Saturday, February 07, 2009
Friday, February 06, 2009
This OpEd by Paul Krugman shows that this guy is completely off his rocker. Either that or he's a liar.
February 6, 2009
On the Edge
By PAUL KRUGMAN
A not-so-funny thing happened on the way to economic recovery. Over the last two weeks, what should have been a deadly serious debate about how to save an economy in desperate straits turned, instead, into hackneyed political theater, with Republicans spouting all the old clichés about wasteful government spending and the wonders of tax cuts.
One could argue that the Democrats turned a serious debate, what with their asinine description of contraception funding as just the type of economic stimulus that is timely, targeted, and temporary - not to mention all of the other special interest pork that they threw into the bill.
It’s as if the dismal economic failure of the last eight years never happened — yet Democrats have, incredibly, been on the defensive. Even if a major stimulus bill does pass the Senate, there’s a real risk that important parts of the original plan, especially aid to state and local governments, will have been emasculated.
I wonder why they have been on the defensive? Perhaps it is because the American people are rejecting what their elected representatives (the Democrats) have decided to put into this porkulus bill and the Democrats realize that the've been caught.
Somehow, Washington has lost any sense of what’s at stake — of the reality that we may well be falling into an economic abyss, and that if we do, it will be very hard to get out again.
Again, I would say that the moment someone wrote the pork into the bill and the fact that most of the spending wouldn't hit until 2011 or later - that was a sign that legislators lost any sense of what's at stake.
The debate that is raging now is the first serious debate we've had in a long time!
It’s hard to exaggerate how much economic trouble we’re in. The crisis began with housing, but the implosion of the Bush-era housing bubble has set economic dominoes falling not just in the United States, but around the world.
Consumers, their wealth decimated and their optimism shattered by collapsing home prices and a sliding stock market, have cut back their spending and sharply increased their saving — a good thing in the long run, but a huge blow to the economy right now. Developers of commercial real estate, watching rents fall and financing costs soar, are slashing their investment plans. Businesses are canceling plans to expand capacity, since they aren’t selling enough to use the capacity they have. And exports, which were one of the U.S. economy’s few areas of strength over the past couple of years, are now plunging as the financial crisis hits our trading partners.
Exports were a strength in the economy in the last 8 years? Huh... thought I would've seen that on the front page of the Times somewhere. Oh, well...
Meanwhile, our main line of defense against recessions — the Federal Reserve’s usual ability to support the economy by cutting interest rates — has already been overrun. The Fed has cut the rates it controls basically to zero, yet the economy is still in free fall.
I would argue it's in free fall because the government is doing too much. People are uncertain what the future holds and some key political lobbying by this or that group could make or break their company or their industry.
And taxpayers are also uncertain of the future, what with the expectation of high inflation, business and industries being completely nationalized or eliminated, future tax increases, etc, etc. It's the governments action, rather than inaction, that is the major force for uncertainty today.
I would also say that the Mark-To-Market principle for asset valuation - while intended to provide increased transparency into the value of assets has (as usual) actually created additional uncertainty.
It’s no wonder, then, that most economic forecasts warn that in the absence of government action we’re headed for a deep, prolonged slump. Some private analysts predict double-digit unemployment. The Congressional Budget Office is slightly more sanguine, but its director, nonetheless, recently warned that “absent a change in fiscal policy ... the shortfall in the nation’s output relative to potential levels will be the largest — in duration and depth — since the Depression of the 1930s.”Of course, the CBO also said the stimulus package is a net negative on the economy in the long run, but no need to mention that!
Worst of all is the possibility that the economy will, as it did in the ’30s, end up stuck in a prolonged deflationary trap.
The probability of this gets higher as we start to enact legislation which mirror that of Hoover or Roosevelt's New Deal.
And deflationary traps can go on for a long time. Japan experienced a “lost decade” of deflation and stagnation in the 1990s — and the only thing that let Japan escape from its trap was a global boom that boosted the nation’s exports. Who will rescue America from a similar trap now that the whole world is slumping at the same time?
The only thing? But I thought the Japanese spent their way out of their "lost decade"?
Oh, that's right... they spent like drunken sailors during the lost decade and it had zero effect except to bankrupt future generations.
Would the Obama economic plan, if enacted, ensure that America won’t have its own lost decade? Not necessarily: a number of economists, myself included, think the plan falls short and should be substantially bigger. But the Obama plan would certainly improve our odds. And that’s why the efforts of Republicans to make the plan smaller and less effective — to turn it into little more than another round of Bush-style tax cuts — are so destructive.We could be on the precipice if ACORN doesn't get it's 2.4billion! We might face another Great Depression if we don't fund contraception to the tune of billions! We might all die if we do not re-sod the Washington Mall!!!
Quick! The sky is falling - Throw some money in the air to keep it from hitting us!
