February 18, 2011
$6 Trillion in play: derivatives markets
Reuters is reporting on 
a ploy to stall the re-regulation of derivatives markets as proposed by the Dodd-Franks financial reform bill. GOP strategists are now asserting that rushed rule-making can’t become a higher priority than economic analysis, so we ought to slow down and (finally) do the sort of analysis that might have prevented the market crash and the resulting recession (if only we hadn’t let Wall Street insiders write their own rules for so long.)
As I discussed earlier this week elsewhere, the provocatively-titled Wall Street Journal article “Study: Strict Derivatives Regulation Could Cost 130,000 Jobs” echoing the “government regulations hurt business” talking-point has been yet again defused — this time by professors John E. Parsons and Antonio S. Mello, who pointed out, “It’s always possible to ignore the system-wide purpose of a regulation and claim it is costly due to the burden it imposes…”
“We have regulations controlling immigration, restricting tobacco and alcohol sales, establishing speed limits, and prohibiting the use of dangerous materials such as lead paint. We embrace regulations about what can’t be in our drinking water, and insuring we have the freedom to practice religion unfettered by the preferences of government agencies…
…laws about everything from voter registration to verifying the safety & efficacy of drugs because we know we can’t simply trust everybody to do the right thing if there’s no referee…
…the GOP has been persuaded to slow down the process of reforming Wall Street’s greedy, self-serving behaviors.”
Thomas A. Hayes
We’ve seen what happens on Wall Street without adequate oversight and regulation(s): the markets crashed, foreclosures destroyed home values, the economy went into a tail-spin. As if that wasn’t bad enough, the trickle-down effect is that millions of our friends and neighbors are unemployed at precisely the time when their highest-value asset, their home, has collapsed.
Compare the amount of money we’re talking about to the debt-ceiling or the budget for the entire U.S. Government. On Wall Street, in the derivatives market alone, $600 trillion is in play. That’s why the players, and the Chamber of Commerce, are lobbying so hard to be left alone, and trying to scare us with more jobs lost.
“…there is ‘no upside’ to imposing margin requirements on end users, said David Hirschmann, who heads the U.S. Chamber’s Center for Capital Markets Competitiveness.”
Victoria McGrane, from her articleWall Street Journal February 13, 2011
Recovering our standing as the world leader in agriculture and industry, and creating the millions of jobs our country needs, won’t be enough to keep Wall Street greed from ruining our economy. We abandoned a “free market” approach to firefighting, because the profit motive led to really bad outcomes for the people that fire companies were supposed to protect. There are countless examples of systems that operate better in terms of the “common good” when we don’t let snake-oil salesmen operate unfettered in pursuit of their individual profit.
I’ve been pondering whether or not our financial markets can “create prosperity” other than for Wall Street insiders. It’s certainly not what the evidence suggests they’ve done lately; it’s hard to see an “upside” (to borrow David Hirschmann’s term) to heeding those with the most to gain by slowing down reforms when they’ve shown such willingness to abuse the system.
It’s harder still to trust the tired old assertions about government regulations being nothing more than interference that “burdens small business” which can be, and have been, so quickly, thoroughly debunked by simple logic.
This is not Somalia. The citizens of the United States don’t want an end to government; we want a return to the ideal that good government works “for the people” not the fatcats who game the system for profit at the expense of the majority of fair-minded, hard-working people. We want solutions, not sound-bites.
August 2, 2010
Pawlenty knows politics.
Is America ready for a first lady who's recently entered a topless contest?
While it’s arguably inappropriate objectification of his wife to bolster his career when lame-duck MN Governor Pawlenty describes her as his “red-hot smoking wife,” I disagree w/ wonkette’s characterization that it’s “two years early.” If Obama hadn’t started early he probably wouldn’t be President, and remember Senator McCain tried to woo votes from Harley riders by suggesting his wife enter the topless Miss Buffalo Chip contest in Sturgis in 2008.
If voters made their choices rationally the political calculus of candidates and campaigns would be very different. Voters often rationalize when interviewed, but research proves the decisions are more often based on emotion than intellectual evaluation.
Campaigns get longer and more costly all the time because mainstream media producers see candidate spending as helping their own bottom lines. In other words, it’s also arguably a conflict of interest to base so much of the determination of a campaign’s viability on successful fund-raising. True, in many cases advertising is a crucial factor, and we all accept that one of the keys to advertising success is repetition across a wide range of media to generate the maximum number of impressions. Yet wouldn’t it be refreshing for a network or newspaper to cap the amount of political ads they’d take at some reasonable level?
