Paul Krugman: More On Deficit Limits

amie Galbraith responded to this post in comments; what he said, and my counter-response, below the fold:

First, Jamie:

Paul’s argument is that *infinite* inflation is a theoretical possibility. Well, yes. It happened in Germany in 1923.

There is no reason to cut Social Security benefits or Medicare now, with effect in the future, in order to avoid the theoretical possibility that some combination of policies might at some time in the future give us the economic conditions of post World War I Germany.

Digby: Exploding the Social Security Myths

I have a reading assignment for you. It's a short one, but an important one. If you don't get to it right away, bookmark it for some time when you have a few minutes.

The assignment is this and this post by Susan G at Daily Kos about Social Security myths. The first is this one about life expectancy, which is something that has driven me crazy for years. Mush of the literature about "problems" with social security will tell you that longer life expectancy was unanticipated by the people who designed the system, which is ridiculous. They certainly did. And they will also tell you that life expectancy was only 63 at the time social security was designed, which is true, but they neglect to explain that life expectancy in those days was was shorter mostly because of childhood diseases, which means that the financing ratios were never affected. After all, kids who die at 3 never pay FICA in the first place. Anyway, the upshot is this, from Nancy Altman's important book on the subject The Battle for Social Security: From FDR's Vision To Bush's Gamble:

For Social Security purposes, the correct question is not how many live to age 65, but rather how long those reaching age 65 live thereafter. Here the numbers are not as dramatic. In 1940, men who survived to age 65 had a remaining life expectancy of 12.7 years. Today, a 65 year old man can expect to live not quite three years longer than he might have in 1940, or 15.3 years beyond reaching age 65. For women, the comparable numbers are 14.7 years beyond age 65 in 1940; 19.6 years in 1990.

Telling It Like It Is

Dave notes the following ridiculous statement from Tea Party Patriot leadership:

The NAACP has long history of liberalism and racism. If you are a conservative -- including a conservative African-American -- there is no room for you at the NAACP. If you have opinions that differ from the NAACP and the liberal establishment, and if you are African-American, you are an "Uncle Tom," a "negro," "not black enough" and "against our people."

Citing his own posts, Dave asserts:

When I said the NAACP's move would backfire, I meant things like this would happen. I didn't mean they were wrong to go down that road. It's just that they should know that calling out a group for "racism" is pointless -- whoever's been targeted will simply claim to have been attacked unfairly and had his free speech threatened.Remember what happened when Eric Holder said that America had been a "nation of cowards" in discussing race. Boom: Backlash. Anger. Debate over why he said it, but not what he meant. A year and change later we have a ridiculous national debate over whether Holder's department hates white people because it won't draw and quarter the New Black Panther Party. This stuff is what he meant, of course. But saying it isn't actually starting the debate. It's pretty obvious that the NAACP failed here.

One way of looking at the Tea Party Patriot statement on the facts. It is true that NAACP is fairly liberal. It is also true that Michael Steele is arguably the most prominent black conservative in America. He is also--among many other things--a member of the NAACP, and thus presumably part of a racist group.

A Roosevelt Moment for America’s Megabanks?

2010-07-14

WASHINGTON, DC – Just over a hundred years ago, the United States led the world in terms of rethinking how big business worked – and when the power of such firms should be constrained. In retrospect, the breakthrough legislation – not just for the US, but also internationally – was the Sherman Antitrust Act of 1890.

The Dodd-Frank Financial Reform Bill, which is about to pass the US Senate, does something similar – and long overdue – for banking.

Prior to 1890, big business was widely regarded as more efficient and generally more modern than small business. Most people saw the consolidation of smaller firms into fewer, large firms as a stabilizing development that rewarded success and allowed for further productive investment. The creation of America as a major economic power, after all, was made possible by giant steel mills, integrated railway systems, and the mobilization of enormous energy reserves through such ventures as Standard Oil.

Krugman finally gets it right — The Republicans as crisis-creators

by Gaius Publius on 7/17/2010 04:36:00 PM

I don't mean Krugman finally "gets it right" about economics; he's done that many times over. Paul Krugman finally calls the Republican playbook correctly, in terms of its real goals.

It's one thing to say the talk doesn't match the walk, something he's been saying a lot lately. It's another to say why — and make sense. In the Friday column he says why, and makes sense. Finally.

Poor Little CEOs

The government's giving them everything they want, yet still they whine.

By Daniel Gross
Posted Saturday, July 17, 2010, at 7:04 AM ET

---

After an eight-year slumber, the Environmental Protection Agency is again issuing regulations. Two years after an appalling financial debacle, Congress has finally moved to regulate Wall Street. But to hear our nation's corporate chieftains tell it, it's enough to plunge us back into recession. "We have to become an industrial powerhouse again, but you don't do this when government and entrepreneurs are not in sync," lamented GE CEO Jeff Immelt in a recent speech. On July 12, the U.S. Chamber of Commerce, the Business Roundtable, and National Federation of Independent Business held a "Jobs for America" summit. While President Obama met with CEOs at the White House, the summiteers called for—wait for it!—cutting taxes for companies, extending tax cuts for the wealthy, and opening up federal areas for resource exploration.

The notion of these guys holding a jobs summit is a little like BP holding a deepwater-drilling safety summit. Between 2001 and 2009, corporate America designed the playing field to its specifications—easy money from the Federal Reserve; lower taxes on capital gains, dividends, and income; an administration that let industry essentially write its own regulations. But the players proceeded to put up goose eggs. In January 2001, there were 111.6 million private-sector payroll jobs in the United States. In January 2009, when Bush left office, there were 110.9 million. The stock market is basically where it was a decade ago. The lost decade ended with the deepest recession since the Great Depression.

