just around the corner from Nixon’s. He told me that “I don’t take myself so seriously. US bankers maybe see themselves as more important than we do.” In Clark’s view, Canadian culture imposes a limit on CEO megalomania: “Canada is a more egalitarian society; Canadians are less hierarchical. In the US, you can tell people to do something. In Canada, you have to ask them to do something – and hope they will do it!”


The most convincing testimony I heard to Canada’s culturally distinct approach to banking came during an interview at RBC’s offices on the southern tip of Manhattan. There I met Kevin Lewis, a 44-year-old investment banker wearing a navy suit but no tie, with a shaven head. Lewis used to work at Lehman Brothers, one of Wall Street’s most aggressive firms, until it went bankrupt. “I don’t want to sound condescending to Canadians,” he said, “but there is a ‘being nice’ mentality that exists in the institution. There is a priority on decorum, on being friendly, on being collegial. It’s a subtle thing. It is like soft music playing, rather than hard rock.”
I feel an urge to tell you -- whoops! 'ask you' -- to go read the whole thing, but I wouldn't want to bore you!

Saturday, January 30, 2010

Canada Gets a High Five

Here's a bit from a posting on Paul Krugman's NY Times blog:
Nice piece by Chrystia Freeland on lessons from Canada, the only G7 country to avoid a major financial meltdown.

I’ve always liked to cite Canada in economic discussions; as I once wrote,
Canada has often been a very interesting case–the country that defies the trends, that demonstrates by example the hollowness of the conventional wisdom of the moment.
And so it is with finance. Those who think that “too big to fail” is the essence of the problem have to explain why Canada, with basically just five banks, has avoided crisis. Those who blame the Fed for keeping interest rates too low too long have to explain why Canada, which basically had the same interest rate experience we did, didn’t have anything like the same problems.

So what’s Canada’s secret? Regulation, regulation, regulation. Much stricter limits on leverage, much stricter limits on unconventional mortgages, and an independent consumer protection agency for borrowers.
It is always nice when the elephant to our south notices us, mouse to their north. Usually the only news is when the elephant crushes the mouse yet again. But here's one of those rare bits where the elephant has something pleasant to say about the mouse.

Obama Shows Some Life

Here's a bit from a NY Times op-ed by Maureen Dowd:
White House advisers thought that if they asked that cameras and reporters be allowed in for the usually closed Q. and A. with the president at the annual retreat of House Republicans, the Republicans might say no and look obstructionist.

But the Republicans realized what the White House was up to, got irritated and opened up the exchange in Baltimore to show they weren’t scared of the smart, facile and newly warmblooded Barack Obama.

And during the next hour and a half, our government did not look quite so lame.

Obama is always at his best when his back is against the wall, and he is perversely content when he has the challenge of the lion’s den.

He may lapse back into his Camus coma at any moment. But on Friday he dropped the diffident debutante act and offered, as he did at the State of the Union, some welcome gumption.

“You know,” he said, halfway through his sparring session with Republicans, “I’m having fun.”


But he didn’t hesitate to give Jeb Hensarling a smack-down when the rabid ideologue from Texas asked if the president’s new budget, “like your old budget,” would “triple the national debt.”

Obama crisply told “Jim,” inadvertently (perhaps) mixing up Jeb’s name, “It’s very hard to have the kind of bipartisan work that we’re going to do, because the whole question was structured as a talking point for running a campaign.” Then the president offered a quick math lesson on what Republicans never admit: that it was W. and the Republican Congress who ran up much of our $12 trillion debt and left us pawning our family jewels to the Chinese.

Obama’s advisers must wish they could do this every week for the cameras. It was a lot more elucidating than Joe Wilson shouting, “You lie!”
I would like to think that Obama will stir to life, but he's had a year. It is pretty obvious to me that he isn't committed to any serious change. He is too busy "reaching out" to get down to work fixing the problems that ordinary Americans face.

You are About 8.3% Virus in Your DNA

Here's an interesting talk by Carl Zimmer:

Funny... only 1.2% of your genome codes for proteins, this is the part that we think of as being "you". But 8.3% of your genome is the descendant of virus infections. Whoa! That in some crazy sense makes you more virus than human!

Animal Emotions & Empathy

Here is an interesting interview of Frans de Waal by Carl Zimmer:

Part 1:

The whole interview is just over an hour and can be seen in the video clips at the John Templeton channel at the YouTube site.

Friday, January 29, 2010

The Peacock Obama Struts like a Turkey

Here's a bit from a NY Times op-ed by Paul Krugman:
Last week, the Center for American Progress, a think tank with close ties to the Obama administration, published an acerbic essay about the difference between true deficit hawks and showy “deficit peacocks.” You can identify deficit peacocks, readers were told, by the way they pretend that our budget problems can be solved with gimmicks like a temporary freeze in nondefense discretionary spending.

One week later, in the State of the Union address, President Obama proposed a temporary freeze in nondefense discretionary spending.

Wait, it gets worse. To justify the freeze, Mr. Obama used language that was almost identical to widely ridiculed remarks early last year by John Boehner, the House minority leader. Boehner then: “American families are tightening their belt, but they don’t see government tightening its belt.” Obama now: “Families across the country are tightening their belts and making tough decisions. The federal government should do the same.”

What’s going on here? The answer, presumably, is that Mr. Obama’s advisers believed he could score some political points by doing the deficit-peacock strut. I think they were wrong, that he did himself more harm than good. Either way, however, the fact that anyone thought such a dumb policy idea was politically smart is bad news because it’s an indication of the extent to which we’re failing to come to grips with our economic and fiscal problems.
There's more! Go read the whole article. Find out the sad truth about the fraud and delusion within the US government and the shyster politicians on all sides. Nobody is standing up for the people. All the politicians have been bought to stand up for big corporations and tax breaks for the rich. These fools are partying like there is no tomorrow while the ship of state sinks under the waves taking everything with it. What fools!

As Krugman summarizes the situation:
I’m sorry to say this, but the state of the union — not the speech, but the thing itself — isn’t looking very good.

Putting A Little Light on the Subject

Fusion as an energy source has been promised for a long, long time. Here is an short documentary put out by the Lawrence Livermore National Lab's National Ignition Facility

And here's a visit to this Lawrence Livermore National Lab's National Ignition Facility by physicistBrian Cox for BBC Horizon television series:

Our Home: What Could Have Been

I'm a little leery about the planetary stability of dual sun systems, but this video claims that NASA scientists have found good evidence to believe that planets circle at least two kinds of dual sun configurations:

Canadians at War

I'm not a big fan of the Canadian military in Afghanistan, but this picture pleases me. It is from the Boston Globe's The Big Picture blog:

Master Warrant Officer Charlotte Hawes from Dundurn, Saskatchewan from the Canadian Army Reservists attached to Princess Patricia's Canadian Light Infantry patrol talks with Afghan women during a meeting in Kandahar City, southern Afghanistan Thursday, Jan. 21, 2010.

My preference is for the "traditional" (at least since Lester Pearson) role of Canadians as peacekeepers. I think sending in a military to "fight" in a country for 8 years creates a sense of occupation. It only recruits more Taliban.

I accept the need to strike hard in retalliation when the Taliban allow al Qaeda to strike out at targets around the world, but I don't buy sending over a hundred thousand troops to occupy the land for coming up on 9 years. The initial strike in Afghanistan was effective because it was a CIA operation on the ground coordinating Northern Alliance fighters with US Air Force planes that could bomb selected targets. These "foot patrols" in Afghanistan that result in deaths from IEDs is a sheer waste of human life. It is a policy of "national building" that is a complete waste of blood and treasure.

