Why Austerity Doesn’t Currently Work

The following article is quite possibly one of the best explanations of Keynesian vs classical economics I’ve ever read.

Why Debunking The Austerity Paper Won’t Kill Austerity — And What Actually Could

By Ruy Teixeira, Guest Blogger on ThinkProgress

Yesterday on TP Ideas Zack Beauchamp covered the release of new research showing that a key paper used to justify austerity in a time of economic crisis is so empirically flawed as to be rendered useless as a guide to policy. That paper, by Carmen Reinhart and Kenneth Rogoff, purported to show that countries that cross a 90 percent debt to GDP ratio sustain a big hit to economic growth. Turns out the data were analyzed incorrectly and the alleged relationship does not exist. Out the window goes one of the main intellectual justifications for the current hysteria about bringing down the national debt.

Zack focused on exposing the foibles of journalists who take as gospel studies like Reinhart-Rogoff based on methodology they don’t understand and data they know nothing about. That is indeed a problem and his post does a service by concentrating on it.

I’ll take a different tack here and focus on the idea of austerity. The theory that slashing deficits can revive slumping economies has been a dominant economic theory since the late 18th century and the rise of classical economics. But its claim to be a policy elixir has never been grounded in strong empirical evidence. That is why, despite this serious hit to the academic case for austerity, we should not expect austerity’s vice grip on policy to weaken very soon or very easily.

The theory behind the austerity idea is as follows. Classical economists believed that the overall economy tended toward a full employment equilibrium where all resources were productively employed. While this equilibrium could be temporarily disturbed by wage and price rigidities, misguided monetary policies and other things that distorted the market, the economy would quickly return to a full employment equilibrium once these distortions were eased. The role for government in responding to recession was therefore to do nothing, letting prices and wages fall to their natural levels or, even better, to do less, since government spending simply crowds out the private spending necessary to get the economy back into equilibrium. That is why, prior to Keynes, the orthodox budgetary approach to recessions was to cut, not increase, government spending so as to create the proper business environment and hasten the arrival of a new equilibrium.

Keynes didn’t buy all this, seeing it as inconsistent with the behavior of real world economies, especially the ones he was observing at the time. In his view, the normal state of capitalist economies was not full employment because total demand in the economy could easily fall short of total supply, creating equilibria with high levels of unemployment — the reverse of the classical precept (Say’s Law) that supply creates its own demand. A shortfall of demand could arise, for example, when consumers and investors start to prefer holding cash to spending and investing.

Another reason for a shortfall of demand, according to Keynes, was the instability of investment, the non-consumption part of demand. Investment was unstable because businesses’ expectations fluctuated depending on their assessments of future possibilities for profit which, in turn, were intrinsically uncertain. Classical economists, in contrast, believed businesses precisely understood their statistical probabilities of success and invested accordingly. Keynes rejected this view and insisted that uncertainty was pervasive.

Given shortfalls in demand, only the “animal spirits” of capitalists — confidence and the lack thereof — allowed capitalists to forge ahead (or not) in poor business conditions and were therefore a huge influence on their investment decisions. And if capitalists lacked confidence in their ability to make profits they would seek to reduce costs by laying off workers, thereby reducing demand in the economy and further eroding business confidence. The process of lowering output, employment and confidence would continue until a new equilibrium was reached — an “under-employment equilibrium” rather than the full employment equilibrium of the classical economists.

Keynes argued that because these equilibria were a natural and recurring tendency of capitalism, there was no natural adjustment process that would lead a market economy back to full employment. Nor could monetary policy mechanisms, like lowering interest rates or increasing the money supply, always be relied upon to jolt businesses back into action and increase employment. Instead, government must frequently step in to make up shortfalls in demand through fiscal policy — in other words, through government spending.

This was a powerful idea and powerfully backed up as well by the empirical record. Its influence spread rapidly. As Mark Blaug, perhaps the leading historian of economic thought, remarks “[N]ever before had the economics profession been won over so rapidly and so massively to a new economic theory, nor has it since. Within the space of about a decade, 1936-46, the vast majority of economists in the Western world were converted to the Keynesian way of thinking.” This “Keynesian consensus” underpinned economic policy-making until the 1970s.

But the austerity idea never really went away as Mark Blyth shows in his excellent new book Austerity: The History of a Dangerous Idea (soon to be the subject of a TP Ideas book symposium!). It came roaring back in the 1970’s when Keynesian economics appeared to falter, dominated economic thinking for the decades leading up to Great Financial Crisis and then, after a very brief resurgence of Keynesian economics in 2008-2010, is back again (see this great paper by Henry Farrell and John Quiggin for a blow by blow of how this happened), suffusing our economic conversation with the “expansionary fiscal austerity” chimera — the idea that the way out of an economic slump is to cut spending which will lead to rising business confidence, more investment and strong growth.

It ain’t working and, truth be told, it’s never worked. As Larry Summers put it a review of Blyth’s book in the Financial Times:

In many cases, the idea of expansionary fiscal contraction is not just oxymoronic but plain moronic as well. Blyth’s views on the current situation are also cogent. As he argues, the accumulation of debt by the public sector throughout the industrial world has far more to do with the direct and indirect effects of financial distress than it does with government profligacy. Indeed, countries such as Ireland and Spain had more favourable records of government debt accumulation than even Germany before the crisis.

The author makes a strong case that at times such as the present, austerity can actually be self-defeating in that its adverse effects on growth exceed any direct benefits from reduced borrowing. This is nowhere better illustrated than in the UK, where extraordinary austerity has been coupled with a rapid rise in the debt-to-GDP ratio.

So how can we defeat a powerful idea like austerity given its remarkable ability to persist across time in spite of abundant empirical evidence that it just doesn’t work? The only answer is another powerful idea; just undermining the austerity idea empirically isn’t going to do the job.