Our 10,000 Year Struggle Against Aristocracy

by: Gislebertus

Sat Jul 17, 2010 at 14:00

(A very welcome expansion on a comment I made in a previous post. 10,000 years in less than 10,000 words? Pretty much! - promoted by Paul Rosenberg)

In a recent blog post here, Paul Rosenberg explained the inability or unwillingness of the "serious people" in charge of our nation to address its fundamental problems: "It's the same old elitist aristocratic death grip that we've been struggling against for the past 10,000 years."

That's an excellent observation, one not often made, and I'd like to elaborate on it. Below is a basic outline of that struggle.

Obama's done a lot, but gets little credit for it; why?

By Steven Thomma | McClatchy Newspapers

WASHINGTON — Step by step, President Barack Obama is building a record of major legislation that's sure to make a mark on history.

The most sweeping financial regulation since the Great Depression. A vast expansion of health care, which Democrats had wanted for more than six decades. An $862 billion stimulus package that locked in long-sought Democratic priorities.

Yet his job-approval rating remains low. Why doesn't he get any credit?

Scientists baffled by unusual upper atmosphere shrinkage

By Derrick Ho, Special to CNN

July 17, 2010 -- Updated 0407 GMT

(CNN) -- An upper layer of Earth's atmosphere recently shrank so much that researchers are at a loss to adequately explain it, NASA said on Thursday.

The thermosphere, which blocks harmful ultraviolet rays, expands and contracts regularly due to the sun's activities. As carbon dioxide increases, it has a cooling effect at such high altitudes, which also contributes to the contraction.

But even these two factors aren't fully explaining the extraordinary contraction which, though unlikely to affect the weather, can affect the movement of satellites, researchers said.

Treasury Makes A Mistake – Claiming They Are Not Blocking Elizabeth Warren

By Simon Johnson

It’s one thing to block Elizabeth Warren from heading the new Consumer Financial Protection Bureau.

It’s quite another thing to deny in public, for the record, that any such blocking is going on (e.g., see this report; Michael Barr apparently said something quite similar today).

There is a strong groundswell of opinion on this issue from the left – see the BoldProgressives petition. But the center also feels strongly that, given everything Treasury has said and done over the past few months, it would be a complete travesty not to put the strongest possible regulator in change of protecting consumers.

Obama Blows Up The Gulf: An Inquiry Into Conspiracy Theories, Part I

By Sara Robinson

Created 07/16/2010 - 11:45am

You've heard the latest one, right? President Obama -- or maybe it was Obama working hand-in-glove with BP -- deliberately blew up the Deepwater Horizon, sent 11 workers to their deaths, destroyed the country's biggest fishery, and smeared the coasts of five states with endless tides of oil.

Why did he do this? Why, to pass the new energy bill, of course.

This is the Conspiracy Theory Of The Week (TM) on the far right this past week -- our little dip into the alternate, fact-free, gravity-free reality zone of the rabid right. Tracking the loony parade of right-wing conspiracy theories became something of a personal enthusiasm last spring, when the right wing's Bizarro World stories took a quantum leap for the weird. Up until the inauguration, these confections had almost always been wrapped around a kernel of factual truth; but there came a point -- it was somewhere in the early phases of the health care debate -- when that chewy middle suddenly became optional. Some new level of outrage and irrationality had been breached; and beyond that point, the new stories being told had absolutely no relationship to any observable reality at all.

GOP Fairy Tales

— By Kevin Drum | Fri Jul. 16, 2010 3:00 AM PDT

Back in the day, one of the key Republican arguments against the estate tax was that it forced hardworking, salt-of-the-earth children of small farmers to sell the family plot in order to pay their taxes after dad died. It was a sad story, but with one problem: no one could find even a single small farmer who had been forced to liquidate in order to satisfy Uncle Sam's voracious maw. Even the American Farm Bureau Federation was eventually forced to admit that it couldn't come up with a single example, and a few years later the Congressional Budget Office estimated that under the now-current exemption level, only a tiny handful of small farms were likely to owe any estate tax to begin with — and of those, only about a dozen lacked the assets to pay their taxes. And even those dozen had 14 years to pay the bill as long as the kids kept running the farm. In other words, the story was a fraud from beginning to end.

Hundreds of Afghanistan contractor deaths go unreported

Congressional report estimates Afghanistan death rate more than four times greater than for U.S. troops

By Justin Elliott

In one of the least examined aspects of President Obama's escalation of the Afghan war, armed private security contractors are being killed in action by the hundreds -- at a rate more than four times that of U.S. troops, according to a previously unreported congressional study.

At the same time, the Obama administration has drastically increased the military's reliance on private security contractors, the vast majority of whom are Afghans who are given the dangerous job of guarding aid and military convoys, the new Congressional Research Service study found.

Social Security Cuts Eyed by Deficit Commission ‘Especially Painful,’ Report Finds

Next month, Social Security, one of the nation’s most successful and important government programs, turns 75. It is the cornerstone of retirement security for tens of millions of Americans.

(Today, the U.S. House Ways and Means subcommittee on Social Security will examine the success of Social Security 75 years after President Franklin Roosevelt signed it into law. We’ll be covering the hearing.)

Governor purges database of innocents stopped and frisked by NYPD

By The Associated Press
Friday, July 16th, 2010 -- 12:08 pm

NY gov signs law removing information from stop-frisk database; NYC mayor, top cop decry move

Gov. David Paterson signed legislation Friday that eliminates a database of thousands of people stopped and frisked by New York City police without facing charges, calling the practice "not a policy for a democracy."

The Economic Crunch We're in: Corporations Want Fewer Workers, But They Still Need Everyone to Be Consumers

By Robert Parry, Consortium News
Posted on July 15, 2010, Printed on July 16, 2010
http://www.alternet.org/story/147573/

A hard truth about the U.S. economy is that corporations don’t need as many of us as workers but still need us as consumers. That dilemma helps explain why unemployment is stuck near 10 percent and why the economic recovery is stumbling toward a double dip.