Hypocrisy in the US Navy

Here's a posting by Tom Ricks:
The Naval Academy has made a terrible mistake by waiving its "zero tolerance" of drug use for a football player who tested positive for marijuana use. What exactly makes the Navy, after punishing so many sailors for puffing a little weed, think this guy should be an officer? The Academy's leadership -- and I am guessing the entire Navy's -- looks like a bunch of hypocrites.
I find nothing new here. For time immemorial the upper classes have insisted that they not be subject to the rules applied to the "little people". I remember a famous case in Vancouver several decades ago when the former Chief Justice of the BC Supreme Court broke out of a "alcohol treatment facility", got plastered, and got behind the wheel, and was arrested for drunk driving. Here's the guy who applied the rules. What happened to him for flagrantly breaking the rules? Nothing! He got a break and was simply sent back to the detox centre to finish his time.

I remember reading a story about some poor sucker who was hungry in the Great Depression and stole an apple. In the early 1960s he was finally being released from prison for his "grand larceny" of trying to feed himself. Meanwhile there newspapers were full of Wall Street flim-flam artists who got slaps on the wrist for defrauding little old ladies and charitable institutes out of their life savings (similar to the Bernie Madoff scandal). Since these were "white collar" crimes, the upper classes were sent to country club "prisons" to golf away their time while the guys who knock over the corner store -- and this guy who stole an apple -- rot in hellholes reserved for the lower classes.

I remember working on a military project and reading through the specs for the new fleet of maritime coastal defence vessels and noted that the enlisted sailors got a tiny footlocker in which to store their gear while the officers got spacious closets and lockers. I was struck by the fact that an officer got more space to store his "liquor ration" than the enlisted guys got for all of their stuff. This in a democracies "navy". I found that hard to swallow.

The Bush Years: Torture Unleashed!

Here's an interesting posting from Tom Ricks:
When retired Army Col. Stuart Herrington talks about intelligence, and especially about interrogation issues, I listen. His time in Vietnam was captured well in his book Silence was a Weapon also published under the title Stalking the Vietcong. He ran a secret interrogation operation on an island off the coast of Panama after the invasion of Panama, where, he says, much was learned about Noriega's relations with Cuba and the PLO. He ran a similar secret operation after the 1991 Gulf War. In 2004, he was asked to look into U.S. intelligence operations in Iraq and produced a scathing report that, to my knowledge, has never been released. (As I understand it, the report wasn't classified, but only two copies were made of it.) To my knowledge, he was one of the first people to blow the whistle on Abu Ghraib and on the broader abuse of prisoners that was occurring in many locations in Iraq back then.

Last November, Herrington gave a speech at Fort Leavenworth, sponsored by the CGSC Foundation, in which he explored how U.S. interrogation operations went badly off track after the Sept. 11, 2001 terrorist attacks, becoming both abusive and counterproductive. But he also worries that the remedies instituted could cripple our intelligence gathering efforts.

One of the most striking aspects of his talk is the cold professional contempt he has for Cheney, Rumsfeld and others who not only encouraged a brutal approach, but were amateurish in doing so.

Herrington began his talk by looking back to Vietnam, where he insisted on providing his prisoners(and intelligence targets) with "unconditional decent treatment-food, medical care and clothing." He showed his Vietnamese colleagues, fond of using "water torture and electrocution," that "One can employ legions of effective stratagems to achieve control over a potential recruit, but brutality, abuse and torture have no place."

He used the same approach after the invasion of Panama and the Gulf War, in each case establishing "guest houses" were prisoners were given air conditioned rooms and treated well. "We afforded unconditional decent treatment to our Iraqi guests," he said. "We did not gloat over the coalition's lopsided victory, but channeled their anger towards Saddam Hussein, who had set them up for defeat and humiliation."

His bottom line:
"There was no room on our team for charlatans who believed in sleep deprivation, inducing hypothermia, stress positions, face slapping, forced nudity, water boarding, blaring heavy metal music, or other amateurish, ineffective and ethically flawed tricks."
The Bush years created far more al Qaeda militants than it killed. It was a completely backwards approach to the threats to the US and the world. It created enemies when the US needed allies. It turned marginally angry people into fanatical suicidal killers. It was a tragedy for the American people and it raised the threat to innocent civilians around the world. History will judge Bush & Cheney harshly. I would hate to be related to them because their relatives will have to live with the ignominy the rest of their lives.

Herrington is concerned about how the stupid torture policy of Bush/Cheney has led to a less secure world. Here is another posting by Ricks that looks at the "blowback" from the idiot Bush/Cheney policies:
[Herrington] expressed concern about the current rules governing interrogation, I am inclined to pay attention.

As a result of a series of abuses, he said, new restrictions, new legal rulings, and a new manual have placed a series of new constraints on the handling of prisoners that deeply concern him. Much that was secret is now public and available to our foes. Also, lawyers are far more involved than in the past. "A detainee advised by an attorney is an interrogator's worse nightmare."

He is most alarmed by the new limits on separating prisoners. This is essential, he said, in order that prisoners not observe and police each other, tracking how long their comrades are interrogated and punishing collaborators. "Housing high-value detainees communally" (as was done at Guantanamo, he notes) "is fatal to successful interrogation." Yet now, under the Army Field Manual, separation may only be used against specific "unlawful enemy combatants," initially only for a period of 30 days, and requires the written approval of a four-star commander. Even then, a prisoner can only be isolated after a justification and interrogation plan has been provided and authorized by the chain of command. What's more, he adds, "Other prisoners-an Iranian Quds colonel or a North Korean officer, for example, cannot be separated, a true show-stopper."

He places blame for this outcome squarely on the shoulders of senior Bush administration officials:
For a professional interrogator, these new operating conditions are onerous, and translate into a net loss for our national security. Responsibility for this can be traced back to zealous officials in the Bush Administration who decided that brutality was an effective shortcut to obtaining good information-against the wisdom and experience of mainstream professional interrogators. . . . Ironically, their ill-advised and unethical actions were taken in the name of protecting the nation, but wound up doing harm.
My italics. Read it and weep.
I'm less pessimistic than Herrington about the tighter restrictions, but I understand his concerns. If it truly hampers the effectiveness of the fight to suppress al Qaeda, then I say "loosen the rules" but be cautious. I would trust Herrington because he understands that the madness of Bush/Cheney is operationally ineffective. Herrington is less worried about morality than I am, but I'm willing to be realistic about operational needs just like Herrington is willing to be sensitive to operataional effectiveness (and not just be a dupe of ideological craziness with the "torture" approach of Bush/Cheney).

Now You Know it is a 'Serious' Matter

When Osama Bin Laden lines up with the weather fanatics, you know you are dealing with some serious stuff. From a BBC report:
'Bin Laden' blames warming on US

A new message said to be from al-Qaeda leader Osama Bin Laden has blamed global warming on the US and other big industrial nations.

The audio tape, broadcast on al-Jazeera TV, urges a boycott of the US dollar "to free humankind from slavery".

It comes days after another tape said to be from Bin Laden was released, praising the attempted bombing of a US airliner on 25 December.

The authenticity of neither tape has been verified.

But IntelCenter, a US group that monitors Islamist activity, has said the voice on the earlier tape appeared to be that of Bin Laden.

"All industrial nations, mainly the big ones, are responsible for the crisis of global warming," the latest tape says.

"This is a message to the whole world about those who are causing climate change, whether deliberately or not, and what we should do about that."

"Bush the son, and the [US] Congress before him, rejected this [Kyoto Protocol] agreement only to satisfy the big companies"
I can think of no better endorsement to verify the integrity of the "climate warming" cause than having the world #1 nutcase proclaiming the validity of your point of view. Maybe he will convince the enviro-fanatics to declare a "jihad" or at least issue a "fatwa" against any honest discussion of climate, climate models, weather data, and data manipulation.

Official Hypocrisy

Here is a bit from a Canadian Press report about Omar Khadr:
The Supreme Court has confirmed Canadian officials violated Omar Khadr's constitutional rights, but the judges left it up to the federal government whether to ask the United States for his return to Canada.

Khadr, 23, is being held by the Americans at Guantanamo Bay, Cuba, for allegedly throwing a grenade that killed a U.S. soldier in Afghanistan more than seven years ago. The landmark decision is bound to renew debate over whether Khadr can receive a fair hearing in the U.S. military justice system.