Indeed, the entire history of austerity is a testament to the amazing power of ideas. It is a lesson that progressives, focused as we tend to be on the pragmatic, day-to-day struggle, should take to heart.

How Progressives Can Save California…And the Nation

Conor Friedersdorf has a great editorial over at the Atlantic on California’s political and economic situation. As a Democrat (mostly because I’m too lazy to change my registration to Independent) and as someone who PEW described in a study as a liberal, I agree with most of what he wrote about California. Yet, for all that I enjoy Freidersdorf’s editorials, I think he fails because of his libertarian bent and his understanding of history.

As a few examples of why I agree with Friedersdorf’s editorial, I submit these examples:

Regarding the citizen approved non-partisan redistricting committee, I was absolutely outraged by Democratic party attempts to con, manipulate and impede the independent redistricting committee. It was wrong, immoral and highly unethical. I gather from later news reports that it failed; at least I hope so. No seat should be safe for a party or a legislator through redistricting. All people, regardless of partisan or political views, need to be represented fairly.

Moreover, I voted for Prop 5 and thus against the 3-strikes law for the reasons Freidserdorf stated: its economically wasteful as well as unreasonably harsh. Even Superior Court Judges have stated that the 3-strikes law forces penalties, in terms of prison sentences, that are excessive considering the crimes. But California’s prison system was mostly sold off private prison corporations. Thus, private profit motives nearly preclude any sensible changes like rehab, community monitoring, and ankle bracelet monitors for drug and minor infractions. If California enacted the same kind of reform that Texas did to save money, our prison costs would drop dramatically while leaving plenty of room in our prison system for hardened criminals. I have a few thoughts on them as well: like required real, prison fiscally sustaining work, job training and education rather than inmates spending time weight lifting and body building. For example…and this is my bias…ditch the gyms and create sustainable food gardens.

As for the pension funds, I’d like to see state employees given salaries comparable to private industry for that specific job and then have the employees make defined contributions to CALPers. I’d recommend, too, that CALPers investigate/study pulling the funds out of Wall St. firms to create it’s own investment bank where it loaned money to businesses and bought state infrastructure bonds for a reasonable return, a la ND’s state bank.

If state employees no longer need taxpayer funds, as a result of employee only investments and a CALPers investment bank, then taxpayers would be off the hook for employee pension funds, which would make CALPers and state employees more responsible for their own retirement management.

I also believe state workers should not receive retirement benefits until they meet the Social Security retirement age. My brother, who worked really hard and rarely had a day off for the State as a Budget Analyst, retired at 50 with a really good retirement pension as well as a large payout for all the accumulative vacation time he never took. He’s not worked a day since he retired because he didn’t have to…and he’s living quite comfortably as are all retired state workers who retired long before Social Security retirement ages. That’s absurd.

California’s public employee retirement benefits should match the Social Security retirement age. Another point of my agreement with Friedersdorf is teacher tenure. I hate it.

I had a couple of those bad teachers who ended up being a wasting my time and taught me nothing. I’d scrape tenure altogether along with the entire Civil Service System. Both systems exist because of outdated and disproved social psychology thinking from many decades ago (the 30s or 40s?) in which it was believed that if employees didn’t have to worry about being fired, they would do a better job. We now that is wrong.

The fear of being fired provides the additional incentive to work harder and be more productive while complete protection encourages laziness.

California should lead the nation in determining best practices based on recent research, private industry models and what are the best incentives for employees. Research is needed and should be done but in the short term both tenure and Civil Service guarantees should be eliminated. No more working hard until tenure or civil service employment guarantees occur to then become lazy workers as my mother discovered amongst many of her coworkers after she went to work for the State. All workers should be held to private industry best practices standards. Period.

Where is disagree with Friedersdorf are those areas which he exhibits a seemingly youthful naiveté.

Unlike Friedersdorf, I unfortunately don’t have much faith in California Republicans either to deal with California’s real problems of fiscal solvency and rebuilding the state back to the vibrant, thriving state I remember it being when my family returned to CA in 1959.

Admittedly, the state’s proposition ability has made fiscal constraint and budgeting sense much harder, allowing emotional appeals on spending while leading citizens to believe there is no financial penalty to that spending. In the very same election year, I’ve seen propositions approved by citizens that both increased spending while at the same time demanding higher restraints on taxes.

Californians, like the rest of nation over the last 30 some years, came to believe that spending and taxes were disconnected; deficits didn’t matter and a magical belief in growth (i.e., dynamic scoring) would solve all fiscal problems.

Does any company determine its spending based upon what might happen in a year or three or five years? No, they take a hard look at their market and, if they’re smart, make a strategic decision on where to spend their money. They don’t make fiscal decisions based on magical market predictions, which is exactly what Republicans across the country, and most specifically in Congress, now demand. Dynamic scoring, which the GOP pushes, is a lie based on an unproven economic myth of unknown growth. Yes, budgeting for an entire year is hard to do when no one knows what the future will bring which is why the most accurate numbers and predictions must be available.

That is why the California proposition system must to be reformed to bring some reality to it. Overall, the idea that you can get something for nothing, based on magical growth numbers, has caused much of the state’s fiscal problems. And very liberal Democrats have added to this fantasy along with their Republican fellows who said tax cuts were all that was needed to fix the state’s fiscal woes. Hidden accounts or lock boxed accounts no longer make any fiscal sense. Our Legislature must be free, regardless of voter propositions, to make economically fiscal sense of all money flowing into the state and end those that no longer are fiscally appropriate or feasible or necessary.

Right now, I’m praying the State’s Democratic majority will become more fiscally responsible and demand real, true accounting and be willing to say to the citizens that if voters want more spending, it’s going to mean higher taxes. But I don’t have much hope.