The Washington Post reported Thursday that nonfinancial companies are sitting on $1.8 trillion - about one-fourth more than at the start of the recession - but won't add personnel in part because they're waiting for consumer demand to pick up, which isn't happening because many Americans don't have jobs or are afraid of losing theirs.

The Questionable Cost of America’s Spy Games

by Stephen Engelberg
ProPublica, Yesterday, 1:59 p.m.

There's nothing like a spy story to get the journalistic juices flowing. They have all the elements. High stakes. Betrayal. And, if you're lucky, sexual intrigue.

The true import of spy stories is more difficult for readers to weigh. The facts are invariably spooned out by intelligence agencies whose interests lie mainly in covering up their secrets and obscuring their missteps. For understandable reasons, law enforcement officials seldom disclose exactly how they came to unmask the culprits. (If the National Security Agency were taping the cell phone calls of, say, Vladimir Putin, it would probably want to hide that fact.)

Paul Krugman: Redo That Voodoo

Republicans are feeling good about the midterms — so good that they’ve started saying what they really think. This week the party’s Senate leadership stopped pretending that it cares about deficits, stating explicitly that while we can’t afford to aid the unemployed or prevent mass layoffs of schoolteachers, cost is literally no object when it comes to tax cuts for the affluent.

And that’s one reason — there are others — why you should fear the consequences if the G.O.P. actually does as well in November as it hopes.

For a while, leading Republicans posed as stern foes of federal red ink. Two weeks ago, in the official G.O.P. response to President Obama’s weekly radio address, Senator Saxby Chambliss devoted his entire time to the evils of government debt, “one of the most dangerous threats confronting America today.” He went on, “At some point we have to say ‘enough is enough.’ ”

Chomsky: Is the U.S. Gearing Up for the Destruction of Iran?

By Noam Chomsky, Noam Chomsky's Official Site
Posted on July 15, 2010, Printed on July 16, 2010
http://www.alternet.org/story/147572/

The dire threat of Iran is widely recognized to be the most serious foreign policy crisis facing the Obama administration. General Petraeus informed the Senate Committee on Armed Services in March 2010 that "the Iranian regime is the primary state-level threat to stability" in the U.S. Central Command area of responsibility, the Middle East and Central Asia, the primary region of US global concerns. The term "stability" here has its usual technical meaning: firmly under US control.

There's No Crying in the Oval Office

By: David Dayen Thursday July 15, 2010 7:51 am

Netroots Nation is next week, and if you go, you’ll see the Majority Leader of the Senate, the Speaker of the House, at least three other Senators and a half-dozen members of Congress, and a bevy of candidates running in November. You won’t see a single member of the Administration, save for the late addition of the Secretary of Transportation (and that’s on a panel, not a keynote session).

See, the White House is deeply hurt that liberal validators are slagging them around. So hurt that they blabbed to VanDeHarris about it.

Eric Alterman, in a column that drew wide notice, wrote in The Nation that most liberals think the president is a “big disappointment.” House Democrats are in near-insurrection after White House press secretary Robert Gibbs stated the obvious — that the party has a chance of losing the House under Obama’s watch. And independent voters have turned decisively against the man they helped elect 21 months ago — a trend unlikely to be reversed before November [...]

After Advocating For Cutting Servers Wages, MN GOP Gubernatorial Candidate Gets Pennies Dumped On Him

As ThinkProgress previously reported, the Republican candidate for Minnesota’s gubenatorial race, Tom Emmer, recently advocated for reducing the minimum wage of service workers in his state, ludicrously citing $100,000 compensation that few Minnesota service workers get.

Yesterday, Emmer held a town hall with servers at a Mexican restaurant in Roseville, Minnesota, to try to contain the political backlash from his earlier comments.

22 Statistics That Prove The Middle Class Is Being Systematically Wiped Out Of Existence In America

The 22 statistics that you are about to read prove beyond a shadow of a doubt that the middle class is being systematically wiped out of existence in America.

The rich are getting richer and the poor are getting poorer at a staggering rate. Once upon a time, the United States had the largest and most prosperous middle class in the history of the world, but now that is changing at a blinding pace.

David Axelrod's Talking Points

David Axelrod was on the Diane Rehm show this morning -- a great opportunity to connect with listeners who will actually stop what they are going and pay attention, at least for a short while. He was awful.

He had even the most basic facts wrong -- it's not "8 million people have lost their jobs" but rather "more than 8 million jobs have been lost" since December 2007. He rambled -- it was hard to see his point, particularly in the introduction. But most of all, there was no narrative -- why exactly did we have a recession, why has it been so bad, and why aren't the jobs coming back?

Without a narrative, how can anyone make sense of the past 18 months?

Companies pile up cash but remain hesitant to add jobs

By Jia Lynn Yang
Washington Post Staff Writer
Thursday, July 15, 2010; A01

Corporate America is hoarding a massive pile of cash. It just doesn't want to spend it hiring anyone.

Nonfinancial companies are sitting on $1.8 trillion in cash, roughly one-quarter more than at the beginning of the recession. And as several major firms report impressive earnings this week, the money continues to flow into firms' coffers.

Yet all the good news from big business hasn't translated into much promise for jobless Americans, leading many to wonder: If corporations are sitting on so much money, why aren't they hiring more workers?

Poll Tapes, Other Evidence Discovered Missing in Long-Disputed, 'Fixed' Arizona Election

Material sought by Election Integrity advocates from Pima County's 2006 RTA election no longer in 'secured' facility

AZ AG Terry Goddard failed to examine evidence during his criminal investigation hand-count of ballots last year...