The Conservative government strongly opposes Khadr's repatriation, but his lawyers and several interested groups argued before the high court that Canada should request his return.

Khadr's captors threatened the Toronto-born teen with rape, isolated him and deprived him of sleep by moving him from cell to cell - a practice known as the "frequent flyer program."

The Supreme Court unanimously said Friday that Khadr's constitutional rights were violated.
Omar's father was a fanatic (and died fighting for al Qaeda) and his mother and older sister are fanatics (but free in Canada). This kid was 15 when captured. He was a "fighter" but how seriously can you take his "political views" at that age. I truly believe the US authorities have trumped up charges against him and seriously mistreated him. But the Canadian authorities are guilty of a greater moral wrong: they have allowed him to stay in the hands of the Americans despite a public protestation that they wanted him to be "treated properly" and that they "looked forward" to his release. Here is the Canadian Supreme Court continuing the game of hyposcrisy by noting that his rights have been "violated" but handing him back to the Canadian authorities to look after him. That is like rescuing a child who is being raped by a criminal and after admonishing the rapist to "treat the kid properly" you had the kid back to the rapist. It is utterrly nonsensical. It is a mockery of "justice". yep, that's what Canadians have for a Supreme Court, a bunch of clowns wearing robes playing at "justice". A tragedy.

Thursday, January 28, 2010

Reforming Wall Street

Here's an excellent video of Robert Reich giving you the facts:

The Shot Heard 'Round the World

Well... maybe not all the way around the world, but it is an amazingly effective sonic shot that can take down its prey:

Thinking the Impossible

I was raised with the "duck and cover" exercises for all out nuclear war. I take it seriously. But most don't these days. Here's a bit from a posting by science reporter K.C. Cole in the NPR blog site.
Last Friday, the Bulletin of the Atomic Scientists set back The Doomsday Clock from 11:55 to 11:54--six minutes to midnight, instead of 5. I find it hard to take much comfort in this "progress." On the long lists of things most people worry about, nuclear weapons don't even show up. It didn't help that the Bush administration used the term "weapons of mass destruction" to lump biological, chemical and nuclear weapons into the same category--which is a little like lumping sparklers and exploding stars: only a nuclear weapon can vaporize a city in an instant, and we have many thousands of them on "hair trigger" alert. And during the Bush years, the investment in developing new weapons rapidly increased while investment in securing nuclear weapons through-out the world so that they don't fall into the hands of terrorists almost disappeared.
This is not a pretty sight. And the funny thing is that most people can't imagine and and don't even want to think about it. I remember as a kid looking at the city I lived and trying to convert kiloton payloads into the size of a crater being dug in the valley floor and the radius of destruction for that size of bomb. I remember going on school outings to visit backyard bomb shelters. And the wierdest memory was of a bomb drill where they had my class crouch in a hallway opposite a wall of windows that in any explosion would have showered us with shards. When I tried to point this out to the teachers I got indifference. A lesson I learned early in life: bureaucrats only go through the motions, they don't want to know the truth or understand the meaning of their actions.

Here's a nagging worry that Cole points out:
In fact, for the first time, the control of our nuclear arsenal is in the hands of people who have never seen a nuclear explosion first hand. It is not a pretty sight.
I still remember the shock when people realized in the 1980s that an all out nuclear war could create a nuclear winter. This more than anything else helped get serious disarmament started. But, when you realize the size of the arsenal still remaining and the proliferation of nuclear nations, you have to be pessimistic about humanities likelihood of survival. When you have fanatics eager to get into heaven by blowing themselves up, the idea of an arsenal that will destroy the world many times over must leave them drooling and panting with desire and anticipation. The end will come. And it will come when it is least expected. That is the "lesson" of history. I've lived my whole life knowing how pointless everything is because there is madness behind every facade. We live in a world that is past is "best by date".

It is funny... those who look to the skies and realize there are a 100 billion stars in our galaxy and that there are a 100 billion galaxies in the visible universe often wonders "where are the aliens?". The answer may be very simple. They, like us, built weapons too powerful for their social control. They blew themselves up. The universe is a lonely place because "intelligent" life snuffs itself out early in its adolescence.

Why Obama Fell Short

Here's a simple summary by Brad DeLong of the failed economic policy of Barack Obama:
There are always two paths to boost employment in the short term. The first path is to boost demand for goods and services, and then sit back and watch employment rise as businesses hire people to make the goods and services to meet that demand. The second path is not to worry about production of goods and services, but rather to try to boost employment directly through direct government hiring.

The first path is better: not only do you get more jobs, but you also get more useful stuff produced. The problem is that it does not take effect very quickly. It is subject to what Milton Friedman called “long and variable lags.” Thus, policies aimed at boosting employment by the end of, say, this calendar year needed to be put in place about a year ago to have time to have reached their full effect.

Some countries – China, for example – did, indeed, implement such job-creation policies a year ago and are already seeing the benefits. Others, like the United States, did not, and so unemployment remains at around 10%.


This brings us to the present moment, with US unemployment unacceptably high and refusing to fall. As a result, there is now a very strong case to turn the focus of the US economy from measures aimed at increasing demand to measures aimed at boosting employment directly (without worrying much about whether these measures are efficient in the sense of substantially raising the quantity of goods and services produced).


There is still time for a substantial shift in federal spending toward high-employment (but in all likelihood low-value) projects to reduce unemployment before the end of 2010 – if Congress acts quickly. And there is still time for a substantial temporary and incremental new-hire tax credit aimed at getting businesses to boost employment before the end of 2010.

But will Congress act quickly? Given the depth of political polarization in the US, and thus the need for 60 of 100 votes in the Senate to end a Republican filibuster, there is no sign of it being able to do so.
DeLong gives Obama more credit than I do. If you go read the whole article he claims Obama achieve 2.5 out of 5 policy objectives. I'm dejected and "feel" he achieved little if anything. I can't quantify. I'm not an expert and don't follow it that closely. But it sure feels like Obama achieved little or nothing.

In my mind, a leader would lead. Obama would have given a fire & brimstone State of the Union laying down the law to the legislators. He would have mapped out a vision of recovery that would have dazzled. He didn't.

My problem with Obama is that he has had a year to see he is falling short. All along the way he should have gotten onto the "bully pulpit" of the Presidency and hectored the nation and the legislators to rise to the occasion, but he didn't. His laid back, cool dude approach is a "feel good" approach but not appropriate for a leader in a crisis. In a crisis you want a hard-as-nail, glint-in-the-eye leader who is over the ramparts before anybody else yelling "follow me boys!".

For more comments by DeLong, comments specifically on Obama's State of the Union address, go read this.

The Power of Ideology

Here is an interesting article by Felix Salmon. He points out how the John Roberts, the Chief Justice of the US Supreme Court is blinded by his own right wing ideology, a belief that "markets are always right" and, in this case, corporations should be let loose to play a role in politics as if they were "individuals" with a similar stake in the society:
If only the Chief Justice of the United States spent more time reading blogs! James Fallows finds this passage from oral arguments in the case in which John Roberts helped overturn over a century of jurisprudence to allow corporations to spend unlimited amounts of money in political campaigns:
” ‘When corporations use other people’s money to electioneer,’ as Kagan explained, ‘that is a harm not just to the shareholders themselves but a sort of a broader harm to the public,’ because it distorts the political process to inject large sums of individuals’ money in support of candidates whom they may well oppose.

