"We have come to our Nation's Capitol to cash a check:" How Dr. King's legacy is being destroyed by income inequality and Citizen's United

For someone who spends time thinking and writing about politics and policy, the juxtaposition of the holiday celebrating the leadership of Dr. Martin Luther King Jr., the State of the Union address by the Nation’s first African American President, and the fifth anniversary of the Citizen’s United ruling can’t be ignored.   What makes it all the worse, however, is that the President tonight should – if he wants to keep Dr. King’s legacy alive – make another round of proposals that require starting with rolling back Citizens United.

Unfortunately, This MLK Day finds us in a more divided, more racially, more economically unequal society.  Like it or not, the SCOUTS prediction that their decision in Citizen’s United would decrease campaign corruption – because unlimited funds for “speech” by corporations and other groups would “allow” more people to know who gave what to whom – the reality is that BOTH parties are now both heavily dark money funded, and funded in such significant amounts by super PACs that the political speech of ordinary people is effectively drowned out. In a day and age where it takes $1 Billion or more just to get to the White House, no one can realistically say that any person (except a billionaire or two) has as much political speech as a corporation or Super PAC.  This is critically important, because in the wake of the SCOTUS gutting of the Civil Rights Act, all an individual has left is their speech (since in many cases they have defacto lost their vote).

In turn, that court-created inequality in political speech of necessity creates economic inequality where there was none, and enlarges it where it already exists.  Wages after the Great Recession are stagnant at best, and the reality is that while unemployment keeps dropping, the two biggest forces driving it are people taking lower wage jobs (and often at less than full employment) and people simply exiting the workforce all together.  These things, not coincidentally, have driven corporate profits up to the highest levels in decades.  Sadly, the income inequality that this created is now coming back to haunt those corporations, as lower gas prices give underpaid workers some economic breathing room to clear up debts and begin saving again.  Consumers can also spend again (though it seems they aren’t – waiting further price drops), but many more of them may well lose their jobs in the formerly growing energy sector if prices continue to stay low.  In addition, the financial sector that is now the “bedrock” of our economy is taking stock hits to energy sector stocks, which means that Wall Street will likely start advocating for government interference in the market to boost oil prices. After all, you can’t invest tens of millions of dollars on a Presidential candidate, or tens of thousands on a Senator if they don’t help you stay afloat, can you?

All of this would look and sound eerily familiar to Dr. King, who died in 1968 preparing his Campaign for the Poor as the next chapter of his Civil Rights Movement work.

Then, as now, most of the poor of working age had jobs, but, as King puts it: “they are making wages so low that they cannot begin to function in the mainstream of the economic life of our nation.” In 1968, 25 million people — nearly 13 percent of the population — were living below the poverty level, according to the Census Bureau. (In 2013, 45.3 million people — 14.5 percent were below the poverty level.)

Dr. King understood, as do a few folks today, that access to the voting booth, or forced desegregation, would do little to ease the plight of racial minorities if their economic condition – along with the economic condition of the poor whites who were often their most violent opposition – didn’t improve.  Then, as now, minorities and poor whites compete for fewer and fewer lower paying jobs, and that competition stokes much of the fear used by politicians to drive a wedge between groups that should be allied.  Yet because he was unable to carry on with his important work, we are left to apologize to our descendants, as we seem unwilling to do anything to support the radical change now necessary to keep the Dream Alive.

Supply SIde Economics is SO Last Century - And Why That's Bad for America's Economy

Milton Friedman and his Supply Side followers got precisely one thing right in their economic theory - money taken out of the economy in taxes is not readily available for private capitol uses.  Sure, that money then reenters the economy down stream as labor wages for government workers, and as purchasing by government agencies (which then creates other labor wages in other sectors).  But tax expenditures do, in fact, remove money from first order private economic activity.

And in Friedman's day, altering that balance MAY well have led to more capital investment, since the economy of his time was dominated by newly rising industrial manufacturing and more industrialization of farming and food production.  So he was potentially right - way back then - that a key to economic growth in recessions might have once been diverting tax revenue back to the private sector where there were incentives (increased private profits) to grow manufacturing capacity and hire more and better paid workers.

