Europe Sees the Light, as U. S. Opts for Darkness

The misguided GOP focus on deficits and austerity in the U. S. is messing up the whole world’s economy.  From the NYT*:

“The Europeans lately have slightly eased their austerity policies, after four years of deep spending cuts and rising taxes that many economists blame for keeping the Continent in recession long after America’s ended.

“And the Obama administration, after years of pressing Europe to adopt American-style stimulus measures, is now presiding — if reluctantly — over European -style austerity that is measurably slowing its recovery. …

“The new reality in the Unites States reduces the president’s already limited leverage in his fiscal debate with Europeans…even as Europe’s woes continue to act as a drag on its trading partners, including the United States.”

I would force every Republican member of Congress to write “Keynes was right” on the blackboard 1,000 times.

*  “Lines Blur in U.S.-Europe Debate on Austerity,” Jackie Calmes

Quote of the Day

“Yes, total debt in the U.S. economy, public and private combined, has risen dramatically relative to G.D.P. No, this doesn’t mean that we as a nation have been living far beyond our means, and must drastically tighten our belts. While we have run up a significant foreign debt (although not as big as many imagine), the rise in debt overwhelmingly represents Americans borrowing from other Americans, which doesn’t make the nation as a whole any poorer, and doesn’t require that we collectively spend less. In fact, the biggest problem created by all this debt is that it’s keeping the economy depressed by causing us collectively to spend too little, with debtors forced to cut back while creditors see no reason to spend more.

“So what should we be doing? By all means, let’s restore the kind of effective financial regulation that, in the years before the Reagan revolution, helped deter excessive leverage. But that’s about preventing the next crisis. To deal with the crisis that’s already here, we need monetary and fiscal stimulus, to induce those who aren’t too deeply indebted to spend more while the debtors are cutting back.

“Unemployment, not excessive money printing, is what ails us now — and policy should be doing more, not less.”  Emphasis added.

Paul Krugman, from “The Urge to Purge,” NYT

Marching In Place

Unemployment was steady in December at 7.8%, with 155,000 jobs created, compared to 161,000 in November.

We need more short-term stimulus, but not with this Congress.

 

November 6 — Slow Job or Snow Job?

From “Pointing Toward Prosperity?,” Paul Krugman, NYT:

“The point is that America is still suffering from an overall lack of demand, the result of the severe debt and financial crisis that broke out before Mr. Obama took office.  In a better world, the president would be proposing bold short-term moves to move us rapidly back to full employment.  But he isn’t.

“O.K., we all understand why.  Voters have been told over and over again that the 2009 stimulus didn’t work (actually it did, but it wasn’t big enough), and a few days before a national election is no time to try to change that big a false belief.  So all that the administration feels able to offer are measures that would, one hopes, modestly accelerate the recovery already under way.

“It’s disappointing, to be sure.  But a slow job is better than a snow job.  Mr. Obama may not be as bold as we’d like, but he isn’t actively misleading voters the way Mr. Romney is.  Furthermore, if we ask what Mr. Romney would probably do in practice, including sharp cuts in programs that aid the less well-off and the imposition of hard-money orthodoxy on the Federal Reserve, it looks like a program that might well derail the recovery and send us back  into recession.

“Mr. Obama may not have an exciting plan, but if he is re-elected, he will get to implement a health reform that is the biggest improvement in America’s safety net since Medicare.  Mr. Romney doesn’t have an economic plan at all, but he is determined not just to repeal Obamacare but to impose savage cuts in Medicaid.  … Think instead about the 45 million Americans who either will or won’t receive essential health care, depending on who wins on Nov. 6.”  Emphasis added.

And think about who will or won’t be appointed to the Supreme Court depending on who wins.

 

 

Mitt’s Can’t Win on the Economy Because His Policies Are Losers

From “Clarifying Romney,” James Surowiecki, The New Yorker:

“Romney’s specific policies haven’t helped him much, either, partly because his economic speeches have been light on detail, and partly because his party’s ideology limits the kinds of solutions he can offer to the current job crisis.  As a Republican, Romney can’t push for any more stimulus, and is demanding deep spending cuts (without specifying exactly what programs he’d kill).  And, while even a conservative could go after the Federal Reserve for doing too little to boost economic growth, Ropmney has made exactly the opposite argument.  He has said that he would replace Ben Bernanke with someone who would support a ‘strong dollar’ — which means tighter monetary policy, fewer exports, and fewer jobs.”  Emphasis added.

This “strong dollar” garbage is intended to reach out to the Paul people, who want to return to the gold standard.  He won’t just call out crazy for what it is, he panders to it, he appeases it. 

Ryan’s Urgent Need for Frank Luntz

Give me a break!

From “Ryan Says Requesting Stimulus Funds Was a Mistake,” Trip Gabriel, The Caucus, NYT:

“Representative Paul D. Ryan said on Thursday it was a mistake to have requested funds in 2009 from the federal stimulus bill after voting against it.

“Mr. Ryan earlier denied asking for money from the $787 billion stimulus on behalf of companies in his Wisconsin district, contradicting a report by the Boston Globe on Tuesday that he wrote to the federal Energy Department requesting funds for two companies to develop so-called green jobs.