“Roberts sharply challenged this line of argument. ‘Isn’t it extraordinarily paternalistic,’ he asked, ‘for the government to take the position that shareholders are too stupid to keep track of what their corporations are doing and can’t sell their shares or object in the corporate context if they don’t like it? … ‘ “We the government have to protect you naive shareholders.” ‘
Of course, as both Fox and Fallows could have explained to Roberts, that isn’t how it works at all. Here’s Fallows, making mincemeat of Roberts’s argument:
Virtually all such “wealth” as my wife and I hold, apart from our house, is in low-cost indexed mutual retirement funds. I literally have no idea which specific companies I might have bigger or smaller positions in. By the prevailing wisdom of the day, I’m behaving rationally for a non-expert prudent investor. By Roberts’ standard, I am “too stupid to keep track” of what every one of these companies is doing and shifting my positions day by day in response. Or maybe just too lazy.
As long ago as 2003, Roberts owned no fewer than 46 different common stocks, on top of 31 different mutual funds, one ETF, and a REIT. I very much doubt that he was keeping track of what all of the corporations he owned were doing, and selling his shares or objecting in the corporate context if he didn’t like it. And I don’t think that he believed that his mutual-fund managers were doing that either. Maybe he assumed that the magical qualities of the efficient market hypothesis meant that he didn’t need to do that, and that some other group of shareholders would do it for him. Although it’s hard to understand why someone who believed so strongly in the EMH would own 46 individual common stocks.
John Roberts is a fanatic ideologue, so the fact that his own behaviour doesn't live up to his crazy view of "reality" doesn't give him pause. He is so blinded by what he wants to think is "real" that he can't be bothered to see the world as it really is. And the fact that this beliefs lead to much pain and suffering won't stop him. I think back to the days of Southern slavery. The myth was that the darkies were happy, just singing and dancing, and that the 'ol Massa was a kindly gent who had his slaves interests deep in his heart. The fact that you could look around and see exploitation with one class of people living in big mansions while many toiled long, long hours in the fields couldn't break through the rosy hue of the ideology. That's exactly the same as what's going on with John Roberts today. He may be an "intelligent" man but he is a fool because he lives blinded by his own right wing ideology. And the really sad truth is that he has turned the United States down a path of toil and ruin as he has handed over the keys of the kingdom to corporations to buy elections. The myth that a corporation is a "person" is a cruel hoax that will destroy American democracy.

Obama's Ship of State

Here's a bit from a Financial Times article by Edward Luce questioning how effectively Obama can run the government:
Worse, most people do not think Mr Obama can even command unity within his own administration on the Wall Street proposals amid growing speculation about whether Tim Geithner, the Treasury secretary, can survive in his job. Mr Geithner was conspicuously sidelined during Thursday’s announcement by the presence of Paul Volcker, the former Federal Reserve chairman, who lent his name to the push to rein in Wall Street banks.

The speculation about Mr Geithner is only likely to grow. “The Obama proposals were clearly politically motivated and came from the White House not the Treasury,” says a Democratic adviser to the administration, who withheld his name.

Finally, there is increasingly open Democratic disaffection about the way Mr Obama is managing relations with Capitol Hill. Many believe that Rahm Emanuel, Mr Obama’s aggressive chief of staff, served Mr Obama badly by persuading the president that his election was a transformational moment in US politics that gave him the opportunity to push through long-cherished Democratic goals, such as healthcare reform.

In fact, exit polls from Mr Obama’s election showed that almost two-thirds of the voters cited the economy as their chief concern, with fewer than one in 10 mentioning healthcare. Mr Emanuel is also perceived to have mishandled the day-to-day logistics of getting healthcare through Congress.


In short, Mr Obama’s nightmare January could easily slip into a nightmare February. “Unless and until the president changes the way his White House, works, things are going to continue to go badly for him,” says the head of a Democratic think-tank. “Heads still have to roll.”
Yep... Obama has got to change his modus operandi. He needs to lead. But that requires deep changes and it just isn't in his character. I don't see him making the right moves. I've watched too many American president's caught in this same trap where they intellectually understand what needs to be done, but because of deep emotional and/or personality constraints, they just can't make the necessary changes. So their ship of state slowly sinks from a thousand tiny holes letting the water seep in, drowning ignominiously in their own ineptitude.

A Concise Overview of the Obama Administration

Paul Krugman has the ability to size things up, to cut things down to size, and to put them in perspective. Here's his NY Times blog posting on the State of the Union speech:
Pretending To Be Stupid

When people ask me what I think of the Obama administration, I have a stock answer: they’re not stupid and they’re not evil, which represents a vast improvement.

I stand by that position. But it’s sad that they apparently feel the need to pretend to be stupid:
[F]amilies across the country are tightening their belts and making tough decisions. The federal government should do the same. (Applause.) So tonight, I’m proposing specific steps to pay for the trillion dollars that it took to rescue the economy last year.

Starting in 2011, we are prepared to freeze government spending for three years. (Applause.) Spending related to our national security, Medicare, Medicaid, and Social Security will not be affected. But all other discretionary government programs will. Like any cash-strapped family, we will work within a budget to invest in what we need and sacrifice what we don’t. And if I have to enforce this discipline by veto, I will. (Applause.)
This is exactly — exactly — what John Boehner said last year:
Boehner said Americans want government to practice the same financial restraint they have been forced to exercise: “It’s time for government to tighten their belts and show the American people that we ‘get’ it.”
It was stupid then, and it’s stupid now.

The saving grace, such as it is, is that administration officials know better; they’re well aware that the spending freeze will make no difference to the long-run budget outlook. This is just a sop to public prejudices and/or centrist Democrats in the Senate.

But it’s a spectacular demonstration of Obama’s failure to change the narrative. Not only is he accepting the general Republican world view, he’s parroting their dumb attacks on his own policies.
A year ago I was nearly ecstatic with Obama taking office. I'm still relieved that he's in office and not a Republican. But I'm deeply saddened that he has failed the American people. He had a chance to be a great president in an hour of great need. He has accomplished little. So at best he will be seen as a modest President who at least didn't make things worse under his tenure. And hopefully his tenure will be limited to one term with a better Democrat stepping in from the wings to lift high the torch and lead the people to a better future. (But I know that American presidents are not easily displaced so the most likely outcome is that either he is re-elected for another relatively mediocre term, or far worse, another nutcase Republican comes in to finish the devastation that Bush the Second so ably started.)

Krugman has nailed Obama when he points out that Obama is now trafficking the idiotic Republican Party line about "government spending is like your family budget". That's like saying that the US military is like your neighborhood Cub Scouts. Yep... all those wonderful skills of hiking in the words and sitting around a campfire, singing songs, learning skills to win merit badges. Don't you worry, nuclear weapons and bloody assaults are just another Cub Scout activity with their own merit badges. It's all the same. Nothing different. Everybody knows that Cub Scouts learn bloodthirsty techniques to kill so they can defend their parents home. Because everybody knows that Cubs Scouts are "just like" the military.

The Republicans have never understood the role of government. It does social good that no individual can do: military, infrastructure, public services. And when it comes to the economy, a key role of government during a financial panic is to step in and secure the financial system. A key role during a depression is to step in and act as a buyer of "last resort" to limit the damage to the underlying economy. The Republicans don't understand these things. That's why George Bush's administration set up the American people for the worst recession since the Great Depression.

Wednesday, January 27, 2010

Here's My Favourite for Fed Reserve Chairman

Here is the most honest person in Washington. She needs to be put in charge of something really important. I'm thinking make her the Federal Reserve Chairman instead of the banker's pet poodle, Ben Bernanke:

One Hand Gives, The Other Takes Away

From a posting by Brad DeLong, here is an interesting bit about a proposed tax credit to help ordinary Americans:
[T]he president is calling on Congress to nearly double the child care tax credit for families earning less than $85,000 — a proposal that, if adopted, would lower by $900 the taxes such families owe to the government. But the credit would not be refundable, meaning that families would not get extra money back on a tax refund...

That means: if your annual household cash income is more than $85K or less than $30K, you get nothing.

