The latest (February) issue of Harpers’ Magazine has an interesting discussion of Europe and the eurozone, “How Germany Reconquered Europe: the Euro and its Discontents.” Some of the big questions of European unity, democracy, and national sovereignty are debated in broad and direct terms not often seen in other analyses:
“The basic lesson of the past ten, twenty years – even of the past hundred years – is that the upper limit, not only of democracy but of political legitimacy, is the nation-state…” (John N. Gray, London School of Economics.)
Then there is the Franco-German relationship, which is central to the eurozone: Read more…
from Mary Mellor
Handbag economics is the common sense of our age. Public sectors are like households, they must live within their means, balance their books, cut their coat according to their cloth. Britain is to face more years of austerity, not because it is in recession, but in pursuit of the handbag ideal.
According to handbag economics there is only one breadwinner in the economy, the private sector. Only the private sector can determine the size of the public household budget. In this gendered analogy, the public-housewife must not ask for more house-keeping, or borrow more, to make ends meet. Most emphatically, the public-housewife must not set up a printing press in the back room to create her own money.
There is a shed, though, at the end of the garden beyond her reach. Read more…
from Mark Weisbrot
The rest of the world must have been fascinated at the spectacle of the U.S. government shutdown and threatened default on our public debt. Here is a country that not only has no public debt problem, but can pay any foreign creditors in its own currency – i.e. money that our central bank creates. Yet even this “exorbitant privilege” – as Barry Eichengreen titled his book about the dollar at the center of the international financial system – was not enough to assure the world that Republicans would not cause disruption by attempting the impossible.
As expected, the Republicans were defeated and got nothing for their efforts other than a record-low approval rating. The New Yorker’s satirist Andy Borowitz summed up their “noble cause” with a fictional quote from Ted Cruz: “The dream of keeping poor people from seeing a doctor must never die.”
The outcome was never much in doubt. The Tea Party and its friends do not control the majority of the Congress, nor could anyone expect House majority leader John Boehner to defy the Chamber of Commerce, the Business Roundtable, and the rest of America’s most powerful business lobbies after they made it clear that they would not stomach even a temporary, technical default on U.S. Treasury obligations. Indeed, it is testimony to the extremists’ base of support within their party – and their own stubbornness – that they made it as far as they did. Read more…
from Dean Baker
Doing policy work in Washington, I tend to be around people who are highly educated and think of themselves as very intelligent. Many of them think of ordinary Americans as being stupid and ill-informed. After all, they understand little about politics and the government; in their view this reflects a lack of intelligence.
It would be great if everyone were smarter (especially the people doing policy work), but the problem of an ill-informed population has at least as much to do with the failures of the highly educated people as the failures of the masses. Nowhere is this more obviously the case than with the federal budget.
Public opinion surveys consistently show the public is terribly confused about the budget. They hugely overestimate relatively small areas of spending, failing to recognize that popular programs like Social Security, Medicare, and Medicaid account for the largest portion of the budget, along with military spending.
For example, a 2011 CNN poll found that the typical person thought foreign aid accounted for 10 percent of the budget. The actual number is less than 1 percent. They thought public broadcasting accounted for 5 percent of the budget. The actual number is 0.012 percent. There were several other items where the typical person overestimated spending levels by a factor of 100 or more. Read more…
from Peter Radford
In this fast moving and ridiculously puerile crisis of ours we are being treated to an equally fast paced run-through of right wing fantasy. As each layer of their beliefs is peeled away and revealed as absurd, another is quickly located to defend, often for only a few hours, the destructive and profoundly anti-American path the Republicans are leading us down.
But: when is a fantasy not a fantasy, but a goal?
I am trying to think of an appropriate way to describe GOP policy at the moment, it clearly isn’t “policy” in any respectable sense of that word. I am not sure what to call the stream of ad hoc tactical adjustments spewing out from Republicans currently, but whatever they are they reveal basic truths we ought to consider carefully.
Today’s hot topic is that the default crisis is not a crisis at all. Apparently it is all made up to scare voters. It is, in other words, yet another in a long line of conspiracies cooked up by the Democrats to divert the honest folk of America from the imminent socialist/Islamist takeover being masterminded in the White House. The extremists are, naturally, our last line of defense against that ghastly prospect.
Well, no, but it sounds that way if you watch Fox News.