As a result of term limits, few if any legislators understand the budget or the budget process which means that few if any candidates understand the budget and all the hidden accounts. As has been noted in numerous news accounts, legislators now rely upon bureaucrats and lobbyists to teach them about the budget and often to write budget legislation. Our California legislators no longer have the knowledge they need to perform their job, and just about the time they begin to understand it, they’re termed limited out for another neophyte. Nevertheless, California citizens seem to getting that message…slowly.

As studies have begun to show, Californians are beginning to realize that our enormous number of propositions and gerrymandered districts caused legislative problems that have accumulated over the last 30 some years which led our state’s fiscal problems.

But California will never be able to resolve its fiscal problems until the state – and by extension the entire country – ends its reliance on special interest election funding, whether that funding comes from teacher and prison guard unions or from corporations or from other groups whose ideology has been totally debunked by mainstream economics. Citizens United and the whole notion of SuperPacs and lobbying dollars for all special interest groups must be overturned and made illegal.

TR described in his autobiography how a system of campaign financing, which closely resembles that which now exists, corrupted the political system during his early political career and before. He described it quite eloquently in his autobiography and showed examples of how it corrupted the public good. Right now, we are right back to where TR looked onto the political system and saw massive corruption on both sides of the political aisle. Nothing can be accomplished to reform our political process nationally or within California until well-funded special interests are barred from elections and lobbying.

Perhaps Freidersdorf fails to understand the special interest money that historically has led to the state’s fiscal dysfunction, but I’m old enough to have learned the history of it…and it ain’t pretty regardless of whichever side of the aisle you choose.

Conservative Health Ideology is Still Wrong…..

I object to many of the points in this article published by the American Conservative Magazine…and many of its comments.

According to PEW, I’m a liberal. However, I do not believe in taxing hospitals and providers at extraordinarily (75%!) high levels as the American Conservative article claims all liberals want. Nor do I believe in making all doctors/practitioners state workers. I find these notions shocking and antithetical to our democratic principles. In addition, I do not agree that liberals want someone else to pay for our health care needs. All of my liberal, Democratic friends agree with me on these points. Conservative talking points about what liberals and Democrats is long out of date, thus making them no longer relevant.

I agree that more money should and could be put into health cure research. Curing diseases, as in eliminating them, does bring down cost of health care. However, contrary to what some people posted in the comments section, the fed government via the NIH has provided much of the needed funding for basic research. Health care companies, in general, have reduced their R&D budgets by billions as more me-too drugs and generics hit the market which means the NIH grants become all the more important. I realize this flies in the face of the oxymoronic notion that government cannot do anything right. Would those thinking this way say the same about the DoD and DARPA over the last 30-plus years? Tremendous research is being carried out all across the country by leading research labs and universities as a result of NIH and allied federal research institutes’ funding.

Third, regarding costs. When people talk about how much cheaper it was to get medical care back in the ’50s they fail to note how much medical care has changed since the ’50s. Technologically driven advances drove much of the increased costs. Comparing 1950s medicine to today is like comparing the Model T to today’s automobile. Ain’t gonna work! It’s why a comparison of the 1950s costs to today are totally worthless at best and deceptively ignorant at worst. By the way, health insurance was instituted by companies, as an employee recruitment draw, during WWII. You know, back in the early ‘40s. So, the ‘50s argument about costs is ludicrous on its face as most large companies already offered health insurance to their employees.

The author correctly states in his analysis that hospitals shift cost losses from ERs to all other areas of the hospital. If hospitals failed to do so, they’d go broke rapidly since EMTLA (since Reagan signed the law, hospitals cannot deny treatment to anyone without insurance, regardless of ability to pay cash) is the law for the land. Thus, ERs have become loss leaders even while being necessary as public/community services. But the medical establishment, in conjunction with politicians, has divided up hospital territories upon which, all too often, none shall intervene.

But more to the point is that medical costs are opaque. Even when you ask about costs, most of the time you cannot get an answer. Either the provider refuses to give an answer or says that different insurance negotiating policies provide different pricing so they cannot/will not provide you an answer regarding pricing. In Taiwan, which has a single payer system and a private practitioner system, all prices of all the different providers are printed and posted in every provider’s office so patients can see the prices and can make their decisions accordingly. We don’t have that same transparency here in the US. How can you know you’re getting the best bang for the buck if pricing and comparative quality remain a mystery?

In addition, regardless of emergency needs, how many of us are capable of telling our doctors, “Sorry, I don’t want to do that test you demand I take or take that expensive medicine you prescribe”? Medical care is not like buying shoes or cars, regardless of the libertarian arguments simply because health care consumers – patients – understand they are not medical experts. If the doctor says do x, y, and z, we tend to do it because we believe the doctor is the expert and knows best. And all too often, as I’ve discovered, when you argue with the doctor, he angrily pulls the argument that he’s the professional and you’re not…do it or else! Free financial markets, to work correctly, depend upon access by all to the same information. That doesn’t occur all too often, and most particularly does not occur in the health care market because we’re not all equal experts in health care.

In addition, current regulations preclude the ability of Medicare from negotiating RX prices which means this country subsidizes other countries. We in the US essentially pay higher costs so those other countries can obtain lower prices. As a free market advocate, I object to that subsidy to other countries.

Finally, let me say that I and my liberal friends look forward to the day when health insurance is completely separated from the current employer based system to one that enables a group of like minded individuals to buy insurance on an exchange at market competitive prices. We recognize, as realists, that health insurance is not going away…it’s been around too long and has a huge hold in the mindset of too many people as an appropriate way to spread costs a la all other insurance policies. In addition, many of us liberals hope that once the exchanges are up and working well, a la Reihan Salam, that Medicaid, Medicare and VA outpatient systems can be moved into that singular system similar to Switzerland which spends approximately 11% compared to our almost 18% (17.9% in 2012). Currently, our health care systems are so fragmented that the most needy in those systems cause the highest cost. Moving everyone into the same system spreads the cost across a greater market – which the rest of the insurance market essentially does – to decrease costs for any individual or family.

