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Fallows Nails Danger of Double-Dip

James Fallows puts economic news in order:

“…this morning’s jobs report makes me wonder whether, as a political system, we ever learn anything. Even this basic thing: That when tens of millions of people cannot find work because of an overall “failure of demand” — not enough paychecks going to not enough people who can not make enough payments to create jobs for enough other people — the main problem facing the nation is not “runaway government spending.” Any more than it was when Herbert Hoover tightened up on spending as markets crashed, in the wave of folly that Keynes and Ahamed in their different ways chronicled. A lot has changed since the 1930s, and the 1970s. But not this basic principle

Some of his readers’ responses:

From FVH, a businessman on the East Coast:
>>As an owner/manager of a small manufacturing business I suffer a combination of despair and anger each time a political animal, of whatever color, promises to “focus like a laser on job creation.” I neither need nor want Government to focus on “job creation” (as though it were in their power to do anything in that realm). I need it to focus on “customer creation”! IT’S DEMAND, STUPID!

If governments can induce demand, I will happily handle the part about “job creation.” Get me to the point where my 1.5 production workers have to be put on overtime to fill the orders and I will quickly make my part-time employee full-time. A few more customers and I’ll hire another worker. Look, guys, that’s what we do out here! Don’t worry about cutting my taxes, don’t concern yourself with over-regulating me, don’t fuss about the “death tax” depriving my progeny of the joy of running my business. That is all trivia! This is all about Demand Side Economics.

Oh, and don’t look now, but if we can get a little “demand creation” goin’ on, so I (and my ilk) can hire some folks, then maybe those folks can think about dumping their overpriced rentals and buying foreclosed homes, thus addressing the housing inventory glut and moving us toward housing recovery. And thus beginneth a Virtuous Circle.<<From JK, whereabouts unknown:
>>My greatest disappointment with Obama so far has been his inability to explain economics.

just saying ‘stimulus’ is not an explanation. And saying that the government, like a family, must balance its budget is crazy — as Krugman repeatedly points out.

Why has Obama NOT EVER tried to explain counter-cyclic government spending?
Why has he not explained the need for deficit spending?
Why has he NOT used the Great Depression as an example?
Why has he NOT taken on the inconsistent and self-serving arguments of the Republicans?

The level of discussion has been appallingly low. The points are not difficult to present. But, at some stage, a bit of economics must be presented and defended. It’s not an argument of the morality of economics — share the burden — its how a government fights a weak economy.<<

What more can you say?  In addition to his many other talents, Mr. Fallows was trained as an economist.

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Deficit Deal: Whose Country is This!

The collapse of the Boehner-Obama deficit reduction talks essentially confirms the total incapacity of Republicans to compromise in the interests of the country.  There is no rational reason:

1.  Reductions in spending (primarily discretionary spending) far outweigh ‘raising revenue’ in Obama’s $4 trillion plan.

2.  The tax breaks for oil and gas, private jets and hedge fund managers are inexcusable in this economy.  Due to a huge loophole in the tax code hedge fund managers making billions of dollars a year pay no personal income tax.  This is a clear oligarchical haven.

3.  Obama is willing to tackle the ‘sacred cows’ of Medicare and Social Security.


To make this into an ideological split between Keynesian and supply-siders, taxes vs. spending, big government vs. small, when the entire fiscal system and credit worthiness of the American economic system is on the brink, is treasonous.  If these people aren’t able to grasp the situation, they have no right to govern.

If Republicans can’t see the difference between what’s necessary for economic growth long-term and what’s necessary on an emergency basis now, they have no right to govern.

And if the Republican leadership can’t whip their base into line, then they have no right to govern.

Obama needs to be clear with the American people:  if we cut spending too much now, the economy will collapse.  If we don’t close loopholes in tax rates and repeal Bush tax breaks for wealthy people, a deficit reduction program won’t be enough to make a dent, and Republicans know that.  It’s  not a  matter of ideology, the figures don’t add up.

The surest means to raising revenue is economic growth.  A collapsed economy doesn’t grow.  Once the economy picks up and the deficit ratio drops, we can get back to retiring debt.

Republicans do not have a right to win seats to Congress and think they represent ‘the people’ more than an elected President, for goodness sake!  They don’t have the right to represent their districts in a national assembly and refuse to compromise.  Compromise is what gives American democracy the flexibility to have lasted 200-plus years.

New York Times

National Journal

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Mr. Panetta, Will the US End the ‘War on Terror’?

Leon Panetta hit the road running as the new Secretary of Defense.  In his Saturday comments about Al Queda defeat being ‘within reach’, he struck a much more precise tone about how weak, after two years of targeted heavy bombing, the organization is today.  New information came from tapes and notes found in the Bin Laden compound during the raid that killed him.  The military has basically put a bull’s-eye on the back of 10 – 20 in the group.

Will Obama end the “War on Terrorism” before the 2012 elections?  The politics of such an announcement would be treacherous.  Democrats would expect an appeal of the Patriot Act.  Republican leaders would see blood.  However, no less an authority than General David Petraeus would need to sign off on such a declaration as CIA Director and part of the National Security Council.  There’s not a politician in Washington who would challenge Petraeus.  Obama has  maneuvered the General into being exactly where the President needs him at exactly the right time.  First, he took the reigns in Afghanistan, now the CIA.

With Bill Daley as chief of staff, a Democratic partisan at Defense and god at the CIA, he has in place a team whose members focus on results, and who wouldn’t be adverse to mixing it up with Republicans in Congress.