The problem for modern Republicans - who cling to his Supply Side theories as if they were inviolate Gospel - is that those theories fall apart in service oriented, demand driven economies that are founded on consumption and provision for services, and less so on manufacturing (even if manufacturing is needed somewhere to feed the consumption demand).  The theories aren't even applicable to rent seeking economies (and the ultra rich who participate in such economies), because as rents increase (i.e. as more profits are made on financial transactions in Wall Street, Derivatives markets and the like), economy can "grow" with fewer people actually doing work.

Thus, as we have seen since the Great Recession began, historically low rates of income taxation on top economic earners and corporations do NOT trickle down to increased labor wages for the rest of the economy, nor do they lead to more hiring even as the economy appears to "grow."  The reason is really very simple - there is a perverse or negative incentive structure in returning more tax revenue to private hands in this kind of economy because the more funds a rent seeking 1%'er has, the more rents he or she will seek, and the more he or she will seek to dampen competition for those rents.  In an economy that grows because labor wages grow, an increasing number of people will move up the ladder to a point where more of their income can also be rent seeking, driving DOWN the amount of money to be made in that sector of the economy by any one person or corporation.

So if you support Republican "slash and burn" tax policy, you're not only deflating government's size and ability to control markets (which are historically bad at self-regulation), but you are destroying middle and lower class economic opportunity in order to destroy competition for rents.  That's, by definition, the OPPOSITE of " a rising Tide lifts all boats."  And I wish Republicans would just come clean about it.

A small but important victory - civil charges rise from the ashes of the Great Recession

Reports are surfacing this morning that the Securities and Exchange Commission has leveled civil charges against Goldman Sachs for its CDO's that were a major part of the sub-prime mortgage securities driver from the credit bubble burst.

Sadly, these are not the sort of charges that send people to jail, and the fines that may ultimately result are not likely to cause Goldman to fold - much less fire anyone. But for now, at least, the media will be forced to use the term Fraud when talking about Goldman, and that brings a small measure of accountability to the story.

Finally.

The bailouts and healthcare reform - one quote says it all

While ruminating on what the loss of the public option means to so-called "healthcare reform," and trying to draw useful links and lessons to the payback of TARP funds (apparently hastened by huge additional tax breaks); I read this in a comment at The Intersection. Marion's comment was in a post about the death of science journalism, but it rings true for so many things these days:

Markets don’t give you what you want OR need – they trade whatever you can scrape up by way of labor or money for what, crudely expressed, the owners of resources and physical plant and the providers of finance and credit want to offer, and you then try to cobble together what you want and need from the menu you’re given.

Paul Volcker Speaks - and you should listen

Paul Volcker is RIGHT - and you need to read his latest staements at the Baseline Scenario to know why.

Too Big To Fail meets Too Much Common Sense

Over at the Baseline Scenario, they have published the text of a bill by Senator Sanders of Vermont to break up the "Too Big to Fail" financial institutions. It's well worth the time to link over and read - short, sweet, and to the point. Wish all federal legistation were thus. Once you read it, use the imbedded link to go to Senator Sanders' website and sign his petition. Then email your Senators and tell them to support the bill.

UPDATE:
This AM I sent the follow email to each mof my Senators, and my Congressman. Fell free to crib the text for your own use, changing the names as appropriate:

Senator ________,

As you may be aware, Senator Sanders of Vermont has introduced a bill that would direct Treasury to break up the "too big to fail" banks and financial institutions that continue to imperil our financial sector. The Bill reads:

A BILL
To address the concept of ‘‘Too Big To Fail’’ with respect to certain financial entities.
1 Be it enacted by the Senate and House of representa-
2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.
4 This Act may be cited as the ‘‘Too Big to Fail, Too
5 Big to Exist Act’’.6
SEC. 2. REPORT TO CONGRESS ON INSTITUTIONS THAT
7 ARE TOO BIG TO FAIL.
8 Notwithstanding any other provision of law, not later
9 than 90 days after the date of enactment of this Act, the
10 Secretary of the Treasury shall submit to Congress a list

