Wednesday, September 29, 2010

No, It Is Not

Paul Krugman posted this on his blog site yesterday. It is a spectacularly clear statement on Keynesian policies.

Economics Is not a Morality Play

Brad DeLong catches someone wondering if I am actually advocating war as a solution to our problems. Against stupidity, the gods themselves …

To be fair, though, I understand from the Times that whenever I mention in my column that WWII ended the Great Depression, the paper gets a lot of mail accusing me of being a warmonger. Amazing.

But maybe this is an opportunity to reiterate a point I try to make now and then: economics is not a morality play. It’s not a happy story in which virtue is rewarded and vice punished. The market economy is a system for organizing activity — a pretty good system most of the time, though not always — with no special moral significance. The rich don’t necessarily deserve their wealth, and the poor certainly don’t deserve their poverty; nonetheless, we accept a system with considerable inequality because systems without any inequality don’t work. And before the trolls jump in to say aha, Krugman concedes the truth of supply-side economics, that’s not an argument against progressive taxation and the welfare state; it’s just an argument that says that there are limits. Cuba doesn’t work; Sweden works pretty well.

And when we’re experiencing depression economics, by which I mean a situation in which it’s hard to create sufficient demand to achieve full employment — mainly because short-term interest rates are up against the zero lower bound — the essentially amoral nature of economics becomes even more acute. As I’ve said repeatedly, this is a situation in which virtue becomes vice and prudence is folly; what we need above all is for someone to spend more, even if the spending isn’t particularly wise.

The trouble in practice is that conventional modes of thought tend to prevail even when they shouldn’t; in particular, public spending on the scale needed never seems to happen. That’s why Keynes facetiously proposed burying bottles full of cash in coal mines, so people could dig them up again: since any proposal to spend money on things we need got shot down on grounds of prudence and efficiency, he proposed completely pointless spending instead.

And what actually ended up doing the trick was spending that was beyond pointless, it was actually destructive – a sort of cruel joke on the part of the gods of economics.

The point is that it would have been much better if the Depression had been ended with massive spending on useful things, on roads and railroads and schools and parks. But the political consensus for spending on a sufficient scale never materialized; we needed Hitler and Hirohito instead.

Tuesday, September 28, 2010

The Rich get Richer and the Poor get Poorer

Data from the latest Census:

WASHINGTON — The income gap between the richest and poorest Americans grew last year to its widest amount on record as young adults and children in particular struggled to stay afloat in the recession.

The top-earning 20 percent of Americans — those making more than $100,000 each year — received 49.4 percent of all income generated in the U.S., compared with the 3.4 percent earned by those below the poverty line, according to newly released census figures. That ratio of 14.5-to-1 was an increase from 13.6 in 2008 and nearly double a low of 7.69 in 1968.

full AP article here

Sunday, September 26, 2010

Republicans Will Cut Social Security

Republican Representative Eric Ryan (the likely chair of the House Budget Committee if Republicans take the House) on his proposal for Social Security:

"The Ryan plan would cut traditional guaranteed Social Security retirement benefits substantially compared to the benefits now scheduled to be paid. Much of the reduction would stem from the adoption of what is called "progressive price indexing," which would reduce the benefits of future retirees except for the bottom 30 percent of wage earners. For the average new retiree, defined benefits would be reduced by about 16 percent in 2050 and about 28 percent in 2080. Reductions would be greater for retirees with higher earnings."

Young Guns: A New Generation of Conservative Leaders, Rep. Eric Cantor (R) and Rep. Kevin McCarthy (R)

Americans Have the Right Values - They're Just Not Very Well Informed

"Recent analyses have shown that income inequality in the US has grown steadily for the past three decades and reached its highest level on record, exceeding even the large disparities seen in the 1920s, before the Great Depression. Norton and Ariely estimate that the one percent wealthiest Americans hold nearly 50 percent of the country's wealth, while the richest 20 percent hold 84 percent of the wealth.

But in their study, the authors found Americans generally underestimate the income disparity. When asked to estimate, respondents on average estimated that the top 20 percent have 59 percent of the wealth (as opposed to the real number, 84 percent). And when asked to choose how much the top 20 percent should have, on average respondents said 32 percent -- a number similar to the wealth distribution seen in Sweden".

