Wednesday, August 31, 2011

40% of schools cutting recess

This seems like one of those issues which "both" sides should be able to agree on: liberals because they're smart and realize kids need physical activity for their health and mental development; and conservatives because they recall that back in the good ole days, kids used to be free to spend hours a day unsupervised playing (in between praying, reciting the Pledge, and trading politically incorrect epithets).

Yet with all our focus on kids' test scores and tight education budgets, this common sense gets lost. Too bad.

Researchers say that cuts in play time affect children's health and development process.
By LiveScience
August, 15 2011 | Mother Nature Network

Libertarian 'thinkers' prefer autocracy to democracy

Lind sums up his well-cited takedown of libertarianism's leading lights thusly:
The dread of democracy by libertarians and classical liberals is justified. Libertarianism really is incompatible with democracy. Most libertarians have made it clear which of the two they prefer. The only question that remains to be settled is why anyone should pay attention to libertarians.
The basic problem libertarians have with constitutional democracies is that, no matter what country or culture you look at, over time the mean majority tends to vote for things which take resources from some people with a lot (taxation) and give them to other people with less (redistribution), which libertarians equate with tyranny, while normal people call it fulfilling the social contract and promoting the general welfare.
And since we live in the real world and not an Ayn Rand novel where there is nowhere for our libertarian masters to run away to, they have to stay put and pout about how unfair it all is. And CATO, Mises, etc., are their well-funded and credentialed pouting, er, think tanks.

By Michael Lind
August 30, 2011 | Salon

Monday, August 29, 2011

Wall St. rescue missed Main St.

By Gretchen Morgenson
August 27, 2011 | New York Times

FOR the last three years we have been told repeatedly by government officials that funneling hundreds of billions of dollars to large and teetering banks during the credit crisis was necessary to save the financial system, and beneficial to Main Street.

But this has been a hard sell to an increasingly skeptical public. As Henry M. Paulson Jr., the former Treasury secretary, told the Financial Crisis Inquiry Commission back in May 2010, "I was never able to explain to the American people in a way in which they understood it why these rescues were for them and for their benefit, not for Wall Street."

The American people were right to question Mr. Paulson's pitch, as it turns out. And that became clearer than ever last week when Bloomberg News published fresh and disturbing details about the crisis-era bailouts.

Based on information generated by Freedom of Information Act requests and its longstanding lawsuit against the Federal Reserve board, Bloomberg reported that the Fed had provided a stunning $1.2 trillion to large global financial institutions at the peak of its crisis lending in December 2008.

The money has been repaid and the Fed has said its lending programs generated no losses. But with the United States economy weakening, European banks in trouble and some large American financial institutions once again on shaky ground, the Fed may feel compelled to open up its money spigots again.

Such a move does not appear imminent; on Friday Ben S. Bernanke, the Fed chairman, told attendees at the Jackson Hole, Wyo., conference that the Fed would take necessary steps to help the economy, but didn't outline any possibilities as he has done previously.

If the Fed reprises some of its emergency lending programs, we will at least know what they will involve and who will be on the receiving end, thanks to Bloomberg.

For instance, its report detailed the surprisingly sketchy collateral — stocks and junk bonds — accepted by the Fed to back its loans. And who will be surprised if foreign institutions, which our central bank has no duty to help, receive bushels of money from the Fed in the coming months? In 2008, the Royal Bank of Scotland received $84.5 billion, and Dexia, a Belgian lender, borrowed $58.5 billion from the Fed at its peak.

Walker F. Todd, a research fellow at the American Institute for Economic Research and a former assistant general counsel and research officer at the Federal Reserve Bank of Cleveland, said these details from 2008 confirm that institutions, not citizens, were aided most by the bailouts.

"What is the benefit to the American taxpayer of propping up a Belgian bank with a single New York banking office to the tune of tens of billions of dollars?" he asked. "It seems inconsistent ultimately to have provided this much assistance to the biggest institutions for so long, and then to have done in effect nothing for the homeowner, nothing for credit card relief."

Mr. Todd also questioned the Fed's decision to accept stock as collateral backing a loan to a bank. "If you make a loan in an emergency secured by equities, how is that different in substance from the Fed walking into the New York Stock Exchange and buying across the board tomorrow?" he asked. "And yet this, the Fed has steadfastly denied ever doing."

If these rescues were intended to benefit everyday Americans, as Mr. Paulson contended, they have failed. Main Street is in a world of hurt, facing high unemployment, rampant foreclosures and ravaged retirement accounts.

This important topic of bailout inequities came up in Congress earlier this month. Edward J. Kane, professor of finance at Boston College, addressed a Senate banking panel convened on Aug. 3 by Sherrod Brown, the Ohio Democrat. "Our representative democracy espouses the principle that all men and women are equal under the law," Mr. Kane said. "During the housing bubble and the economic meltdown that the bursting bubble brought about, the interests of domestic and foreign financial institutions were much better represented than the interests of society as a whole."

THIS inequity must be eliminated, Mr. Kane said, especially since taxpayers will be billed for future bailouts of large and troubled institutions. Such rescues are not really loans, but the equivalent of equity investments by taxpayers, he said.

As such, regulators who have a duty to protect taxpayers should require these institutions to provide them with true and comprehensive reports about their financial positions and the potential risks they involve. These reports would counter companies' tendencies to hide their risk exposures through accounting tricks and innovation and would carry penalties for deception.

"Examiners would have to challenge this work, make the companies defend it and protect taxpayers from the misstatements we get today," Mr. Kane said in an interview last week. "The banks really feel entitled to hide their deteriorating positions until they require life support. That's what we have to change. We must put them in position to be punished for an intent to deceive."

Given the degree to which financial regulators are captured by the companies they oversee, prescriptions like Mr. Kane's are going to be fought hard. But the battle could not be more important; if we do nothing to protect taxpayers from the symbiotic relationship between the industry and their federal minders, we are in for many more episodes like the one we are still digging out of.

EVALUATING bailout programs like the Troubled Asset Relief Program and the facilities extended by the Fed against "the senseless standard of doing nothing at all," Mr. Kane testified, government officials tell taxpayers that these actions were "necessary to save us from worldwide depression and made money for the taxpayer." Both contentions are false, he said.

"Bailing out firms indiscriminately hampered rather than promoted economic recovery," Mr. Kane continued. "It evoked reckless gambles for resurrection among rescued firms and created uncertainty about who would finally bear the extravagant costs of these programs. Both effects continue to disrupt the flow of credit and real investment necessary to trigger and sustain economic recovery."

As for making money on the deals? Only half-true, Mr. Kane said. "Thanks to the vastly subsidized terms these programs offered, most institutions were eventually able to repay the formal obligations they incurred." But taxpayers were inadequately compensated for the help they provided, he said. We should have received returns of 15 percent to 20 percent on our money, given the nature of these rescues.

Government officials rewarded imprudent institutions with stupefying amounts of free money. Even so, we are still in economically stormy seas. Doesn't that indicate that it's time to try a different tack.

Channel Marx to save capitalism?

By George Magnus
August 28, 2011 | Bloomberg

Policy makers struggling to understand the barrage of financial panics, protests and other ills afflicting the world would do well to study the works of a long-dead economist: Karl Marx. The sooner they recognize we're facing a once-in-a-lifetime crisis of capitalism, the better equipped they will be to manage a way out of it.

The spirit of Marx, who is buried in a cemetery close to where I live in north London, has risen from the grave amid the financial crisis and subsequent economic slump. The wily philosopher's analysis of capitalism had a lot of flaws, but today's global economy bears some uncanny resemblances to the conditions he foresaw.