2
1 of all commercial banks, investment banks, hedge funds,
2 and insurance companies that the Secretary believes are
3 too big to fail (in this Act referred to as the ‘‘Too Big
4 to Fail List’’).
5 SEC. 3. BREAKING-UP TOO BIG TO FAIL INSTITUTIONS.
6 Notwithstanding any other provision of law, begin-
7 ning 1 year after the date of enactment of this Act, the
8 Secretary of the Treasury shall break up entities included
9 on the Too Big To Fail List, so that their failure would
10 no longer cause a catastrophic effect on the United States
11 or global economy without a taxpayer bailout.
12 SEC. 4. DEFINITION.
13 For purposes of this Act, the term ‘‘Too Big to Fail’’
14 means any entity that has grown so large that its failure
15 would have a catastrophic effect on the stability of either
16 the financial system or the United States economy without
17 substantial Government assistance.

Introduced by Senator Bernie Sanders of Vermont. That’s the entire bill.

I urge you, in the strongest terms, to support this bill. No company, no private interest, has the right to grow so big as hold our economy hostage. No company has the right to take private risks with its money, and expect public bailouts when those risks fail. You have the obligation, as a U.S. Senator, to help us, your constituents, combat those companies. Please co-sponsor this bill, and work with your Senate and House Colleagues to make this important change in our national financial system.

Thank you.

Goldman Sach to Employees - Don't spend it all in one Place!

That Goldman Sachs would actually say this to employees shows just how big a gulf exists between this firm and the rest of the country.

The State of the Economy - why the bailout may have been necessary afterall

I have to confess that my liberal political bent still has not reconciled itself to the bailout of the financial sector yet. Nor has it come to terms with many other economic urban legends, such as the notion that the U.S. is no longer a manufacturing nation. No friends, I remain skeptical, but as skeptical as I once was.

Regular readers will note that I tend to go to original source data whenever I can, read and analyze it myself, and then draw my own conclusions. And I see no reason why the state of the economy should be an exception.

As luck, or good bureaucratic planning, would have it, the Census Bureau is able to help me look at both the question of "Are we still a manufacturing country" and did the financial sector really deserve a bailout. See, every 5 years, Census goes out and does a look at business. They collect sector specific statistic on number of employees paid, number of businesses in each sector, receipts, and payroll expenses. And they make it all available on the web. So, thanking my colleagues in that federal agency, I downloaded the data, and ran some graphs. The first is presented here - I'll be doing some more posts in the days ahead with other parts of the data.

I'll call two things to readers attention. First, with regards to manufacturing, I fail to see how we are no longer a manufacturing nation when that sector of the economy did $5.3 Trillion in 2007 business. Thats more then the individual Gross Domestic Product of every other country in the world. Nice try alarmists, but we seem to be doing just fine making things these days.

As to the financial sector bailout - no wonder Citi is giving raises, and Goldman Sachs expects their best year ever. The Financial and Insurance sector did $3.6 Trillion in 2007, meaning that $1 Trillion in loans and bailouts secured about 1/3rd of their receipts for 2009, without them having to really do much of anything. I'd love a pay plan like that, as I'm sure would a lot of small business owners. Interestingly, there were only 4 countries in 2008 that had GDP's higher then the Receipts of the U.S. Financial sector - The U.S., Japan, China, and Germany in that order.

The really galling part of the bailouts, however, is that the financial sector only had payroll expenses (the yellow line) of $494 Billion that year. The rest, I'm sure, went to a lot of overhead, but there is still ENORMOUS profit built in there. One wonders how much, if any was set aside in reserves. One suspects that a lot could have been.

So where does that leave taxpayers? Well, to be sure based on a receipts basis, if the financial sector had collapsed, it would have significantly hurt the U.S. economy. The numbers bear that out. But at the same time, the numbers also show that there are still plenty of other sectors that could have helped offset the loss. I know it isn't a perfect assessment, but I am left with even more questions then before.