Voters report they’re actually annoyed by the saturation of TV as elections approach; in some cases the result seems to be tuning out altogether. Meanwhile where are the balancing stories about what the candidates have actually accomplished, how a candidate runs an efficient and fiscally restrained campaign focused on issues instead of fund-raising, or which ads are to distract from facts or obscure their votes while echoing slogans and talking points in much the same way Budweiser hammers away with their “King of Beer” message.
MN Governor Pawlenty spending most of his time raising money and his visibility
Pawlenty knows “earned” media coverage is less costly than buying ads, and he’s got the recent examples of Palin and Bachmann proving the press loves provocative statements more than substantive discussion. Any “news” outlet is reliant on ad revenues, which are in turn driven by ratings. Look how quickly most mainstream media companies jumped on the Shirley Sherrod story – a hint of controversy and the race for viewers/readers was on without what we used to think of as journalistic integrity, all in pursuit of the mighty dollar. Pawlenty certainly doesn’t want the national press talking to disgruntled Minnesotans or economists about how his “no new taxes” mythology has driven down quality of life and scuttled the state budget.
Look for conflicts of interest in coverage, and follow the money if you want to understand Pawlenty — but don’t underestimate either his political savvy or the impact his “red-hot smoking wife” may have on voters and donors.
July 15, 2010
Deficit truth and voodoo economics
If the GOP is really serious about deficit reduction why does Sentator McConnell (R-KY) say it’s a “uniform view in his caucus that tax cuts needn’t be offset by other changes in spending” — do none of them think tax cuts affect the budget? There’s ample evidence that the tax cuts enacted under the previous administration were, in fact, the largest factor in rapidly turning the Treasury’s surplus in 2000 into the deficit under a Republican administration which mostly enjoyed a Republican Congressional majority.
What kind of voodoo budgeting lets you ignore a revenue decrease? We lost 3 million manufacturing jobs while Bush was President, but the GOP line is that tax cuts will help? Tax cuts don’t put groceries on the table of an unemployed person, but they do add to the deficit – it’s not complex math.
We’ve got to get more rational in discussing the budget and the deficit. The economy can work – productivity has nearly doubled in this country in the past 30 years, and corporate profits are obviously robust even as CEO salaries and bonuses have sky-rocketed.
Leaders who will safeguard the interests of ordinary citizens are becoming an endangered species in the Congress. In late summer 2008 Congressional leaders and the Bush administration told the country that big business needed behemoth bailouts our our entire economic system would collapse, but that Wall Street bailout did nothing to save blue collar jobs, reverse the outsourcing trends, or stimulate job creation. The bailout didn’t even stimulate lending, it just gave banks cash that went to year-end bonuses.
Bonuses – seriously. What other industry would award bonuses when they had to get billions to remain in business?
And now Senate Republicans want to balance the budget (and stir up fears about deficits) while they claim there’s no need to offset tax cuts with other revenue? Think about that. Tax cuts may or may not make be your cup of tea; they’re a tool in the economist’s arsenal. 
Yet to claim on the one hand deficits are bad and then turn around and advocate revenue reduction — in this case by providing tax cuts for the wealthiest citizens — without offsetting it in any way defies the reasoning powers we expect in our elected leaders.
February 11, 2010
Is the gridlock finally breaking loose in DC?
President Obama’s statement following action by the Senate to confirm twenty-seven nominees:
“Today, the United States Senate confirmed 27 of my high-level nominees, many of whom had been awaiting a vote for months.At the beginning of the week, a staggering 63 nominees had been stalled in the Senate because one or more senators placed a hold on their nomination. In most cases, these holds have had nothing to do with the nominee’s qualifications or even political views, and these nominees have already received broad, bipartisan support in the committee process.
Instead, many holds were motivated by a desire to leverage projects for a Senator’s state or simply to frustrate progress. It is precisely these kinds of tactics that enrage the American people.
And so on Tuesday, I told Senator McConnell that if Republican senators did not release these holds, I would exercise my authority to fill critically-needed positions in the federal government temporarily through the use of recess appointments. This is a rare but not unprecedented step that many other presidents have taken. Since that meeting, I am gratified that Republican senators have responded by releasing many of these holds and allowing 29 nominees to receive a vote in the Senate.
While this is a good first step, there are still dozens of nominees on hold who deserve a similar vote, and I will be looking for action from the Senate when it returns from recess. If they do not act, I reserve the right to use my recess appointment authority in the future.”
It’s amazing to many to realize that it was one Senator, Alabama’s Richard Shelby, on a quest for a 
massive earmark for his home state, that was able to suspend all progress in filling key leadership roles. It’s no wonder some in the GOP think government can’t be effective, if their own party can’t be relied on to let so many agencies have leaders — Americans were stunned to learn that the objections weren’t about qualifications, but rather a partisan ploy that amounted to demanding a kick-back for Alabama.