What would declaring an end to the “War on Terrorism” mean?  A return to a more normal perspective on state affairs and global security.  Terrorism existed before Al Queda and it will exist afterwards.  Vigilance and working with allies to route out cells will continue.  Had we stayed in Afghanistan and not diverted troops to Iraq, Al Queda would have been snuffed out years ago.  But let us at least take some satisfaction that it is in disarray and directionless now.  I’ll leave the legal ramifications to someone else.

Juan Cole has a few tips for reducing terrorism in the future.

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Stimulus: Did it Work? Obey’s 1% Doctrine

A great debate about if the Stimulus Bill worked, and a fine size-up by Dave Weigel in Slate.

Did the stimulus do less than President Obama said it would? Absolutely. In the first months of 2009, when the president sold the bill, got it passed, and defended it, he tossed off predictions for job growth that got progressively higher and were never matched. At his most optimistic, he said the stimulus would be a success if it “created or saved” 4 million jobs. It fell far short of that. But ambitious, expensive bills have fallen short before, and it hasn’t discredited their reasons to exist. George W. Bush’s tax cuts were supposed to balance the budget by 2010.

Weigel  does an excellent job showing how the dynamics between media, policy and politics determine public opinion and why.  It’s a ‘last hurrah’ warning to conservatives in Congress against pulling the deficit reduction reigns too tight.

The Republican leadership is being pushed into the same mistake the Roosevelt Administration made in 1937 when it was forced by Congress to cut back on stimulus and the Depression double-dipped.  Why are we repeating history?


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Why US Should Not Veto Palestinian State at UN

The following article, by Henry Siegman in Foreign Policy is the best argument for why the US should not veto UN recognition of a Palestinian state this September.  The author turns the tables on borders as well as concerns over ‘attacks’ on Israel’s legitimacy then links the Palestinians’ quest for UN recognition of a Palestinian state to Israel’s in 1948.  Here’s some of what he has to say.  Please read the whole article:

Shlomo Avineri, a leading Israeli intellectual and politically very much a centrist, is to be commended for dismissing Israeli fears that outside criticism of their country’s occupation policies is an effort to challenge Israel’s very right to exist. Writing in Ha’aretz, Avineri notes there is not a single country in the world that maintains diplomatic ties with Israel that has ever questioned the legitimacy of Israel’s existence…

…it is in fact Israel that is engaged in the “delegitimization” of the Palestinian people’s right to national self determination and statehood, not the reverse.

For proof of this one need look no further than Israel’s near-hysterical efforts to prevent the Palestinians from bringing their case to the United Nations, the institution that happens to be the source of Israel’s own legitimacy, as acknowledged in Israel’s Declaration of Independence. For what Israel’s current government apparently most fears is the legitimacy that the United Nations uniquely can confer not only on Palestinian statehood but on the 1967 borders.

A state that since 1967 (i.e. for most of its existence) has imposed a military occupation on its neighbor, confiscating its territory and dispossessing its population, is guilty not only of an abstract challenge to its neighbor’s claim to statehood but of violently preventing it on the ground.

Henry Siegman, President of the U.S./Middle East Project, is a non-resident visiting professor at the Sir Joseph Hotung Middle East Program, School of Oriental and African Studies, University of London.

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Obama & Boehner Go for Broke

OK, that may be an exaggeration but suddenly it seems that Boehner is warming up to ‘increasing revenue’, closing corporate tax loopholes and maybe even letting the infamous Bush tax cuts for the wealthy expire.  These would be as part of a larger 10-year budget reduction program /debt ceiling package proposed by President Obama.  Obama also put Medicare and Social Security reform/cuts on the table.

Most importantly, the President wants his $4 billion package over 10 years to be the first step in revising an outdated, unfair and impenetrable  U.S. tax code.

The budget cut and debt ceiling negotiations, with conservatives obstructing any progress that includes ‘revenue raising’, have been a farce so far.  Now it will enter the circus phase as both Party bases scream about betrayal by their leaders


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Quote: David Brooks

The struggles of the next few weeks are about what sort of party the G.O.P. is — a normal conservative party or an odd protest movement that has separated itself from normal governance, the normal rules of evidence and the ancient habits of our nation.   New York Times

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RE: Troop Withdrawal in Iraq, Afghanistan

President Obama will announce shortly how many troops will be withdrawn in Afghanistan and Iraq.  Pressure from both left and right is building for a significant draw-down, especially after the killing of Osama Bin Laden.  At the same time, the Afghan government is in talks with the Afghan Taliban for some type of political resolution.  Intelligence sources who have mined the computer files found in Bin Laden’s compound are saying Al Queda is crippled.

Also on the President’s plate is ‘status of forces’ agreement between the US and Iraq, which calls for all US troops to be out of Iraq  by the end of next year.  Outgoing Defense chief Robert Gates wants it re-written to allow thousands of US troops to remain in Iraq indefinitely.  According to Juan Cole in Informed Comment, however:

As for US troops being killed in Iraq, it is the very prospect of Gates succeeding in keeping them there that has caused violence against them to spike. When it was understood that they were leaving, the attacks on them declined enormously. (Likewise, the press to somehow keep Western troops in Iraq has caused renewed violence against Western interests generally. Today there was a bombing of a French embassy car in south Baghdad that wounded 7 Iraqis.

The Pentagon denial that the Iraqi and Afghani people oppose continued American presence in their countries persists. Opening the Iraq status of forces agreement to retain an American troop presence post 2012 would be stab in the back of an independent nation of Iraq.  The US should leave Afghanistan as quickly as possible and quit pretending it can shore up the corrupt Karsai government.  Let’s leave nation-building and COIN behind.


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