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Posts Tagged ‘economy

The Congressional TP is wrong…and it is killing the GOP.

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Is the New Yorker wrong or has the GOP gone GOP Elephant Closes Governmentover the top? I’m of the opinion that the GOP is hurting themselves for a generation if the most hardline members of their base continue this quixotic campaign. There are a lot of things about the ACA that could and should be fixed that would enable better growth in our economy, but the GOP has not offered any alternatives that fixes the problems of coverage, affordability with consumer protections, or bends the medical cost curve that the nation, as a whole, supports. If the nation had, Romney would be president right now.

What the Republican intransigents were willing to deprive of funds, besides the Capitol police, included the following: The Centers for Disease Control, which said that it would have to stop its seasonal flu-prevention program and would “have significantly reduced capacity to respond to outbreak investigations.” The Environmental Protection Agency, which would close down almost entirely, and the Occupational Safety and Health Administration, which would stop most of its inspections. The WIC program, which provides healthy food supplements for millions of pregnant women, new mothers, and babies, and could run on temporary federal funds only through the end of the month. The Food and Drug Administration, which said it “will be unable to support the majority of its food safety, nutrition, and cosmetics activities,” and would have to halt “the majority of the laboratory research necessary to inform public health decision-making.” The National Institutes of Health, which announced that it would not be enrolling any new patients in ongoing studies or clinical trials.

Since Tea Party conservatives dislike the federal government on principle, the derailing of what the federal government does every day doesn’t bother them all that much. What should bother them, deeply, is the anti-democratic nature of the maneuver. To hold up a budget and shut down the government in order to sabotage a law you don’t like is not just nose-thumbing at the government; it’s flouting the will of the people. Obamacare passed both Houses of Congress nearly three years ago. In June, 2012, in an opinion written by Chief Justice John Roberts, the Supreme Court upheld the constitutionality of its fundamental elements. In November, 2012, Obama, who had devoted much of his political capital to the Affordable Care Act—it will likely be his signature legislation—was handily reëlected. And, last week, on the first day that you could sign up for insurance through the new health-care exchanges, 2.8 million people went on the federal government’s enrollment site. Surely that’s evidence that, whatever else Obamacare will prove to be, it is legislation that is fulfilling a real need: that of the fifteen per cent of the American population who are uninsured, as well as of individuals who are paying exorbitant sums for insurance on the open market, all of whom live with the insecurity of being unable to afford health care. In no small part, fixing this problem was what Barack Obama was elected to do.

In the meantime, the diehard opponents of the bill in Congress remain a faction within their own party, whom fellow-Republicans seem determined to identify by more and more outlandish epithets. To Representative Devin Nunes, a Republican from California’s Central Valley, they are “lemmings with suicide vests.” To Senator John McCain, they’re “wacko birds.” (He used the term in March, when Senators Rand Paul and Ted Cruz were filibustering the nomination of John Brennan for C.I.A. director; McCain later apologized, but Cruz, according to a profile in GQ, has embraced “wacko bird.”) To Representative Peter King, of New York, Cruz is the “con man” who knew “this would never work” but somehow “suckered” House Republicans. Cruz, meanwhile, compared those Republicans who were willing to vote on the budget—and let Obamacare proceed—to appeasers of the Nazis.

It’s worth remembering that in the early nineteen-sixties, when another health-care bill was under debate, the rhetoric of the Republicans who opposed it was just as over the top. We didn’t get socialism, as those opponents warned; we got Medicare, which turned out to be a very popular, mostly high-functioning program that saves elderly people from going bankrupt when they get sick. In the end, as the President says, that is the kind of outcome that the extremist Republicans running this budget battle fear the most: that Obamacare will work, and the Democrats will get credit for it. And what the mainstream Republicans fear the most is that voters will blame them for letting the lemmings run the show. If Obama refuses to back down, this could be a moment that will define his legacy—a fight for democracy as much as for Democrats. ♦

According to reports, the Dems already accepted the House budget numbers, which, in reality, are lower than the Ryan budget for the 6 week CR. Six weeks! It’s not like we’re talking about a full year, for heaven’s sake. That, in itself, is a great win for House Republicans. But attaching a defunding or delay in the individual mandate – that only applies to individuals who don’t get health insurance through their company – to the CR was always going to be a loser for the GOP which they should have known. First, most of the ACA funding is not part of the discretionary (aka annual) budget. It’s self-funded like Social Security or Medicare. Second, the Dems would never agree to delay it start up until close to the next election, making the ACA again another election year issue.

