A picture of history

from Peter Radford

There is no serious effort in Washington to deal with our so-called debt crisis. I would like to think this is because people realize we don’t have one, but a more realistic interpretation on non-events is that the Republicans are stuck in a rut of obstruction. They have no policy other than to contradict whatever Obama says. Even if this means contradicting what they themselves said in the past. At the moment this obstruction produces gridlock on any constructive efforts to get the economy moving at a more rapid pace. It also means avoiding negotiating on the budget, even though both the Senate and the House now have working budget proposals. The problem seems to be that were the Republicans to engage in negotiations they wouldn’t be able to engineer a crisis atmosphere within which they could extort excessively. They want, apparently, to wait until we nudge back up against the debt ceiling at which point they can reload their hostage taking weaponry and cause the nation greater mayhem.

Larry Summers and the Davos Scam

from Dean Baker

Every January the public is treated to tales of the World Economic Forum, a gathering of the world’s rich and a select few who are invited there to educate and/or entertain them. Most of us will never have the honor of getting on the inside, so we must rely on media accounts to give us the picture. It turns out that these accounts might be more informative than intended.

Reuters reported on a talk given by Clinton Treasury Secretary and former Obama National Economic Adviser Larry Summers. According to the Reuters account, Summers said:

In 1993, here’s what the situation was: Capital costs were really high, the trade deficit was really big, and if you looked at a graph of average wages and the productivity of American workers, those two graphs lay on top of each other. So, bringing down the deficit, reducing capital costs, raising investment, spurring productivity growth, was the right and natural central strategy for spurring growth. That was what Bob Rubin advised Bill Clinton, that was the advice Bill Clinton followed, and they were right.

This segment is so striking because it is completely wrong in a very big way.

A tale of two economies

from David Ruccio

Back in May, at the Volcano Symposium at Oxford University, I made the argument that economists and pundits are not seeing the same economy.

We are, by almost any measure, in the midst of a Second Great Depression.

I am often amazed at how controversial that claim is. Many economists and pundits, on both the Left and the Right, refuse to admit we’re in the midst of a depression—qualitatively different from the succession of postwar recessions and comparable in scope to what we last experienced in the 1930s.

The only explanation, it seems to me, is we’re looking at two different economies. 

It’s the wages stupid

from Peter Radford

Such is the breadth and depth of the Romneyfication of our economy that otherwise sensible people make silly faux pas or repeat false thinking without a hint of knowledge of their error.

Take Sebastian Mallaby for instance. I was pleased with his two recent articles on banking. He offered us all a strident argument for the break up of the biggest. His logic was impeccable. His conclusions irrefutable. Of course this glowing reference of mine might be due to my prior identical argument. So, he rose in my estimation. Only to trip up.

In his article in yesterday’s Financial Times he goes to great lengths to criticize the Fed’s rather anemic approach at present. Despite the manifest failure of its previous efforts to bring down unemployment, and despite the recent gathering of darker clouds portending a weakening of the economy, the Fed is stuck in a dithering pattern. This is largely because there are one or two strict advocates of depression austerity on the board who manage manfully to scupper progress most of the time. I think, also, that Ben Bernanke, being a stout Republican, is loath to do too much to help Obama. 

United States of financial insecurity

from David Ruccio

The United States is becoming a nation of increasing financial insecurity.

According to a new survey by the Consumer Federation of America (pdf), more Americans find themselves living paycheck to paycheck, forced to reevaluate their expectations for retirement, and falling further behind in terms of their retirement savings.

President Obama discovers how serious the recession is

from Dean Baker

That’s what he told an audience in Chicago last week. To be fair, he was referring to revised data from the Commerce Department showing that the falloff in GDP was larger than originally reported. However, ridicule is appropriate. He and we knew all along how many people were out of work. The employment numbers told us the size of the hole and the desperate need for government action.

This sort of ridiculous comment, and President Obama’s weak response to the recession over the first two and a half years of his presidency, explains the tidal wave of skepticism facing President Obama’s widely hyped upcoming speech on jobs.  The list of remedies leaked ahead of time does little to inspire hope.

Speechless: Follow-Up

from Peter Radford

I think Krugman is making an important point. So let me put my own spin on it.

Our political system has spun out of control not because of the emergence of a virulent form of right wing extremism, but because there is no counter balance. There is no penalty for being an extremist. A Tea Party activist can say extraordinary things and not have to pay the price either in terms of derision, or in terms of counter attack. The fatal flaw is within the media and the way it maintains a false balance.

Productivity in Europe: two graphs

from Merijn Knibbe

Introduction: instead of looking at an ill defined variable like Unit Labor Cost to investigate competitiveness, it’s better to look at a still quite vague (it excludes household production and social and environmental effects) but better defined variable like ‘productivity’. The transition economies are rapidly closing the EU productivity gap EU.  So do Italy, the UK and even Germany…. Since 2006, Spain increases its relative productivity – but this is to little avail as unemployment in Spain has reached 21%.

Leaders of the EU have negotiated a Greek debt deal. I’m not impressed, yet. Mark Rutte, prime minister of the Netherlands and Jan Kees de Jager, minister of finance of the Netherlands, told the press that the deal involved a total of 109 milliard Euro – while all other heads of state seem to have the idea that the amount involved is 159 milliard Euro…. somebody is fifty milliard wrong (yes, I write milliard). Update: guess who were wrong… all of them. According to a letter

GOP bad faith on the debt ceiling

from Kevin P. Gallagher

President Obama has the economic and moral high ground on the debt ceiling debate – but won’t take it. With an eye next year’s elections, the Republicans are putting Obama on the defensive by using the debate to paint Obama as a big spending Democrat.

Let’s get the facts straight on a few things: the Republicans are largely responsible for the debt problem because they spent too much and taxed too little during the Bush years; and austerity economics doesn’t bring economic growth.

Why don’t we hear that from the White House? 

Separate and increasingly unequal

from David Ruccio

The United States has never solved the problem of racial inequality. And, in the wake of the financial crash, the problem has only gotten worse.

In fact, according to a new study by the Pew Research Center, the racial wealth gap—between white and black and Hispanic households—in 2009 was the largest since the government began publishing such data a quarter century ago and roughly twice the size of the ratios that had prevailed between these three groups for the two decades prior to the Great Recession.

Pain with the USA Consumer Price Index

from Dean Baker

There is a full-fledged drive in the United States to cut Social Security benefits by lowering the annual cost-of-living adjustment for people already receiving benefits. The plan involves changing the index for calculating the cost of living. The new index, which is known as the “chained consumer price index” (CCPI) typically shows a rate of inflation 0.3 percentage points less than the CPI currently used to adjust benefits.