If your cash income is between $30 or $40K, there are nine chances in ten you get zero. If your cash income is between $40K and $50K, there are two chances in three you get zero. Even if your cash income is between $50K and $85K, there is still one chance in four you get zero.
Seems to me, "ordinary" means not poor and not rich. I certainly agree that if you make more than $85,000 you can look after yourself. But I find it odd that if you make less than $30,000 then you get no help raising your kids. Does Obama subscribe to eugenics, i.e. the poor should be prevented from reproducing since they obviously produce only nitwits, alcoholics, and petty thieves? Why are the poor left to fend for themselves? Is this the idea that they should be punished for being poor? A little brutalization will give them the inducement to pull up their socks and get that second or third job so that they can raise the family income? Inquiring minds would like to know.

Tax Cuts, Tax Cuts, Tax Cuts

Obama gave the American people what they wanted... fantasy and pie in the sky. He gloried in delivering tax cuts, tax cuts, tax cuts. From the State of the Union speech:
Let me repeat: we cut taxes. We cut taxes for 95% of working families. We cut taxes for small businesses. We cut taxes for first-time homebuyers. We cut taxes for parents trying to care for their children. We cut taxes for 8 million Americans paying for college. As a result, millions of Americans had more to spend on gas, and food, and other necessities, all of which helped businesses keep more workers. And we haven't raised income taxes by a single dime on a single person. Not a single dime.
This is sadly funny.
  • The United States is one of the least taxed developed countries in the world, yet all that the citizens want is still more tax cuts.

  • The United States has a huge deficit and a big tax burden, and rather than acknowledge that it will require raising taxes to fix the problem, the President only talks about tax cuts, tax cuts, and more tax cuts. (It would be bad to raise taxes right now because that would cut spending, but an honest President would tell Americans that the unsupportable tax cuts of George Bush have to be brought to an end when the economy recovers. But Obama didn't do that.)

  • Taxes are the cost of civilization. You cannot have public services unless you pay for them. (Oh sure, you can borrow from the average Chinese who makes one-tenth what you do, but that Chinese citizen will one day want his money back with interest. So the free ride will end, sooner rather than later. But Obama didn't want to tell the American people this.)
A President that I admired said "ask not what your country can do for you -- ask what you can do for your country". But that was 50 years ago. For thirty years all that Americans have been told is "demand lower taxes" and "shrink government" and they wonder why public spaces have become squalid, public health is sinking like a stone, and educational achievement in the US is plummeting.

You can't eat pie in the sky, but the politicians keep promising more and better pie in the sky.

Update 2001jan28: James Fallows provides a transcript of Obama's speech along with his comments. He is much warmer in his regard for Obama than I am, so he is a good dose of "alternative viewpoint" to look at. The fun thing about Fallows' version is that he has annotated it. Since he was a presidential speech writer, it is fun to see what he thinks of the rhetoric and how the speech was crafted. He gives you links to pop up his analysis. Give it a try!

Sad News

Life is a fatal condition. It is really hard to wrap your mind around this fact, but as you get older you find that your are pressed up against the Grim Reaper and it becomes all too evident that we are "dust to dust, ashes to ashes". Here is an obituary from the Boston Globe:
Howard Zinn, the Boston University historian and political activist who was an early opponent of US involvement in Vietnam and whose books, such as "A People's History of the United States," inspired young and old to rethink the way textbooks present the American experience, died today in Santa Monica, Calif, where he was traveling. He was 87.

His daughter, Myla Kabat-Zinn of Lexington, said he suffered a heart attack.

"He's made an amazing contribution to American intellectual and moral culture," Noam Chomsky, the left-wing activist and MIT professor, said tonight. "He's changed the conscience of America in a highly constructive way. I really can't think of anyone I can compare him to in this respect."


For Dr. Zinn, activism was a natural extension of the revisionist brand of history he taught. "A People’s History of the United States" (1980), his best-known book, had for its heroes not the Founding Fathers -- many of them slaveholders and deeply attached to the status quo, as Dr. Zinn was quick to point out -- but rather the farmers of Shays' Rebellion and union organizers of the 1930s.

As he wrote in his autobiography, "You Can't Be Neutral on a Moving Train" (1994), "From the start, my teaching was infused with my own history. I would try to be fair to other points of view, but I wanted more than 'objectivity'; I wanted students to leave my classes not just better informed, but more prepared to relinquish the safety of silence, more prepared to speak up, to act against injustice wherever they saw it. This, of course, was a recipe for trouble."


In 1997, Dr. Zinn slipped into popular culture when his writing made a cameo appearance in the film "Good Will Hunting." The title character, played by Matt Damon, lauds "A People’s History" and urges Robin Williams’s character to read it. Damon, who co-wrote the script, was a neighbor of the Zinns growing up.

"Howard had a great mind and was one of the great voices in the American political life," Ben Affleck, also a family friend growing up and Damon's co-star in "Good Will Hunting," said in a statement. "He taught me how valuable -- how necessary -- dissent was to democracy and to America itself. He taught that history was made by the everyman, not the elites. I was lucky enough to know him personally and I will carry with me what I learned from him -- and try to impart it to my own children -- in his memory."

Damon was later involved in a television version of the book, "The People Speak," which ran on the History Channel in 2009, and he narrated a 2004 biographical documentary, "Howard Zinn: You Can't Be Neutral on a Moving Train."
He was a great historian because he forced a re-write of history. He opened up the history of ordinary Americans and put them on the stage with the names of politicians and generals. He added a new perspective that made room for a broader definition of what it is to be an American.

If you want to know more, take a look here and here.

Dowd Does Obama

Here's a nice tongue-in-cheek NY Times op-ed piece by Maureen Dowd that makes fun of the dethronement of Obama in favour of the new senator from Massachusetts:
The only question left is: Why isn’t Scott Brown delivering the State of the Union? He’s the Epic One we want to hear from. All that inexperience can really be put to good use here.

Obama’s Oneness has been one-upped. Why settle for a faux populist when we can have a real one? Why settle for gloomy populism when we can have sunny populism? Why settle for Ivy League cool when we can have Cosmo hot? Why settle for a professor who favors banks, pharmaceutical companies and profligate Democrats when we can have an Everyman who favors banks, pharmaceutical companies and profligate Republicans? Why settle for a 48-year-old, 6-foot-1, organic arugula when we can have a 50-year-old, 6-foot-2, double waffle with bacon?

Everyone in Washington now wants to touch the hem of President-elect Brown — known in the British press as “the former nude centrefold” — who has single-handedly revived the moribund Republican Party. It uncannily recalls the way they once jostled to piggyback on the powerful allure of One-Term Obama.
This is all good fun, but so long as you pick politicians by the current fad, you are going to continue to have bad government. You need to pick politicians by policy, by party platform, by clear statements of what they promise to do once in office. But politics is Madison Avenue in the US so all the voter gets to see is the "horse race" aspect, i.e. whether a politician is polling well, how "strong" he looks, whether the spin doctors are performing well or poorly. Sad.

Obama and Taxing the Banks

Here is commentary by Thomas F. Cooley, the Paganelli-Bull professor of economics and the former dean of the NYU Stern School of Business, pubblished in Forbes magazine:
The problem here is not the taxes per se. It is that the administration elected to treat the imposition as populist political theater. In doing so it missed the opportunity to articulate a well-reasoned economic policy to deal with too-big-to-fail institutions. And in the process it got completely wrong-footed with the regulatory reforms the House and Senate are currently considering.

Another problem with treating the tax as punitive rather than regulatory is that it gives the banks and other financial institutions the ammunition to fight it. This administration tends to treat too many of the economic problems it faces as political. They end up being far less effective.

There is a very sound argument for levying new fees on financial institutions. The financial system as it is currently structured is extremely distorted, and its distortions are due to the way the system was regulated and by the regulators' responses to the financial crisis. Basically over time we have encouraged, through regulation or the lack thereof, the creation of large, complex, interconnected financial firms. In response to the financial crisis our regulators decided that many of these firms were too big to fail. In trying to rescue them we made them larger, more complex, more interconnected and arguably riskier.

It is now clear to almost everyone except the institutions themselves that we created a big problem.