“’No, I never asked for stimulus,’ Mr. Ryan said in an interview with WCPO-TV in Cincinnati, which was broadcast Thursday. Mr. Ryan, along with Mitt Romney,…have vociferously denounced the stimulus as an example of President Obama’s failure to restore the economy. The Congressional Budget Office said the stimulus increased employment by 1.3 million to 3.3 million people.

“Mr. Ryan said in the television interview that he did not recall writing the letters. Later, his office issued a statement that he had since checked into the letters. ‘They were treated as constituent service requests in the same way matters involving Social Security or Veterans Affairs are handled,’ he said in the statement. ‘This is why I didn’t recall the letters earlier. But they should have been handled differently, and I take responsibility for that. Regardless, it’s clear that the Obama stimulus did nothing to stimulate the economy, and now the President is asking to do it all over again.’’’

The newest pathetic GOP euphemism —  It’s not stimulus money, it’s constituent service.  Yeah, that’ll work.  Paging Frank Luntz…

If Ryan keeps twisting in the wind like this, he’ll be generating some energy, just not for the GOP ticket.

Quote of the Evening

“The stimulus was not, as conservatives have convinced many of their fellow Americans, big government on steroids; it was Keynesian economics on birth control. It did not restore the 8 million jobs lost to the crash of 2008 or provide the 200,000 jobs a month needed for new entrants into the labor market, but it did prevent a second Great Depression.”

Drew Westen, “If Obama loses the election, here’s why,” WaPo

Our Limping Economy

GDP growth in the second quarter was only 1.5%, compared to 2.0% in the first quarter.

Our economy must grow between 2 and 2.5% just to keep unemployment, currently at 8.2%, from rising.

As for the third quarter, forecasts are for growth in the 1 to 1.5% range.

This is all good news for Mitt, and Mitt is bad news for us because he wants British-like austerity that would definitely send us back into recession*:

“The U. K.’s economy suffered a much larger contraction than expected in the second quarter, heightening questions about the pace and effectiveness of the government’s austerity program and fueling the broader debate across Europe about how to tackle the Continent’s economic woes.

“The deteriorating British economy is likely to intensify the debate both within the U.K. and other debt-laden countries in the West about cuts versus stimulus, amid increasing evidence that austerity is proving a major drag on growth.” Emphasis added.

* “U.K. Stumble Fuels Austerity Debate,” Ainsley Thomson and Cassell Bryan-Low, WSJ

 

Where’s the Obama Plan?

From “Wasting Warren Buffett,” Thomas L. Friedman, NYT:

“What the president should have done is follow the advice of the Princeton University economist and former Fed Vice Chairman Alan Blinder, namely lay out a specific ‘three-step rehab program for our nation’s fiscal policy.’  Call it the Obama Plan; it should combine a near-term stimulus on job-creating infrastructure, a phase-in, as the economy improves, of ‘something that resembles the 10-year Simpson-Bowles deficit reduction plan — which would pay for the stimulus 15-20 times over’ and a specific plan to ‘bend the health care cost-curve downward.’

“When the Grand Bargain talks with John Boehner fell apart, Obama retreated to his base when he should have rallied the center by laying out — in detail — the Grand Bargain the country needs.  That would have forced Romney to speak in detail about his plan — the Paul Ryan plan — and reveal it for what it is:  a radical plan that few Americans would embrace if they understood it.

“Then people would see a real choice:  a tough-minded-but-centrist plan with real bipartisan support versus a radical plan to gut Medicare, give more tax cuts to the already wealthy and drastically shrink discretionary spending so eventually nothing is left for education, veterans, roads, research, the F.B.I. or the poor.”  Emphasis added.

A War Between Debtors and Creditors That We Are All Losing

From “Obama’s Fate Rests in Part on Europe,” Eduardo Porter, NYT:

“Battle lines have been drawn across the Continent between a political establishment that defends austerity at all costs in the name of preserving the euro, and increasingly radical oppositions.

“This kind of political polarization may be a standard feature of financial crises.  Economists have noted that such crises naturally widen the chasm between the interests of creditors — like banks, investors and even governments — and debtors, who are suddenly made insolvent by a crisis that takes away their jobs and destroys the value of their homes.

“Creditors push austerity as the best way for debtors to repay their debts.  They oppose efforts to write down or renegotiate loans, or to allow higher inflation to erode their value.  And creditors, better financed and organized, usually gain the upper hand.  Debtors, who are generally poorer, lose.

“This cleavage is evident in Europe, where German voters have staunchly opposed committing more German resources to aid indebted Southern European countries.  It is also evident on Capitol Hill, where Republicans have countered the administration’s stimulus plans with proposals to cut public spending to finance tax cuts that would favor the most affluent Americans.  The ensuing gridlock has paralyzed policy-making on both sides of the Atlantic.  And it could produce a lot of economic damage.

“When Lehman Brothers went bankrupt in 2008, sending the global financial system into a tailspin, its debts amounted to about $600 billion.  Government debt alone in Greece, Spain, Portugal and Ireland…adds up to about $1.9 trillion.”  Emphasis added.