But there are now emerging a sizable number of more extreme Republicans arguing that potential US debt default is no big deal. Indeed some are arguing it will be healthy, not just here but worldwide. And, from what I can tell, they actually mean it. I call it the Republican “non-default” strategy.
Their thinking goes this way: Read more…
from Dean Baker
Much of the media, and certainly the Democrats, have been unfair to the Republicans in Congress in characterizing their decision to shut down the government as “outrageous,” “crazy,” or even “terrorism.” It is undoubtedly an extraordinary measure, but sometimes extraordinary measures are warranted.
Suppose we were back in 1968 when the United States had more than 500,000 soldiers in Vietnam and was bombing the country on a daily basis, killing thousands of people every week. How many people would view it as outrageous if Congress had voted to shut down the government until President Johnson agreed to end the war? In fact, most people might view the inconveniences associated with a shutdown, and the real pain endured by government workers, to be justified if it could bring an end to the killings in Vietnam.
The difference between shutting down the government to end an unjust war, or to advance any of the other great causes of recent decades, and what the Republicans are doing now is that the Republicans don’t have a great cause. They are trying to keep people from getting health care. This is the disaster the Republicans hope to prevent by shutting down the government. Read more…
from Peter Radford
The end, that is, of Reaganism.
The Republicans have shut down government because no one is taking their demand that health care reform is abandoned seriously.
In a nutshell the fight is over the part of reform that increases taxes on the top 1% of income earners, reduces subsidies to insurers within the Medicare system, and thus can afford to provide health care to tens of millions of previously uninsured people. That’s it. The Republicans failed to defeat these things during the law’s passage; the law stood up to challenge in the Supreme Court; and subsequently a presidential election was fought, with the winner being the advocate of the law. That’s pretty conclusive. The reform has been constitutionally and electorally approved.
But the extremists now running the Republican party think they can ignore all that. They abhor reform and so have taken to insurgency. Their defense of the wealthy to the detriment of the poor and the sick is open class warfare. It can be construed in no other way. Unless the extremists go through some radical change, their intransigence and defense of the privileged will lap over into a fight over the debt ceiling.
Which is odd, isn’t it? Because the privileged stand to lose the most when our credit worthiness is undermined. They are, after all, the holders of most of our collective wealth.
I see this in historical terms. Read more…
from Peter Radford
You may not be aware of the article that has created quite a storm on the New York Times website. It is about inequality at Harvard Business School and the insidious consequences of the emergence of a “class” system there.
If HBS is now afflicted by class issues and the social disaster of inequality, then we can assume the rest of the country is in worse shape. HBS is, of course, partly responsible for the inequality we now suffer from through its relentless production of clever people with great connections who exploit finance and consulting without adding on offsetting social value.
Disclaimer: I graduated from HBS in 1979. Things seem to have changed enormously since I was there. Sure we had our contingent of super privileged kids, but the bulk of our class seemed to me to be from pretty ordinary backgrounds. The obnoxious oppression of class was largely absent. At least we could ignore the super wealthy and the quasi aristocrats because they were too few to have much impact.
Since then things have changed. Read more…
from Peter Radford
Like many people I am perplexed by claims that federal spending has ‘exploded’ on Obama’s watch. The claim is generally made by someone on the right of center in politics and is stated as if it is a well known fact. So well known that no one can possibly refute it. The conversation is then meant to proceed immediately to what we can do about said ‘explosion’ and how we can restrain the Federal government.
The problem I have is factual.
Here is a chart of Federal spending from way back when:
from Dean Baker
Many people have been asking about the Justice Department’s priorities in the wake of the suicide of computer whiz and political activist Aaron Swartz. As has been widely reported, the Justice Department was pressing charges that carried several decades of prison time against Swartz. He was caught hacking M.I.T.’s computer system in an apparent effort to make large amounts of academic research freely available to the public.