That was then. Now we must figure out how to undo the damage. In a more perfect world we would do three things: 1. modify the bankruptcy code and create mechanisms to allow for the orderly failure of these institutions; 2. impose a tax on them that is proportional to the risk to the system that they create; and 3. treat that tax as an insurance premium to cover the cost of future problems, just as the FDIC charges banks for deposit insurance.


An important flaw in the [Obama] tax is that it is designed only to recover the bailout costs already incurred. It should be an ongoing charge for the insurance against risky behavior. There should be two parts to such a charge: A portion to cover the risk a firm creates for itself and its investors by taking on excessive leverage, and a portion to cover the risk that leverage creates for the system as a whole.
Go read the article. It is thoughtful and well-reasoned.

The sad fact is that Obama isn't serious in his initial neglect of the banks and now the sudden "popularism" of his "tax the banks" cries. He isn't consistent. He isn't thoughtful and effective. And, as Cooley points out, this makes Obama into a distraction rather than part of the solution.

Obama a Surgeon with a Scalpel?

I love consistency. I love politician whose word is his bond. I love intellectual honesty...

Now... all Obama needs is a little warpaint and a war dance to go with his new hatchet.

Here is Brad DeLong's viewpoint on this Obama proposal to freeze spending:
There are two ways to look at this. The first is that this is simply another game of Dingbat Kabuki. Non-security discretionary spending is some $500 billion a year. It ought to be growing at 5% per year in nominal terms (more because we are in a deep recession and should be pulling discretionary spending forward from the future as fast as we can)--that's only $25 billion a year in a $3 trillion budget and a $15 trillion economy.

But in a country as big as this one even this is large stakes. What we are talking about is $25 billion of fiscal drag in 2011, $50 billion in 2012, and $75 billion in 2013. By 2013 things will hopefully be better enough that the Federal Reserve will be raising interest rates and will be able to offset the damage to employment and output. But in 2011 GDP will be lower by $35 billion--employment lower by 350,000 or so--and in 2012 GDP will be lower by $70 billion--employment lower by 700,000 or so--than it would have been had non-defense discretionary grown at its normal rate. (And if you think, as I do, that the federal government really ought to be filling state budget deficit gaps over the next two years to the tune of $200 billion per year...)

And what do we get for these larger output gaps and higher unemployment rates in 2011 and 2012? Obama "signal[s] his seriousness about cutting the budget deficit," Jackie Calmes reports.
After more digging to fully comprehend this new policy direction from Obama, DeLong has managed to pin down the particulars:
It seems that it is not a freeze in non-security discretionary outlays, but rather an overall cap on non-security discretionary--which is a diffrent animal. And it seems that it is not an overall cap on non-security discretionary outlays, but instead an overall cap on non-security discretionary authority--which is a different animal. And it seems that it is not a binding cap on overall non-security discretionary: that ARRA extensions and other job-boosting deficit-spending measures, plus other "emergencies", are exempt...
That should clear things up for everybody and reassure those "nervous Nellies" out there who think this is just political Kabuki theatre.

Personally, I think DeLong got it right when he started his post with:
For some time I have been worried about fifty little Herbert Hoovers at the state level. Right now it looks like I have to worry about one big one.
Obama's "spending freeze" will have all the benefits of Herbert Hoover's economic policies: bankruptcies, unemployment, soup kitchens, homelessness, and the mobilization of a generation of hobos left to "ride the rails" because there are no jobs. Now there's "change you can believe in" in spades!

Seeing Deja Vu All Over Again

Bruce Bartlett is a reformed conservative. After being a cheerleader for Reagan and the two Bushes, the scales fell from his eyes when Bush the Second pushed the US economy over the cliff and into the Great Recession. Here's an article he has written as part of his repentance:
According to press reports, the Obama administration plans to put forward a budget on Feb. 1 containing significant deficit reduction measures. Some liberal economists are warning that it is grossly premature to implement deficit reduction. Indeed, they believe that additional fiscal stimulus is necessary to prevent a double-dip recession. They argue that there is a danger we will make the same mistake that Franklin Roosevelt made in 1937, which crippled the economy's recovery.

To evaluate the relevancy of 1937 to current economic and fiscal conditions we first need to review a little history of the Great Depression. First of all, it's important to remember that what we call the Great Depression was not a continuous downturn; it was really two back-to-back recessions. According to the National Bureau of Economic Research, the first ran from August 1929 to March 1933 and the second from May 1937 to June 1938.

According to current Commerce Department data, real gross domestic product fell sharply in 1930, 1931 and 1932, and modestly in 1933. But GDP rebounded strongly in 1934, growing 10.9% that year, 8.9% in 1935, 13% in 1936 and 5.1% in 1937. But in 1938, real GDP fell 3.4%.

For many years, economists thought this "secondary recession" was inherent in the nature of the business cycle. Today, however, economists generally believe that the only thing that caused the 1937-38 downturn was disastrously bad government policy.

Although right-wingers like to portray FDR as a giddy big spender whose profligate ways made the depression worse, the truth is that he was by nature quite conservative, fiscally. Indeed, when running against Herbert Hoover in 1932 Roosevelt was unsparing in his criticism of Hoover's spending and deficits. As he put it in an Oct. 19, 1932 speech:

"I regard reduction in federal spending as one of the most important issues of this campaign. In my opinion it is the most direct and effective contribution that government can make to business. In accordance with this fundamental policy it is equally necessary to eliminate from federal budget-making during this emergency all new items except such as relate to direct relief of unemployment."

Roosevelt vowed that every member of his cabinet would be required to support the economic plank of the Democratic Party's 1932 platform, which said, "We advocate an immediate and drastic reduction of governmental expenditures by abolishing useless commissions and offices, consolidating departments and bureaus, and eliminating extravagance to accomplish a saving of not less than 25% in the cost of the federal government."

While it is true that spending and deficits rose sharply once Roosevelt took office, the fact is that they never rose sufficiently to offset the fall in private spending that was at the heart of the Great Depression. This was proven to the satisfaction of most economists in a 1956 article by economist E. Carey Brown, "Fiscal Policy in the Thirties: A Reappraisal." According to my calculations, the deficits of the 1930s should have been at least five times larger than they were.


In early 1937, Roosevelt was preparing his budget for the next fiscal year, which began on July 1 in those days. Strong growth in the economy and tax increases over the previous three years, especially the institution of a new payroll tax for Social Security, had caused tax receipts to almost double from 2.8% of GDP in 1932 to 5% in 1936. Projections showed that budget balance was within reach with only a modest reduction of spending.

Roosevelt was also concerned about the reemergence of inflation. After falling 24% between 1929 and 1933, the Consumer Price Index rose by a total of 7% over the next three years and signs pointed to even higher prices in 1937. Indeed, the CPI rose 3.6% that year.

Rather than viewing this as a sign of progress, which had caused the stock market to almost double between 1935 and 1936, Roosevelt and the inflation hawks of the day were determined to pop what they viewed as a stock market bubble and nip inflation in the bud. Balancing the budget was an important step in this regard, but so was Federal Reserve policy, which tightened sharply through higher reserve requirements for banks. Between August 1936 and May 1937 reserve requirements doubled.

During 1937, Roosevelt pressed ahead with fiscal tightening despite the obvious downturn in economic activity. The budget deficit fell from 5.5% of GDP in 1936 to 2.5% in 1937 and the budget was virtually balanced in fiscal year 1938, with a deficit of just $89 million.

The result was a huge economic setback, with GDP falling and unemployment rising. For this reason, Obama's economic advisers have been warning for some time that stimulus must be continued until full employment has returned. As Council of Economic Advisers chair Christina Romer wrote in The Economist last June:

"The 1937 episode provides a cautionary tale. The urge to declare victory and get back to normal policy after an economic crisis is strong. That urge needs to be resisted until the economy is again approaching full employment."
It is always reassuring to see that the leaders of today can rise to the occasion and an act as willfully blindly ignorant as any leader in the past. I guess Obama wishes to distinguish himself in this department and prove that he can produce an ever more impressive downturn than FDR was able to pull off in 1937. Obama is a very impressive leader and I have full confidence that he can pull off this masterful blunder with all the aplomb required. His golden tongue oratory will help ease the pain as he throws the American middle class back into the hellish landscape of a full blown recession/depression. I have every confidence in Obama's ability to pull off this kind of monstrous error. He has shown himself adept at pulling defeat out of the jaws of victory time and again. I stand assured that he will demonstrate this mastery yet again.