This just in - Make sure you pay your taxes

If the AP report on MSNBC is correct, firms taking taxpayer funded TARP money owe the U.S. government 0.02% of that fund in back taxes. Yep, you heard that right, TARP recipients owe back taxes. And they all had to sign certifications saying they didn't in order to get their funds in the first place.

Two thoughts spring to mind. First, will the Republicans who have sunk so many Democratic nominees over tax issues holler as loudly about this? Me thinks not. And second, will this be the "smoking gun" that will finally open criminal investigations into the very companies who willfully and gleefully took our economy into the tank in the name of short term profits? After all, Al Capone got sent up for tax issues . . . .

Why Wall Street needs to be put in Time Out.

Say what you will about Wall Street types - at least they are committed to a battle to the end so that they remain "relevent" to modern economic policy. But look at this graph,and ask yourself - how much do we really need to pay attention to these guys?

See, the data (from the work of Robert Shiller who lets you copy his data sets and then do your own graphing) makes the case clearly that 1) we haven't fallen as far as we did before, and 2) once you take all the "noise out" stocks are still likley to see growth in the future. How did I arrive at this conclusion? I just fitted the blue trend line to the graph. And it's the trendline that we all need to keep in mind, not the bounciness around it.

Every time one of the Wall Street brokerages, or their friends in the MSM or cable, gets on TV and talks about the market, keep this in mind - PE ratios (one o fthe best measures of the stock market's soundness) have not yet fallen as low as they did in the 1980's rcession under Ronald Reagan. In fact, by the time the Great Depression started in 1929, they were on a substantial climb from their earlier collapse. PE also hasn't fallen that low yet, and the trend line tells us even if it does, the rebound is likely to keep us on a slow but steady upward climb.

given that, why don't we let a few banks go into receivership and start the auctions? If history is our guide, the stock market will do just fine, and so will the economy.

Let's get it over, already!

It probably somes as no surprise, but Paul Krugman is one of my favorite economists. His column today about the continued failure of the Obama Administration's financial rescue package is spot on.

See, being a mere oceanographer, I see it this way. the BUsh Administration started out to buy up the toxic derivative investment packages from the banks to free up the capitol markets and restart lending. then they realozed that meant something other thenthe market would be putting certain banks, investment banks and insurance companies out of business (plus it might well create a run on helathy banks). And they didn't want that. So they shifted to bank recapitolization. Mr. Obama hired Mr. Geithner to essentially continue that policy while they looked for something else that might work. After all, no one wants to bring down the economy and be blamed for a second Great Depression.

All that said, it's time to bring in the army of federal program analysts, budget formulators, and accountants, and take apart the banks books. We have to figure out who has what in order to sell it, and we have to sell it so banks will start lending to each other again (as well as to other business). Otherwise, AIG will still have to be on the public dole, GM won't be able to be liquidated in bankruptcy, and Cerebus won't put more money into Chrysler. Painful to watch - perhaps, but only if the government and media focus on the "losers" and not the healthy and solvent banks.

And yes Martha, there should be losers here - they mad bad, risky decisions driven by short term profit. they contributed to the downturn of the U.S. economy. They do not deserveto be rewarded fo rthose decisions by being allowed to continue to pretned they don't hold anything that's bad.

The Real Stimulus Package

Over at Think Progress, Matt Yglesias has a good piece on what the final stimulus actually looks like. While some commenters got the colors wrong - I think there could have been a yellow in there instead of two greys - the basic idea is this. For all the howling by Republicans about the stimulus, the single biggest piece at approximately 32% is made up of . . . wait for it . . . tax cuts! Yes Sir, step right up, because Democrats are actually adopting Republican economic ideas, even after those ideas have been debunked by history. So, when they whine as they will about eing shut out, send them this graph and ask them to have Michale Steele apologize for their hystrionics.

And while we're at it, ponder this from teh Center fro American Progress study Matt cites:

"While Keynesian hasn’t been disproven, supply-side economics has. President Bush’s economic advisors assured the American public in the early 2000s that the president’s massive tax cuts would generate economic growth and create jobs. This classic supply-side policy intervention did no such thing. The 2000s economic recovery was the weakest of all post-World War II recoveries in terms of growth in investment, GDP, and job creation."