Posted By Brad Friedman On 14th July 2010 @ 15:27 In Diebold/Premier, Election Irregularities, Election Reform, Arizona, Election 2006, Election Fraud, Pima County | 12 Comments

- Special investigative report by Brad Friedman, The BRAD BLOG ^[1]

The mystery surrounding a long-questioned and allegedly "fixed" ^[53] non-partisan 2006 Regional Transportation Authority (RTA) bond election in Pima County, AZ continues to deepen as troubling new details have now emerged. The resolution in this matter --- should it ever come --- could spell trouble for supporters of paper-based optical-scan electronic voting systems, since indications are that if the election was rigged, it was done with insiders via the electronic central tabulating computers. Late last week another new twist was discovered in the years-long election fraud investigation by Democratic and Libertarian Election Integrity advocates in Tucson. The revelations come to light in what was thought by many to have been a settled election, at last, following a long-sought hand-count of paper ballots carried out last year by the office of AZ's Democratic Attorney General Terry Goddard. The AG had announced in April of last year^[54] that his criminal investigation hand-count had "affirmed" the original results of the election were correct.

Dirty Little Secrets the Republicans Don't Want You to Know

he Republicans have a set of dirty little (actually not so little) secrets they don't what you to know -- and certainly don't want you to think about when you go to the polls in November.

And the fact is that some of those secrets could provide Democrats with silver bullets this fall. But first let's recall the context.

Over the course of eight short years -- between 2000 and 2008 -- the Republicans methodically executed their plan to transform American society. They systematically transferred wealth from the middle class to the wealthiest two percent of Americans -- slashing taxes for the wealthy. They eviscerated the rules that held Wall Street, Big Oil and private insurance companies accountable to the public. They allowed and encouraged the recklessness of the big Wall Street banks that ultimately collapsed the economy and cost eight million Americans their jobs. They ignored exploding health care costs, tried to privatize Social Security, gave the drug companies open season to gouge American consumers and presided over a decline in real incomes averaging $2,000 per family. They entangled America in an enormously costly, unnecessary war in Iraq, pursued a directionless policy that left Afghanistan to fester, and sullied America's good name throughout the world.

Fears grow as millions lose jobless benefits

By Nick Carey
CINCINNATI | Wed Jul 14, 2010 5:38pm EDT

CINCINNATI (Reuters) - Deborah Coleman lost her unemployment benefits in April, and now fears for millions of others if the Senate does not extend aid for the jobless.

"It's too late for me now," she said, fighting back tears at the Freestore Foodbank in the low-income Over-the-Rhine district near downtown Cincinnati. "But it will be terrible for the people who'll lose their benefits if Congress does nothing."

For nearly two years, Coleman says she has filed an average of 30 job applications a day, but remains jobless.

Elizabeth Warren: Big Banks Must Stop Trying to Stall Reforms to the Financial System

By Lynn Parramore, NewDeal 2.0
Posted on July 14, 2010, Printed on July 15, 2010
http://www.alternet.org/story/147561/

Senate Dems are making the final push on financial reform this week, but will big banks really change the way they do business? Or will we still be pawns in a game rigged in their favor? I caught up with Elizabeth Warren to talk about the need to reform Wall Street culture, the pernicious influence of bank lobbies, and the debt-fueled threat to America’s middle class. Warren will discuss these issues and more at this weekend’s Hamptons Institute symposium, sponsored by Guild Hall in collaboration with the Roosevelt Institute (details below).

Lynn Parramore: Has the financial crisis changed the culture of Wall Street?

Elizabeth Warren: I would have expected the financial crisis to sweep through Wall Street like a hundred-year flood — wiping out old business practices and changing the ecology profoundly. So far, the financial services industry has seemed to treat the crisis like a little rainfall — inconvenient, but no significant changes needed. The real question moving forward is how the industry will respond to Wall Street reform and growing public anger. Will it react to all the new cops on the beat just by hiring more lobbyists? Will it continue to spend $1.4 million a day to beat back anything that could mean more accountability and oversight? Or will the financial services industry finally begin to rethink its business models, lobbying approach, and attitude toward the public?

The folly of common currencies

By Henry CK Liu

This is the 11th article in a series.
Part 1: The crisis of wealth destruction
Part 2: Banks in crisis: 1929 and 2007
Part 3: The Fed's no-exit strategy
Part 4: Fed's double-edged rescue
Part 5: Too big to save
Part 6: Public debt - prudence and folly
Part 7: Global sovereign debt crisis
Part 8: Greek tragedy
Part 9: Greek crisis, German politics
Part 10:The trillion-dollar failure

For the weaker economies of the eurozone, adopting the euro is comparable to the earlier unhappy dollarization experiment by Argentina, which should have served as a cautionary tale to all national economies linked to the European currency.

Commenting at the onset of the sovereign debt crisis in Greece, Argentine President Cristina Fernandez characterized International Monetary Fund (IMF) "conditionalities" imposed on Greece as being "unfortunately condemned to failure". She spoke from experience, as Argentina was hit by one of the world's biggest sovereign debt defaults in 2001, from which the once prosperous nation still has not fully recovered from IMF "assistance".

Regulators and Risk-Takers

Didn't Big Pharma or the FDA learn anything from the Gulf oil spill or the Wall Street meltdown?

By Eliot Spitzer
Posted Wednesday, July 14, 2010, at 2:01 PM ET

---

It's a depressingly familiar story: A company hides enormous risk in its effort to get outsize returns, hoping that if and when the risk metastasizes, somebody else will have to pick up the tab. The name of the company may change, the sector of the economy may differ, but the basic narrative is as predictable as a Hollywood sequel.

Our two recent cataclysms—the financial meltdown of the past several years, and the more recent eco-disaster in the Gulf of Mexico—follow this pattern. The latest version of this story involves Big Pharma. Add GlaxoSmithKline and the Food and Drug Administration to the roster of actors, joining Goldman Sachs, AIG, BP, the Securities and Exchange Commission, the Federal Reserve, and the Minerals Management Service. In all these cases, the regulatory entity responsible for oversight failed to do even a minimally acceptable job of identifying and requiring protection against the risk at hand.