Looking Into the Crystal Ball

The wondrous thing about American politics is how clear the crystal ball truly is. Any dimwit can take a peek and predict the future. I'll just take a random pick out of the grab bag known as "the Internet" and up I come with this...
It has been an interesting day for us fiscal policy wonks. Over my morning muffin, I digested President Obama’s plan to freeze some domestic spending for the next three years as well as his package of aid to the middle-class. Then, I spent a few hours chewing over the CBO’s latest budget projections. Finally, I watched the Senate trash the bipartisan budget commission.

Add it all up, and we are pretty much where we started, although some important issues are becoming clearer.

To take things slightly out of order, In today's budget update, CBO figures the 2010 deficit will be about $1.35 trillion, or 9.2 percent of GDP. We could cut the deficit in half by 2012 if Congress allows the Bush tax cuts to expire, lets the Alternative Minimum Tax bite 30 million middle-class Americans etc.—none of which is going to happen.
Who is this Howard Gleckman? And why would the Brookings Institute think that it can so easily see the future? How dare Gleckman and Brookings so easily dismiss the eminently rational action of allowing the tax cuts expire? Don't they know that the Congress is the great deliberative body of the American People? That the Congress is that institution mandated to deliberate on the fate of the nation and find the right path forward? How dare Gleckman and Brookings dismiss the noble institutions of democracy and their ability to carry out their sacred charge?

Oh well a second... it was the Congress under Bush that passed the idiot legislation to begin with. Yep, this is the same body that just gutted health care? This is the same 'noble body' who handed hundreds of billions to Wall Street while Wall Street thumbed its nose at the American people and proceeded to divvy up the billions in loot as "bonuses" among the gang of cutthroats otherwise known as "Wall Street bankers".

Maybe Gleckman and Brookings have a point after all...

Maybe you can predict the future when it comes to how the politicians will behave...

Gee... if the US Congress could behave like the UK or Canada, or even if the US Congress could pass a health care to get runaway heath care expenditures under control, then the future might look like this with lines going down or at least sideways instead of up, up , up:

from CEPR (Center for Economic and Policy Research)

Thought for the Day

Gosh... I wish I had thought of this...
Plan B

I get that administration officials were not as pessimistic as I was about the economy. I don't claim to right and prescient about everything. They could have been right!

What bugs me is that they should have had a plan 'B' in place. And they didn't.

From: Duncan Black, Eschaton blog
I'm just a plodder. I'm not that snazzy debonair 'intellect' that Obama is. I would have thought that a guy as smart as Obama with all the the resources of the presidency would have come up with a Plan B. But then, I'm just a average schmoe. I'm dumb enough to think I would have come up with not just a Plan B, but a Plan C, and even a 'just-in-case' Plan D. But then I'm not the "leader of the free world" and as deep a thinker as Obama. Thank goodness we have clear thinkers like Obama who don't let themselves get disttracted with Plan Bs or concerns about downsides or unintended consequences or unexpected turns in the road.

A leader like Obama is a precious resource. He is like a famous Civil War general would could calmly lead his troops across the fields of Gettysburg amidst withering fire and not be distracted. No concerns about troops falling all around him. No, a true leader knows that job one is to lead. Damn the consequence. No distractions. No second thoughts. No Plan B. Not curiosity. No second opinions. Just heroism, just a steely look in your eye as your step boldly into the jaws of death leading your people proudly to their finest moment. Never let 50% casualties deter your from your moment with destiny! Lead on! Charge into the maw of doom. Glory! Glory! Glory!

Telling it Like it Is, Krugman Style

Here's Paul Krugman saying "I told you so!"
Same As He Ever Was

These days quite a few people are frustrated with President Obama’s failure to challenge conservative ideology. The spending freeze — about which the best thing you can say in its favor is that it’s a transparently cynical PR stunt — has, for many, been the final straw: rhetorically, it’s a complete concession to Reaganism.

But why should we be surprised? Here’s one from the vault. Two years ago, I was deeply frustrated with Obama’s apparent endorsement of the Reagan myth.

There was a lot of delusion among progressives who convinced themselves, in the face of clear evidence to the contrary, that Obama was a strong champion of their values. He wasn’t and isn’t.

That doesn’t mean that there’s no difference between the parties, that everything would have been the same if McCain had won. But progressives are in the process of losing a big chance to change the narrative, and that’s largely because they have a leader who never had any inclination to do so.
I admit that I didn't believe Krugman a year ago. But I now recognize he was right. As Brad DeLong likes to put it, there are two rules with regard to Paul Krugman: (1) Remember that Paul Krugman is right. (2) If your analysis leads you to conclude that Paul Krugman is wrong, refer to rule #1.

Obama has failed the people of the United States. He had a great opportunity to right the injustices of the past 30 years as the political right have ravaged the land with their fanatical ideology. But Obama has fallen far short. Bush liked to boast he was a "uniter, not a divider" and Obama claims to be able to "reach across the aisle" but the reality is that both have left the little guy abandoned while they have busied themselves looking after the interests of the rich and powerful.

Go read the Krugman original to get the links he provides. And while you are at it, go read this post by Krugman on the "supermajority" rule and how it is turning the US into a banana republic.

Pot Calls Kettle Black

This is funny. A court in the Netherlands has come down hard against "infringing" on copyright. But in making its decision, the judges knowingly took text from a legal activist's blog and copy-and-pasted this material into their judgement. This is plagiarism! This is illegal. So you have the odd fact of some judges coming down hard on somebody appropriating somebody else's copyrighted material while they themselves are in fact stealing copyrighted material!

What makes it especially juicy is that the judges are idiots who have taken a particularly "hard line" view of copyright protection which no normal person would. So while they were willing to harshly judge others, they simply ignore their own misuse of other's materials. A perfect case of the pot calling the kettle black, or of seeing a mote in another's eye while ignoring the beam in one's own eye.

But of course, the judges are part of the elite, the rich, and the powerful, so they are allowed to pass judgement on other mere mortals for their errors. But it isn't clear that the high and mighty judges will be called to account for these very same crimes. That's the way life works. The pecking order lets the guys on top peck at you and you can peck at those below you, but the guy at the bottom simply has to lie down and allow everybody else to peck him because he is powerless and has no protection. So "copyright laws" will allow the powerful to thump you over the head with "the law" but you won't be able to use that same law to thump the powerful over the head.

The power and beauty of the law is summarized best by Anatole France:
The law, in its majestic equality, forbids the rich as well as the poor to sleep under bridges, to beg in the streets, and to steal bread.

...If you want to hear about justice delayed and justice denied, but after 40 years justice finally served, then listen to this.

Elizabeth Warren for Fed Reserve Chairman!

Here's an interesting interview:

Tuesday, January 26, 2010

The Face of Tragedy

Here is the tragedy:

The level of employment today is the same as it was 10 years ago. But the population of the US has grown by 9.9% from 281,421,906 to 309,162,581.

I remember with bitterness the Bush "justification" for two big tax cuts for the rich. His version of Reaganomic "trickle down" economics was that the tax cuts would prime the pump for an explosive growth in the economy. Look carefully at the above graph. Do you see any "explosive" growth in the economy? No!

What exploded was the wealth for the top 0.1% of the population. The super rich got obscenely rich under Bush. The US returned to a new "gilded age".

And the tragedy of Obama is that unlike the progressives of the early 20th century, Obama is not interested in breaking the power of the super rich. He is just another pet poodle of the rich & powerful.