As I've said before, supply side responses to demand side issues just don't work.

Societal Shame - do we need more or less?

Over at the Atlantic, Ross Douthat has an interesting take on the effectiveness of shame in society. I commend it to you, even though he and I are definitely on different ends of the political spectrum.

Once you read it, come back here, and ponder this with me: If there were a strong sense of societal shame that would have stigmatized the actions of those responsible for the current economic crisis, would we be where we are today? You see, I tihnk that when Republicans talk about "voluntary" regulation of markets, they are theoretically calling for the establishment of shame mechanisms in society to keep individual actors in markets from doing things that are, in the long term, detrimental to those actors. If I'm right, Republican policy makers believe this moral imposition will be stronger then any governemental regulatory scheme, since you can't price being stigmatized the way you can price . . . . say air pollution fines vs. installing the latest clean air technology.

Now, the next question to ponder - have we, as a society, made enough use of stigmatization and shame in responding to this crisis? I'm not asking about what we should have to prevent it - I'm asking about what we are doing to respond to it. Clearly, We've seen Congress rake business leaders over the coals, and we've seen a few pudits begin to take these guys to task f or their actions. But if we aim to do more then just endure this crisis, maybe we need a more folks calling our business and elected leaders out on thier behavior. After all, many in congress who watched this mess unfold, and did nothing, are still on Capitol Hill.

H/T to Mike for turning me on to Ross' writing.

Can we all DEMAND some change now?

Listening to Michael Steele, newly minted Republican National Committee Chair on ABC’s This Week with George Stephanopolous, I started having really bad 1980’s flashbacks. As the interview unfolded, it became clear why all the House Republicans and many of the Senate Republicans were so opposed to the Democratic stimulus bill then in the Senate for debate. Here’s the exchange that really got me going, from the ABC website transcript (emphasis mine):


“ STEPHANOPOULOS: He suggests that you and Republican Party leaders here in Washington are on the wrong side of the biggest issue, jobs.

STEELE: Well, no -- you know, with all due respect to the governor, I understand where he's coming from. Having been a state official, I know what it means to get those dollars when you're in tight times. But you've got to look at the entire package. You've got to look at what's going to create sustainable jobs. What this administration is talking about is making work. It is creating work.

STEPHANOPOULOS: But that's a job.

STEELE: No, it's not a job. A job is something that -- that a business owner creates. It's going to be long term. What he's creating...

STEPHANOPOULOS: So a job doesn't count if it's a government job?
(CROSSTALK)

STEELE: Hold on. No, let me -- let me -- let me finish. That is a contract. It ends at a certain point, George. You know that. These road projects that we're talking about have an end point. As a small-business owner, I'm looking to grow my business, expand my business. I want to reach further. I want to be international. I want to be national. It's a whole different perspective on how you create a job versus how you create work. And I'm -- either way, the bottom line is...

STEPHANOPOULOS: I guess I don't really understand that distinction.

STEELE: Well, the difference -- the distinction is this. If a government -- if you've got a government contract that is a fixed period of time, it goes away. The work may go away. That's -- there's no guarantee that that -- that there's going to be more work when you're done in that job.

STEPHANOPOULOS: Yes, but we've seen millions and millions of jobs going away in the private sector just in the last year.

STEELE: But they come -- yes, they -- and they come back, though, George. That's the point. When they go -- they've gone away before, and they come back. And the point is that the small-business owners take the risks. They're the ones that are out there in the morning putting that second mortgage on the house, taking the risks that are necessary so that they can employ your -- your kids and my kids and future generations. That's sustainable, long-term growth. Otherwise, then why do we need the small-business community? Why don't we all just get a government job and call it a day? “


What’s so remarkable here is that Mr. Steele has all but admitted that, in spite of the current economic state, including the recent loss of over 500,000 jobs in a single month, the Republican Party still believes that the government can not create jobs. It can only make work. So, opposition to the stimulus, even sweetened as it is with a variety of tax cuts, incentives and reductions, is all about sticking to a deeply held political and economic principle, no matter what the facts on the ground or the truth in evidence.