The Justice Department’s determination to commit substantial time and resources to prosecuting Swartz presents a striking contrast to its see-no-evil attitude when it comes to financial fraud by the Wall Street banks. People should recognize that this is not just a rhetorical point. It is clear that the Justice Department opted to not pursue the sort of investigations that could have landed many high-level people at places like Goldman Sachs and Citigroup behind bars. Read more…
from Dean Baker
Treasury Secretary Timothy Geithner’s departure from the Obama Administration invites comparisons with Klemens von Metternich. Metternich was the foreign minister of the Austrian Empire who engineered the restoration of the old order and the suppression of democracy across Europe after the defeat of Napoleon. This was an impressive diplomatic feat given the popular contempt for Europe’s monarchical regimes. In the same vein, protecting Wall Street from the financial and economic havoc they brought upon themselves and the country was an enormous accomplishment.
Just to remind everyone, during his tenure as head of the New York Fed and then Treasury Secretary, most, if not all, of the major Wall Street banks would have collapsed if the government had not intervened to save them. This process began with the collapse of Bear Stearns, which was bought up by J.P. Morgan in a deal involving huge subsidies from the Fed. The collapse of Lehman Brothers, a second major investment bank, started a run on the three remaining investment banks that would have led to the collapse of Merrill Lynch, Morgan Stanley, and Goldman Sachs if the Fed, FDIC, and Treasury did not take extraordinary measures to save them. Read more…
from Peter Radford
No one knows exactly what went on, but this evening’s extraordinary melt down within the House Republican caucus is surely a historical moment.
Here’s the story:
Speaker Boehner has been negotiating a deal to resolve the so-called ‘fiscal cliff’ with President Obama. Set aside whether we think the economy has a debt or budget problem. It certainly has a manufactured fiscal policy problem. The reason the cliff is a rotten thing is that unless it dealt with it will induce a severe contraction in policy staring January 1st. The CBO forecasts a recession if we go over the cliff with GDP dropping by nearly 4.0% in the first quarter. Read more…
from Deniz Kellecioglu
About a year ago, while having coffee with friends in Addis Ababa, I postulated that the Eurozone would break up, probably by May, but certainly by September. Of course, I was not the only one offering such projections. But why did we miss the mark (so far)?
Economically, it does not make much sense to go on with the Euro, especially if we have the general populace at heart. Last Thursday, statistics from Eurostat confirmed that the Eurozone remains in recession. The day before that, millions of people across Europe, but predominantly in the most affected countries Portugal, Spain, Italy and Greece, took to the streets against austerity. As you already know, the unemployment figures are at record heights. Read more…
from Edward Fullbrook
The following two charts from http://www.the-crises.com/ compre the distribution of income in the United States in 2007 and England in the seventeenth century.
from John Schmitt
Within the economics profession, the standard explanation for rising inequality over the last three decades is that we have been experiencing a long-term shortage of college-educated workers. Technological progress, the story goes, has increased demand for the kind of highly skilled workers that colleges produce, but, young people have not been going to college in sufficient numbers to meet that demand. The result, these economists argue, is that the earnings of the third or so of the workforce with a college degree have pulled ahead of the rest, creating a widening gap between the top and bottom of the income scale. Read more…
from Mark Weisbrot
MADRID — I have argued for some time now that the recurring crisis in the eurozone is not driven by financial markets’ demands for austerity in a time of recession – as is commonly asserted. Rather, the primary cause of the crisis and its prolongation is the political agenda of the European authorities – led by the European Central Bank and European Commission. These authorities — which if we included the IMF constitute the so-called “Troika” that runs economic policy in the eurozone — want to force political changes, and particularly in the weaker economies, that people in these countries would never vote for.
This is becoming more obvious here in Spain, where the government – run by the right-wing Popular Party (PP) – shares the political agenda of the European authorities, perhaps even more than the IMF does. Read more…
from David Ruccio
As the BBC explains,
There was a big build-up of debts in Spain and Italy before 2008, but it had nothing to do with governments. Instead it was the private sector – companies and mortgage borrowers – who were taking out loans. Interest rates had fallen to unprecedented lows in southern European countries when they joined the euro. And that encouraged a debt-fuelled boom. Read more…
from Peter Radford
We have reached a crucial point in our attempt to bottle up the banks. It looks as if they will win. That means the economy will lose, and the likelihood of a new crisis immediately jumps. Read your Minsky. And weep.
There is a looming deadline in the Dodd-Frank regulations that requires rules to go into effect to govern proprietary trading. As you all know by now I am ardently opposed to banks being allowed to speculate. I refuse to call speculation ‘banking’, which is a term I like to reserve for the very dull and prosaic process of credit extension based upon sober analysis. Read more…