There’s nothing inherently wrong about earmarks – they allow for quick resolutions to funding decisions that don’t require much, if any, debate. They can be used to replace a fallen bridge, or abused to fund a pork-barrel project that benefits a key constituent or city… but Shelby’s audacity has backfired, and he’s walking back from his stand after embarrassing his party — claiming after the fact that it was just to get attention.
Well, Senator, you’ve drawn attention, your bluff has been called, and people around the country are starting to call your Grand Old Party the Republi-can’ts.
Are disingenuous “republicants” trying to undermine confidence in government?
Now more than ever Americans question that Congress is ready, willing, or able to effectively govern. We trusted them with billions of dollars in handouts to Wall Street in late 2008, but still needed a separate stimulus bill to create jobs after a new administration took office, a process which has yet to make much headway as reverberations of the economic crash continue.
Some debate the value of Cash for Clunkers, too – mostly they’re elected to Congress as Republicans, and none of them work in the auto industry. But it’s fashionable to bash the opposition, after all. The media drinks it up, and it keeps their pundits off the foreclosure stories.
The “Credit Card Bill of Rights” was so hamstrung that banks used the interval to increase fees and interest rates on consumers. The American people fear Washington has gone wrong, and the media coverage of Republican leaders steadfastly refusing to compromise on anything has come to epitomize Washington’s gridlock.
Health Care Reform was one of the keys to President Obama’s litany when he was still just Senator Obama, a candidate for our nation’s highest office. It united a broad coalition of voters who believed he understood the unfairness of a system where insurance companies treated health care differently than any other form of insurance, picking and choosing the most profitable customers while denying those who most needed health care access to what is nominally a payment system. In fact, 55 Republican members of Congress who oppose a public option, calling it a “government takeover of health care” nonetheless rely on just such a system themselves. If “government run” health care payment administration is good enough for a member of the U.S. Congress, it’s probably good enough for you and me.
Meanwhile, medical bankruptcies will continue to occur despite the skyrocketing cost of premiums. Over half the personal bankruptcy filings in the U.S. are triggered by medical costs, but Congress spent billions to prop up rich bankers who didn’t even suffer a cut in pay, let alone lose their jobs or benefit packages. Set aside the uninsured a moment, 
the average medical debt that causes insured families to become bankrupt is $18,000 – compare that to the bonuses paid on Wall Street.
Corporations jiggle their accounting to avoid paying taxes, and the richest Americans pay a smaller fraction that the less well-to-do in personal taxes. It’s no wonder the Tea Party concept holds appeal – we seem to have returned to taxation without representation, and if there’s one things Americans agree on it’s the concept of “fair play.” Well, Americans outside the Republican Caucus in the U.S. Capitol, anyway.
Since it’s politics, we know we have to follow the money. We’ve recently cut dozens of taxes; Congress has left income tax laws alone which would normally put the GOP in a mood to smile. In this case, with one party childishly digging in their heels much like children who won’t eat their vegetables, we have to ask: “What more does the minority hope to gain?”
October 27, 2009
Recent tax cuts increased the 2009 deficit
Bruce Bartlett was a domestic policy adviser to President Ronald Reagan, and conservative supply sider. He did a little simple math and uncovered that the cause of the deficit increase is revenue-related.
The increase cannot be blamed on spending – the Obama administration’s spending has been more conservative than was forecast – $28 billion less than was predicted. This math strongly suggests that more tax cuts, as some in the GOP are advocating, would actually further increase the deficit; tax cuts were unambiguously a major factor in the problematic revenue decline that underlies the deficit growth.
Mr. Bartlett, in a column dated October 24th, was responding to the theory that tax cuts were the best way to solve the deficit, as was advanced by Mort Zuckerman recently in a New York Daily News opinion piece.
Here’s an excerpt:
According to the Congressional Budget Office’s January 2009 estimate for fiscal year 2009, outlays were projected to be $3,543 billion and revenues were projected to be $2,357 billion, leaving a deficit of $1,186 billion. Keep in mind that these estimates were made before Obama took office, based on existing law and policy, and did not take into account any actions that Obama might implement.
Therefore, unless one thinks that McCain would have somehow or other raised taxes and cut spending (with a Democratic Congress), rather than enacting a stimulus of his own, then a deficit of $1.2 trillion was baked in the cake the day Obama took office. Any suggestion that McCain would have brought in a lower deficit is simply fanciful.
Now let’s fast forward to the end of fiscal year 2009, which ended on September 30. According to CBO, it ended with spending at $3,515 billion and revenues of $2,106 billion for a deficit of $1,409 billion.