Banks Financing Mexico Gangs Admitted in Wells Fargo Deal

Just before sunset on April 10, 2006, a DC-9 jet landed at the international airport in the port city of Ciudad del Carmen, 500 miles east of Mexico City. As soldiers on the ground approached the plane, the crew tried to shoo them away, saying there was a dangerous oil leak. So the troops grew suspicious and searched the jet.

They found 128 black suitcases, packed with 5.7 tons of cocaine, valued at $100 million. The stash was supposed to have been delivered from Caracas to drug traffickers in Toluca, near Mexico City, Mexican prosecutors later found. Law enforcement officials also discovered something else.

The Miracle Deficit Cure? Growth.

So far this fiscal year, the federal government is $1 trillion in the red. Why this is good news.

By Daniel Gross
Posted Tuesday, July 13, 2010, at 5:35 PM ET

---

On Tuesday, the Treasury reported the federal government's receipts and expenses for June. The upshot: Through the first nine months of fiscal 2010 (which started last fall), the federal government has run a $1 trillion deficit.

Deficits hawks will doubtless highlight these numbers as yet another reason why the National Debt Commission must move swiftly to cut social insurance and impose new regressive taxes. I take the opposite view. The fiscal 2010 deficit—$1 trillion and counting—is an encouraging sign.

Let me explain. Federal tax revenues are highly leveraged to economic growth and to the performance of markets, corporations, and rich people. This means they can be volatile. When markets and profits boom, capital gains taxes, payroll and income taxes, and corporate income taxes flow like a mighty stream. As a result, it's not uncommon for tax receipts to rise 6 percent or 7 percent in a year when the economy grows by 3 percent. This volatility works to the downside, too. When the economy contracts and markets crash, capital gains and corporate income tax revenues dry up. For example, corporate income taxes (click here and scroll down to Page 30) fell from $370 billion in fiscal 2007 to $304 billion in fiscal 2008 (down 18 percent), and then plunged to $138 billion in fiscal 2009 (down 55 percent). In fiscal 2009, a period in which the economy shrunk about 2.6 percent, government receipts plummeted 16 percent, from $2.5 trillion to $2.1 trillion. To aggravate matters, some government spending is countercyclical. That means that in good times, when tax receipts are high, less money is spent on stimulus and social welfare benefits. In bad times, when tax receipts are ebbing, more money goes out the door. And that's why surpluses and deficits can materialize out of nowhere.

Paul Krugman: Delusions About Debt Dynamics

Via Mark Thoma, Dean Baker catches Erskine Bowles vastly overstating future federal interest payments. This reminded me of Dan Senor’s similar blooper regarding Japanese interest payments. And I think they have a common cause.

Both Bowles and Senor want to scare us about the short-run deficit (as opposed to longer-run budget concerns). And both are turning to an argument that sounds compelling: debt dynamics. The story goes like this: the more the government borrows, the more interest it has to pay, which requires even more borrowing, and before you know it the debt explodes.

Americans are getting poorer, and it's going to get worse

Tony Pugh | McClatchy Newspapers

last updated: June 18, 2010 06:25:56 PM

WASHINGTON — The early impact of the worst recession since the 1930s pushed median incomes down, forced millions more people into poverty and left more Americans without health care in 2008, according to new annual survey data from the U.S. Census Bureau.

Poor people, working people, blacks, Hispanics and children bore a disproportionate share of the hardship. The new figures, however, likely understate the severity of the economic downturn because a large portion of nation's job losses and unemployment rate increases occurred after the Census survey data was collected in March as part of the annual Current Population Survey.

There’s Just No Pleasing Some Robber Barons

By Robert Scheer

The flight from reason that now marks American public discourse came home for me last Friday when I found myself on public radio debating whether Barack Obama is anti-business. The “news hook” for KCRW’s “Left, Right & Center” show, which I have co-hosted for 15 years, was an absurd spate of charges from Obama’s former big-business allies that he had become their enemy. If only it were so.

One of those who has been complaining is billionaire publisher Mort Zuckerman, who now finds in a White House he once supported “hostility” to the business culture he credits with the country’s greatness. I assume he is not talking about the belated efforts to hold BP accountable for the cost of the oil spill that our pro-drilling president once thought not possible.

And then there was Jeffrey Immelt, CEO of General Electric and once friendly to Obama but now alarmed by new regulations. He was one of the many CEOs cited by Fareed Zakaria in The Washington Post as evidence of “Obama’s CEO problem.” General Electric is a company that got into deep trouble when it stopped worrying about making better light bulbs and came to devote much of its business through GE capital to fancy financial products. With GE having been saved by the taxpayers, one wonders what the conglomerate has to complain about. Or Wall Street donors now stiffing the Democrats and claiming Obama is hostile to them.

How Brokers Became Bookies: The Insidious Transformation of Markets Into Casinos

Tuesday 13 July 2010
by: Ellen Brown, t r u t h o u t | Op-Ed

"You all are the house, you're the bookie. [Your clients] are booking their bets with you. I don't know why we need to dress it up. It's a bet." - Sen. Claire McCaskill, Senate Subcommittee investigating Goldman Sachs (Washington Post, April 27, 2010)

Ever since December 2008, the Federal Reserve has held short-term interest rates near zero. This was not only to try to stimulate the housing and credit markets, but also to allow the federal government to increase its debt levels without increasing the interest tab picked up by the taxpayers. The total public US debtinterest bill on the debt actually dropped (from $406 billion to $383 billion), because of this reduction in interest rates. increased by nearly 50 percent from 2006 to the end of 2009 (from about $8.5 trillion to $12.3 trillion), but the

One of the dire unintended consequences of that maneuver, however, was that municipal governments across the country have been saddled with very costly bad derivatives bets. They were persuaded by their Wall Street advisers to buy credit default swaps to protect their loans against interest rates shooting up. Instead, rates proceeded to drop through the floor, a wholly unforeseeable and unnatural market condition caused by rate manipulations by the Fed. Instead of the banks bearing the losses in return for premiums paid by municipal governments, the governments have had to pay massive sums to the banks - to the point of pushing at least one county to the brink of bankruptcy (Jefferson County, Alabama).