Further, it should be noted that PPACA, aka Obamacare, does go a long way to fund pilot projects that looks at other health care funding models. Some 27 provisions in the PPACA legislation provide state approved or organizationally approved experimental models. The goal of these 27 provisions is to determine what works to provide the best heath outcomes at the best prices. Many of them are showing such remarkable results that large private companies like Boeing have signed up for.

For the libertarians out there, might I remind you of two things: 1) Friedrich Hayek said he was not a conservative because conservatives look to the past while he looked to the future, and, second, that he believed it was necessary and vital to provide a strong social safety net, including national health care, as societal goods because they promoted social and political stability.

What I believe most conservatives, including many social scientists like Prof. Heidt who claims to lean liberal, get wrong is that modern, post-Clinton Democrats are not adverse to capitalism but rather see the difference between laissez-faire capitalism which never worked for the masses (see Adam Smith, the Irish Famine & British Parliamentary history, early 1900s in the US, Robber Barons, Progressive Movement, TR’s autobiography) and long held Jeffersonian – Jacksonian values of opportunity regardless of the social and economic class into which one was born and regardless of race or ethnicity or wealth. What we liberals don’t demand is equality of outcomes, but rather equity of beginnings, i.e. education.

As a result of our modern belief system, liberals want a medical care delivery system that is fair to all providers while using the best technology and gathered data available to lower delivery system costs including using data from other OECD countries.

Rather than being ideological, we seek pragmatic answers to our modern challenges. Can today’s GOP and its libertarian allies say the same?

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When I read stories or emails like this one, I remember the first time, as an adolescent, I took my mother out to the woods behind our house in New Hampshire. I clearly remember the confusion in her eyes as I talked about how much I loved the woods, how beautiful they were, and how much I enjoyed listening to the animals that inhabited the woods. Her eyes glazed over while I talked about my deep joy of all the forest held since time immemorial as though nothing I said held any significance for her.

I suspect many people today feel much as my mother did those many years ago. Maybe even the owners and stockholders of the company to which this email from the Sierra Club refers.

Almost two weeks ago, my colleague Sarah Matsumoto and I wrote a letter to one of the largest landowners in America, Red Emmerson.

As two workaday environmentalists, united in our devotion to forests and the service to the planet they provide, we made a simple request.

We would like Mr. Emmerson to be clear about his company’s clear cutting. We would like him to let consumers who visit his company’s website—and there are people who do such things before they buy wood to build a new house or remodel a kitchen—get a clear picture of his company’s clear cutting practices.

Emmerson, a timber titan whose own story suggests the protagonist is not your average Joe, got his start in California logging mills as a teenager in the late 1940s. He joined forces with his father, a mill builder, and grew Sierra Pacific Industries (SPI) into one of the largest and most powerful lumber companies in America.

As the company’s name suggests, a big chunk of the family owned business’s holdings are in the Sierra Nevada. Unfortunately, the awe-inspiring part of the story stops there.

Here’s why: Much of the company’s nearly two million acres are destined to be clear cut. That is, they have already been or will be totally wiped clean of trees, shrubs and other living plants, then doused with pesticides before replanting with seedlings that will require decades to mature.

If you fly over parts of the Sierra Nevada and Cascade ranges today—or watch a Google Maps-assisted flyover produced by the Sierra Club—you can see what clear cutting means. It creates a checkerboard of bald spots across the forested mountains. At ground level, it dramatically changes habitat, microclimates and ecosystem services. Clear cutting eliminates breeding and living space for most animals, makes cool places hotter, and reduces the essential water-storing services of the bare land left behind.

When author Cheryl Strayed stumbled across a clear cut during her hike along the Pacific Crest Trail (recounted in Wild, one of my favorite books of 2012), it unsettled her. “I felt sad and angry about it, but in a way that included the complicated truce of my own complicity,” she writes. “I used tables and chairs and toilet paper, too, after all.”

So do we consumers of wood products have to accept clear cutting as a necessary evil? No, not at all.

There are better ways to do forestry. Most logging companies in California are moving away from clear cutting, and some do almost no clear cutting. They employ more selective ways to harvest timber. These ways preserve more trees and do less damage to the habitat and the forest’s ability to recover quickly and keep providing ecosystem services.

SPI uses a range of harvest methods, but harvest plans filed with the state suggest it is leading the pack among those who continue to rely heavily on the outdated practice of clear cutting. How much clear cutting does the company do? That’s the question we think SPI should clearly answer for consumers.

That’s why Sarah and I wrote the letter. On the SPI website, the company implies that it practices sustainable forestry. There’s nothing sustainable about clear cutting—it doesn’t sustain forests and it doesn’t sustain jobs.

Clear cutting is to forestry what clubbing baby seals is to the fur trade: an ugly, archaic practice so unnecessary that it is almost hard to believe it continues.

So SPI needs to be clear about clear cutting. We want it to disclose on its home page the number of acres the company clear cuts. Let consumers consider whether Mr. Emmerson’s SPI is really practicing sustainable forestry. Then consumers can vote with their pocketbooks.

Scientists Write An Open Letter About the Sequester

Did you see this in the Atlantic a few days ago? If not, well, here it is.

Paul Alivisatos, director of Lawrence Berkeley National Laboratory, Eric D. Isaacs, director of Argonne National Laboratory, and Thom Mason, director of Oak Ridge National Laboratory wrote an open letter, published on the Atlantic website, stating their view that the sequestration will set back basic research for a decade. You may be saying to yourself, no big deal. Let private companies take over. Except private companies have decreased their research budgets dramatically over the last decade. Or you could say, well, what’s so important about all that research? Or even, oh, they’re just exaggerating. Maybe. Guess we’ll find out. Just remember, while we’re cutting research funds, China is increasing them.

Here’s their letter.