To recap, the deficit came in $223 billion higher than projected, but spending was $28 billion [less] and revenues were $251 billion less than expected. Thus we can conclude that more than 100 percent of the increase in the deficit since January is accounted for by lower revenues. Not one penny is due to higher spending.
It turns out you have to go back to 1950 to find a year when federal revenues were lower as a share of GDP. So Bartlett, who is happy to say there is some basis for criticism of the Obama administration’s anti-recession tactics, points out that excessive spending isn’t the problem.
In fact, with much of the revenue that was not collected due to the tax cuts sitting more-or-less idle in savings accounts, and certainly not trickling down to stimulate job growth, or bank lending, etc., Bruce Bartlett concludes that:
The idea that Reagan-style tax cuts would have done anything is just nuts.
Bartlett’s article is a must-read for anybody involved in the U.S. economy – which should include every voter and pundit, not just those elected to Congress.
May 25, 2009
Texans won’t be seceding from the union
Oh I know, there’s a lot of talk about states’ rights, and they’ve got a governor making noises to insure he’s getting lots of PR, but at the end of the day? Texans don’t want to secede, they’re proud to be Americans – in fact, many Texans look on themselves as iconic of Americans.
Will they threaten? Absolutely they will. Collectively these are very shrewd, savvy folks when it comes to negotiating, so if Governor Rick Perry has made anti-D.C. rhetoric the theme of the month by deliberately raising secession at a tea-bag event they will talk the talk – but they’re too smart to walk out. Do you realize how much federal money flows into Texas each year? Do you think they want to give up the U.S. military bases, or NASA? Do you think most Texans want to deal with the drugs and violence spilling across the border from Mexico without federal dollars and agents to bolster that fight?
I’m not certain Governor Perry is manipulating the Texas voters or the national media for personal political gain, but consider this: Do you think the governor and his advisers don’t realize the benefit of federal funding for the wall at the border has for local construction jobs, for instance? Would the good folks of Dallas surrender the slogan of their NFL Cowboys as “America’s Team”?
Of course not.
Nor do they want to work out the price of buying back the federally owned land or start paying for the maintenance of interstate highways – and believe me, the highways matter a lot more in Texas than they do in your smaller states. But they will loyally back their governor, and they are an independent lot, so anybody doing a survey is bound to find a fair amount of pro-secession sentiment expressed -well, maybe less so over Memorial Day weekend, or the 4th of July, but few people watching veterans on parade, or fireworks while the national anthem plays, really want to secede.
And there’s no day of the year your survey in Texas would show greater support there for extending Bush’s tax cuts for the rich than in some other state after his spending priorities shorted armor for troops on the ground in Iraq. So actually, just how much pro-seccesion sentiment you found would probably have a whole lot to do with exactly how you framed the question.
So what’s Perry up to?
I hope he’s just trying to attract national press coverage, in the tried and true manner of politicians almost everywhere. Perhaps he senses the chaos in the GOP leadership as a vacuum, and wants to position himself for a Presidential bid (although in the wake of G. W. Bush that hasn’t been a smooth path for GOP governors.) The alternative, though, if this isn’t about boosting his “federal cred” by raising the issue of federalism as he suggested last week, is dark indeed for those of us old enough to recall what the rallying cry of “states’ rights” has meant in politics in this country.
The reality is that “states’ rights” hasn’t been about the federal government, or taxes, it’s been a call to white bigots. By raising it, and then backing away and saying it’s just a discussion about a legal principle, has Perry sent his signal to those who hear it another way? Some of us recall George
Wallace flanked by Alabama State Troopers, exerting states’ rights to exclude black children from “white” schools. There’s been a lot of progress in the country since that era, and most Texans aren’t bigots, but that doesn’t change what that phrase has signalled for most of the time since the civil war.
States’ Rights has consistently been the politically correct way of saying we’ve got to keep minorities from attaining power, wealth, or influence. I’m not saying there’s no bigotry left in Texas, or that President Barack Obama’s campaign and election stopped nay-sayers on all sides of the racism issue dead in their tracks. In Texas, though, there’s precious little tolerance for slippery politically correct double-speak .
You might argue that Reagan got away with a covert shout-out to white racists in a speech in Mississippi in 1980, but this isn’t the same electorate, or the same mood, that dominated the country then – and Perry may be shooting his political career in the foot. He’s arguably signaled the most extreme members of the GOP at a tea-party despite quickly back-walking from the rhetoric for the national press. Would his leadership further distance the Republicans from the values of moderate Americans?
The state that’s famous for knowing when a politician is, “all hat – no cattle,” is surely gathering around the grills and picnic tables this summer wondering just where their Governor’s going with this.
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