Moreover, using the debt ceiling as a negotiating strategy, regardless of how much the deficit is hated, is not acceptable. It’s one thing to decry how on the House or Senate floor how much the country is going into debt when you know the increase will happen anyway, but it’s another to threaten the US economy with default on the nation’s promises of payment. The debt limit and promised payments to our all of our nation’s creditors, whoever they may be, should never, ever be put at risk.

Yes, there is an ongoing disagreement over the size of the federal government. Some are good arguments, such as should the US be the world’s police force or have a huge, expensive national security state that infringes upon the rights of privacy of citizens, but some are bad arguments such as throwing the least able into the trash can of history. Can government work better? Clearly the answer is yes. Our federal government continues as a model of the 19th Century. But *only* Congress can change that antiquated model…and that change will only occur when committee power and fundraising models change.

Regardless, PIMCO’s El-Erian notes, the failure to increase to increase the debt ceiling would lead to a Great Depression worldwide and cause irreparable harm to the US in prestige, authority, and, most of all, to our status as the world’s reserve currency and the special borrowing rates that status implies.

Further, China, in 2011, when Congress last threatened the debt ceiling as a serious negotiating point, entered into talks with other BRIC nations to replace the US dollar as the world’s reserve currency. China, apparently, received a lot of support among those nations. Does anyone in their right minds believe that China will let go of their ability to reduce the status of the US dollar as the world’s reserve currency when it obviously is in their own interest to reduce the influence of the US? Although the Chinese did not say as much publicly, I am quite sure they would like the Renminbi become the world’s reserve currency.

If US voters do not understand the perils on the world stage and to the US economy of the Tea Party strategy, then God help us all.

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Written by Valerie Curl

October 9, 2013 at 9:23 PM

America the Stupid!

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There is a growing movement among the Tea Party and the far right to impeach President Obama. Buzzfeed today wrote story about a book, published by World Net Daily which is a far right, conspiracy theory addicted website, that espouses all the reasons why Obama should be impeached.

A new book making the case for the impeachment of President Barack Obama is flying off the shelves, its author said, as the president’s reelection fails to entirely damp down the deep loathing of him on parts of the right.

Impeachable Offenses: The Case for Removing Barack Obama from Office cites everything from the attack on the American consulate and CIA outpost in Benghazi — which it compares to the Iran Contra scandal in the Reagan years — to the way Obamacare was passed, which the authors say constitutes “taxation without representation.” The book, by WABC radio host Aaron Klein and Brenda Elliott, an anti-Obama blogger, also includes American military action in Libya and the Transportation Security Administration’s passenger screenings as impeachable offenses.

The problem for this book and the conspiracy theorists is that all their claims are fallacious or just hypocritical…or far worse. On foreign policy, Obama has continued Bush policies outside of starting wars of choice as Bush did. On internal, domestic spying, Obama continued the policies of Bush’s Administration. On Executive signings, Obama has used that method far less that Bush did…and only within legal and SCOTUS demanded requirements or his legal powers at head of the Administration. On regulations, his record shows he’s enacted fewer regulations than the anti-regulation Bush Administration. On sticking to regulatory timelines, Obama is no more guilty than any other administration. For example, Dodd-Frank is nearly 2 years behind in setting most of its rules yet no one is complaining, but somehow the rules on ACA have to be met on time even when businesses have asked for clarifications and simplification and HHA acceded those requests.

Should I continue?

I hardly think is it necessary. There are lots of reasons why Americans of all flavor dislike Obama. Some are solid and some are idiotically specious. But to those asking for his impeachment, allow me to ask these questions:

1) Would you prefer President Biden? Remember that Biden is far more liberal than Obama. Compared to Biden, Obama is downright conservative. Moreover, Biden’s decades in the Senate would make him a much tougher negotiator. He could very well be an incarnation of LBJ.

2) If you hate the national security state, why do you continue to vote for legislators who voted for the Patriot Act and NDAA? Regardless of what you may think or wish, the President, regardless of party affiliation, must follow the legislation that Congress passes. You don’t like the national security laws, then stop voting for the Congressional legislators who enacted and continually approve of these laws.

3) The whole Bengazi uproar is idiotic. American embassies and consulates throughout the troubled Middle East and Northern Africa have been targets for over two decades. How many American embassies and consulates were targeted and bombed during the GW Bush and Clinton Administrations? The insanity of perverted jehadism will continue regardless of presidential political party affiliation until Arab nations say enough and use their own power, influence and money to end it.

