Graph of the 2nd American Revolution

from David Ruccio

US federal spending facts (2 graphs)

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:

Aaron Swartz, financial fraud, and the Justice Department

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.  

Timothy Geithner: modern day Metternich

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.  

Oh Boy: Over the Cliff We Go?

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. 

Why won’t the Eurozone disintegrate?

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. 

Comparisons of income distribution in the USA in 2007 and England in the 17th century (2 charts)

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.   

Technology or Power?

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. 

Spain’s government and European authorities bent on dismantling welfare state

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. 

Debt: Where did it come from? (chart of the day)

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.

A fervent plea on behalf of the wretched of the earth for 2012 and beyond

from Geoff Harcourt

The interrelated capitalist world is in a state of crisis, unstable and almost out of control. The orthodox theory behind the lunatic policies being followed has little connection to the actual world it is meant to interpret and explain. Social unrest, prejudice, racism, self-interest, lack of compassion, anarchistic or worse forces are being unleashed: all the outcome of finance capital being out of kilter with industrial and commercial capital. 

Volcker and Banks

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.

President Obama’s budget is disappointing

from Mark Weisbrot

President Obama’s proposed budget has a few interesting proposals for reforms over the next decade.  Among the best are the proposals to rescind the Bush tax cuts for households with incomes of more than $250,000 and to tax dividends for stockholders among this group as ordinary income.  These and a few other proposals would sum up to a small but significant step in the opposite direction from where this country has been going for the past three decades:  i.e. a vast upward redistribution of income to the rich and the super-rich.

But those concerned with the immediate future are likely to be disappointed.  Most Americans have to work for a living, but there are more than 25 million, or 15 percent of the labor force that are either unemployed, have given up looking for work, or are involuntarily working part time.  The main reason for that is quite simple: There is not enough demand for goods and services in the economy in order to employ them. 

Captain America?

from Peter Radford

The Economist’s astonishingly tone deaf editorial on Mitt Romney – “America’s next CEO?” – is partisan, wong-headed, and naive. The very title gives away the fundamental error: America does not need a CEO. The popular notion that business experience somehow makes for a more productive president is horribly misguided and displays a misunderstanding of politics that, frankly, the Economist ought to know how to avoid.

US corporate profits after tax, as a percentage of GDP

from David Ruccio

source

Wall Street under seige?

from Steve Keen

The Occupy Wall Street campaign is now in its 17th day–making it easily the longest political protest of the Global Financial Crisis. Unfortunately, even I wasn’t aware of it when I was in New York two weeks ago, a few days after it started, since it received very little coverage from the media prior to the arrest of about 700 protesters on the Brooklyn Bridge.

Now it’s entrenched, and growing.

High profits, low taxes

from David Ruccio

The United States is now a country in which corporations make extraordinary profits and spend more to remunerate their CEOs and to engage in lobbying than they pay in federal taxes.