And now, they're coming for your Social Security money - they want your fucking retirement money - they want it back - so they can give it to their criminal friends on Wall Street. And you know something? They'll get it. They'll get it all from you sooner or later. Because they own this fucking place. It's a Big Club: and you're not in it.
"In short, the choice in this election is between a candidate who wants to have lower taxes on the rich and either larger deficits or cuts to social programs and public investment and one who prefers higher taxes on the rich and fewer cuts to social programs and public investment. That is the way people not working for Governor Romney would describe the trade-offs. "
— Dean Bakerdescribes the upcoming election campaign with typical insight and simplicity. Unfortunately, all that’s left for us is documenting the atrocities. Because the mainstream media is fundamentally incapable of describing the two candidates in language that even approaches this level of clarity and verisimilitude. They see themselves as conduits for warring press releases and little else. Anything else would be “taking sides.”
In total, the economy has lost close to $1.3tn in annual demand as a result of the collapse of the housing bubble. This explains the economy’s weak growth and high unemployment. There is no simple way to replace this demand.
We can gather together a coven of market-worshipping Republicans and sacrifice all the workers and retirees we want, it still will not replace the demand gap. We can love the private sector as much as we want and it still will not make firms go out and invest and hire when they don’t see demand for their products.
It’s almost as if our media aristocracy of inbred Serious People have a vested interest in seeing to it that the middle class, and only the middle class, gets soaked in any economic “compromise.” Amidst reacting to a particularly poor NYT Magazine piece, Dean Baker nails it:
…the piece too quickly dismisses the possibility of getting substantial additional tax revenue from the wealthy. It presents the income share for those earning more than $1 million as $700 billion, saying that if we increase the tax rate on this group by 10 percentage points (from roughly 30 percent to 40 percent), then this yields just $70 billion a year.
However, if we lower our bar slightly and look to the top 1 percent of households, with adjusted gross incomes of more than $400,000, and update the data to 2012 (from 2009), then we get adjusted gross income for this group of more than $1.4 trillion. Increasing the tax take on this group by 10 percentage points nets us $140 billion a year. If the income of the top 1 percent keeps pace with the projected growth of the economy over the decade, this scenario would get us more than $1.7 trillion over the course of the decade, before counting interest savings. Of course there would be some supply response, so we would collect less revenue than these straight line calculations imply, but it is possible to get a very long way towards whatever budget target we have by increasing taxes on the wealthy.
Shocking. And but also, Baker smartly includes the most important issue in any truly serious discussion of American economics and the proper balance of same: the cost of health care:
We pay twice as much per person as people do in other wealthy countries. Since more than half of the tab for our health care is paid by the government, our broken health care system becomes a budget problem. If we paid the same amount per person for our health care as people in other wealthy countries, we would be looking at long-term budget surpluses rather than deficits. The reason that we pay so much more is not that we get better outcomes – we don’t generally. Rather it is that we pay too much to drug companies, hospitals, medical specialists, and others in the health care industry.
Baker’s being generous. We spend as much as five times more per capita than the best performing countries do, all of which achieve uniformly better outcomes than we do. Obviously, the only possible answer here is just get Big Guvmint out of the way so the poor can kindly go die in the streets. It’s the only serious answer to the problem. Well, that and lowering taxes on the wealthiest 1% of the country.
Dean Baker, once again, pointing out an inconvenient truth:
… a study by Charles Rivers Associates suggests that the main impact of the regulation would be to hasten the replacement of old polluting power plants. This could help to create jobs in the private sector in the next few years, a period in which all projections show that the economy will still be suffering from substantial unemployment.
In other words, if Obama was interested in an action that he could take unilaterally that would create jobs, supporting the EPA on the ozone restrictions probably would have topped the list. In nixing the regulation, Obama went the job killing route.
This is precisely the sort of thing that happens when you adopt the framing of your opponent. You end up painted into a political corner, rhetorically speaking, and pretty soon it seems reasonable and even advantageous to make boneheaded moves like this one that are not only economically counterproductive, but work to dishearten your supporters and embolden those of your opponents. Well played, Democrat.
"Finally, it is not clear why it views the fact that the [proposed EU financial transaction] tax will make it more difficult to construct trading algorithms as an unintended consequence. These algorithms may provide large profits to the people who develop them, but the benefits to the economy and society are likely to be near zero. If a transactions tax discourages skilled mathematicians and computer programmers from developing complex formulas for financial arbitrage and instead has them work in a productive area of the economy, then the tax will have been a great success."
— Dean Bakernails it. The very existence of this sort of trading apparatus, which benefits only the company deploying it, relies entirely on what should be privileged knowledge (e.g. foreknowledge of trade patterns about to happen that can only be extracted and acted upon through either initiating the trade itself or privileged placement of what amounts to a compute cluster on a particular routing switch (or both)), and is the sort of thing used by Goldman et al. to, you know, screw their own customers by trading against their interests and/or simply profiting off what amounts to insider information, is as anti-market, anti-competitive, and the very essence of what all our anti-collusion, anti-insider trading, anti-trust, and anti-monopoly laws are intended to control. And these types of transactions do nothing for the broader economy beyond radically enriching a handful of folks who can only spend so much. And we’re a country with a giant aggregate demand problem. So there’s that.