I'd love to see MR. Steele, who is no moderate, try to make that distinction to a family now living in a homeless shelter because they have lost their house to foreclosure after loosing their jobs inthe last year. He'd fail miserably, since to many unemployeed, the distinction is meaningless. Sure, as my colleague Mike at the Big Stick points out, it would be better to have high demand for high skilled labor created by the stimulus package. It would be ideal. We're way past ideal.

So why are Republicans clinging so tightly to this line of reasoning? Several thoughts come to mind. First, the Republican Party is still a Social Darwinist, supply side economics, monetarist policy party. They firmly believe that markets can indeed solve economic crises, and that market failures of any type should not ever be addressed through government action – which is welfare in their world view. Second, any economic action taken by government must be directed at businesses, not workers, because it is businesses that create jobs, and supply. And finally, Republicans still believe in supply side economics, no matter what the evidence of the last 30 years shows.

The biggest problem with this world view, however, is that if we follow their reasoning we’ll spend an aweful lot of time, and money (yours and mine incidentally) trying to fix what is now a demand side problem with supply side glue. As unemployment continues to rise, and the economy continues to contract, demand drops like a stone. President Obama said as much last night in his first Prime Time press conference:


“Question: Thank you, Mr. President. Earlier today in Indiana, you said something striking. You said that this nation could end up in a crisis without action that we would be unable to reverse.
Can you talk about what you know or what you're hearing that would lead you to say that our recession might be permanent when others in our history have not? And do you think that you risk losing some credibility or even talking down the economy by using dire language like that?

Obama: No, no, no, no. I think that what I've said is what other economists have said across the political spectrum, which is that, if you delay acting on an economy of this severity, then you potentially create a negative spiral that becomes much more difficult for us to get out of.
We saw this happen in Japan in the 1990s, where they did not act boldly and swiftly enough and, as a consequence, they suffered what was called the lost decade, where essentially, for the entire '90s, they did not see any significant economic growth.
So what I'm trying to underscore is what the people in Elkhart already understand, that this is not your ordinary, run-of-the-mill recession. We are going through the worst economic crisis since the Great Depression.
We've lost now 3.6 million jobs, but what's perhaps even more disturbing is that almost half of that job loss has taken place over the last three months, which means that the problems are accelerating instead of getting better.
Now, what I said in Elkhart today is what I repeat this evening, which is, I'm absolutely confident that we can solve this problem, but it's going to require us to take some significant, important steps.
Step number one: We have to pass an economic recovery and reinvestment plan. And we've made progress. There was a vote this evening that moved the process forward in the Senate. We already have a House bill that's passed. I'm hoping, over the next several days, that the House and the Senate can reconcile their differences and get that bill on my desk.
There have been criticisms from a bunch of different directions about this bill, so let me just address a few of them.
Some of the criticisms really are with the basic idea that government should intervene at all in this moment of crisis. Now, you have some people, very sincere, who philosophically just think the government has no business interfering in the marketplace. And, in fact, there are several who've suggested that FDR [President Roosevelt] was wrong to interfere back in the New Deal. They're fighting battles that I thought were resolved a pretty long time ago.
Most economists almost unanimously recognize that, even if philosophically you're -- you're wary of government intervening in the economy, when you have the kind of problem we have right now -- what started on Wall Street, goes to Main Street, suddenly businesses can't get credit, they start paring back their investment, they start laying off workers, workers start pulling back in terms of spending -- that, when you have that situation, that government is an important element of introducing some additional demand into the economy.
We stand to lose about $1 trillion worth of demand this year and another trillion next year. And what that means is you've got this gaping hole in the economy.
That's why the figure that we initially came up with of approximately $800 billion was put forward. That wasn't just some random number that I plucked out of -- out of a hat. That was Republican and Democratic, conservative and liberal economists that I spoke to who indicated that, given the magnitude of the crisis and the fact that it's happening worldwide, it's important for us to have a bill of sufficient size and scope that we can save or create 4 million jobs.
That still means that you're going to have some net job loss, but at least we can start slowing the trend and moving it in the right direction.
Now, the recovery and reinvestment package is not the only thing we have to do. It's one leg of the stool. We are still going to have to make sure that we are attracting private capital, get the credit markets flowing again, because that's the lifeblood of the economy.
And so tomorrow my treasury secretary, Tim Geithner, will be announcing some very clear and specific plans for how we are going to start loosening up credit once again.
And that means having some transparency and oversight in the system. It means that we correct some of the mistakes with TARP [Troubled Asset Relief Program] that were made earlier, the lack of consistency, the lack of clarity, in terms of how the program was going to move forward.
It means that we condition taxpayer dollars that are being provided to banks on them showing some restraint when it comes to executive compensation, not using the money to charter corporate jets when they're not necessary.
It means that we focus on housing and how are we going to help homeowners that are suffering foreclosure or homeowners who are still making their mortgage payments, but are seeing their property values decline.
So there are going to be a whole range of approaches that we have to take for dealing with the economy. My bottom line is to make sure that we are saving or creating 4 million jobs, we are making sure that the financial system is working again, that homeowners are getting some relief.
And I'm happy to get good ideas from across the political spectrum, from Democrats and Republicans. What I won't do is return to the failed theories of the last eight years that got us into this fix in the first place, because those theories have been tested, and they have failed. And that's what part of the election in November was all about.”