The Sequester Is Going to Devastate U.S. Science Research for Decades

Cutting the meager amount the federal government spends on basic science would do little to meet short-term fiscal goals while incurring huge costs in the future.

Most of the talk about sequestration has focused on its immediate impacts — layoffs, furloughs, and cancelled White House tours in the days and weeks ahead. But one severe impact of the automatic spending cuts will only be felt years — or even decades — in the future, when the nation begins to feel the loss of important new scientific ideas that now will not be explored, and of brilliant young scientists who now will take their talents overseas or perhaps even abandon research entirely.

Less than one percent of the federal budget goes to fund basic science research — $30.2 billion out of the total of $3.8 trillion President Obama requested in fiscal year 2012. By slashing that fraction even further, the government will achieve short-term savings in millions this year, but the resulting gaps in the innovation pipeline could cost billions of dollars and hurt the national economy for decades to come.

As directors of the Department of Energy’s National Laboratories, we have a responsibility both to taxpayers and to the thousands of talented and committed men and women who work in our labs. We are doing everything we can to make sure our scientists and engineers can keep working on our nation’s most pressing scientific problems despite the cuts. It’s not yet clear how much funding the National Labs will lose, but it will total tens of millions of dollars. Interrupting — or worse, halting — basic research in the physical, biological, and computational sciences would be devastating, both for science and for the many U.S. industries that rely on our national laboratory system to power their research and development efforts.

Instead, this drop in funding will force us to cancel all new programs and research initiatives, probably for at least two years. This sudden halt on new starts will freeze American science in place while the rest of the world races forward, and it will knock a generation of young scientists off their stride, ultimately costing billions in missed future opportunities.

New ideas, new insights, new discoveries — these are the lifeblood of science and the foundation of America’s historic culture of innovation and ingenuity. The science community recognizes the importance of those new ideas, so we have systems in place to make sure great new ideas get a chance to thrive. Every ongoing federally funded science program is reviewed regularly to make sure it’s on track and likely to yield results. Each year, stalled programs are terminated to make room for more promising lines of research. Under sequestration, we will continue to review and cull unsuccessful research efforts, but we won’t be able to bring in new ideas to take their place.

Every federal agency that supports basic scientific research is facing this impossible dilemma. The National Science Foundation — which funds 20 percent of all federally supported basic research at American colleges and universities — just announced it is cutting back on 1,000 new research grants it had planned to award this year. The Department of Energy’s Office of Science, the nation’s largest supporter of basic research in the physical sciences, will have to shut the door on hundreds of new proposals as well. The impact will multiply as long-planned and overdue supercomputer upgrades and other necessary investments in our scientific infrastructure are stretched out, delayed, or put on hold indefinitely.

The National Laboratories aren’t just crucial to America’s scientific infrastructure. They are also powerful engines of economic development. Nobel Prize-winning economist Robert Solow has calculated that over the past half century, more than half of the growth in our nation’s GDP has been rooted in scientific discoveries — the kinds of fundamental, mission-driven research that we do at the labs. This early-stage research has led to extraordinary real-world benefits, from nuclear power plants to compact fluorescent bulbs to blood cholesterol tests. Because the United States has historically valued scientific inspiration, our government has provided creative scientists and engineers with the support, facilities, and time they need to turn brilliant ideas into real-world solutions.

Basing funding decisions solely on short-term fiscal goals risks the heart of America’s scientific enterprise and long-term economic growth — diminishing our world leadership in science, technology and in the creation of cutting-edge jobs.

Sequestration won’t have an immediate, visible impact on American research. Laboratories will continue to open their doors, and scientists and engineers will go to work. But as we choke off our ability to pursue promising new ideas, we begin a slow but inexorable slide to stagnation. We can’t afford to lose a generation of new ideas and forfeit our national future.

Mea Culpa

Dear Readers,

For the last couple of weeks, I’ve not posted anything to my blog. Not even about those little known stories the mainstream media tends to ignore…and I love. It’s not that those stories don’t exist. Heck, plenty of them exist everywhere; just look at any issue of Wired Magazine’s Wired Science blog. I’ve just been occupied elsewhere.

I admit to having “liked” Bruce Bartlett’s facebook page which supplies me with endless conversations (and articles) on economics and politics as well as the absurd. Of course, I still read the news every morning in the Washington Post (especially Wonkblog) as well as The Atlantic, The New Republic, The American Conservative, Bloomberg, and a few others like the Financial Times and the Economist.

But over the course of the last year I’ve become more involved in volunteering my expertise to community non-profit groups. My little, rural town in the Sierra Nevada foothills can’t afford paid services for the help it needs. We’re still suffering from the severe recession.

Wages are below median average for California, and industry, as we generally think of it, is practically unknown here. For years, Colfax, where I live, was ruled by a “no expansion” crowd that hamstrung local businesses and the community at large. Finally, that hold is breaking as a result of the Great Recession. Businesses, hard hit by lack of customer revenues, are finally speaking up and demanding revenue growth in order to stay in business and to fill the empty storefronts. Residents are seeing the need to build sustainable businesses that can help support necessary, and even desired, community services.

I’ve spent most of my adult years in large towns where governmental actions made a huge difference in both the local economy and in people’s lives. When governments partner with the business community, local service non-profits, and residents great accomplishments occur that better the lives of everyone in the community. The current Tea Party inspired, Ayn Rand anti-government fad fails to acknowledge the many benefits government provides communities via increased demand revenues and stabilizing taxes.

For me, when my local community chose to develop an Art Walk which promoted both local artists and main street businesses, expand the reach and profitability of our annual July 3rd Independence Day Celebration (yeah, I know it’s a day ahead of the real thing), and develop a community-wide business plan to promote our city, I volunteered. Unlike the Ayn Randers out there, there’s more to a good life than just me…and the financial perks I personally am getting. I saw these non-profit activities as a chance to rebuild and renew our business community.