Obama’s Embrace of Free Trade, and the Subversion of Democracy

By Roger Bybee

Has President Obama allowed Karl Rove to design a key piece of economic strategy crafted to deeply alienate core Democratic voters four months before the crucial mid-term elections?

The notion is of course absurd, but you have to wonder how Obama's inner
circle of Wall Street-oriented geniuses—and his political advisors—dreamt up the president's new push for expanded exports via new "free-trade" agreements with Colombia, Panama and South Korea.

It’s Obama’s Empire Now

Posted on Jul 13, 2010

By Stanley Kutler

The American Empire is alive and well—and as expansive as ever. We have established more than 700 military bases across the world, largely encircling the peripheries of Russia and China, which are now central to the Iraq and Afghanistan conflicts. The Cold War in the aftermath of World War II drove the expansion as we searched for security—and markets, to be sure.

Perhaps we now are the largest imperial power the world ever has known. Bagram Air Base in Afghanistan trivializes the once-massive naval and air facility at Cam Ranh Bay during the Vietnam War, and we have developed “permanent” mega-bases in Iraq. We engage in denial, and euphemisms abound. Stumping for the colonial takeover of the Philippines in 1901, Theodore Roosevelt, so fashionable today, insisted that “there is not an imperialist in the country. ... Expansion? Yes. ... Expansion has been the law of our national growth.” Chalmers Johnson reminds us of Democrat Woodrow Wilson’s liberal “idealist imperialism,” which would make the world safe for democracy. (See Johnson’s “The Sorrows of Empire: Militarism, Secrecy, and the End of the Republic” and other works.) Deceit comes from the top.

US government lifts lid on alleged leak to WikiLeaks

By Chris Vallance BBC News

The US state department has told the BBC it believes an alleged whistle-blower obtained secret diplomatic data despite being at a field base in Iraq.

Serviceman Bradley Manning, 22, faces two charges related to the illegal transfer and transmission of classified information from a US military network.

The US said he was suspected of downloading from SIPR Net.

He reportedly then passed on the data, including army videos and diplomatic messages, to the WikiLeaks website.

It's All About the Wages -- Our Economy Would Be Fine If Everyone Made Their Fair Share

By Robert Reich, Robert Reich's Blog
Posted on July 13, 2010, Printed on July 14, 2010
http://www.alternet.org/story/147531/

Missing from almost all discussion of America's dizzying rate of unemployment is the brute fact that hourly wages of people with jobs have been dropping, adjusted for inflation. Average weekly earnings rose a bit this spring only because the typical worker put in more hours, but June's decline in average hours pushed weekly paychecks down at an annualized rate of 4.5 percent.

In other words, Americans are keeping their jobs or finding new ones only by accepting lower wages.

Meanwhile, a much smaller group of Americans' earnings are back in the stratosphere: Wall Street traders and executives, hedge-fund and private-equity fund managers, and top corporate executives. As hiring has picked up on the Street, fat salaries are reappearing. Richard Stein, president of Global Sage, an executive search firm, tells the New York Times corporate clients have offered compensation packages of more than $1 million annually to a dozen candidates in just the last few weeks.

The fighting twins

By Henry CK Liu

In monetary economics, the trade deficit and the fiscal deficit are referred to as the "twin deficits", as if they were genetically related twins merely because they both contribute to increases in public debt. Yet these two deficits are genetically opposite and can act like fighting twins to neutralize one another in their adverse economic effects.

A fiscal deficit is created by a government spending in excess of revenue in the domestic economy. The external penalty of a persistent fiscal deficit is the devaluation of the exchange rate of the domestic currency in foreign trade.

Real disposable income is the dominant swing voter ideology

by: Chris Bowers

Tue Jul 13, 2010 at 15:23

One of the main problems facing the Democratic Party on a national level is that it caters to the 20-30% of its elected officials who are primarily center-right when it comes to public policy. (For a list of the ways the party caters to this 20-30%, read my article "BREAKING: I am now a conservative Democrat."). In the upcoming 2010 elections, the net result of this catering is likely to be a a minimal electoral boost for that 20-30% of the party, and a massive electoral setback for the entire party, including that 20-30%.

Scientists expected Obama administration to be friendlier

A culture of politics trumping science, many say, persists despite the president's promises. The use of potentially toxic dispersants to fight the gulf oil spill is cited as just one example.

By Tom Hamburger and Kim Geiger, Tribune Washington Bureau
9:42 PM PDT, July 10, 2010
Reporting from Washington

When he ran for president, Barack Obama attacked the George W. Bush administration for putting political concerns ahead of science on such issues as climate change and public health. And during his first weeks in the White House, President Obama ordered his advisors to develop rules to "guarantee scientific integrity throughout the executive branch."

Many government scientists hailed the president's pronouncement. But a year and a half later, no such rules have been issued. Now scientists charge that the Obama administration is not doing enough to reverse a culture that they contend allowed officials to interfere with their work and limit their ability to speak out.

"We are getting complaints from government scientists now at the same rate we were during the Bush administration," said Jeffrey Ruch, an activist lawyer who heads an organization representing scientific whistle-blowers.

Researchers discover a surprising threat to democracy: our brains

By Joe Keohane | July 11, 2010

It’s one of the great assumptions underlying modern democracy that an informed citizenry is preferable to an uninformed one. “Whenever the people are well-informed, they can be trusted with their own government,” Thomas Jefferson wrote in 1789. This notion, carried down through the years, underlies everything from humble political pamphlets to presidential debates to the very notion of a free press. Mankind may be crooked timber, as Kant put it, uniquely susceptible to ignorance and misinformation, but it’s an article of faith that knowledge is the best remedy. If people are furnished with the facts, they will be clearer thinkers and better citizens. If they are ignorant, facts will enlighten them. If they are mistaken, facts will set them straight.

