Paul Krugman: In the Austerity Debate, Reputation Trumps Reason

When it comes to inflicting pain on the citizens of debtor nations, austerians are all about steely determination — hey, it's a tough world, and hard choices have to be made.

But when they or their friends come under criticism, suddenly the discussion is all about empathy and hurt feelings.

Debt Limit Bill Passes House, Ordering Obama To Pay Only Some U.S. Creditors On Time

Posted: 05/09/2013 11:42 am EDT;Updated: 05/10/2013 12:44 am EDT

WASHINGTON -- The House passed a measure Thursday that would amount to the rough equivalent of declaring bankruptcy for the United States, directing the government to meet only certain obligations if Congress failed to raise the country's borrowing limit.

Republicans characterized the measure as a responsible step to mitigate the fallout from such a failure, but Democrats slammed it as the "Pay China First Act."

The legislation, which is actually called the Full Faith and Credit Act, lacks support in the Democratic-controlled Senate, and President Barack Obama has threatened to veto it. But it passed the House 221 to 207.

If Congress does not raise the debt limit, the Full Faith and Credit Act would direct the White House to pay U.S. debts in a certain order -- to first pay people on Social Security and holders of U.S. bonds, which include many major U.S. pension funds and foreign governments, with China being the largest among them.

Other obligations, from Medicare to military benefits, would go on the backburner.

Markets erode moral values 

Researchers from the Universities of Bamberg and Bonn present causal evidence on how markets affect moral values

Many people express objections against child labor, exploitation of the workforce or meat production involving cruelty against animals. At the same time, however, people ignore their own moral standards when acting as market participants, searching for the cheapest electronics, fashion or food. Thus, markets reduce moral concerns. This is the main result of an experiment conducted by economists from the Universities of Bonn and Bamberg. The results are presented in the latest issue of the renowned journal "Science".

Prof. Dr. Armin Falk from the University of Bonn and Prof. Dr. Nora Szech from the University of Bamberg, both economists, have shown in an experiment that markets erode moral concerns. In comparison to non-market decisions, moral standards are significantly lower if people participate in markets.

Paul Krugman: Bernanke, Blower of Bubbles?

Bubbles can be bad for your financial health — and bad for the health of the economy, too. The dot-com bubble of the late 1990s left behind many vacant buildings and many more failed dreams. When the housing bubble of the next decade burst, the result was the greatest economic crisis since the 1930s — a crisis from which we have yet to emerge.

So when people talk about bubbles, you should listen carefully and evaluate their claims — not scornfully dismiss them, which was the way many self-proclaimed experts reacted to warnings about housing.

And there’s a lot of bubble talk out there right now. Much of it is about an alleged bond bubble that is
supposedly keeping bond prices unrealistically high and interest rates — which move in the opposite
direction from bond prices — unrealistically low. But the rising Dow has raised fears of a stock bubble, too.

The American Dream Is Dead; Long Live the New Dream

Friday, 10 May 2013 00:00  
By Cliff DuRand, Truthout | News Analysis 

The American Dream of upward mobility is dead, thanks to the neoliberal ministrations of capital and government. But a new dream could rise from the mess left by globalization, off-shoring and austerity.
The continuation of the economic crisis of 2008 up to the present has driven home a social trend that has been evident since the late 1970s, the decline of what is usually called "the middle class" and the accompanying American Dream.

The American Dream is the belief that if you work hard, if you are blessed with at least a modicum of ability and have a little luck, you can succeed. That is, you can rise in society no matter how humble your origin to something better in the way of material well-being, economic security, a settled life and social prestige. It is the dream of upward mobility for oneself, or at least for one's children.

7 Dangerous Food Practices Banned in Europe But Just Fine in America

By Tom Philpott

May 9, 2013  |  Last week, the European Commission voted to place a two-year moratorium [4] on most uses of neonicotinoid pesticides, on the suspicion that they're contributing to the global crisis in honeybee health (a topic I've touched on here [5], here [6], here [7], and here [8]). Since then, several people have asked me whether Europe's move might inspire the US Environmental Protection Agency to make a similar move—currently, neonics are widely used in several of our most prevalent crops [5], including corn, soy, cotton, and wheat.