Stop and think about that for a second. $ 1 Trillion in DEMAND lost each year for two years. DEMAND. How do you stem that with supply side approaches like tax cuts? How does a machinery reinvestment tax credit address this? And what good would a two year payroll tax holiday (that’s Social Security, Medi-care and Medi-cade, BTW) do to increase DEMAND? The only way I know of to increase demand is this – put people to work, and make sure they can work for long periods of time. Get the credit markets flowing again (Hello TARP, the people are still waiting) so people can borrow again, and then let them DEMAND so that supply can again be ramped up.

Of course, to make Republicans happy, we’ll probably have to use another term besides DEMAND to describe our position. It sounds too personal, too much like something an individual might control, rather then a business. And we’ll especially have to make sure we don’t “make work” while we do it.

NOAA scientist publishes on climate change - and it's worse then we thought!

Of all the times I hope my professional colleagues are wrong - this is one of them. I can't fault Dr. Solomon's science - she really is a climate science "rock star" because she does good work, and has a solid track record of publication. That track record, incidentally, is how you get street cred as a scientist, so when her study is dismissed (as I assume it will be) by many, they will be denying decades of persistent, solid science.

Aside from the obvious challenges in the article - and anyone who thinks massive coastal flooding and drought that lasts for 100's of years isn't a challenge is delusional - there's a more fundamental issue. Read the wrong way, this article points to a future where the changes we make now have had little effect. Such prognoses, while scientifically accurate, feed the many climate change deniers who say "well, if we can't do anything about it, why should I give up my hummer, my vacation house, and all the other things that make my life a wanton display of American consumerism." After all, such single-minded folks will intone, the droughts will not occur until after I am long dead, so why should I care?

Well, if you have kids, you should care. If you like clean water and clean air, you should care. If you have a conscience, you should care. Leaving all that aside, if you value the American capitalist economy you should care. the types of drought, coastal flooding, and resultant population dislocations that Dr. Solomon's work hints at will have impacts on our economy that are far greater then what we see now in our current recession/depression. We wont' be able to sustain our economy if we're fighting this stuff. Building bridges, or bailing out banks will be the least of our worries.

So take steps now. Car pool, ride mass transit, turn out the lights. Turn your thermostat back. It all helps.

Banking blues - sorting out the continuing panic in financial markets

I'll only add one addendum to this fine piece: There are an army of analysts of all types working for the federal government. Many of them are, in fact accountants. I f the banks won't sort out their debt sheets voluntarily (and I agree they want to hide it for as long as possible), then we have capable, competent folks who can do it for them. And at no additional cost to taxpayers or the banks. Sounds like a win-win to me.

It's the End of Year as we know it - and liberals feel fine?