In the end, truth will out. Won’t it?

Maybe not. Recently, a few political scientists have begun to discover a human tendency deeply discouraging to anyone with faith in the power of information. It’s this: Facts don’t necessarily have the power to change our minds. In fact, quite the opposite. In a series of studies in 2005 and 2006, researchers at the University of Michigan found that when misinformed people, particularly political partisans, were exposed to corrected facts in news stories, they rarely changed their minds. In fact, they often became even more strongly set in their beliefs. Facts, they found, were not curing misinformation. Like an underpowered antibiotic, facts could actually make misinformation even stronger.

Energy efficiency helps homeowners avoid foreclosure

Energy-efficient homes have significantly lower default and delinquency rates than typical homes, according to an internal analysis conducted for a major financial institution last year. Here's yet another reason why it makes no sense that Fannie Mae and Freddie Mac have effectively killed Property Assessed Clean Energy (PACE), a financing tool that has helped make efficiency improvements affordable for thousands of American homeowners.

The Case for a New WPA

Why many are calling for a modern incarnation of the Depression-era program.

by Kate McCormack

posted Jul 12, 2010

The image catches your breath. The look etched on the mother’s face reveals more about the hard lives of migrant workers during the 1930s than any history book. The photo, by Dorothea Lange, is one of the most famous shots in American history and an iconic representation of the Great Depression. Lange captured it while participating in the Farm Security Administration’s photography project, a division of the Works Progress Administration (WPA).

In 1933, when Franklin Roosevelt took office with the promise of government action to relieve destitution, unemployment had reached nearly 25 percent. As part of that commitment, his administration created the WPA, a permanent jobs program that put 8.5 million Americans to work between 1935 and 1943. The WPA was a massive public undertaking that changed the face of a growing nation. In addition to providing jobs to millions, it brought the nation’s transportation system into the 20th century and brought art to people of all classes, leaving the U.S. with a rich legacy of oral history and artistic masterpieces.

Extremist Christians Aim to Create Armed Militias Against "Godless" Federal Government

By Sarah Posner and Julie Ingersoll, Religion Dispatches
Posted on July 12, 2010, Printed on July 13, 2010
http://www.alternet.org/story/147453/

The following is reprinted with permission from Religion Dispatches. You can sign up for their free daily newsletter here.

Herb Titus, a lawyer for the far-right Gun Owners of America, is jubilant over last week’s Supreme Court decision in the case McDonald v. City of Chicago, finding that state and local regulation of gun ownership must comport with the Second Amendment right to bear arms.

The decision has also pleased the National Rifle Association, which sees it as ammunition for challenging gun control laws across the country. But for Titus, who thinks the NRA “compromises” on gun rights, the Second Amendment isn’t solely about “firepower,” he says. “You have to see it in its spiritual and providential perspective.”

Scary Anti-Iran Talk Is Escalating -- And Weapons May Be Moving Into Position for Attack

By Conn Hallinan, Foreign Policy in Focus
Posted on July 12, 2010, Printed on July 13, 2010
http://www.alternet.org/story/147504/

Dispatches From The Edge

Crazy talk about the Middle East seems to be escalating, backed up by some pretty ominous military deployments. We'll start with the department of scary statements:

First up, Shabtai Shavit, former chief of the Israeli spy agency Mossad, speaking June 21 at Bar Ilan University, Tel Aviv on why Israel should launch a pre-emptive strike at Iran: “I am of the opinion that, since there is an ongoing war, since the threat is permanent, since the intention of the enemy in this case is to annihilate you, the right doctrine is one of presumption and not retaliation.”

Second up, Uzi Arad, Israeli prime Minister Benjamin Netanyahu’s national security advisor, speaking before the Jewish Agency in Jerusalem June 22 on his belief that the “international community” would support an Israeli strike at Iran: “I don’t see anyone who questions the legality of this or the legitimacy.”

The Attack of the Real Black Helicopter Gang: The IMF Is Coming for Your Social Security

Monday 12 July 2010

by: Dean Baker, t r u t h o u t | Op-Ed

A few years back, there was a fear in some parts about black UN helicopters that were supposedly taking part in the planning of an invasion of the United States. While there was no foundation for this fear, there is basis for concern about the attack of another international organization, the International Monetary Fund (IMF).

Last week, the IMF told the United States that it needs to start getting its budget deficit down. It put cutting Social Security at the top of the steps that the country should take to achieve deficit reduction. This one is more than a bit outrageous for two reasons.

Paul Krugman: The Feckless Fed

Back in 2002, a professor turned Federal Reserve official by the name of Ben Bernanke gave a widely quoted speech titled “Deflation: Making Sure ‘It’ Doesn’t Happen Here.” Like other economists, myself included, Mr. Bernanke was deeply disturbed by Japan’s stubborn, seemingly incurable deflation, which in turn was “associated with years of painfully slow growth, rising joblessness, and apparently intractable financial problems.” This sort of thing wasn’t supposed to happen to an advanced nation with sophisticated policy makers. Could something similar happen to the United States?

Not to worry, said Mr. Bernanke: the Fed had the tools required to head off an American version of the Japan syndrome, and it would use them if necessary.

Today, Mr. Bernanke is the Fed’s chairman — and his 2002 speech reads like famous last words. We aren’t literally suffering deflation (yet). But inflation is far below the Fed’s preferred rate of 1.7 to 2 percent, and trending steadily lower; it’s a good bet that by some measures we’ll be seeing deflation by sometime next year. Meanwhile, we already have painfully slow growth, very high joblessness, and intractable financial problems. And what is the Fed’s response? It’s debating — with ponderous slowness — whether maybe, possibly, it should consider trying to do something about the situation, one of these days.