 

The answer is no. As I reported [4] recently, an agency press officer told me the EU move will have no bearing on the EPA's own reviews of the pesticides, which aren't scheduled for release until 2016 at the earliest.

All of which got me thinking about other food-related substances and practices that are banned in Europe but green-lighted here. Turns out there are lots. Aren't you glad you don't live under the Old World regulatory jackboot, where the authorities deny people's freedom to quaff  atrazine-laced drinking water, etc., etc.? Let me know in comments if I'm missing any.

What Does It Take for Traumatized Kids to Thrive?

May 6, 2013 • By Laura Tillman
 
About a decade ago, Washington State embarked on an early social experiment to educate people about the impacts of stress on children. The results are starting to show.

Paine High School was a shambles when Jim Sporleder arrived to serve as its new principal in the spring of 2007. Housed in a run-down, brown-brick building with metal security screens on its windows, the “alternative” secondary school served 77 of Walla Walla, Washington’s most challenging students. And for years, by nearly all accounts, it had served them exceedingly poorly.

About half of Paine’s students had been ordered to attend the school by a judge; most of the rest had been ejected by the city’s mainstream high school due to behavioral problems. Students weren’t the only hard cases that wound up at Paine; troublesome teachers and feckless administrators also had a history of being diverted there by the district, according to a 2007 city-funded report on the school. Members of the staff referred to their workplace—a dysfunctional campus with a broken intercom system and no hot lunches—as the district’s “dumping ground.”

Sporleder, moreover, was arriving at an especially difficult time: the previous principal was relocated midyear, and the school was “on a downward spiral,” as one student reported at the time.

Dean Baker: Moody’s Playing Dangerous Games With Public Pension Funds

The bond-rating agency Moody's made itself famous for giving subprime mortgage backed securities triple-A ratings at the peak of the housing bubble. This made it easy for investment banks like Goldman Sachs and Morgan Stanley to sell these securities all around the world. And it allowed the housing bubble to grow ever bigger and more dangerous. And we know where that has left us.

Well, Moody's is back. They announced plans to change the way they treat pension obligations in assessing state and local government debt.

Instead of accepting projections of pension fund returns based on the assets they hold, Moody's wants to use a risk-free discount rate to assess pension fund liabilities. This will make public pensions seem much worse funded than the current method.

Fiscal Scolds: The Next Generation

Cash prizes, a date with Bill Clinton: Pete Peterson recruits collegiate centrists 

BY ALEC MACGILLIS

oung Republicans and College Democrats have their perks—the occasional trip to a state party convention, maybe—but they can’t hope to compete with young centrists. When a dozen college students came to St. Louis recently as part of a competition funded by the 85-year-old billionaire deficit hawk Pete Peterson, they were put up in the Ritz-Carlton, while the hundreds of other students attending the same conference stayed in humbler quarters. “Once Peterson opens the money faucet, it’s hard for him to close it,” joked one of the lucky ones, University of Texas business student Hamid Poorsafar.

The students had not sought out such luxury. They had simply responded to a call that came across campus list-serves last year—a new contest, funded by the Peterson Foundation and dubbed Up to Us, under which students from 10 colleges would devise ways to “educate and engage” their classmates about the national debt and the threat it poses to their generation. The prize for the team with the most effective proselytizing: $10,000 and the chance to attend Clinton Global Initiative University, the annual youth-oriented counterpart to the former president’s huge philanthropic confab for grown-ups.

 

Digby: The Medicare crystal ball

I have been searching high and low for this handy chart, which I couldn't for the life of me remeber where it came from, and voila, Mike the Mad Biologist sent it to me today:

Paul Krugman: No Redemption for George W. Bush

Tuesday, 07 May 2013 14:11  

I've been focused on economic policy lately, so I sort of missed the big push to rehabilitate President George W. Bush's image in the run-up to the opening of his presidential library in Texas recently; also, as an anti-Bushist who pointed out how terrible a president he was back when everyone else was praising him as a Great Leader, I'm kind of worn out on the subject.