4) If you hate Obama because of his skin color, doesn’t that say more about you than him? I spent many years as a White child and young adult living in the deep South where Racism reigned supreme. It was ugly, cruel, and wrong. God did not differentiate between peoples based on skin color; He differentiated between people based on the moral values of compassion, respect, consideration, thoughtfulness, and consideration. And still does, as Jesus said over and over again.

5) If you think Obama is some kind of hidden Black Panther racist, then why has he excoriated the Black community, and especially Black fathers, over and over again for not meeting their familial obligations and responsibilities while at the same time not saying a word about White guys who run away from their children and responsibilities?

There are a lot of other conspiracy theories I could debunk, but those who deliberately choose to believe them will never be convinced because they adamantly refuse to change their thinking. Reason, rationality, and logic play no part in their lives. Hate is all that matters, for whatever reason.

The last time the US went through this kind of political and social insanity was during the 1930s because people were scared, confused, and became targets of self-indulgent, ego-centric individuals and organizations that played on people’s fears for their own self interest. This time is worse because of the President’s skin color. But skin color is only…skin color. A physiological development, caused by the pigment melanin, as a result of genetic adaption to sunlight over multiple generations. For example, the onlu reason Northern Europeans have light skin color, blue eyes, narrow noses, and light colored hair is because less melanin was required genetically, over thousands of years, to withstand the sun’s rays.

As a result, skin color has less to do with intelligence than adaptation to climate. Given the same economic and social advantages, all races perform the same, as science has proved.

As a result of scientific and social conclusions, it becomes quite clear that the current hatred of Obama has less to do with his policies and more to do with who is he physically and politically. And those are not good enough reasons for impeachment.

The Constitution states that impeachment of a president can only occur because of “High crimes and misdemeanors.” Think about what that phrase means: murder, perversion of governmental, administrative powers for one’s own benefit, lying to Congress on matter of national importance, etc. None of these criteria have occurred under Obama, except perhaps the national security state which can equally be blamed on Congress and Chief Justice Roberts. Would you chose to impeach Roberts for appointing the FISA court justices who approved the warrentless wiretapping? Would you chose to impeach you local representative because he or she approved the Patriot Act or NDAA that allowed such actions to occur?

United States Americans have to clean up their act and start acting responsibly rather than politically. Tribalism destroys countries and societies. That may be why ancient Greeks developed a governing creed based on logic and not only the denial of emotions but the destruction of all emotions.

The far right and far left depend upon emotion over logic. As many problems exist with Stoicism, it still beats the kind of emotional irrationality that dominates today’s political conversation.

Written by Valerie Curl

August 21, 2013 at 12:27 PM

I’m disgusted

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Student Loan Bonanza

Illustration by Victor Juhasz

Over the last five years I’ve become more and more disgusted by both our federal government and our financial industry as a result of our entire country, and government, becoming financialized. All that matters now is how much profit can be made, regardless of the consequences to human lives, and protecting the worse financial actors from the recent financial meltdown that caused a worldwide recession.

A couple of days ago, Matt Taibbi, wrote a lengthy piece in Rolling Stone Magazine about the student loan scandal that threaten our nation’s economy.

Ripping Off Young America: The College-Loan Scandal
The federal government has made it easier than ever to borrow money for higher education – saddling a generation with crushing debts and inflating a bubble that could bring down the economy

I didn’t read this story two days ago when it was published. I wish I had since my voice now will make little difference – everyone’s moved on to the next scandal or reality show highlights. 

However much Taibbi’s rhetoric seems over the top, his actual story is accurate. A couple of years ago, the Higher Ed. journal he mentions published a story on the rapidly rising cost of a college education.

Although the journal didn’t go into the whole funding of students loans issue, the publication did lay most of the blame on institutions that went on a spending binge during the last decade, which universities defended as needing to do to “attract students”. According to the schools, competition among colleges required spas, hot tubs, outrageously expensive sports stadiums, cafeterias rivaling the best restaurants, and so much more. 



Money was cheap so colleges spent lavishly, expecting the public through taxes, to pick up the bill even as students were being saddled with higher tuition costs. Not long after that journal article came news of the UC Berkeley Chancellor being given a million dollar salary and a completely renovated (real) mansion (at the UC system) multi-million dollar expense. Within months, news broke of other chancellors receiving million dollar incomes…and other expensive perks. Like the dramatic increase in C-suite salaries, competition, you know. 



Then as the states’ began to deal with massive lost revenues following the financial crash, states cut back on higher educational funding, putting even more pressure on students in yet higher tuition costs. Even now under Obama’s Administration, as Taibbi notes, the federal government expects to make billions of dollars in profit off of student loans, especially since students cannot discharge those loans under bankruptcy. Nor were students and parents informed or warned of the hazards and total costs of those government backed loans. Now, we have millions of our young people’s lives being destroyed by the cost of loans they never understood and never expected.

To those of us who were paying attention, the inability of discharge student loans in bankruptcy is old news. The GOP Congress, under Bush 2, pushed it through, even though huge numbers of groups and people lobbied against it at the same time they turned over the student loan program to banks. What happened under that GOP sponsored and driven legislation is that student loans became one of only two financial obligations that cannot be erased in bankruptcy. The other is taxes owed. 



Taibbi is also correct about the degree requirement for even low skill workers. When I worked for Oracle back in the ’90s, even our receptionists were required to have 4-year degrees. Why, I have no idea; it’s not like someone answering the phone and forwarding calls needs an elevated education. 

Yet, in our increasing “information” economy, a degree has become a necessity…unless you agree with the recent GOP mantra that only some should attain a degree while the vast majority should forego college. To become what: checkers at Walmart or burger flippers at McDonalds? Even getting into a qualified tradesman program (not hyped for-profit ripoff programs), like plumbing or carpentry which cannot be outsourced, that actually trains apprentices and helps them with jobs are few and far between.

I keep asking but no one answers, why do we citizens continue to permit our entire economy to be financialized to the detriment of millions of families, both now and in the future? Why do we allow ourselves to be conned and lied to and abused? Why aren’t we fighting back not only with our votes but with our power to demand changes in electoral laws that protect our interests, rather than just the interests of the powerful, wealthy and connected?

As long as the voting public unwisely protects the lobbyists and wealthy donors who have far more power, influence, donor money, and ability to get their preferred message listened to and across to legislators, average Americans, and our future generations, will be nothing more than insignificant chess pawns.

It’s obvious that Obama is not really going to stand up for you. Neither will anyone on the GOP bench. Supply side, neo-liberal economics which has destroyed our jobs and our economy is all the GOP offers. And Obama’s Administration is not a whole lot better. Obama is not a progressive or a socialist or liberal. He’s center right on almost every issue. Even Republican TR was more progressive and more concerned about average Americans and new businesses and against the excesses of Wall St than Obama has been.

But nothing…absolutely nothing…will change until we voters demand that the entire campaign financing system be rebuilt from the bottom up. Corporations, so-called non-profit Super-PACs and unions are not people as all of our founders concluded and should not have First, Fourth and Fifth Amendment rights. They are nothing more than legal fictions, which our greatest legal minds stated long ago. Moreover, TR eloquently wrote when money became heavily involved in the political process, corruption occurred either by bribery of legislators or by legislators blackmailing companies. In both cases, the public loses even as legislators grow more wealthy.

The current system of financialization of our entire economy and political bribery and blackmail are killing our country and destroying the lives of our children and grandchildren. Just throwing these “bums” out and replacing them with another set of bums changes nothing since the incentives remain the same. Nothing will change but the faces. If America is to recover, the voters must demand new and strict new election donor laws, including a Constitutional Amendment and prohibitions on party gerrymandering, that puts power back into hands of voters again.

As voters, parents and workers, we must demand real change that protects our interests. Ask and demand all legislative candidates promise in their first term to promote election changes that prohibit lobbying donations and lobbyists writing legislation, make all campaign donations even to SuperPacs transparent and online within 24 hours, and a Constitutional Amendment that eliminates all non-human entities First, Fourth and Fifth Amendment rights.

Written by Valerie Curl

August 17, 2013 at 3:54 PM

Democratic Republic for Sale by Narcessistic, No-Nothing Legislators. Shouldn’t the American Public Expect Better?

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In the days of Dole and Howard Baker, et al, Congressional members knew something about the legislation they were voting on. These days Congressional members know little to nothing about the legislation the vote on…and for far too many in Congress, they have no interest in learning about the legislation. Instead they spend an average of 60% of their time “dialing for dollars” and attending fundraisers. During the days of Dole and Baker, congressional members spent most of their time working on legislation and learning what was in the legislation. Now we have “no-nothing” narcissists representing us at both the state and federal levels, according to

This current state of affairs doesn’t work for me. I expect my legislators, whether in Congress or my state house, to work for my and my community’s benefit rather than for the benefit a wealthy donor or a corporation seeking protective legislation.