But may the Flying Spaghetti Monster help anyone who tries to regulate this practice in any way, much less apply a nominal cost to such actions. This, along with rampant and abusive naked shorting, is the true scandal of Wall Street. (By the by: naked shorting is already illegal, but is basically never even investigated, much less litigated. In light of recent events, this should be the basis of a scandal…but that would require a functioning media. Look over there! A missing white woman!)
And, so far as I can tell, exactly zero is being done about any of it. And nothing will be done until after the next financial collapse. And it will only happen then if the collapse is sufficiently devastating that the entire structure of Wall Street finance is utterly laid waste (thus ending their political influence in the aftermath). Sounds like a time.
"[Rather than a double dip recession] we may be looking at 2 years or more where the growth could be in the range of 2.0 percent or even less. When we have 9.1 percent unemployment, this is an outrage. If we get people applauding because at least we are not seeing a double dip, then we have to calmly escort these ignorant beings to somewhere far away from economic policy discussions. They clearly do not have a clue and need to try a different line of work.
Finally, it is 100 percent nonsense to say that the government is out of policy options. We can do more stimulus. The financial markets are yelling at the government at the top of their lungs saying “borrow more money.” That’s what 2.6 percent interest rate on 10-year Treasury bonds means. There are balanced-budget worshipping politicians who say that the government can’t do anything, but this is not true and the NYT has no business repeating it.
The Fed could also do more. […] Ben Bernanke has himself suggested: targeting a long-term interest rate (e.g. a 1.0 percent 5-year Treasury rate) or a higher rate of inflation (e.g. 3-4 percent). […]
The government could also try to create jobs by taking steps to lower the value of the dollar. The Chinese government has been making threats that it will stop buying up U.S. government debt if we don’t take their advice. The Obama administration could ask what they most want and then do the exact opposite. If the Chinese government stops buying U.S. assets then the dollar will fall against the yuan. This is equivalent to imposing a tariff on Chinese imports and giving a subsidy to U.S. exports. In other words, it should lead to a burst in net exports which will lift the economy and create jobs."
— Dean Baker is either giving great analysis of the nation’s near term economic outlook and policy options —or— reciting a litany of facts, large and small, that you will never, ever hear on any MSM outlet. Even by accident.
I’m not sure which, though.
An interesting read in which Dean Baker agrees with Ron Paul’s idea:
…the Fed has bought roughly $1.6 trillion in government bonds through its various quantitative easing programs over the last two and a half years. This money is part of the $14.3 trillion debt that is subject to the debt ceiling. However, the Fed is an agency of the government. Its assets are in fact assets of the government. Each year, the Fed refunds the interest earned on its assets in excess of the money needed to cover its operating expenses. Last year the Fed refunded almost $80 billion to the Treasury. In this sense, the bonds held by the Fed are literally money that the government owes to itself.
Unlike the debt held by Social Security, the debt held by the Fed is not tied to any specific obligations. The bonds held by the Fed are assets of the Fed. It has no obligations that it must use these assets to meet. There is no one who loses their retirement income if the Fed doesn’t have its bonds. In fact, there is no direct loss of income to anyone associated with the Fed’s destruction of its bonds. This means that if Congress told the Fed to burn the bonds, it would in effect just be destroying a liability that the government had to itself, but it would still reduce the debt subject to the debt ceiling by $1.6 trillion. This would buy the country considerable breathing room before the debt ceiling had to be raised again. President Obama and the Republican congressional leadership could have close to two years to talk about potential spending cuts or tax increases. Maybe they could even talk a little about jobs.
In addition, there’s a second reason why Representative Paul’s plan is such a good idea. As it stands now, the Fed plans to sell off its bond holdings over the next few years. This means that the interest paid on these bonds would go to banks, corporations, pension funds, and individual investors who purchase them from the Fed. In this case, the interest payments would be a burden to the Treasury since the Fed would no longer be collecting (and refunding) the interest.
More detail at the link. I’m no economist, but it sounds like dodging the interest alone is worth doing in exchange for a fairly minor “bank tax” down the road as the reserve rate requirements would necessarily ratcheted up slightly to offset the eventual inflationary pressure caused by The Great Bond Shredding of ‘11.
Were I Obama, I’d get out on the hustings this very second talking about how under no circumstances should the Fed order these bonds be destroyed. Go have lunch with Joe Biden. Come back out and say “well, it is with a heavy heart I have to bow to the demands of my GOP overlords. We shall shred the bonds effective immediately. Bipartisan!”
After all, the only way to get something done in this government is for Obama to come out against it and wait for the GOP’s reflexive adoption of the opposite position no matter what the issue. That the Democratic leadership in DC haven’t yet figured this out is why they fail.