But it does need to be said: Mr. Bush was a terrible president, arguably the worst ever, and not just for the reasons many others are pointing out.

Opting Out of Wall Street and Building Sustainable, Resilient Communities: Remaking Finance, Part III

Wednesday, 08 May 2013 00:00  
By Margaret Flowers and Kevin Zeese, Truthout | News Analysis

This article is the continuation of a series on remaking our financial system so that it serves and protects people instead of the "too big to fail or jail" banks, collectively called big finance. More and more people see that the current financial system rewards those who hoard their money and invest in risky or damaging ventures such as derivatives and other forms of speculation and are asking: how do we opt out of Wall Street now?
 
They do not want to be part of big finance practices that keep money out of the economy and place us all in danger of losing our bank deposits if an investment goes badly. Almost all Americans experience the predatory practices that have put the population in debt in order to meet basic needs for housing, education and health care.

The dark side of home schooling: creating soldiers for the culture war

The Christian home school subculture isn't a children-first movement. Some former students are bravely speaking out

Katherine Stewart
guardian.co.uk, Wednesday 8 May 2013 07.00 EDT
Several decades ago, political activists on the religious right began to put together an "ideology machine". Home schooling was a big part of the plan. The idea was to breed and "train up" an army of culture warriors. We now are faced with the consequences of their actions, some of which are quite disturbing.

According to the Department of Education, the home schooling student population doubled in between 1999 and 2007, to 1.5 million students, and there is reason to think the growth has continued. Though families opt to home school for many different reasons, a large part of the growth has come from Christian fundamentalist sects. Children in that first wave are now old enough to talk about their experiences. In many cases, what they have to say is quite alarming.

Fly factory that transforms waste into animal feed wins UN innovation prize

By Agence France-Presse
Wednesday, May 8, 2013 10:50 EDT

A fly factory that transforms blood, guts, manure and discarded food into animal feed has walked away with a $100,000 UN-backed innovation prize.

The Stellenbosch, South Africa-based initiative uses the prolific egg layers to recycle industry’s cast-offs into reusable protein by mimicking nature and harnessing the winged insects, usually regarded as pests.

“We’ve created the first industrial farming operation for flies,” said Jason Drew of AgriProtein Technologies which devised the concept.

Disaster Capitalism Strikes as Hedge Funds Circle Near-Bankrupt Municipalities Like Vultures

A troubling pattern emerges as private funds seek to profit from beleaguered cities

- Jon Queally, staff writer

In Detroit, a once bustling city at the center of the US economy, the hedge fund vultures are circling.

But first, a moment of background, employing Naomi Klein's contemporary classic The Shock Doctrine, which tells the story of how purveyors of aggressive capitalism take advantage of crises and public vulnerability in order to push through neoliberal policies and profit-motivated financial arrangements.

Played out in various spheres before and after the book's publication in 2005, the idea of 'disaster capitalism' has been at the center of austerity politics on both sides of the Atlantic (and around the world) in the wake of the 2008 financial meltdown. And now, in places like Detroit, its taking place in US communities at the municipal level as towns and cities hit hard by diminished economies and the slashing of public services are struggling on the edge of bankruptcy.

Social Security's Explosive Injustices

Tuesday, 07 May 2013 09:54  
By Richard D Wolff, Truthout | News Analysis 

People over 65, a growing share of the US population, are suffering a crisis-ridden capitalist system. High unemployment, reduced private pensions, fewer job benefits, less job security, high personal debt levels, and falling real wages make Social Security payments more important than ever. Yet President Obama and Congress recently agreed to bargain over how much to reduce Social Security payments from current levels. That would not only hurt seniors - but also the children who help them.