The author is conflating wealth and income inequality here. The data I presented was on income inequality (top 1% receive 17.1% of all income) while Norton and Ariely present wealth data (top 1% have 50% of total wealth).

Nevertheless, the point stands. Americans have their values right; they are just ignorant. I would say that is the fault of the media.


Saturday, September 25, 2010

Obama on the GOP "Pledge"

"It is grounded in same worn out philosophy: cut taxes for millionaires and billionaires; cut the rules for Wall Street and the special interests; and cut the middle class loose to fend for itself. That's not a prescription for a better future. It's an echo of a disastrous decade we can't afford to relive."

Friday, September 24, 2010

Wonder Why?

In an Associated Press-GfK Poll this month, 60 percent disapprove of the job congressional Democrats are doing — yet 68 percent frown on how Republicans are performing. While 59 percent are unhappy with how Democrats are handling the economy, 64 percent are upset by the GOP's work on the country's top issue. Just over half have unfavorable views of each party.

Most say President Barack Obama isn't cooperating enough on the economy, yet even more accuse Republicans of the same thing. Former President George W. Bush and former Alaska Gov. Sarah Palin — the only two Republicans the AP-GfK Poll tested — are both viewed negatively by more than half in the survey, worse than Obama's marks. And people overwhelmingly fault Bush more than Obama for the recession.


That's About Right

From Bill Maher:

"But I've done some math that indicates that, considering the hole this country is in, if you are earning more than a million dollars a year and are complaining about a 3.6% tax increase, then you are by definition a greedy asshole."

Tuesday, September 21, 2010

Poor Just Keep Getting Poorer

Here is data from the non-partisan Congressional Budget Office:

Year 1 2 3 4 5 10% 5% 1%
1979 6.8 12.3 16.5 22.3 42.4 27.6 18.1 7.5
2007 4.9 9.4 14.1 20 52.5 38.7 29.3 17.1

It shows the Household (which differs from family) income shares of after-tax income for each quintile of the population. After tax income takes into account not only taxes but also transfer payments such as food stamps, Medicare, Social Security and the like.

Notice that 80% of the population experienced a drop in relative shares at the expense of the top 20%. Notice that the top 1% received 17.1% of total income in 2007 compared to 7.5% in 1979.

In 2007, everyone with a Household after-tax income of $74,700 (the minimum to get into the top 20%) or less was in the bottom 80% of Household income recipients.

One could summarize the Reagan Revolution as one that transferred income from the bottom 80% of Households to the top 20% of households.

Monday, September 20, 2010

Shorter Eric Cantor: "Don't forget the high earners."

Harry Reid says:

"We're having this fight before November," the aide told TPM, speaking on a condition of anonymity to be able to lay out the political agenda. "The caucus is in agreement that this fight is a fight worth taking before the election. You may not win but you put yourself in the camp of fighting with the middle class."

The idea is to vote on the middle class cuts, then box Republicans into calling for cuts for the rich. "Those Republicans will have to stand up and say, 'Don't forget the high earners.' They will have to call for an amendment."

Eric Cantor says:

Tax Fight: GOP Won't Back Down

By Eric Cantor

As we enter the final stretch before the November midterm elections, all eyes have gravitated to the fight over the looming federal tax increases. President Obama and Speaker Nancy Pelosi want to keep the current rates on income, capital gains and dividends in place only for those who happen to fit their description of "middle class." In this moment of economic distress, will they get their way even though a bipartisan majority of the House disagrees with them? Or will present tax rates be extended for all American taxpayers—and most importantly for small businesses and investors, the nation's job creators?

Republicans unequivocally oppose any impending tax increase. House Republicans have called on Speaker Pelosi to allow the House to vote on legislation that would freeze all tax rates for the next two years. It's a vote the taxpayers of this country deserve before November.

Sunday, September 19, 2010


The following data is from the most excellent work of Emmanuel Saez and Thomas Piketty. It is based on all income excluding transfer payments (welfare, food stamps, unemployment insurance, housing subsidies) and includes realized capital gains.

In 2008:

The average family in the United States earned $54,315.

The average family in the bottom 90% earned $31,244.