Consider, for example, Marx's prediction of how the inherent conflict between capital and labor would manifest itself. As he wrote in "Das Kapital," companies' pursuit of profits and productivity would naturally lead them to need fewer and fewer workers, creating an "industrial reserve army" of the poor and unemployed: "Accumulation of wealth at one pole is, therefore, at the same time accumulation of misery."

The process he describes is visible throughout the developed world, particularly in the U.S. Companies' efforts to cut costs and avoid hiring have boosted U.S. corporate profits as a share of total economic output to the highest level in more than six decades, while the unemployment rate stands at 9.1 percent and real wages are stagnant.

U.S. income inequality, meanwhile, is by some measures close to its highest level since the 1920s. Before 2008, the income disparity was obscured by factors such as easy credit, which allowed poor households to enjoy a more affluent lifestyle. Now the problem is coming home to roost.

Over-Production Paradox

Marx also pointed out the paradox of over-production and under-consumption: The more people are relegated to poverty, the less they will be able to consume all the goods and services companies produce. When one company cuts costs to boost earnings, it's smart, but when they all do, they undermine the income formation and effective demand on which they rely for revenues and profits.

This problem, too, is evident in today's developed world. We have a substantial capacity to produce, but in the middle- and lower-income cohorts, we find widespread financial insecurity and low consumption rates. The result is visible in the U.S., where new housing construction and automobile sales remain about 75% and 30% below their 2006 peaks, respectively.

As Marx put it in Kapital: "The ultimate reason for all real crises always remains the poverty and restricted consumption of the masses."

Addressing the Crisis

So how do we address this crisis? To put Marx's spirit back in the box, policy makers have to place jobs at the top of the economic agenda, and consider other unorthodox measures. The crisis isn't temporary, and it certainly won't be cured by the ideological passion for government austerity.

Here are five major planks of a strategy whose time, sadly, has not yet come.

First, we have to sustain aggregate demand and income growth, or else we could fall into a debt trap along with serious social consequences. Governments that don't face an imminent debt crisis -- including the U.S., Germany and the U.K. -- must make employment creation the litmus test of policy. In the U.S., the employment-to-population ratio is now as low as in the 1980s. Measures of underemployment almost everywhere are at record highs. Cutting employer payroll taxes and creating fiscal incentives to encourage companies to hire people and invest would do for a start.

Lighten the Burden

Second, to lighten the household debt burden, new steps should allow eligible households to restructure mortgage debt, or swap some debt forgiveness for future payments to lenders out of any home price appreciation.

Third, to improve the functionality of the credit system, well-capitalized and well-structured banks should be allowed some temporary capital adequacy relief to try to get new credit flowing to small companies, especially. Governments and central banks could engage in direct spending on or indirect financing of national investment or infrastructure programs.

Fourth, to ease the sovereign debt burden in the euro zone, European creditors have to extend the lower interest rates and longer payment terms recently proposed for Greece. If jointly guaranteed euro bonds are a bridge too far, Germany has to champion an urgent recapitalization of banks to help absorb inevitable losses through a vastly enlarged European Financial Stability Facility -- a sine qua non to solve the bond market crisis at least.

Build Defenses

Fifth, to build defenses against the risk of falling into deflation and stagnation, central banks should look beyond bond- buying programs, and instead target a growth rate of nominal economic output. This would allow a temporary period of moderately higher inflation that could push inflation-adjusted interest rates well below zero and facilitate a lowering of debt burdens.

We can't know how these proposals might work out, or what their unintended consequences might be. But the policy status quo isn't acceptable, either. It could turn the U.S. into a more unstable version of Japan, and fracture the euro zone with unknowable political consequences. By 2013, the crisis of Western capitalism could easily spill over to China, but that's another subject.

(George Magnus is senior economic adviser at UBS and author of "Uprising: Will Emerging Markets Shape or Shake the World Economy?")

Sunday, August 28, 2011

The next big scam after Madoff?

The new documentary Chasing Madoff is about Harry Markopolos, half crusader, half cuckoo, whose warnings about Ponzi-schemer Bernie Madoff were ignored by the SEC for years. The next big financial scam, according to Markopolos, is foreign exchange fees fraud:

"'The investment managers were saying they're reporting this much and the pension funds were saying we're receiving this much. The gap should've only been fees but there was something extra missing, 30 basis points for currency overcharges.'

"Markopolos said the Madoff case was 'a total wakeup call' for the SEC, which now has more financial examiners to go with all the lawyers. It 'remains to be seen if [the SEC] becomes a credible law enforcement agency. If they're not doing big cases 18 months from now, we have a big problem.'"

By Margo D. Beller
August 28, 2011 | CNBC

Friday, August 26, 2011

Steve Jobs' record on workers' rights

Americans and American media tend to pile on. When it comes to rich, "self-made" tycoons, they trip over themselves to lavish praise and attention on the already rich and famous.

So while everybody is piling on the praise of Apple's Steve Jobs, who is retiring as CEO (but will be chairman of board), let's not forget where part of Apple's high profits came from: easily exploited overseas labor.

According to a review conducted by Apple itself: less than 1/3 of all Apple factories obeyed Apple rules about not forcing factory workers to work more than 60 hours a week; only 57 percent of its factories complied with the Apple's policies on occupational injury prevention; 95 factories did not perform regular safety inspections; and 54 factories failed to give their workers adequate safety equipment.

By Mike Elk
August 25, 2011 | In These Times

Alter: Prove Obama's a bad president

[Beavis]: You know, I kinda agree with Alter, because he's like, speaking my language, you know, but at the same time, Obama has kinda sold out the Left...

[Butthead - sudden backhand to Beavis's face - THWAP!]: What the hell are you talking about, Beavis? Uh-huh-huh-huh.

[Beavis]: Uh, I don't know. Huh-huh-huh.

Yeah, Beavis -- er, Jonathan Alter, what the hell are you talking about? In the 7th paragraph down you wrote: "I could go on." Well then, why don't you? Why don't you go on about all the times Obama has disappointed liberals and progressives? Isn't that relevant to why Obama is so unpopular at the moment? Don't we count?

Nobody who's halfway reasonable will argue with the semi-good things Obama has done. Or that he's damned if he does or doesn't by about one-third of the electorate. That's not the point. The point is that since Day One, Obama has been more worried about what Big Business, Republicans and right-leaning Independents think of his presidency, than the ordinary folks who got him elected.

When he wasn't ignoring us and his promises on health care, unions, Iraq, and Afghanistan, he was insulting us ("f----ing retarded," "professional left," "firebagger lefty blogosphere"). And that's why he's so damn unpopular today. One-third of this country was never going to like him; they thought he was the Anti-Christ before Day One. But after two years of being ignored and crapped on, his Democratic base has thrown Obama off its shoulders.

Even if they don't have the heart to criticize him like I do, they're not actively defending him anymore, they're not going to raise money and go door to door and for him like they did last time. They're not going to risk getting shot at on some teabagger's doorstep defending Obama, when Obama has never had their back. He's on his own now.

By Jonathan Alter
August 26, 2011 | Bloomberg

Tell me again why Barack Obama has been such a bad president? I'm not talking here about him as a tactician and communicator. We can agree that he has played some bad poker with Congress. And let's stipulate that at the moment he's falling short in the intangibles of leadership.

I'm thinking instead of that opening sequence in the show "Mission Impossible," the one where Jim Phelps, played by Peter Graves, gets his instructions.

Your mission, Jim (and readers named something else), should you decide to accept it, is to identify where Obama has been a poor decision-maker. What, specifically, has he done wrong on policy? What, specifically, would you have done differently to create jobs? And what can any of the current Republican candidates offer that would be an improvement on the employment front?