Consider these statistics covering 2010 [New York Times, April 20, pp B1 and B4]. Married and single people over 65 earning $32,600 or less per year relied on Social Security for between 66% and 84% of their total annual income. That is the majority - 60% - of all US citizens over 65. Cutting Social Security payments seriously damages their lives. An additional 20% of the over-65 population, earning between $32,600 and $57,960, count on Social Security for 44% of their annual income. Cutting Social Security benefits is a cruel "thank you" for a lifetime's work, a default on the payroll taxes they paid into the Social Security system.

Dean Baker: Budget austerity proved a joke, but the US and Europe won't change course

The US and European economies need government spending to boost jobs, but sanity isn't winning in politics today

It appears that the Reinhart-Rogoff battles over their faulty data about government debt have flamed out. Even the inventors of the 90% debt cliff are now anxious to portray themselves of cautious supporters of expansionary fiscal policy. This should mean that sober policy types everywhere can turn to the immediate problem of reducing unemployment with more expansionary fiscal policy.

Unfortunately, this does not appear likely to happen. Even though the case against fiscal policy has been blown to smithereens, there is little impulse in the United States or Europe to change course. The counter-argument appears to have two sides. First, growth has picked up so that we don't really need it. Second, we really wouldn't know what to spend money on in any case.

Neither of these arguments deserves to be taken seriously on its merits. But they nonetheless must be taken seriously because of the prominence of the people who say them.

Why America May Be the Last Empire

By Tom Engelhardt

May 7, 2013  |  It stretched from the Caspian to the Baltic Sea, from the middle of Europe to the Kurile Islands in the Pacific, from Siberia to Central Asia.  Its nuclear arsenal held 45,000 warheads [4], and its military had five million [5] troops under arms.  There had been nothing like it in Eurasia since the Mongols conquered China, took parts of Central Asia and the Iranian plateau, and rode into the Middle East, looting Baghdad.  Yet when the Soviet Union collapsed in December 1991, by far the poorer, weaker imperial power disappeared.

And then there was one.  There had never been such a moment: a single nation astride the globe without a competitor in sight.  There wasn’t even a name for such a state (or state of mind).  “Superpower” had already been used when there were two of them.  “Hyperpower” was tried briefly but didn’t stick.  “Sole superpower” stood in for a while but didn’t satisfy.  “Great Power,” once the zenith of appellations, was by then a lesser phrase, left over from the centuries when various European nations and Japan were expanding their empires.  Some started speaking about a “unipolar” world in which all roads led... well, to Washington.

Your Retirement for a Bottle of Champagne: How Wall Street Fraudsters Ripped You Off, Again

By Lynn Stuart Parramore

May 6, 2013  |  Just as you’re struggling to finance a summer vacation, or simply to pay the freaking rent, how would you like to open your wallet and hand over a wad of cash to a gang of international con artists who commit fraud as casually as they order a five-course dinner?

Really? That’s how you feel about it? Well, tell it to the U.S. Department of Justice, because that’s just what’s going down as a result of the LIBOR scandal.

To recap: Bank hustlers manipulated the world’s most important set of benchmark interest rates and thereby impacted the prices of upward of $500 trillion worth of financial instruments. The LIBOR scam devastated state and municipal budgets, squeezed pension yields and ripped off bank shareholders. In a case of jaw-dropping fraud, greedy traders rigged up the benchmark so that they could cash in on bets on derivatives, while banks submitted fake numbers to make themselves look financially healthier. One Barclays official was fond of fudging numbers in exchange for champagne [3]. “Dude…I owe you big time!” gushed a trader in an email to Barclays’ Mr. Fix-It. “Come over one day after work and I'm opening a bottle of Bollinger."

Paul Krugman: The Chutzpah Caucus

At this point the economic case for austerity — for slashing government spending even in the face
of a weak economy — has collapsed. Claims that spending cuts would actually boost employment
by promoting confidence have fallen apart. Claims that there is some kind of red line of debt that
countries dare not cross have turned out to rest on fuzzy and to some extent just plain erroneous
math. Predictions of fiscal crisis keep not coming true; predictions of disaster from harsh austerity
policies have proved all too accurate.