Certainly, Social Security and Medicare made it economically possible for me to spend my time on efforts to help my community develop and become more profitable. Without those earned insurance benefits, as they currently exist, I’d be bankrupt…and be left wondering what to do to survive. It’s not that I didn’t save in retirement accounts throughout my 40-some working years. I had. I invested the maximum amount the federal government allows each working year. Regardless, between 2001 and 2009, following the great crash, I lost nearly 2/3s of my retirement savings. Over that decade, I continually bought more shares via my retirement accounts, but the values (profits) decreased. The end result became my need for these two primary insurance benefits into which I paid for over 40 years.

Nevertheless, those insurance benefits now afford me the ability to spend many hours each week voluntarily working for my cash-strapped community, rather than solely worrying about how I’m going to pay the bills or how to survive another month. I’m not forced to go begging for state or federal assistance. Or made to feel like I’m the lowest of the low for needing help. I still have my dignity and the knowledge that I’m taking financial care of myself.

But I’m no hero, by any means. Those earned insurance programs now have just provided me the means to the end of helping my community at large.

Strikingly, my community volunteering increased my skills far beyond what I learned during my career…and I really enjoy all I’m learning in the process of doing. Sure as heck beats vegetating and waiting to die!

But I guess, for me anyway, I feel valuable again. I feel like I really can make a contribution to my community and my fellow citizens…and that makes me feel important and good about myself.

I understand my senior’s path isn’t the same for everyone. But it’s working for me and adding to the renewal efforts of my community while not increasing costs. Most of all, though, I’m getting far more personal satisfaction out my volunteer activities than I’m putting in terms of time and my increased skills.

Yes, Republicans Too Are Responsible for the Sequester Regardless of What They’re Now Saying

I really hate it when politicians lie to make themselves look good…or to divert attention from their own compliance on harmful or economically devastating policy.

On the sequester, yes, Obama’s Chief of Staff Jack Lew recommended it. But, let’s face facts, Congress – including the GOP – approved it before it was sent to Obama to become law. In the House, 174 Republicans votes yea for the sequester. The sequester could not have become law without Republicans willing compliance and votes in both the House and Senate. For them to now attempt to say they were not equally responsible for it is nothing short of a bald face lie of the worst kind.

As a party, the GOP states that it unequivocally believes in personal responsibility, i.e. taking responsibility for your actions, decisions, and behavoir. Consequently, the GOP needs to step up to the plate and acknowledge that they too are responsible for the sequester. Trying to blame Obama now is like saying “dog ate my homework.” Or even worse: like Pontius Pilate’s washing his hands of the entire affair as if he has no responsibility for crucifying Jesus.

From FactCheck.org:

But as Woodward wrote in his book, and as he subsequently explained to Politico, neither party wanted the automatic cuts to take effect or thought they would happen. The cuts were included as a mechanism to force members of the bipartisan committee to work out a deal to avoid them.

Politico, Oct. 23, 2012: “No one thought it would happen. The idea was to design something … that was so onerous that no one would ever let it happen. Of course, it did, because they couldn’t reach agreement,” [Woodward] said. “They all believed that the supercommittee was going to come up with a $1.2 trillion deficit-reduction plan, so there would be no sequestration. Of course, the supercommittee failed and so the trigger went off, which has all of these very Draconian cuts.”

The automatic cuts were supposed to take effect in January, but the president and Congress agreed to delay them until March 1 to give themselves more time to work out a deal. Now, as the new deadline for sequestration draws closer, many Republicans blame the president. And though it’s true that the idea of sequestration originated in the White House, there would be no possibility of automatic cuts had members of Congress — both Democrats and Republicans — not gone along with the idea.

The Budget Control Act passed in the House with 269 votes in favor — 174 from Republicans and 95 from Democrats. And the bill cleared the Senate with 74 “yea” votes, of which 28 were cast by Republicans. In fact, one of those voting in favor, Republican Sen. John McCain of Arizona, said on NBC’s “Meet the Press” on Feb. 17 that “Republicans deserve blame; I’ll take some blame for it.”

And Rep. Justin Amash, a Republican from Michigan who voted against the bill, has said that “it’s totally disingenuous” for Republicans who voted in favor of the bill to now blame the president for it. Amash told Buzzfeed: “The debt ceiling deal in 2011 was agreed to by Republicans and Democrats, and regardless of who came up with the sequester, they all voted for it. So, you can’t vote for something and, with a straight face, go blame the other guy for its existence in law.”

As adults, we are all responsible for our actions, including those 174 House Republicans, including Paul Ryan, who voted for the sequester. For him and others like him to claim no responsibility (e.g. throwing up his hands and saying he was not responsible) for the economically devastating budget cuts that will cost directly approximately 70,000 jobs – and potentially millions more in other unrelated industrial sectors as well as sending the US economy back into a recession – is nothing more than a Pilate-like con job Republicans hope to perpetrate on the American electorate. The American people deserve better, especially from a party that claims to believe in – and demand of others – personal responsibility!

If we weren’t in such a polarized political climate, driven by media organizations that require polarized partisanship to increase dramatically their media revenues, regardless of the consequences for the American public, most Americans would not accept the current GOP storyline.

Without the media’s huge profits as a result of political polarization, there would be a backlash…and the GOP would act more sensibly in favor of the American economy and people. But the GOP no longer feels it has to behave sensibly or even logically. As with every policy, the GOP counts on their particular popular media outlets to spin the news and back them up, regardless of how utterly idiotic they sound, behave, and vote…as well as to cause their base voters to agree with the story line that the dog did, indeed, ate their homework so they are not responsible.

I’m not buying that line! That kind of irresponsibility does not work for me. I’m of an older generation which was taught that excuses are not acceptable: if you do something you are responsible for the outcome. My dad wouldn’t let my brothers and me, as kids, get away with irresponsible excuses, so why should we allow our adult legislators?