Economics as Rap

If you learn better with a beat... here's economics done as rap music.

A little background: Keynes is the left and Hayek is the right. You'll actually learn a lot of useful stuff by listening closely to the patter in this 'song'.

I might have stayed awake in school if it was delivered with a beat. I love modern multi-media. A great way to pound home an economic point!

CBO Looks at Unemployment

The CBO (Congressional Budget Office), a non-partisan technocrat organization funded by Congress to provide information has released a study looking at the economy as it stands currently. This graphic shows that unemployment will stay above 6% until late 2013.

This is terrible news for ordinary Americans. This is a disgrace caused by Obama's refusal to provide adequate stimulus (and foreclosure help) to get the US economy out of the credit crunch. The tightening credit conditions continue to put pressure on Main Street (which Obama ignores while he lavishes "aid" to Wall Street).

Copyright and Wrong

Cory Doctorow has written a large number of articles on copyright. All of them interesting. He has just published another in the Guardian. Here's the last two paragraphs:
When copyright cartels endanger a new medium, their copyrights should be converted into economic rights or thrown out. This principle is as old as sound recordings: when the sheet-music publishers refused to license their work for records, the state intervened and forced them to sell at a fixed rate. Today, many copyrights are relegated to economic rights: a performer has the right to be compensated for the playback of his CD in a shop, but not to stop the shop from playing the music. Copyright's purpose is to promote participation in culture: where refuseniks subvert that goal, their copyrights should be limited.

This is just a partial list, and it may strike you as radical. But before you dismiss it, consider this: most copyright systems are supposed to work this way in theory. But between corporate bullies who like to assert that "all rights reserved" means that no one is allowed to do anything without permission, and personal theories of what copyright means based on half-remembered lectures from the company lawyer, we treat copyright as absolute. And when we do, we turn a system with a real purpose (providing a framework for participants in creative businesses) into a caricature of itself, one that no one can respect.
Hopefully that tweaks your interest enough to get you to go read the whole article.

I'm 100% behind Doctorow in his fight to give the little guy some space for non-commercial use of copyrighted material as part of the popular culture. To have corporations claim to "own" everything takes the oxygen out of the air and we all are stifled. Cory Doctorow is a voice of reason. Go read his piece.

Here's a Canadian MP, Charlie Angus (NDP member for Timmins-James Bay) pointing out that "secret negotiating" of copyright laws is very, very, very bad:

Robert Reich Lambasts Obama

Here's a bit from Robert Reich's blog:
President Obama today offered a set of proposals for helping America’s troubled middle class. All are sensible and worthwhile. But none will bring jobs back. And Americans could be forgiven for wondering how the President plans to enact any of these ideas anyway, when he can no longer muster 60 votes in the Senate.

The bigger news is Obama is planning a three-year budget freeze on a big chunk of discretionary spending. Wall Street is delighted. But it means Main Street is in worse trouble than ever.

A pending freeze will make it even harder to get jobs back because government is the last spender around. Consumers have pulled back, investors won’t do much until they know consumers are out there, and exports are miniscule.

In December 1994, Bill Clinton proposed a so-called “middle class bill of rights” including more tax credits for families with children, expanded retirement accounts, and tax-deductible college tuition. Clinton had lost his battle for health care reform. Even worse, by that time the Dems had lost the House and Senate. Washington was riding a huge anti-incumbent wave. Right-wing populists were the ascendancy, with Newt Gingrich and Fox News leading the charge. Bill Clinton thought it desperately important to assure Americans he was on their side.

Two months later, Clinton summoned Dick Morris to the White House to figure out how Clinton could move to the right and better position himself for reelection. The answer: Balance the budget.

But in 1994, Clinton’s inconsistencies didn’t much matter. The U.S. economy was coming out of a recession. It was of no consequence that Clinton’s jobs proposals were small or that he moved to the right and whacked the budget, because within a year the great American jobs machine was blasting away and the middle class felt a lot better. Dick Morris was not responsible for Clinton’s reelection. Nor was Clinton’s move to the right. What reelected Bill Clinton in 1996 was a vigorous jobs recovery that was on the way to happening anyway.

Today, though, there’s no sign on the horizon of a vigorous recovery. Jobs may be coming back a bit in the next months but the country has lost so many (not to mention all those who have entered the workforce over the last two years and still can’t land a job) that it will be many years before the middle class can relax. Furthermore, this recession isn’t like other recessions in recent memory. It has more to do with problems deep in the structure of the American economy than with the ups and downs of the business cycle.

Like Clinton’s, Obama’s package of middle class benefits is small potatoes. They’re worthwhile but they pale relative to the size and scale of the challenge America’s middle class is now facing. Obama can no longer afford to come up with lists of nice things to do. At the least, he’s got to do two very big and important things: (1) Enact a second stimulus. It should mainly focus on bailing out state and local governments that are now cutting services and raising taxes, and squeezing the middle class. This would be the best way to reinvigorate the economy quickly. (2) Help distressed homeowners by allowing them to include their mortgage debt in personal bankruptcy — which will give them far more bargaining leverage with morgage lenders. (Wall Street hates this.)

Yet instead of moving in this direction, Obama is moving in the opposite one. His three-year freeze on a large portion of discretionary spending will make it impossible for him to do much of anything for the middle class that’s important. Chalk up another win for Wall Street, another loss for Main.
Obama's not stupid, but he sure had a tin ear when it comes to politics and/or his class sympathy with the rich & powerful has turned him deaf & dumb to the needs of people & the economy. Maybe it is both. But I'm hopping mad because Obama blew a perfectly good chance to save the economy & jobs a year ago when he inherited Bush's mess. He had a chance to step away from Bush's idiotic middle eastern wars a year ago, but he didn't. He had a chance to stop the catering to the rich & powerful that Bush lived for, but he didn't. Obama talked "change you can believe in" but he delivered "more of the same". It is a tragedy. America was at a crux, a crucial turning point that would have let a president become a historical leader, a great statesman, and Obama decided to fiddle while Rome burned. It is a tragedy of Greek proportions.

Robert Reich is a smart guy. He knows what up, and what's not. He know what smells good and what smells rotten. Here's a bit from another post that tells it as it is:
A third political party is emerging in America. Call it the I’m-Mad-As-Hell party.

It’s a mistake to see the Mad-As-Hell party as just a right-wing phenomenon – the so-called Tea Partiers now storming the gates of the Republican Party. There are plenty of mad-as-hellers on the left as well – furious at Wall Street, health insurers, pharmaceutical manufacturers, and establishment Democrats.

Mad-as-hellers don’t trust big government. But they don’t trust big business and Wall Street, either. They especially hate it when big government gets together with big business and Wall Street – while at the same time Main Street is in shambles and millions of people are losing their jobs and homes.


To the Mad-As-Hell party, the biggest event last week wasn’t Scott Brown’s upset victory in Massachusetts. It was the Supreme Court’s decision in Citizen’s United vs. the Federal Election Commission, allowing corporations to spend however much they want on political campaigns. True mad-as-hellers see this as inviting even more collusion between big business, Wall Street, and big government – and against the rest of us.

With the mid-term elections months away, both Republicans and Democrats are scrambling to embrace the Mad-As-Hell Party as their own. Republicans are hoping the mad-as-hellers forget the gushing corporate welfare of the Bush administration and the last Republican congress. And Democrats have become born-again economic populists, blaming the nation’s problems on the same “fat cat” bankers and corporate lobbyists they’ve been cozying up to for years.

If the Mad-as-hell Party helps get money out of politics it will do a world of good. I might even join up. But if it just fulminates against the establishment, forget it. Wrecking balls are easy to wield. Rescuing our democracy is hard work.
Go read the whole thing. Better yet, go read everything that Robert Reich writes. He's got the whole story down, he knows where the bodies are buried and he knows the backroom deals. He knows the sorrows of long suffering ordinary people and he knows the inside deals of the rich and powerful. And his blog tells it like it is.