Yet calls for a reversal of the destructive turn toward austerity are still having a hard time getting
through. Partly that reflects vested interests, for austerity policies serve the interests of wealthy
creditors; partly it reflects the unwillingness of influential people to admit being wrong. But there
is, I believe, a further obstacle to change: widespread, deep-seated cynicism about the ability of
democratic governments, once engaged in stimulus, to change course in the future.

The Coming War Over Net Neutrality

Posted by Tim Wu

Tom Wheeler, Obama’s nominee to run the Federal Communications Commission, surely has much he hopes to get done. Perhaps it’s freeing up some more wireless spectrum or bringing cell-phone service to Mars—who knows. But chances are (assuming his confirmation goes smoothly) that he’ll end up spending time on different challenges, and a chief candidate is a resurgence of the net-neutrality wars.

The outgoing chairman, Julius Genachowski, made many very good and important decisions, but he also made a rather terrible one that may darken Wheeler’s term. Genachowski spent years and much political capital negotiating net-neutrality rules that everyone could live with, only to enact them in a way that is highly vulnerable to a court challenge. That challenge (brought, cynically, by Verizon after it negotiated the rules it wanted) may soon invalidate years of work and create industry chaos.

The net-neutrality rules now in place reinforce the Internet’s original design principle: that all traffic is carried equally and without any special charges beyond those of transmission. Among other things, the rules are a pricing truce for the Internet; without them, we can expect a fight that will serve no one’s interests and will ultimately stick consumers with Internet bills that rise with the same speed as cable television’s.

There may be millions more poor people in the US than you think

By Erin McClam, Staff Writer, NBC News - Fri May 3, 2013 4:16 AM EDT

 

It is responsible for an estimated half-trillion dollars in federal spending every year, is hated by nearly everyone who studies it and is based on an American lifestyle older than the space program.

Yet the figure known as the “poverty line” is almost certainly here to stay. That’s partly because a more accurate measure of who is poor could add millions of Americans to the rolls — something few lawmakers want to have happen on their watch.
 

How Taxes Fund the Outrageous Pay of "Fix the Debt" CEOs Pushing Austerity on the Rest of Us

By Kathleen Geier

May 6, 2013  |  You may have heard about a relatively recent player in the national debate over austerity-nomics. Fix the Debt portrays itself as a public interest group that is earnestly committed to fiscal responsibility and looking out for our children’s future (it always is about their touching concern for the children, isn’t it?) The group claims [2] to support “a common sense solution to prevent disaster and renew America’s economic strength,” and it likes to give the public the impression that its membership is heavily made up of ordinary citizens and workers.

 

But actually, what it is is another elite-driven Pete Peterson front group consisting of billionaire CEOs lobbying for reverse Robin Hood fiscal policies that enrich themselves, immiserate the rest of us, and continue to run this country’s economy into the ground. Last week, the Institute for Policy Studies and the Campaign for America’s Future released a report [3] that reveals new information about the group’s hypocritical and self-serving agenda.

Inside the Collapsing Media Empire of Deceased GOP Sleaze-Peddler Andrew Breitbart

By Mark Ames, Max Blumenthal

May 5, 2013  |  This March was a cruel month for the American press. The 10th anniversary of the Iraq War briefly punctured the country's cultural amnesia, forcing hacks to sweat out another round of cringing mea culpas.

 

March was also the anniversary of another less epic media failure, but this one came and went without a whimper: The death of Andrew Breitbart, on March 1, 2012.

In the immediate aftermath of Breitbart's death last year, at age 43, the Beltway media reflexively whitewashed and glorified his work and legacy, canonizing a reactionary circus barker as some kind of American Icon, a gonzo iconoclast, a conservative punk rocker, or a "Zany, Magnetic Media Hacker," as Wired's Noah Shachtman [5] put it. Publications ranging from Time, the Washington Post and Slate sang Breitbart's praises; scores of ambitious up-and-coming media figures burned both ends of the candle to compose the seminal Andrew Breitbart funeral tribute.