As you know if you read the teaser below, you know that I'm closing out the year in a bit of a stew. Seems that, while I am supposed to be all atwitter about Mr. Obama's election (especially with Democratic majorities in the House and Senate), I am still uneasy. You see, Mr. Obama, for all his change, is still a centerist politician. he's not a traditional liberal Democrat. Which begs the question - does America really need a liberal antidote to ultra right (or even moderate) Conservatives? And if we do, how to we make it a reality?

The "common wisdom" in DC is that we don't. After all, these supposedly learned persons will say, the Nation began to move Right with Nixon. We swung farther that way with Reagan and Bush I. Clinton was no real liberal, and Bush II just took the pendulum too far. Mr. Obama, they will close, is just setting things back. He'll regulate business (but only just so much); he'll keep the bank bailout in place (and with few requirements of those banks); he'll get the economy going again with big infrastructure spending which will also be good for business.

But will it be good for workers? Will you and I - getting up each day, going to work, paying taxes, playing with our kids - will we really benefit from Mr. Obama's Change We Can Believe In?

Cynical? Perhaps. But as a liberal who has wandered about in the political wasteland, I think I am entitled to a little cynacism. And, as a true liberal, I am skeptical that Mr. Obama, even with a Democratic majority, will infact get us back to a more liberal country. You see, he has a lot to do - restoring the rights eliminated by the Patriot Act; closing Guantanimo Bay; repealing all the last minute Bush II evnironmental and health roll-backs; and then there is the minor issue of keeping the economy from collapsing further. its a tall order.

I look forward to seeing what he accomplishes.

What the Auto Bailout Really means, and why it may be a BAD deal!

If you've been following the news lately, you know that the CEO's of Ford, GM and Chrysler have been to Capitol Hill (twice) to ask for a financial baiout from Congress. The numbers have varied, but add to between $15 Billion and $25 Billion. This on top of the $700 Billion set aside for banks and financial institutions by Congress with the creation of TARP.

So, do the auto makers really need this money? Well, one philosophical argument says that they do, because it preserves American manufacturing in the face of foreign car companies. Never mind that The "Big Three" were too slow to adjust to a changing world, and continued to produce SUVs and pickups after the others had gone smaller again. While no one can claim Toyota or Honda or BMW are perfect tea leave readers, they aopear to be more nimble in terms of changing their manufacturing plan and sales pitches. It turns out that the American three were trying to force consumers to buy into the continued upswinging bubble, even though consumers had already figured out they needed smaller, more efficient transportation.

All that aside, I have to wonder how much a complete shut down of the auto makers will really hurt the American economy. As a scientist, I answer the questions by going to the numbers. Googling on auto industry employment, I find that both the auto industry and the Bureau of Labor Statistics are in agreement. It seems that about 190,000 Americans are actually employed making the cars in questions. Another 777,000 work in suppliers and ancillary support industries. There are 1,235,000 or so who actually sell the cars and trucks once produced (though many of these are part time gigs).

So adding it up, we get about 2.2 million people working in the auto industry. Seems like a lot of people. Yet the current unemployment rate (November 2008) is 6.7% or approximately 10.3 million people. That is up, by 1.7% or 2.7 Million people from December 2007.

If I've done the math right, the auto workers would add another 1.4% to that unemployment rate, driving it to 8.1%. TO put it in context, we went over 8% unemployment between 1977 and 1978; and then again between 1982 and 1985. That, by the way, is a far cry from the 25% and higher unemployment experienced by America in the Great Depression.

So we have a situation wher ethe impacts to the economy aren't going to be as bad as we keep being led to believe. Why is that? Partly its idealogy, partly its the MSM's need to have a controversy to report on. I also suspect, like so many other things, it has to do with American's increasing disconnect from the things, like farming and manufacturing, that underlie our economy.

Should we bail them out? Not if the lax controls that were put in place for TARP are applied here. Giving anyone else my tax dollars wihtout ensuring they do what is right for America is not something I can support. We as a antaion have done it twice in my life time - once with Chrysler in 1979 (!) and once following the S&L crisis. The opinions of the Social Darwinists in the Bush Administration not withstanding, we can do it again.