When in the name that all that is right, holy, and ethical will Republican politicians be held to same standards we require of our children?

Sequester Consequences: The GOP Chooses Tax Expenditures on the Uber Wealthy Over Job Loses

So, you liked your job – or at least it paid the bills and kept you going. Well, all that may be coming to an end. Congressional Republicans have chosen the consequences of the sequester over raising more tax revenues from closing tax loopholes that favor the uber wealthy.

From Neil Gillies: The New York Times on what the republican party is about to do to America: “These cuts, which will cost the economy more than one million jobs over the next two years, are the direct result of the Republican demand in 2011 to shrink the government at any cost, under threat of a default on the nation’s debt. Many Republicans say they would still prefer the sequester to replacing half the cuts with tax revenue increases. But the government spending they disdain is not an abstract concept. In a few days, the cuts will begin affecting American life and security in significant ways.”om Neil Gillies: The New York Times on what the republican party is about to do to America: “These cuts, which will cost the economy more than one million jobs over the next two years, are the direct result of the Republican demand in 2011 to shrink the government at any cost, under threat of a default on the nation’s debt. Many Republicans say they would still prefer the sequester to replacing half the cuts with tax revenue increases. But the government spending they disdain is not an abstract concept. In a few days, the cuts will begin affecting American life and security in significant ways.”

The GOP obviously know what the sequester will do the economy. They can’t be that dumb! But it appears they don’t care. They’d rather kill millions of jobs…as well as increase the deficit due to increased social safety net spending for the newly unemployed…than raise one more dime in new tax revenues. That attitude not only put the lie to their deficit reduction stance, but it should show every American just how little Republicans care about their jobs and lives.

According to Matt Taibbi’s Rolling Stone reporting, in 2003 when then Senator Lincoln Chaffee confronted Vice President Cheney on the second round of tax reduction legistation, stating that it would probably lead to out of control increased deficits, Cheney said we (meaning he and his wealthy friends) deserve it. My hunch is the GOP still believes that the Plutocrats deserve every tax break and cut they’ve received.

My, how times have changed in less than 100 years. At the beginning of the 20th Century, our Plutocrats – men like Rockefeller, JP Morgan, Carnegie and to a lesser extent railroad magnate, Commodore Vanderbuilt – dominated our industrial landscape. Absolute profit, by and large, was their motive. Each actively sought to become the most wealthy, not because they needed the wealth or the cash. Instead the accumulation of wealth for them was like winning real live a Monopoly game. If worker lives were destroyed or communities ruined, to many of them it mattered not. Only winning the game of becoming the most wealthy and powerful…and controlling entire industries.

Not being blind to the rising populist movement against them, they spent millions to elect McKinley twice to protect their interests, even going so far as to choose TR, whom they rightly saw as a threat, for what they thought was the politically dead end position of Vice President. However, when McKinley was killed shortly after his second election, TR became president and game changed entirely for those plutocrats. The country was ripe for change…and TR ushered it in.

Populist worker movements in the early 1900s had sprung up all across the country. Labor was becoming aligned with the new socialist and communist movements which would have ended private ownership in favor of labor-public ownership. Labor unions became more than popular among working class people who saw them as the only way to fight back against corporate giants for economic justice and the rights of workers to decent wages and working conditions. Religious and charity groups supported the labor movement, decrying the vast accumulation of wealth by a few. Violence and extreme turmoil were seen everywhere across the country. Capitalism, itself, was under a massive threat to its existence.

Into this conflict, following McKinley’s assassination, stepped TR. He’d been greatly affected by a few highly influential progressive economists who recognized the dangers facing capitalism. In their minds, if capitalism was to survive, the federal government needed to address the concerns of the growing, vast majority of working class citizens for economic justice and fair play. Those economists proposed better, safer working conditions, higher minimum wages, and shorter working hours (a la 40 hours/week). But TR, once in office, went even further, recognizing that the monopolies retarded growth and innovation, he chose policies to to break up the monopolies that had dominated the previous couple of decades and thereby invigorated 20th Century innovation.

That action alone led to an era of creative destruction and innovation that lasted throughout much of the 20th Century. Only during the latter quarter of the 20th Century, did his anti-monopoly policies begin to lose the favor among the political elite who saw their own personal fortunes or futures rise through choosing policies that favored the plutocrats over labor, creative destruction innovation, and monopolistic business practices.

Yet, his policies for the working classes are probably the best known and appreciated among working people. For the first time, labor, en masse, was guaranteed the right to demand better wages, safer working conditions, and moderately legislated time off.

Throughout the entire era of vast changes, however, Congress never once failed to do its duty to the Country by taxing the people progressively as needed to hold down the nation’s debt – regardless of how much progressive taxes were disliked once they came into being, they were deemed a moral responsibility…and every church and parish and synagog repeated that message of individual and national responsibility in sermons all across the nation.

Presidents from FDR to LBJ only added to what TR began: to create a more perfect nation for every citizen, regardless of wealth or gender or race or religion or ethnicity, could live a sustainable life and to expect their children to accomplish more than they had. In other words, to live the American dream. Now, it appears the GOP would take away that dream to return to an even more perverse rendition of McKinley’s economic policies.

If Republicans refuse to comprise with Democrats on the sequester then our nation will suffer major job losses, home value decreases again as more homes go into foreclosure, and rising deficits in both state and federal budgets as more people require assistance. As Paul Ryan explained, his real emphasis is on tax cuts – or avoidance – and not the deficit or for that matter on how many millions of people are left to struggle along without jobs. His policies emulate those of the McKinley Administration wherein only the uber wealthy matter.

The genius of the American democratic Republic system of capitalism is that it enabled the greatest numbers of people have their say on issues that directly affected their lives and their beliefs. Because of the social safety net we now enjoy, many do not see the harm that our grandparents endured as a result of the same kind of speculation that caused the ’08 financial collapse. Without that safety net, for which we must give thanks to progressive administrations from TR through LBJ, millions of families would be ruined. The Great Depression would have been replayed en toto.