However, when we have a millionaires congress as currently exists, those legislators idea of average middle income lives doesn’t compute. Essentially, they have no clue what it means to struggle to meet expenses and keep/stay out of crushing debt when incomes are declining. Over the last 30 years, millionaires have completely segregated themselves from the rest of American society to the extent that millionaires no longer live in middle income communities so they have no point of reference or understanding of the lives and challenges facing middle income earners, let alone have friends and associates who are not millionaires. Their friends and associates are among their own wealthy class and they associate only among their wealthy class. As a consequence, those of us who are not among that wealth class, as donors and friends. hardly make into our legislators thoughts.

The most recent example of support of the congressional millionaire’s club was the truly bipartisan Senate approval of a Farm Bill amendment that makes it illegal for individual states to approve GMO labeling, even though marches across this country and around the world demanded GMO seeds and product labeling. Instead of listening to the millions of people, who do have legitimate concerns about the genetic effects of GMO foods on humans and animals, both Republicans and Democrats in the Senate cast their votes for Monsanto. Essentially, both sides of the aisle put the concerns of their millionaire friends and donors ahead of the concerns of millions of average families.

It’s taken 30 years of electoral politics of putting money ahead of expertise, knowledge, understanding and community – accelerated by Gingrich’s money raising focused changes in the House – to lead us to this moment when once again millionaires control Congress and all legislation. (see Washington Post associate editor and author of Act of Congress: How America’s Essential Institution Works, and How It Doesn’t Robert G. Kaiser op ed)

At the turn of the 20th Century, millionaires controlled both Congress and state legislatures. That control worked fine for the millionaires, but not so well for anyone who challenged their domination. Tesla, the father of AC electrical current (now the American standard), was destroyed by JP Morgan’s millions (and his political connections) who had spent heavily backing Edison’s DC current. Henry Ford’s first patent application was denied because the millionaires who controlled congress didn’t want the competition he offered the public.

Even as millionaires consolidated their control over state and federal governments, average workers, often enduring deadly and extraordinarily harsh working conditions for very little income, were drawn to communism as espoused by Eugene Debs and other union organizers. Meanwhile the millionaires Congress, ignoring the often deadly plight of workers, along with many states chose to crack down violently on workers and worker movements. Thousands of workers died at state sponsored hands when those workers revolted, via strikes, against working and living conditions.

Finally, the strikes and street corner public outcry grew to the point that prescient economists and politicos like TR recognized that capitalism itself was endangered. Moreover, politicians like TR understood and spoke out in the public forum about the failure of basic ethics and morality among the politician class: that essentially legislation could be bought by or ransomed to the highest bidder at both the federal and state levels.

TR’s reforms began to bring unbridled money dominated capitalism under control, to bring ethics and morality back into government, and to enable competition, including creative destruction of old industries for newer, more inventive ones, back into the capitalist fold.

Later, FDR chose to focus on the human benefits of reform, once again recognizing the significant rise of communism among the working class, to quell the masses who saw only the idealistic good of communism rather than the downside of Stalin and Communist Russia. FDR’s fight against the pro-business SCOTUS Lockner Court was yet another example of the realization that, for capitalism to survive, average workers had to be brought back into the fold as participants in the decision making process: workers had to see some benefit to their labor to prevent a mass uprising against corporations and capitalism at large…and the massive poverty – and small business bankruptcies – that accompanied the Great Depression.

Our modern day millionaires Congress, on both sides of aisle, fails to understand the lessons of history in their constant search for donations and corporate money support. But throughout history, from the earliest days of Mesopotamia to 20th Century America, average people revolted against and overwhelmed governments they saw as not working on their behalf. The same will occur again with our modern day millionaires Congress and state legislatures. Out of the masses another TR will arise to claim an ethical and honorable balance. He or she will find an eager American willing to support his/her presidency that speaks to average, every day, middle income American values and morality with regards to work and living standards.

Communism was the driving force that changed the political millionaires club in Congress and the States. I don’t know what the next counter force will be, but I do know it will occur unless the political, judicial, and pundit class wakes up to harm it has wrought with purchased no-nothing legislators.

Why Austerity Doesn’t Currently Work

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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.

Written by Valerie Curl

April 17, 2013 at 1:57 PM

How Progressives Can Save California…And the Nation

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Californa State Flag

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.

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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.

healthy forests

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.

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