Taming Finance in an Age of Austerity

by Joseph E. Stiglitz

NEW YORK - It was not long ago that we could say, "We are all Keynesians now." The financial sector and its free-market ideology had brought the world to the brink of ruin. Markets clearly were not self-correcting. Deregulation had proven to be a dismal failure.

The "innovations" unleashed by modern finance did not lead to higher long-term efficiency, faster growth, or more prosperity for all. Instead, they were designed to circumvent accounting standards and to evade and avoid taxes that are required to finance the public investments in infrastructure and technology - like the Internet - that underlie real growth, not the phantom growth promoted by the financial sector.

The financial sector pontificated not only about how to create a dynamic economy, but also about what to do in the event of a recession (which, according to their ideology, could be caused only by a failure of government, not of markets). Whenever an economy enters recession, revenues fall, and expenditures - say, for unemployment benefits - increase. So deficits grow.

Big Oil’s Good Deal

No industry enjoys the array of tax breaks and subsidies that the oil and gas industry does. No industry needs them less. For all the damage it has caused, the disastrous oil spill in the Gulf of Mexico may provide the political momentum to end this special treatment.

President Obama’s 2011 budget, proposed before the spill, would eliminate $4 billion in annual tax breaks for oil and gas companies. Bills in both houses introduced after the spill would achieve many of the same results. Industry has spent $340 million on lobbying over the last two years to block these sorts of initiatives, and until recently Congress has been eager to do its bidding. This year could be different.

The White House has proposed eliminating nine tax breaks. Some are modest, all are complicated, but in toto they provide a range of cushy benefits — fast write-offs for upfront drilling expenses, generous depletion allowances, and the like — that are available at virtually every stage of the exploration and production process.

No Dominion: The Lonely, Dangerous Fight Against Christian Supremacists Inside the Armed Forces

Sunday 11 July 2010

by: Matthew Harwood, t r u t h o u t | Report

In his fight against British imperialism, Mahatma Gandhi described the life cycle of successful civil disobedience: "First they ignore you, then they laugh at you, then they fight you, then you win." Mikey Weinstein, the 55-year-old founder of the Albuquerque, New Mexico-based Military Religious Freedom Foundation (MRFF), likes to quote it, knowing full well he's crossed the line into a bloody-knuckle brawl. Over the past year, Weinstein and his organization have recorded a tremendous string of victories in the fight against Christian supremacists inside the armed forces.

Emmer In Damage Control Mode: Meeting Waiters After Claiming They Made $100K In Tips

Eric Kleefeld | July 9, 2010, 1:44PM

Minnesota state Rep. Tom Emmer, the presumptive Republican nominee for governor, appears to be going into damage control mode in the wake of his proposal to lower the minimum wage for waiters by crediting their tips towards the state's wage requirement. He now has a listening tour session coming up this Wednesday, at which he will meet with servers.

Emmer said earlier this week that he would support such an idea, which is common in most other states. Minnesota is one of seven states that do not permit employers to pay less than the standard minimum wage to tipped workers. Federal law permits tipped workers' wages to be as low as $2.13 per hour, absent state regulation to the contrary, with tips given to workers credited against the minimum wage of $7.25 an hour employers are required to pay.

Which is more bizarre: The Iowa GOP platform or the failure of the press to report it?

ASK THIS | July 09, 2010

The platform, claiming to promote moderation, would allow concealed guns in schools, end minimum wage and abortion laws, teach creationism, and impeach ‘activist judges.’ Anybody paying attention? The Iowa press sure doesn't seem to be.

By Herb Strentz
herb.strentz@yahoo.com

The Iowa caucuses are 18 months away, but part of the script for what Iowa Republican activists want is already written.

That script is the 12,000-word, 367-plank platform of the state Republican party, adopted at its June convention and faithful to previous platform themes of “family values,” religious beliefs and downsizing, if not eliminating, the federal government.

A Climate Change Corrective

Perhaps now we can put the manufactured controversy known as Climategate behind us and turn to the task of actually doing something about global warming. On Wednesday, a panel in Britain concluded that scientists whose e-mail had been hacked late last year had not, as critics alleged, distorted scientific evidence to prove that global warming was occurring and that human beings were primarily responsible.

It was the fifth such review of hundreds of e-mail exchanges among some of the world’s most prominent climatologists. Some of the e-mail messages, purloined last November, were mean-spirited, others were dismissive of contrarian views, and others revealed a timid reluctance to share data. Climate skeptics pounced on them as evidence of a conspiracy to manipulate research to support predetermined ideas about global warming.

The panel found no such conspiracy. It complained mildly about one poorly explained temperature chart discussed in the e-mail, but otherwise found no reason to dispute the scientists’ “rigor and honesty.” Two earlier panels convened by Britain’s Royal Society and the House of Commons reached essentially the same verdict. And this month, a second panel at Penn State University exonerated Michael Mann, a prominent climatologist and faculty member, of scientific wrongdoing.

Volcker Pushes for Reform, Regretting Past Silence

By LOUIS UCHITELLE

JUST before the Fourth of July weekend, Paul A. Volcker packed his fishing gear and set off for his annual outing to the Canadian wilds to cast for Atlantic salmon.

He left behind a group of legislators in Washington still trying to nail down a controversial attempt to overhaul the nation’s financial regulations in the wake of the country’s most serious economic crisis since the Great Depression.

A well-regarded lion of the regulatory world, Mr. Volcker had endorsed the legislation before he went fishing, but unenthusiastically. If he were a teacher, and not a senior White House adviser and the towering former chairman of the Federal Reserve, he says, he would have given the new rules just an ordinary B — not even a B-plus.

“There is a certain circularity in all this business,” he concedes. “You have a crisis, followed by some kind of reform, for better or worse, and things go well for a while, and then you have another crisis.”