So what should Mr. Obama do? Count me among those who think that the president made a big mistake in his initial approach, that his attempts to transcend partisanship ended up empowering politicians who take their marching orders from Rush Limbaugh. What matters now, however, is what he does next.
Actually, it wasn't Rush but the actual stupid parts of the bill that made it a farce. Only Nancy Pelosi & Barry "The Novice" Obama get the credit for that. You can't blame Rush, the CBO, or anyone else who can read for pointing those things out, can you?
It’s time for Mr. Obama to go on the offensive. Above all, he must not shy away from pointing out that those who stand in the way of his plan, in the name of a discredited economic philosophy, are putting the nation’s future at risk. The American economy is on the edge of catastrophe, and much of the Republican Party is trying to push it over that edge.
The American people are smarter than you, Paulie. They realize that what is being offered is not stimulus.
- It's not timely. (18 months from now?!?!)
- It's not targeted. (At least not in targeted where it should be - Contraceptives? $400 Million for STD research?)
- And none of it is temporary. (How are increased salaries for Federal employees 'temporary'?)
ARC: St Wendeler
Here are two related stories that I wanted to comment on today. First, from AP:
President Barack Obama says in Washington these days, everyone's an economist—or thinks they are.
Obama introduced a team of outside economic advisers Friday at a White House ceremony in which he also renewed his demand that Congress act quickly on his economic recovery package.
As the country struggles with the worst financial crisis since the Great Depression, Obama said there has been no shortage of advice on how to solve the nation's woes.
"You've got some economists and some folks who think they're economists. By the way, these days everybody thinks they're economists," he joked.
How elitist of you, Barry. While you may have been elected to the highest office in the land, your years of study in Columbia and Harvard Law, when combined with your years as a community organizer, Illinois State Senator, and Senator, make you probably the least qualified person to make such a statement. Unless by economics, you are referring to the skills you picked up learning of the myriad of ways that Illinois politicians "monetize" every decision they make.
The reason your porkulus package isn't getting the public's support is because deep down, in their gut, the voters know that the true problem with our economy is not a lack of government spending but a lack of government restraint. They see the amount of ridiculous projects that the Democratic party has thrown into the stimulus bill and rightly reject the whole package.
Most people recognize the fact that 2+2 does not equal 5.7 and understand that someone is going to have to pay for this unbelievable amount of spending.
And, while you may not like that assessment and may choose to ignore such wisdom, you should listen to the nonpartisan Congressional Budget Office (you know, the guys who perform cost analysis of specific bills):
While I certainly don't agree with most analysis by the CBO (they tend to overestimate the benefits and underestimate the costs), this should be a wake-up call.
CBO: Obama stimulus harmful over long haul
Stephen Dinan (Contact)
President Obama's economic recovery package will actually hurt the economy more in the long run than if he were to do nothing, the nonpartisan Congressional Budget Office said Wednesday.
CBO, the official scorekeepers for legislation, said the House and Senate bills will help in the short term but result in so much government debt that within a few years they would crowd out private investment, actually leading to a lower Gross Domestic Product over the next 10 years than if the government had done nothing.
CBO estimates that by 2019 the Senate legislation would reduce GDP by 0.1 percent to 0.3 percent on net. [The House bill] would have similar long-run effects, CBO said in a letter to Sen. Judd Gregg, New Hampshire Republican, who was tapped by Mr. Obama on Tuesday to be Commerce Secretary.
The House last week passed a bill totaling about $820 billion while the Senate is working on a proposal reaching about $900 billion in spending increases and tax cuts.
But Republicans and some moderate Democrats have balked at the size of the bill and at some of the spending items included in it, arguing they won't produce immediate jobs, which is the stated goal of the bill.
We're in a terrible financial situation and the government is going to tax, borrow, or print money to increase its long-term power and wealth.
It's time for the Feds to tighten their belts. Let's start to see some layoffs from the country's largest employer, Barry! Or is every single government bureaucrat "indispensable"?
Oh, right... it turns out that part of the stimulus is to give federal employees a raise and to redecorate Federal buildings.
And you want to frighten people into supporting this bill? Well, I fear that passage of anything resembling what you describe as stimulus is going to throw us into a new Great Depression.
ARC: St Wendeler
My goodness, somebody at the Post actually gets it.
When will ethical actions start paying dividends?
By Bill McClellan
Wednesday, Feb. 04 2009
Last year, I earned $1,130 in dividends. I just received a note to that effect from my employer, Lee Enterprises Inc.
"This is important tax information and is being furnished to the Internal Revenue Service," the note said.
Well, fine. I consider that a warning, and an appropriate one. If I were inclined to cheat on my taxes, this is probably where I would do it. That's because I feel that my dividends are misleading.
Let me explain. Several years ago, Pulitzer Inc. began offering its employees a 15 percent discount on Pulitzer stock. I sought the advice of a friend, who said, "If somebody offers to sell you a dollar for 85 cents, buy it."
I'd accumulate a little bit of the stock, and then I'd sell it. When Lee Enterprises bought Pulitzer, it offered the same program and I enrolled. Sadly, the stock has not done well. It has gone from about $44 to about 35 cents. I have ridden it down. I began last year with about 1,100 shares of stock worth about $16,000. I ended the year with about 3,000 shares of stock worth about $1,000.In other words, I took a beating.
But while my stock was plummeting, it continued pumping out dividends, which, in my case, were automatically used to buy more stock. Although my investment went from $16,000 to $1,000, that represents a paper loss, and does not become a real loss in the eyes of the IRS until I sell.
But the dividends are real. I will have to pay taxes on them. Here is the question I have to ask myself: Would I pay taxes on that $1,130 if the IRS didn't know about it?
Timothy Geithner wouldn't.
He's the new secretary of the Treasury. He's in charge of the IRS. He was selected for that post, and confirmed to it, despite the fact that he cheated the IRS out of tens of thousands of dollars in payroll tax.
Before becoming the chief of the New York Federal Reserve Bank, he worked for the International Monetary Fund, which did not withhold payroll taxes but compensated U.S. citizens who were then supposed to pay those taxes on their own. Geithner took the extra compensation but didn't pay the taxes.
The IRS audited him and forced him to pay the back taxes for 2003 and 2004. All right, he was caught and he paid. But he didn't go back and pay for 2001 and 2002, even though he clearly knew he owed for those years, too. So there is no doubt that he intentionally cheated the IRS.
Why then was he confirmed for the post? Because he's smart. That's what the senators said. Our financial system is a mess, and we need somebody smart to work on it. Think about that. Our new president and our senators did not believe they
could find somebody who is both smart and ethical.
That tells me two things. One, this country is in worse shape than I thought, and two, we have to forget this business about a tax collection system based on voluntary compliance. For voluntary compliance to work, people have to have faith that other people are paying what they're supposed to pay. If you have that faith, you haven't been paying attention.
On Tuesday, two people slated for big jobs in the administration had to withdraw because of tax problems. Former Sen. Tom Daschle was going to head the Department of Health and Human Services. Nancy Killefer was going to be the government's chief performance officer. Think about that for a minute. Chief performance officer.
Part of the problem is human nature. People tend to try to get away with things. Part of the problem is the fact that the tax code was set up to be gamed. It is thousands and thousands of pages long. It contains millions of words. Every few years, somebody talks about simplifying the tax code — "It's a disgrace to the human race!" said Jimmy Carter in 1976 — but there's a reason it's long. None of those words got in there by accident.
People wanted them in there.
Why do you think that is?
This would be a good time to reform the system. Never has it been so apparent that it's broken. We've put a tax cheat in charge of the IRS. That is the proverbial elephant in the room, isn't it? The first thing we ought to do is go to a simple flat tax. It could still be progressive. But no more deductions. Maybe just charities, but that
would be it.
A 10-page tax code. The truth is, you could write it over a weekend.
Get a few economists together, keep the politicians away, and presto. Here it
is. If you make this much, you pay this percentage. If you make that much, you
pay that percentage. Benefits count, too. No trying to finesse things. If
somebody gives you a car and driver, that counts as income. Of course it
Naturally, corporations and other businesses would be required to report
all compensation to the government. Penalties would be severe if they didn't —
and it would be the corporate chiefs who would pay those penalties.
Such a system would make ordinary citizens feel better. I know the thing that has always bugged me is the suspicion that I pay everything I am supposed to pay while
richer people somehow avoid taxes. Now that's no longer just a suspicion.
Meanwhile, I'll go ahead and pay taxes on my misleading dividends. But
I'll think about Geithner while I pay, and it will hurt.
Wednesday, February 04, 2009
The Washington Post opines on the age old question: How much vermouth to put in a martini?
Wednesday, February 4, 2009; Page F05
What is the proper ratio of gin to vermouth for a dry martini? That's about as subjective as life gets. First, understand that "dry" does not mean vermouth is absent altogether: It simply indicates the use of a dry vermouth rather than a sweet one.
What if the Fifty-Fifty isn't to your taste? Play around with different ratios. Robert Hess of DrinkBoy.com suggests sampling a cold glass of straight gin, then an 8-to-1 gin-to-vermouth ratio, then a 2-to-1 ratio and finally a cold glass of straight vermouth as a baseline. You'll be able to see which point along the spectrum best suits you.
Over time, for instance, I've learned that when I use Plymouth gin, I like either Noilly Prat or Dolin dry vermouth, but I use different ratios for each. With Plymouth and Noilly Prat, I go with 4 to 1. With Plymouth and Dolin, I go with 3 to 1. I use a dash of orange bitters in both cases.
Thanks, Bill, you have restored my faith in humanity.Your Co-Conspirator,