To make it into the top 10% of income earners a family would have to make $109,062 per year or more.

To make it into the top 5% of income earners a family would have to make $152,726 per year or more.

To make it into the top 1% of income earners a family would have to make $368,238 per year or more.

To make it into the top .5% of income earners a family would have to make $558,726 per year or more.

To make it into the top .1% of income earners a family would have to make $1,695,136 per year or more.

To make it into the top .01% of income earners a family would have to make $9,141,190 per year or more.

15,246 of the 152,462,000 U.S. families made it into this last group. They had average incomes of $27,342,212.

Saturday, September 18, 2010

Why Dems in Congress Should Not Compromise on the Tax Cut for the Very Rich

In my opinion, the graph above tells us just about everything we need to know about why most people are feeling a bit stressed. It shows the percentage of income received by the top 10% of income earners (I use that term advisedly) between 1917 and 2007.

First, look at the period up until WWII. The proportion of income peaked in 1929 at just under 50%. The Roaring Twenties were just great if you happened to be in this lucky cohort.

Now look at what happened in the Depression. The top 10%'s share fell, but only into the mid-forties.

The post-WWII era, known as the 'Great Compression' in the literature lasted from 1941 to 1979. The top 10%'s share fell to below 35% of total income. Later we can discuss why this occurred. I am open to your opinions in the comments section. Recall, however, that the top marginal tax rate in the fifties under Eisenhower was 90%. Hmmm...might there be a correlation between high top marginal tax rates and the creation of a middle class?

Then we had the Reagan Revolution with the Bush II effort to complete it by giving massive tax breaks to this group and, lo and behold, by 2007 we managed to top the 1929 figure. Goodbye Middle Class.

The stressed Middle Class has two options. Republicans and their propagandists on talk radio and Fox would have the Middle Class believe the shrinking share of income they receive is because Democrats tax them and give their money to poor people. Democrats claim their shrinking share is a result of the Reagan Revolution that altered a tax structure that had created the Middle Class in the first place. In other words, the Middle Class has shrunk because Republicans have taken our money and given it to the top 10%.

OK, I admit this is a bit of an oversimplification. Nevertheless, I think it is an oversimplification that drives to the heart of our current political crisis.

I am told that the current political debate over whether or not to extend the Bush tax cuts to the top 2% will not resonate in this political climate. Why? Because most people don't believe that the above graph has anything to do with their declining economic condition. I am told that this issue is too rational or too cerebral to have resonance. I am told it does not grab people emotionally. I just hope Democrats in Congress follow President Obama's lead and give us the opportunity to test this. My bet is, if they do, the Republicans will back down. This is a worthwhile goal on its own terms. The added bonus of having the tea party portion of the Republican Party become further disenchanted with their apparently 'reasonable' elected leaders is just a bonus.

The Tax-Cut Racket By PAUL KRUGMAN


Mr. McConnell, who was self-righteously denouncing the budget deficit just the other day, now wants to blow that deficit up with big tax cuts for the rich. But he doesn’t have the votes. So he’s trying to get what he wants by pointing a gun at the heads of middle-class families, threatening to force a jump in their taxes unless he gets paid off with hugely expensive tax breaks for the wealthy.

Most discussion of the tax fight focuses either on the economics or on the politics — both of which suggest that Democrats should hang tough, for their own sakes as well as that of the country. But there’s an even bigger issue here — namely, the question of what constitutes acceptable behavior in American political life. Politics ain’t beanbag, but there’s a difference between playing hardball and engaging in outright extortion, which is what Mr. McConnell is now doing. And if he succeeds, it will set a disastrous precedent.


In response, President Obama is proposing legislation that would keep tax rates essentially unchanged for 98 percent of Americans but allow rates on the richest 2 percent to rise. But Republicans are threatening to block that legislation, effectively raising taxes on the middle class, unless they get tax breaks for their wealthy friends.

That’s an extraordinary step. Almost everyone agrees that raising taxes on the middle class in the middle of an economic slump is a bad idea, unless the effects are offset by other job-creation programs — and Republicans are blocking those, too. So the G.O.P. is, in effect, threatening to plunge the U.S. economy back into recession unless Democrats pay up.