Surely, the US can do better and should do better…as this nation has done in the past to save both capitalism from its worst practices and to assist workers’ aspirations for better lives. Current dogmatic GOP policies (supply side economics which have never worked and only led to greater human suffering and death since first put into practice during the Great Famine in Ireland) only lead to more domestic economic harm. As a result of GOP dogma on preventing even modest and economically competitive tax increases on the most wealthy, this nation will likely return to another recession that will affect every average family and cause the loss of not just the millions of jobs but an increased loss of average middle and working income family wealth again.

I understand that many will denigrate me and proclaim me a vile, evil “liberal”. But to them I answer that history provides us many lessons, amongst which are economics and moral, religious integrity. History is a great teacher for future policy decisions…at the very least, well beyond me, that is what our founders, from the Pilgrims to those who participated in the Constitutional Convention, believed. As a free, democratic republic, we do need to relearn our historic economic lessons to prevent the disasters of the past. And we as a people do need to rise up, as our forefathers did, to seek better justice and economic viability.

Are Oil Prices Misleading? An Unknown Discussion on the Origins of Oil.

I’ve just finished rereading The Emperor’s Tomb, by Steve Berry. It’s a suspense filled, fictional tale between two factions within the Chinese hierarchy…and which both exist in reality today. The book, as in all of Berry’s books, incorporates a great deal of real, documented history. In this case, it’s the history of Chinese innovation and technology along with its historical political past.

But what is most interesting is a theory about oil which has been ignored or is unknown. First a little background.

The Chinese first drilled for oil 2,500 years ago. Those ancients not only used oil but also natural or methane gas – which is a product associated with oil deposits – to light their lamps and one can assume for cooking. But that technology was lost as succeeding governing powers wiped away the history, and technology, of preceding generations.

In 1757, Russian scientist Mikhail Lomonosov, to presented to the Imperial Academy of Sciences, wrote that oil was a product of fossil fuel degeneration under extreme pressure. “Rock oil originates as tiny bodies of animals buried in the sediments which, under the increased influence of increased temperature and pressure,acting during an unimaginably long periods of time, transform into rock oil.”

From Lomonosov’s theorem, modern society derives the notion that oil is a limited biotic source that will decline over time as usage increases. Obviously, OPEC and other oil producing states have made great amounts of money from this theorem and in promoting it.

But what if that theorem is only half the story?

In 1956, the senior petroleum exploration geologist for the USSR said, The overwhelming preponderance of geological evidence compels the conclusion that crude oil and natural petroleum gas have no intrinsic connection with biological matter originating near the surface of the Earth. They are primordial materials which have been erupting from great depths. What this geologist talked about was abiotic oil. In other words, oil that the earth, deep down beyond beyond the point at which most drilling reaches, creates a continual supply of oil and is infinite whereas biotic oil, from ancient fossils, is finite.

However, few people listened or paid attention. In 2005, Raymond Learsy’s book Over a Barrel noted ..scarity – or more accurately, the perception of scarcity – spells opportunity for manipulators. And so it has. Oil is not scarce. We only fear that it is.

Nevertheless, deep wells in Gulf of Mexico are depleting at an astoundingly slow rate which has confounded American experts. Many scientists have come to believe that oil originates solely from organic compounds, and not just from ancient fossils.

If it is true that abiotic oil exists in these deep wells which are constantly replenished by the earth itself, then the notion of scarcity is not only wrong but has placed a higher than necessary price tag on oil.

Of course, that’s not to say we, as a nation and as a world overall should not look for cleaner sources of energy, especially in light of the fact that technological advances require ever increasing amounts of energy sources. Anyone who has seen the amount of air pollution in Chinese cities easily understands the need to reduce oil consumption air pollution that promises to kill millions and increase health related expenses beyond the point any society can afford. It only makes economical sense that the world transitions from dirty, polluting energy to cleaner, non-polluting energy to lessen the many costs associated with burning higher polluting fuels.

But it is worth noting – and discussing – that the current ideology of oil scarcity, which keeps oil prices high, may be false.

Pope Benedict Retires…and Gets Lambasted.

Pope Benedict announced his retirement today, stating that his age and health were his deciding factors in renouncing the papacy. Catholics, across the board, denounced his decision. I believe they are wrong.

Today, I read comments and opinion pieces, everywhere from left, right and center. But what I did not hear from anyone was what Benedict himself said prior to being elected. He said he did not want to become pope; he wanted to become a librarian.

Imagine if you will yourself being elevated into a position you did not want and with which you felt uncomfortable. Further, imagine your health failing along side your discomfort with your job. Would you not want to give up the job that increases your health risks as well as your mental anguish?

Benedict never wanted this job and pleaded with his predecessor to be given another job. He knew his heart and talents…yet, he was thrust into this position – a position he did not want and for which he felt unqualified. I’m not a Catholic, but I have great sympathy for the enormous decision he made. It took great courage to step aside…and great humility. I honor the courage of his decision as should we all. It takes a great man to know when to step aside, knowing he has neither the desire or health to continue.

As this moment, Catholics everywhere should be proud of their Pope, not as the infallible leader the Roman Catholic Church demands, but as a man who knows his heart and abilities as this great moment in history requires. Benedict gives the Catholic and Christian world at large an opportunity to begin anew with a younger, more energetic religious leader to meet the challenges of a new century while vigorously defending the age old tenets of all theologies of caring, sharing, compassion, respect, charity, forgiveness, humbleness and sharing.

I don’t know whether the Catholic Church will take up the challenges laid out before it in this new Century or whether it will turn its back. Only the Church knows its age old prophecies.

But Benedict should be praised for his service rather than damned for his unwillingness to continue in a position for which he believed himself incapable of continuing.