I'm not interested in hearing ad hominem attacks or about your generalized "disappointment."

[My disappointment is very specific, Beavis. - J]

I want to know, on a substantive basis, why you think he deserves to be in a dead heat with Mitt Romney and Rick Perry and only a few points ahead of Ron Paul and Michele Bachmann in a new Gallup Poll. Is it just that any president -- regardless of circumstances and party -- who presides over 9 percent unemployment deserves to lose?

Left, Right, Center

Every day you're pummeling him from the right, left and middle. Senators John McCain and Lindsey Graham even attacked the president for letting Libyan rebels take Tripoli instead of burying Muammar Qaddafi under American bombs months ago. Here we have the best possible result -- the high probability of regime change for about one-thousandth of the cost of getting rid of Saddam Hussein and no bad feelings from the locals -- and Obama gets savaged anyway.

Like everyone else, I've got my list of Obama mistakes, from failing to break up the banks in early 2009 to neglecting to force a vote on ending the Bush tax cuts when the Democrats still controlled Congress. He shouldn't have raised hopes with "Recovery Summer" and "Winning the Future" until the economy was more durable. I could go on.

[How come I'm the only one who noticed Obama cribbed that achingly bad phrase "Winning the Future" from windbag Newt Gingrich? Parroting Newt should be a capital offense for any self-respecting Democrat. - J]

But do these miscalculations really mean it's time for him to go?

Most of the bad feeling goes back to the first year or so of the Obama presidency. And in hindsight, those decisions really weren't so bad. To prove my point, let's review a few areas where he supposedly messed up.

A Few Rebuttals

From the left: "He should have pushed for a much bigger stimulus in 2009."

That's the view of New York Times columnist Paul Krugman, now gospel among liberals. It's true economically but bears no relationship to the political truth of that period. Consider that in December 2008, Pennsylvania Governor Ed Rendell, a hardcore liberal Democrat, proposed a $165 billion stimulus and said he would be ecstatic if it went to $300 billion.

President- elect Obama wanted to go over $1 trillion but was told by House Democrats that it absolutely wouldn't pass. In exchange for the votes of three Republicans in the Senate he needed for passage, Obama reduced the stimulus to $787 billion, which was still almost five times Rendell's number and the largest amount that was politically possible.

From the right: "The stimulus and bailouts failed."

When Obama took office, the economy was losing about 750,000 jobs a month and heading for another Great Depression. The recession ended (at least for a while) and we now are adding several thousand jobs a month -- anemic growth, but an awful lot better than the alternative. How did that happen? Luck?

[Certainly. But then why hasn't Obama said this? And why doesn't Obama remind Americans how Bush's Great Recession lost us 7 million jobs and $15 trillion in household wealth, and explain that this can't be regained in a few years? Because he's afraid Republicans will label him with "malaise" like Jimmy Carter. He's afraid people will start getting angry again and demanding real accountability from Wall Street. Obama has been all about optimism and looking forward; but not because of his great magnanimity; it's because he really doesn't want any of the culprits to catch blame. These are the guys he went to Harvard with, the guys he golfs with, the guys who fund his campaigns. He wants to become a member of all their clubs when he's un-elected in 2012. - J]

Fed, Stimulus, TARP

All the bellyaching ignores that the Federal Reserve's emergency policies stabilized the financial system, and that the non-partisan Congressional Budget Office estimates that the stimulus increased economic growth and saved or created millions of jobs. According to the Treasury Department, taxpayers will end up actually making money on the bank bailouts under the Troubled Asset Relief Program, which Obama inherited from the previous administration.

[Yeah, and according to your employer, Bloomberg, the Fed has given at least an additional $1.2 trillion in secret loans to Wall Street. But only a professional lefty retard would know that, not a Tea Partier, so I guess that fact doesn't count. - J]

The Republican alternative for job creation wasn't tax cuts (the stimulus contained almost $300 billion in tax cuts) but deficit reduction and rolling back regulation. I've yet to see a single economist convincingly argue how either would have reversed the catastrophic job losses.

[Yeah, and I've yet to see Obama challenge the Republicans on this totally winnable point! Why not? Because he's scared sh--less that the Wall Street Journal editorial page or the U.S. Chamber of Commerce will label him "anti-business." - J]

From all sides: "He took his eye off jobs by pushing health care."

Not really. Health care consumed enormous time and political capital in late 2009 and early 2010. But with the stimulus new and still being absorbed (with remarkably little scandal) into the American economy, it's not as if health care distracted the president from another jobs program in that period. Sure, he should have rhetorically "pivoted to jobs" earlier, but substantively it wouldn't have made much difference. And Republicans have offered no evidence for their claim that the Affordable Care Act (which includes tax credits for small businesses) has contributed to current levels of unemployment. How could it? The program hasn't even fully begun yet.

The all-purpose explanation from the business community is "uncertainty." We're told that people, and enterprises, won't invest because they aren't sure about future taxes. This is a crock. "People invest to make money," the noted lefty socialist Warren E. Buffett recently wrote in the New York Times, "and potential taxes have never scared them off."

[Sure it's a crock, but again, why doesn't Obama give simple Americans a simple lecture on the economy and the recession, which was caused by a lack of aggregate demand that is still lagging today? He hasn't even bothered to bat away the stupid retrograde economics of his opponents, totally yielding the debate to them. He and his staff babble on about "headwinds," as if that means something. Seriously, googling "Obama headwinds" yields over 2 million results. - J]

Again, from all sides: "He looked weak during the debt- limit debate."

Yep. And if you were president and a group of extremists was pointing a gun at the head of the American economy, what would you have done? Invoking the 14th Amendment sounded satisfying, but a constitutional crisis layered on top of a debt-limit crisis would have been a fiasco, and probably would have ensured default as world markets spent months wondering who in the U.S. had the authority to pay our bills.

Be Specific

Elections involving incumbents are inevitably hire/fire decisions. With foreign policy mostly off the table, hiring a Republican means buying his or her jobs plan. Firing Obama means rejecting where he has come down on big decisions. He and Romney will unveil their jobs plans in September. In the meantime, I'd like to hear from Democrats, Republicans and especially independents who voted for Obama the last time but have given up on him now. Why?

Your mission, Jim, should you decide to accept it, is to be specific and rational, not vague and visceral.

(Jonathan Alter, a Bloomberg View columnist, is the author of "The Promise: President Obama, Year One.")

Thursday, August 25, 2011

Union rights posters now obligatory

Hey, 'Bama is finally doing something right.  Workers of the world, organize!

By Sam Hananel
August 25, 2011 | Associated Press

Studies agree: Fiscal stimulus worked

This blog post on how the stimulus worked is too long to re-post so just check it out.

Here's the skinny: Out of 9 major economic studies on the effectiveness of the economic stimulus bill (American Recovery and Reinvestment Act), 6 said it had a significant positive effect on employment and economic growth.

These studies are in addition to the positive ratings of Obama's fiscal stimulus by the CBO, IHS Global Insight, Macroeconomic Advisers, and others (see tables p. 12).

"But we still have 9 pecent unemployment! Of course the stimulus failed!" my far-right friends will retort.

I can't dispute the current unemployment numbers, but then again, without ARRA things would be much worse. Also, let's remind ourselves of the size of the whole we're digging ourselves out of, thanks to Dubya's Great Recession: about 7 million jobs lost, and $15 trillion in household wealth. It's simply not realistic to think we can come back so quickly, especially when there is no source of extra demand (spending) out there besides government.

(Sigh) It's just too bad the stimulus wasn't big enough....

By Dylan Matthews
August 24, 2011 | Washington Post

Why Tea Party candidates won't be elected

The Tea Parties have done their job: they helped win an election and scared the herd of "RINOs" back to the far right, purging the GOP of any free-thinkers or moderates. And if the GOP takes the presidency in 2012, you can stick a fork in them immediately: their anger will turn to joy; and anger not joy is their fuel. In any case they will fade, fade, fade away.

Why Tea Party candidates won't win any elections next year: because mainstream Republicans now spout the same ideas.
By David Weigel
August 24, 2011 | Slate

Jamie Radtke was supposed to be the Tea Party's next giant-killer. She'd put together the biggest movement convention ever, a two-day gathering in Richmond, Va., under the banner of her Virginia Tea Party Patriots. When George Allen took the stage, subliminally begging the grassroots to support his comeback bid for Senate, the irony was just too sweet: Radtke used to work for this guy, and now he was kowtowing to her.

And so, two days after Christmas 2010, Radtke announced her Senate campaign. It was national news for reporters looking for the next Christine O'Donnell, the next Joe Miller, the next Sharron Angle. When three freshmen senators launched the Tea Party Caucus in January 2011, she scored an invite to speak at the meeting. Rand Paul talked for five minutes. She talked for seven. In short order she started appearing, and talking, at all sorts of Tea Party events in Washington. She raised more than $250,000—not much, only one-tenth as much as Allen, but not fringe candidate money.

So, how's the giant-killing quest going? Terribly. Earlier this month, a Public Policy Polling survey gave Allen a 68 percent-to-6 percent lead over Radtke, with the rest of the vote split among more marginal candidates. Tea Party activists in the state say they've been focused on this year's state elections, and anyway, she's not unifying the movement.

On Wednesday, the Radtke campaign euthanized its old win-over-the-tastemakers strategy by attacking RedState blogger Erick Erickson and claiming that he hadn't done enough to promote her. Not so, said Erickson: He endorsed her, and then she proceeded to induce comas whenever she talked to activists, and then she screwed him over.

And that's one measure of how the next round of Tea Party challenges is going. Another: Rep. Jason Chaffetz, who actually tied Sen. Orrin Hatch in some polls of Utah Republicans, just announced he was taking a pass on the campaign. Another: Sen. Richard Lugar of Indiana, whom Erickson says is now the ripest Tea Party target for 2012, is waiting to see whether a conservative state senator will jump into his primary, split up the conservative vote, and help him win. Another? Sure, why not. Sen. Olympia Snowe may be beatable in Maine, but she's only got to beat a fractured field of nobodies.

Are we witnessing the end of the Tea Party's electoral rebellion? Did the GOP civil war reach Appomattox, and nobody noticed? Those questions assume that the Tea Party's goal was to purge Republicans in primaries. That was just one of the movement's goals, and we're finding out that, yes, it may have run its course.

In 2010, when they wanted to take out Republicans, the Tea Party had relatively easy pickings. Their three biggest victories were in Delaware, Alaska, and Utah. Delaware and Alaska are, respectively, the 45th and 47th most populous states. Only 57,582 Republicans voted in the Christine O'Donnell-Mike Castle primary; only 109,750 voted in the Joe Miller-Lisa Murkowski primary. Utah nominates all candidates at party conventions, which put Sen. Bob Bennett's fate at the hands of 3,500-odd Republicans. Compare that to the stakes in Indiana. In 2010, when Dan Coats lucked out and beat a split conservative field for the GOP's Senate nod, he won more than 217,225 out of 550,000 votes.

So: It's hard winning elections. It's even harder because the Republican "establishment," insofar as such a thing still exists, consists of fairly smart people who know what happened last time. When Bob Bennett's slayer, Mike Lee, arrived in the Senate, Hatch started copying his homework and showing up at every Lee presser. He kept up his outreach to Utah's Tea Party leaders, like classic car dealer David Kirkham. He used his powerful position as ranking member of the finance committee to add credibility to Tea Party arguments about the debt, like the idea that the administration was fibbing about the impact of passing the Aug. 2 deadline without raising the debt limit.

Yet when Chaffetz passed on the race, those Tea Partiers Hatch had been courting were still shocked. "It was quite surprising," Kirkham says. "He'll still be vigorously challenged. We're looking for someone who's been more reliably conservative, but we had been working really hard to work with Hatch."

This was a victory that looked like a loss. The Tea Party, the Club for Growth—the whole movement has succeeded in driving Republicans further to the right. Nuking a few moderates in primaries was only part of that—a great story for the horse-race media, but not something that would keep up as the GOP was purified. Think about the Tea Party as repeating (and perfecting) the strategy liberals used in 2006 and after, when online activists and unions banded together to beat Joe Lieberman in his U.S. Senate primary in Connecticut.

Lieberman ended up returning to the Senate. Liberals would oust only a couple more Democrats, like Maryland's Rep. Al Wynn, in the next election cycle. But the Lieberman challenge drew a neon line in front of the party's candidates: Oppose the Iraq War, oppose the surge, or you go nowhere. The party's presidential candidates obeyed. Its next presidential nominee won the primaries in a squeaker in part because he, alone among the frontrunners, had always opposed the Iraq War.

Republicans seem to have figured this out. It's increasingly likely that no incumbent Republican will lose a primary to a Tea Partier in 2012. The movement can consolidate its gains. Safe districts and the fear of primaries do more to keep Republicans straight than the occasional wins.

But some activists still like to think about bloodying up the party some more. Virginia activists, while bearish on Radtke, are bemused and annoyed that Allen has his own prefab Tea Party group to make it look like he's gotten right with them. It's possible that Lugar could go down—even if the primary is split, even if his main challenger, Richard Mourdock, keeps pulling in weak numbers. "That would all make it more difficult," says George Ethridge of the Corydon Tea Party, "but Mourdock can beat Lugar."

What about Utah, where a likely coup just turned into a frantic search for a self-funding candidate with great hair? Kirkham hasn't talked to Hatch recently, but he wants to keep putting the fear in him.

"He scored a touchdown, but he shouldn't be dancing in the end zone," he says. "The game is still on."

If El Nino triggers wars, what about MMGW?

If climate change is unavoidable then maybe we should act like the rest of the world does when faced with drought: stop producing stuff and start preparing for war. Put down your plows and PCs, horde your supplies and ammo, and get ready to conquer and pillage!

P.S. - This might be a good time to remind yourself of zombie survival skills, which would also come in handy during climate wars or against marauders.

A new study suggests El Niño may be to blame for nearly a quarter of recent global conflicts.
By Ray Fisman
August 24, 2011 | Slate

What accounts for the collapse of history's great civilizations? Retired anthropologist and author Brian Fagan blames it on the weather, and in particular on the pernicious effects of El Niño, a periodic warming of the Pacific Ocean that brings a hotter, drier climate to tropical countries worldwide. Fagan and others have suggested that El Niño had a hand in the biblical droughts in Egypt, the disappearance of the Mayan Empire, and even the French Revolution.

A newly released study in this week's Nature suggests that there may be some science underlying this speculation and that El Niño's effects on the wealth and stability of nations has continued into recent times. Combining cutting-edge climate science with data on civil conflicts during the second half of the 20th century, the researchers estimate that more than a fifth of violent flare-ups worldwide may have been triggered by El Niño. And if climate experts are correct in predicting that in the next century El Niño-like conditions will become more commonplace due to climate change, the study's findings point to a hotter, drier, and more violent planet in the years ahead.

The primary mechanism by which warmer, drier weather potentially causes civil conflict is none too subtle—heat and drought reduce the food supply, leaving hungry, rebellious populations in their wake. The unruly hordes take up arms against the government or fight amongst themselves for scarce resources.

El Niño promises not just one lean season but up to 18 months of heat and drought, which can sometimes be predicted well in advance. Indigenous societies have for centuries had ways of divining El Niño's arrival. Andean potato farmers, for example, learned to predict El Niño's onset from the brightness of stars in the Pleiades constellation. Why bother tilling the soil if you know there's nothing but drought on the horizon? Better to prepare for war instead, especially if you expect your neighbors will be taking up arms as well.

The new Nature study isn't the first to consider the link between global climactic changes and war. But most large-scale shifts in weather take place over centuries or millennia, amid technology revolutions and social upheaval that make it impossible to discern any measurable effect due to climate. Saying that the world is less violent now than it was 500 years ago—or more violent than it was during the last ice age—isn't a very useful observation, even if we had comparable data on violence going back that far. El Niño causes the tropics to randomly flip back and forth between weather extremes every few years, which allows the researchers to compare the level of civil conflict within a given country under very different climactic conditions but just a few years apart.

The authors (who include eminent oceanographer Mark Cane, the first person to successfully forecast El Niño through numerical modeling) classify El Niño months based on equatorial Pacific sea surface temperatures, with extended periods of warming as the indicator of El Niño's arrival. Unusually cool surface temperatures indicate the onset of La Niña, El Niño's kinder, wetter mirror image. Using data on armed conflicts during 1950-2004 compiled by Swedish and Norwegian researchers, they compare the likelihood that conflicts flare up during El Niño versus La Niña years. (The researchers use a standard measure of conflict onset, defined as a new civil dispute that breaks out between the government and an organized adversary, resulting in at least 25 battle-related deaths in that year.)

In regions affected by El Niño fluctuations the authors find a doubling of conflict risk during El Niño as compared to La Niña. El Niño is a relatively frequent event, occurring every four to seven years, and it affects fully half of the world's population (including most of Latin American, South and Southeast Asia, and all of Sub-Saharan Africa). Given this high frequency and wide-ranging impact, the paper's findings suggest that El Niño has had a hand in triggering as much as 21 percent of recent conflicts worldwide. In a "placebo" set of countries relatively removed from El Niño's influence—including most of North Africa, the Middle East, and northern parts of Asia—conflict risk is the same during both El Niño and La Niña periods, bolstering the claim that weather is indeed behind their results. The authors also found that El Niño's impact on conflict took place relatively soon after its arrival, and well before food shortages would have really set in. While they don't speculate on the explanation for these patterns in the data, they are broadly consistent with the critical role that expectations of future hardship play in causing people to switch from agriculture to waging war.

These findings are of grave concern, if you believe—as many climate scientists do—that climate change will produce global weather patterns that are more El Niño-like, with just as much year-to-year climate variability as exists today, but with warmer and drier conditions overall. While it would be premature to draw any conclusions, given the randomness in year-to-year appearances of El Niño and the extreme complexity of global climate systems, it does hint at one more reason to worry about a warming planet.

But linking the onset of violence to a relatively predictable phenomenon like El Niño might help us head off impending conflict before it starts. Scientists can with some certainty spot an El Niño half a year away, which means aid organizations should have more than enough time to deliver El Niño-dependent relief that can diminish the conflict-inducing effects of drought and famine before bad weather even arrives. By uncovering the link between El Niño and violence, this study may serve as a very early first step in shielding the developing world from the ill effects of its hotter, drier future.

Nokia Siemens helps Arab regimes catch dissidents

As one expert remarked, "There's very little chance a government is smart enough [to identify dissidents] without this [interception] technology."

That means firms like Nokia Siemens, which has actively sold mobile and Internet spying technology to despotic Arab regimes, are ethically complicit in their arrest and torture of peaceful dissidents.

Think about that the next time you're looking to buy one of their products!

Nokia: Connecting dictators and their victims

By Vernon Silver and Ben Elgin
August 22, 2011 | Bloomberg

Levy a transaction tax on Wall Street!

Professor Folbre's is right to support the tiny transaction tax on stock trades, which are oddly exempt from sales tax, unlike other economic transactions. For normal holders of stocks this tax would be virtually unnoticeable.

Still, I'm surprised she did not even mention that high-frequency "robot" traders have likely been responsible, at least partly, for wild stock swings over the past two weeks, with humans trying to catch up. High-frequency trading (HFT) also caused the "flash crash" on May 6, 2010. Well over 70% of trades in the U.S. are already performed by machines, since algorithm-driven computer traders may make many trades per second. If such a transaction tax would not discourage firms from using HFT strategies, it would at least cut our federal budget deficit -- by at least $175 billion per year!

By Nancy Folbre
August 22, 2011 | New York Times - Economix

Most of us pay state and local sales taxes on most things we buy, and most casino gambling is subject to state taxes ranging from up to 6.75 percent in Nevada to 55 percent on slot machines in Pennsylvania.

But speculative purchases of stocks, bonds and other financial instruments in the United States go untaxed but for a tiny fee (less than a half-cent) on stock trades that helps finance the Securities and Exchange Commission.

In Britain, by contrast, a 0.5 percent tax on stock transactions raises about $40 billion a year. President Nicolas Sarkozy of France and Chancellor Angela Merkel of Germany recently announced plans to introduce a similar tax in the 27 nations of the European Community.

It is variously called a "transactions tax," a "financial transactions tax," a "security transaction excise tax" or a Tobin tax (after the Nobel Prize-winning economist James Tobin, who famously argued for its application to foreign exchange purchases in the late 1970s).

By any name, Wall Street hates it, because it would cut into trading profits. But proponents like Dean Baker, co-director of the Center for Economic and Policy Research assert that it would primarily affect short-term "noise traders" and discourage speculation rather than productive investment.

Less speculation could lead to less volatility in prices, encouraging long-term investors.

Further, a sales tax on Wall Street of 0.5 percent could raise up to $175 billion in tax revenue a year, even if, by discouraging frequent trades, it cuts the total number of transactions in half.

A small financial transaction tax proposed by Representative Peter DiFazio, Democrat of Oregon, and supported by Senator Tom Harkin, Democrat of Iowa, the Let Wall Street Pay for the Restoration of Main Street Act (with specific details of a co-sponsored bill still being negotiated) is likely to raise less revenue.

Plenty of highly respected economists support the basic concept, and plenty disagree. In a recent review of the literature, Neil McCulloch and Grazia Pacillo of the Institute of Development Studies in Britain conclude that it is unlikely to reduce speculation but nonetheless represents a relatively good source of tax revenue. A recent report by Thornton Matheson, published by the International Monetary Fund, expresses negative views.

An engaging summary of the pros and cons can be found in a videotaped debate sponsored by the Center for the Study of Responsive Law on July 8 as part of its "Debating Taboos" series.

My University of Massachusetts colleague Robert Pollin argues in favor, while James Angel of Georgetown argues against.

Professor Angel insists that short-term traders are not primarily speculators and describes them as a healthy part of the financial ecosystem that might be killed off. Professor Pollin's view, with which I agree, is that short-term trading has increased enormously in recent years, with no positive impacts on economic efficiency. In any case, I don't think a 0.5 percent tax on transactions will cause serious fatalities.

Professor Angel also points out that a tax on financial transactions will be passed on, at least in part, to all investors, with negative consequences for retirement savings. But all taxes are passed on, at least in part, to consumers. I agree with Professor Pollin when he argues that the effect of a financial transactions tax on most people would be very small compared with other sales taxes.

Economists point out that sales taxes discourage consumption, which is better than discouraging investments that can pay off in the future. But many consumption decisions that ordinary people make have important consequences for future productivity.

As Professor Pollin points out, current sales taxes bite those who buy materials to increase energy conservation in their homes or purchase a more fuel-efficient car.

My own research emphasizes that parental expenditures on children, as well as public spending on health and education, represent a form of investment in human capital.

Most state and local sales taxes are very regressive, with low-income families paying more as a percentage of their income. A proposed national sales tax, or a value-added tax, would have an even more negative impact on families at the bottom.

Our current tax policies favor speculative investment in financial instruments over productive investments in human capabilities. This imbalance helps explain why nurses' unions in the United States have been particularly outspoken advocates of a financial transactions tax.

As they put it: "Heal America. Tax Wall Street."

Wednesday, August 24, 2011

Buchanan: Senate resolution on Georgia is Russia-baiting

While my heart is with Georgia, my mind is with Pat on this one. Sure, Russia likes to throw its weight around in the "near-abroad." And the term peacekeepers as applied to Russian troops in the former Soviet space is risible.

But where is the Senate's statement in favor of Georgia's territorial rights taking the United States? What is it going to get us? I mean, the U.S. is not about to send troops to help Georgia reclaim its lands occupied by Russian peacekeepers and risk nuclear war with Russia.

These territorial disputes are not a cut-and-dried case of neo-imperialism on Russia's part, nor of belligerent rapacity on Georgia's part. The truth of these frozen conflicts is muddled. And the U.S. Senate's unanimous declaration in favor of Georgia does nothing to change things. Not that I can see anyway. Indeed, nobody except Russia recognizes these two breakaway republics as independent states anyway.

And so Buchanan is correct in saying the Senate's resolution is equal to baiting Russia in its own back yard. But even worse, in my view, since the U.S. is doing nothing to back it up, such an empty resolution -- approved right before Congress goes on vacation -- makes America look weak and unserious.

By Patrick J. Buchanan
August 23, 2011 | Human Events

Tuesday, August 23, 2011

Sachs 'surprised' by CEO's ignorance, avarice

Economist Jeffrey Sachs, director of The Earth Institute at Columbia, is really showing he lives in the ivory tower. In his flabbergasted reaction to former AmEx CEO Harvey Golub's WSJ op-ed, Sachs reveals his ignorance about how fiscally retarded Americans really are, from the meanest unemployment-collecting Tea Party members all the way up to richest millionaire CEOs.

(And what in the world is "somewhat surprising" about the rabidly right-wing editorial pages of the Wall Street Journal publishing a slapdash, angry, ignorant rant from some rich blowhard? That's quotidian. It would be surprising if they didn't.)

All of Sachs' points are well taken... by reasonable, rational people. But again, Sachs, who divides his time among places like New York, Davos, Brussels, and Third World/developing countries, apparently doesn't visit American flyover territory often enough to interact with average Americans, whose intensity of feelings about our country problems bears no relation to a given problem's magnitude.

The sad truth is, most Americans will keep on blaming "high" taxes, "overpaid" teachers, "lazy" minorities, and "corrupt" bureaucrats for our nation's problems, while warning Washington to keep its guvmint hands off their Medicare, long after the collapse of the U.S. middle class and the establishment of a permanent plutocracy. 

Average Americans will not "act, and act resolutely" against the mega-rich who threaten the general welfare; they never have and never will. Because they aspire to be rich assholes themselves someday, even though their prospects are next to nil.

Sadly, scarily, professional scrooge Harvey Golub is in the mainstream of current political mood, and professional problem-solver Jeffrey Sachs is on the fringes.

By Jeffrey Sachs
August 22, 2011 | Huffington Post

There may be no group of people in the world more out of touch with U.S. ground reality than super-rich CEOs of major U.S. companies railing against Warren Buffett's suggestion that the rich should pay higher taxes. The Wall Street Journal today brings a somewhat surprising case in point ("My Response to Buffett and Obama," by Harvey Golub, August 22, 2011). Former American Express CEO Harvey Golub, generally respected among his peers, lets loose an ill-informed screed that shows the cocoon in which many of these CEOs live their lives.

Before turning to Mr. Golub's list of particulars, let's start with the big picture. U.S. CEOs pull in compensation that is hundreds of times higher than their workers, a far higher multiple than in any other part of the world. Many of them pulled in hundreds of millions of dollars in compensation and stock options over the past decade or so. They shelter their money in endless tax loopholes; live like royalty in a country that once prided itself on being a republic; effectively set their own pay through their pals on the executive committee; and all-too-frequently drive their companies and the U.S. economy into bubbles and frauds, all the while taking tens or hundreds of millions of dollars in compensation.

Now comes Mr. Golub, reportedly with hundreds of millions of dollars in net worth, to tell us that he's upset with those asking him to pay more taxes. He's so upset indeed that half of what he says is utterly absurd. Mr. Golub is incensed that "gifts to charities are deductible but gifts to grandchildren are not." I'm going to assign that little philosophical puzzler to my freshmen students at the start of school this fall.

It gets worse. "Do we really need an energy department or an education department at all?" Golub's confusion on energy seems to be rather primitive. He asks why the government spends money on "solar panels, windmills, and battery-operated cars when we have ample energy supplies in the country." Golub seems to be completely unaware of some rather basic issues in the land, such as greenhouse-gas emissions, the government's role in R&D and environmental management, and the national balance sheet of energy resources. I will make Golub's energy views the second question I pose to the incoming class.

As for Golub's suggestion to close the Education Department, where should we begin? Should we begin with America's low rankings (in the 20s and 30s) in international comparisons of student performance? Or should we take notice of the low levels of educational attainment in the Southern states, where conservative leaders join Golub in hankering to end the Education Department? Or should we first note the soaring costs of college tuition, and the mass dropout rates of working-class kids who can't make it? Or perhaps we should focus on the withering job pool and falling incomes of kids without a college degree, a majority of America's young people?

What's especially absurd, however, is the phony way that Golub argues against the need for more taxes by citing spending programs that he considers wasteful and costly. We all have our list of least-favorite spending, and we should all agree that spending should be cost effective. Yet there is a fundamental falsehood at the core of Golub's rant. The budget deficit has very little to do with Golub's list.

Golub attacks job-training programs, alternative energy, subsidies for sugar farmers and ethanol producers, rail subsidies, unneeded post offices, and energy and education programs. This is not the place to debate the merits of this list in detail. (I can agree on sugar and ethanol, but I would disagree vehemently on most of the others.) This is the place to show the irrelevance of Golub's list.

The entire Education Department budget in Fiscal Year 2012 is around $77 billion. The entire Energy Department budget is around $30 billion. The entire Labor Department budget is $13 billion. Obama's rail programs are around $8 billion. Farm subsidies, even on the most expansive definition, are in the range of $20 billion. Even if we closed all of these departments and programs entirely (and accepted the national catastrophe that would follow), the direct budget savings would be around $150 billion, or roughly 1 percent of GDP. Yet the federal budget deficit this year is roughly $1.4 trillion or 9.5 percent of GDP. Golub's list is a smokescreen, not a solution to anything.

Golub's attack against outlays on education, energy, training, and other programs on the list misses the basic truth of our fiscal arithmetic. Our current tax collections don't even cover Social Security, Medicare, Medicaid, the Pentagon, and interest on the public debt, much less the programs for education, environment, energy, job training and the rest. Golub evades the real question: how the core of the budget - health, social security, defense, interest servicing -- is to be financed. Should we raise taxes and preserve these programs, or should we spare Mr. Golub and his friends of this modest burden on their great wealth, and instead eliminate the core social and health security in this country? Or perhaps Mr. Golub is calling for a default on interest payments?

I'm sure that Golub's own health care and retirement comfort are not in danger. If Golub and like-minded CEOs continue their campaign to resist the tax revenues needed to protect the health and social security for average Americans, implying the need to slash core budget outlays, they will hear an earful. ["An earful"?!? Ooooh, anything but that! - J] That's why Golub has taken the easy way, railing against small targets that play well in the halls of the rightwing American Enterprise Institute that he helps lead. While Golub's targets are generally phony or misguided (yes, we do need education and energy programs), such attacks are less likely to elicit a broad public rebuke than would a frontal attack on social security and health spending.

Golub is one of the most fortunate people on the entire planet. America has treated him well. He perhaps went to public schools and made his way up with plenty of benefits of American society in the middle of the 20th century. He like everybody in his generation owes his prosperity not only to his own deeds ("I did earn it," he writes) but also to the vibrancy of America during the formative years of his career. Mr. Golub's generation, and the generations that have followed, owe a great deal to the New Deal and the vigorous U.S. Federal Government that led the world in technology and rebuilding after World War II, including the promotion of science, technology, national infrastructure, social security, public health, and higher education.

In another age, Golub would be asking what he could do for his country, partly to help ensure a safe and prosperous country and planet Earth for his own children and grandchildren. Not any more. The American people will not forget the irresponsibility of CEOs who are helping to lead the country towards the cliff. Currently the American people are stunned and bewildered. In the future they will act, and act resolutely to secure the future from those who now threaten it.

SF Fed: Boomers will drain equities markets

Great, yet another way the Boomers will screw us: At the same time their massive payouts will be passing like a bowling ball-sized kidney stone through Social Security's narrowly designed system, they'll be draining the stock market of value for the rest of us.

BTW, will we youngsters keep calling their overly-fecund parents "The Greatest Generation" when we're working our butts off supporting all their broods of aged children, not to mention our own 1.8 kids? In the coming years I bet we'll quietly retire the "Greatest" moniker along with the Boomers.

By Michael S. Derby
August 22, 2011 | Wall Street Journal

The next quarter century or so could be a tough one for the stock market, researchers at the Federal Reserve Bank of San Francisco warn.

In a paper released by the institution Monday, two of its staffers said the retirement of the Baby Boom generation stands to strip away from equities a key source of support. The ongoing wave of retirees won't crater the market, but they may well be "a factor holding down equity valuations over the next two decades," writes Zheng Liu and Mark Spiegel write.

As they see it, what the Baby Boomers have given to the market is something like what they will be taking away. Allowing for the "theoretical ambiguities," the economists noted "U.S. equity values have been closely related to demographic trends in the past half century" across several key metrics. "In the context of the impending retirement of baby boomers over the next two decades, this correlation portends poorly for equity values," Liu and Spiegel write.

As much as it is a problem for the market over the long haul, as retirees sell stocks to try to maintain their lifestyles, the "well known" nature of the troubles is also a problem for markets now. Indeed, if current investors now start pricing in the coming Baby Boomer headwind, they may "depress" stock prices.

"These demographic shifts may present headwinds today for the stock market's recovery from the financial crisis," the paper said.

Liu and Siegel allow that considerable uncertainty surrounds their work. Other important influences on the outlook for stocks are the performance of the bond market, as well as the appetites of foreign buyers. They cited China as one potential wild card, saying that nation and other emerging economies "may relax capital controls, which would allow their nationals to invest in U.S. equity markets." That could counter some of the drag generated by U.S. retirees.

There are, of course, even more risks that surround the stock market beyond what the paper flags. Equity prices have undergone considerable volatility of late after enjoying a sharp Federal-Reserve-engineered rally starting nearly a year ago. Equity investors are confronting a protracted period of economic weakness, and a central bank that appears to have few good options to restart growth. Should weakness prove longer-lasting than some expect, that itself may influence Baby Boomers' retirement plans, and thus change the outlook for the market.

1/3 of Alabamans on food stamps

This makes perfect sense (?!?) because Alabamans hate lazy welfare queens and Big Government, and love the GOP and Tea Parties.

August 7, 2011 | Associated Press

Nearly one-third of Alabama's residents received food stamps in May.

The state Department of Human Resources reports there were a record 1.43 million Alabamians in the Supplemental Nutritional Assistance Program. The number was higher than normal because 43 of Alabama's 67 counties were receiving disaster assistance due to the deadly tornadoes in April.

While the tornadoes had a big effect, the number of Alabamians on food stamps has been growing in recent years. Department spokesman Barry Spear told the Montgomery Advertiser ( ) that the number of Alabamians in the program grew from more than 546,000 in fiscal year 2006 to 805,000 in fiscal year 2010.

Spear said rising unemployment is a factor, along with efforts to make more people aware that they can qualify for the assistance.

BLS data: Texas = Big Government

From 2007-2010, 47 percent of all new government jobs in the U.S. were created in Texas.

I'm starting to like this Perry guy. He really gets it. He looks pretty tan though, he must play a lot of golf....

By Jared Bernstein
August 17, 2011 | On The Economy

Monday, August 22, 2011

Fuel economy standards make strange bedfellows

Great example of Big Guvmint regulation spurring innovation -- and even cooperation among fierce business rivals!

Can cats and dogs learn to get along? Only if Washington regulates it!

¡Viva el Gran Gobierno!

By Chris Woodyard
August 22, 2011 | USA TODAY

Nasty germs at McDonald's, other fast food joints

No, you can't get gonorrhea from a toilet seat... but you can get it from the playground slide at McDonald's/Burger King.

Said an aggrieved activist mother who swabbed a McDonald's for germs, there are "layers and layers and layers and layers of just disgustingness" there.

Layers and layers and layers and layers and layers and layers and layers and.... You get the idea.

Disease-causing pathogens at McDonald's, other fast food playgrounds
By Tiffany Hsu
August 22, 2011 | Los Angeles Times

Stiglitz on problems with the U.S. economy

My favorite bearded liberal economist Joseph Stiglitz 'splains it all.

Better to post late than never.

Listen up, Tea Partiers!

FORTUNE Ed.: For first time, no adults in Washington

I disagree with some of Sloan's observations, but he is right on the money that Obama seems to stand for nothing except trying (and failing) to please everybody, and Tea Partiers are primarily responsible for the recent debt crisis.

By Allan Sloan, senior editor-at-large

August 18, 2011 FORTUNE

What the hell is going on?

Standard & Poor's, the bond-rating agency, downgrades the U.S., and the world trembles. The markets here go nuts on the first trading day after the downgrade, losing $1 trillion in value. European Union finance chiefs are playing Whac-a-Mole with members' debt problems (see the story by my colleague Shawn Tully). And England … England was literally burning.

Only three short years ago we were all terrified when our financial system was on the brink of disaster after Lehman Brothers went broke in September of 2008. Those scary times seemed to have disappeared in the spring of 2009. But now those fears are back -- and things are even scarier, the stock market's "green" days notwithstanding.

Our current mess is different from the Lehman-related horror because it stems primarily from politics, not economics. The previous fear-fest came about because Lehman's bankruptcy disrupted financial markets in unanticipated ways. Today's crisis was completely avoidable. You can blame it directly on the fools who brought our country to the brink of defaulting on its debts in the name of saving us from … I'm not sure what. Yes, the Tea Party types bear primary responsibility -- but they couldn't have done it without the cowardice and incompetence of the Obama administration, which let things get way out of hand. This whole fiasco just enrages me. And it ought to enrage anyone who wants the U.S. to act like a real country rather than some third-rate failed state run by fanatical factions that hate one another.

So why is today scarier than 2008-09? Because this time not only have we got troubled financial institutions to deal with, but we have serious, substantial countries facing possible default on their debts. Including, heaven help us, the U.S.

Things were already bad because of fear and financial fragility afflicting Europe. But the problems took a quantum leap because of fallout from Standard & Poor's totally justifiable Aug. 5 downgrade of U.S. long-term debt. The U.S. economy was already listless enough, with gross domestic product barely growing -- and maybe even shrinking -- plus record long-term unemployment. (One telling statistic: The percentage of U.S. adults with jobs is down to 58.1%, from 64.7% in 2000, according to the St. Louis Fed. That, my friends, isn't good -- see chart below.) The fear, loathing, and political divisiveness are going to make things worse, not better.

Now, a few facts. The S&P downgrade is not -- as some hate-filled knuckleheads inside the Beltway and in the hinterlands keep repeating -- from fear that the U.S. is "broke" or lacks the financial ability to meet its obligations. S&P's primary worry is that the U.S. may not summon up the political will to pay its debts. (Read the analysis for yourself here.)

The escalation of our problems can't be attributed to Angelo Mozilo of Countrywide Financial, a favorite villain. You can't blame it on the other favorite bad guy, Goldman Sachs (GS), or on the other usual suspects: Wall Street in general, greedy lenders and speculators, irresponsible borrowers seeking a free lunch by taking out mortgages they had no chance of repaying.

The root of our current problem is that there are no grownups in positions of serious power in Washington. I've never felt this way before -- and I've written business stories for more than 40 years, and about national finances for more than 20. Look, I certainly don't worship Washington institutions. I called former Federal Reserve chairman Alan Greenspan the "Wizard of Oz" when he was known as the "Maestro." I've said for more than a decade that the Social Security trust fund had no economic value and would be useless when the system's cash flow turned negative -- which I also predicted. But despite being an irreverent professional skeptic, I never felt there was a total absence of adult supervision in our nation's capital. Now I do.

I spent July on family leave, not writing columns, and watching with increasing horror as market-illiterate know-nothings, abetted by the craven leaders of the Republican Party (from which I'm about to resign) and the unspeakable ineptness of Obama and his minions, brought our country to within an inch of defaulting on its debts.

Washington's foolish politicians thought they'd reassured everyone when they stepped back from the brink of default with a deficit-trimming deal that's so absurd that you have to laugh when you think hard about it. Then S&P did what it had previously warned it would do when it became clear that the U.S. might decide not to pay its debts. It downgraded our country's credit. Triple-A credits are supposed to be rock solid. If there's a more than remote chance of default, a security shouldn't be AAA. End of story. I have no love for S&P or its competitors Moody's (MCO) and Fitch, whose influence vastly exceeds their competence; they should have been stripped of their special regulatory standing because of the AAA ratings they bestowed on trashy mortgage-backed securities. But I respect S&P for standing up and alerting investors to the idea that the once unthinkable -- a default by the U.S., the only country in the world that can use its own currency to pay external creditors -- has become thinkable. Fitch and Moody's have kept the U.S. debt triple-A, which I sure wouldn't have done.

Adding to the current sense of foreboding, at least for me, is the fact that the Federal Reserve, which rode to the rescue last time, is legally constrained by provisions of Dodd-Frank legislation little recognized outside the world of regulators and financial techies. Back in 2007, the Fed could invent programs to bail out solvent but illiquid institutions. It could also turn investment banks like Goldman Sachs and Morgan Stanley (MS) into bank holding companies with access to unlimited Fed funding -- and even infuse cash into nonbank basket case AIG (AIG) directly and indirectly to forestall an uncontrolled collapse, which could have made the Lehman Brothers disaster look like a mere rounding error.

The Fed's actions had their own set of problems, which I've written about at length. But once the Fed began acting in the summer of 2007, you knew there was an institution around that could bail out the world, if needed. Now, at least in theory, the only government institution that's supposed to do this kind of thing is the Federal Deposit Insurance Corp. I respect the FDIC, but it's got nothing like the Fed's power and international clout. We've got this problem because our leaders rolled over to pressure from big companies instead of breaking them up into pieces small enough to be allowed to fail.

If I sound angry, it's because I am. Think of me as an angry moderate who's finally fed up with the lunacy and incompetence of our alleged national leaders -- and with people stirring up trouble from which they hope to benefit politically or financially. Some policies and statements you hear from Tea Party types about the economy and the debt markets are utterly insane. Any competent economics instructor would give you an F if you asserted the same sort of nonsense on an exam.

But all that aside, at least the Tea Party people have a story and a message. The Obama people have none -- at least none that I've been able to discern. They don't even know how to spread good news, which actually does exist. One example: This spring I was assigned to figure out how much taxpayers would lose on the Troubled Asset Relief Program -- the much-maligned TARP, that supposed financial sinkhole. To my surprise, I discovered that TARP actually stands to make money for taxpayers. During my research, I found that the Treasury had reached a similar conclusion, but had put the information into the public domain in such a low-profile way that few people saw it. Why wasn't the Obama administration spreading the word that taxpayers had made money saving the world financial system? Beats me.

[If you take TARP in isolation, yes, it looks like a great success. But TBTF banks had at least $1.2 million at their disposal in addition to TARP, and used it to pay off their TARP debts easily. It was a sleight of hand by the Fed and esp. Tim Geithner. - J]

The one saving grace we have is that the rest of the world seems to be run by midgets too. I don't want to think what would happen if the U.S., in its current disarray, had to deal with the likes of Mao, Hitler, or Stalin at the height of their powers. Maybe there is some divine power watching over us.

Now that I've finished venting , let me make one more attempt to be reasonable -- and show how relatively easy it would be to solve our problems while allowing both the Tea Party and the left wing to claim victory and go home. This requires (1) that we survive the 2012 election cycle (boy, that's going to be a blast) and (2) that the winners recognize that our current federal income tax rules and rates, Social Security benefit formula, and Medicare provisions are historical and political accidents rather than holy writ handed down to Moses by the Lord on Mount Sinai.

We need more jobs, more growth, and more tax revenue. Note that I said more revenue, not higher rates. There are lots of proposals kicking around that would cut rates, eliminate the alternative minimum tax, and broaden the tax base by drastically reducing itemized deductions. Only about a third of taxpayers, primarily higher-income types, itemize deductions, so only they would be affected. Do this right, and you end up with more tax revenue from high-income people (which allows the "tax the rich" types to be happy) but lower rates (which lets the Tea Party folks claim victory). Making the system fairer should be doable.

[Reducing itemized deductions? Come on. The fairness and revenue-growth formula is simple. Freeze taxes on anybody making less than $1 million. Raise taxes to at least 40% on anybody making over $1 million; and to at least 50% on anybody making over $10 million. This would revert us to the historical norm. - J]

On the entitlement front, we modify Social Security and Medicare formulas, imposing higher costs on higher-end retirees (which would include me, should I ever retire). What's in it for the right-wing fanatics? Those programs' projected costs drop. For liberal wingnuts? They can claim victory because people are living longer than when these programs were introduced and will collect more benefits over their lifetime than originally intended.

Yes, rationality is out of style, and fanaticism is the new normal. But do we really want a national life like the one we've had the past few years? All shrieking and no thinking? Today's problems are horrible, but what are they compared to the Civil War, the Great Depression, and World War II? Enough screaming. As for me, I'm going back to the beach to finish my vacation.