What kind of political party would engage in that kind of brinksmanship? The answer is the same kind of party that shut down the federal government in 1995 in an attempt to force President Bill Clinton to accept steep cuts in Medicare, and is actively discussing doing the same to Mr. Obama. So, as I said, the deeper explanation of the tax-cut fight is that it’s ultimately about a radicalized Republican Party, which accepts no limits on partisanship.

Thursday, September 16, 2010

Newburyport Charter Commission 9/22/10 from 7-9 p.m. at City Hall

From Charter Commission Clerk Sheila Mullins to Ed Cameron (Chair Newburyport Democratic City Committee) and Larry Giunta (Chair Newburyport Republican City Committee):

Since the ChCom is nonpartisan, I am requesting that the 2 political chairs post on their blogs the following:

The Newburyport Charter Commission wishes to extend an invitation to all Newburyporters for a public hearing on 9/22/10 from 7-9 p.m. at City Hall Auditorium. The Commission will be discussing the survey, the preamble that has been created, presentation of remaining timetable, what has been discovered thus far, what has been done, executive & legislative options, citizens’ safeguards, & number of wards. There will be a question & answer period as well.

This may be a rare occurrence of the local R's and D's being on the same page;-)

Wednesday, September 15, 2010


South Carolina Senate President Dresses Up Like Confederate Soldier With Black Slaves At GOP Event

This past weekend, the National Federation of Republican Women (NFRW) “held its annual fall Board of Directors meeting in Charleston, S.C.” In attendance at the event were major Republican leaders throughout the state, including Gov. Mark Sanford, who spoke to the audience gathered there.

One shocking moment at the NFRW meeting involved a special event called “The Southern Experience.” In this event, attendees dressed in clothing reminiscent of the Civil War and the antebellum South. As FITS News reports, South Carolina Senate President Glenn McConnell (R) participated in the event by dressing up as a Confederate General, and at many points posed with African Americans dressed as slaves:

The National Federation of Republican Women (NFRW) held its annual fall Board of Directors meeting in Charleston, S.C. last weekend – a decision the organization is likely regretting after several controversial pictures from one of the meeting’s sponsored events began surfacing on the internet. One of the pictures shows S.C. Senate President Glenn McConnell – who FITS readers will recall enjoys dressing up as a Confederate General – posing in his Rebel garb with a pair of African-Americans dressed in, um, “antebellum” attire.

The event in question – dubbed “The Southern Experience” – was held last Friday evening at the Country Club of Charleston. Hosted by the South Carolina Federation of Republican Women, it was included on the national conference’s official itinerary. In addition to McConnell, S.C. Gov. Mark Sanford attended (and spoke at) the event – although it was not listed on his weekly public schedule. S.C. Republican Attorney General nominee Alan Wilson also attended.

FITS News shares the picture in question, which it uncovered:


Uh Oh

Monday, September 13, 2010

NYT: Time for This Big Dog to Bite Back

September 11, 2010
Time for This Big Dog to Bite Back

NO, he can’t. President Obama can’t reverse the unemployment numbers by Election Day. He can’t get even a modest new stimulus bill past the Party of No, and even if he could, there would be few jobs to show for it until (maybe) 2011. Nor can he rewrite the history of his administration. Its signal accomplishments to date are an initial stimulus package that was overrun by the calamity at hand and a marathon health care battle as yet better known for its unseemly orgy of backroom wrangling than its concrete results. While that brawl raged, the White House seemed indifferent to the mounting number of Americans being tossed onto the Great Recession scrapheap.

And so the odds that Obama’s party will survive the midterms seem less than Indiana Jones’s in the Temple of Doom — as we are reminded hourly by the Beltway herd flogging the latest polls. The Democrats are facing a “historic” rout, an earthquake, a tidal wave — well, you know the drill. End of story.

Unless it’s not. On Labor Day, the fighting Obama abruptly re-emerged, a far cry from the man whose Oval Office address on Iraq days earlier was about as persuasive as a hostage video. Speaking to workers in Milwaukee, the president finally started giving voice to the anger of America’s battered middle class. And he even let loose with a little anger of his own. The unspecified “powerful interests” aligned against him, he said, “talk about me like a dog.”

The entire piece is here: