Sunday, November 16, 2009

From RealityChex, http://www.realitychex.com...if Catholic Bishops demand a voice in legislation, then they must do what all other special interests in Washington do: register as lobbyists and surrender their tax-exempt status. Bill Press, writing in the Washington Post, is appalled that the House has given Roman Catholic bishops veto power over legislation http://newsweek.washingtonpost.com/onfaith/guestvoices/2009/11/the_catholic_churchs_veto_power.html

Where is the outrage over the defense budget? David Sirota
the 10-year comparison pits a $1 trillion healthcare bill against $6.3 trillion in projected defense spending.

…”When the House considered a healthcare expansion proposal that the CBO says will reduce the deficit by $11 billion a year, tea party protesters and Congress’ self-described “fiscal conservatives” opposed it on cost grounds. At the same time, almost none of them objected when Congress passed a White House-backed bill to spend $636 billion on defense in 2010.

The hypocrisy is stunning — lots of “budget hawk” complaints about health legislation reducing the deficit and few ”budget hawk” complaints about defense initiatives that, according to Government Executive magazine, “puts the president on track to spend more on defense, in real dollars, than any other president has in one term of office since World War II.” And that estimate doesn’t even count additional spending on the Iraq and Afghanistan wars…. The health bill’s expenditures are typically described by reporters in 10-year, $1 trillion terms while defense spending is described — if at all — as a one-year, $636 billion outlay. That can lead citizens to think the healthcare bill will cost more than defense — when, in fact, the 10-year comparison pits a $1 trillion healthcare bill against $6.3 trillion in projected defense spending…” http://www.salon.com/news/healthcare_reform/index.html?story=/opinion/feature/2009/11/13/deficit_hawks

From the New York Times, Home Builders (You Heard That Right) Get a Gift, By GRETCHEN MORGENSON
Published: November 14, 2009
ON Nov. 6, President Obama signed the Worker, Homeownership and Business Assistance Act of 2009 into law, extending unemployment benefits by 20 weeks and renewing the first-time homebuyer tax credit until next April.

But tucked inside the law was another prize: a tax break that lets big companies offset losses incurred in 2008 and 2009 against profits booked as far back as 2004. The tax cuts will generate corporate refunds or relief worth about $33 billion, according to an administration estimate.

Before the bill became law, the so-called look-back on losses was limited to small businesses and could be used to counterbalance just two years of profits. Now the profit offset goes back five years, and the law allows big companies to take advantage of it, too. The only companies that can’t participate are Fannie Mae and Freddie Mac and any institution that took money under the Troubled Asset Relief Program.

Among the biggest beneficiaries are home builders, analysts say. Once again, at the front of the government assistance line, stand some of the very companies that contributed mightily to the credit crisis by building and financing too many homes.

This is getting to be a habit: companies that participated on the upside and are now reaping rewards from the taxpayers on the downside. The banks that underwrote so many dubious loans, for example, received government aid to get them lending again. Unfortunately, that hasn’t been the result.

One can make an argument that throwing money at the banking system is necessary if we are to jump-start the economy. And banks need a bigger capital cushion to protect against future losses.

But dropping helicopter money on the home builders — the folks who massively overbuilt in community after community — seems decidedly less urgent (unless you are one of these companies, of course). Given that the supply of housing far outstrips demand, it is unlikely that these companies will use these tax breaks to hire workers (unless they go into a completely new line of business). http://www.nytimes.com/2009/11/15/business/economy/15gret.html

Saturday, November 15, 2009

Nov. 11: Dr. Jeffrey Sachs of Columbia University’s Earth Institute joins the Morning Joe gang to discuss his criticism of the Obama administrations financial policies.

From The Financial Times, Obama has lost his way on jobs By Jeffrey Sachs
Last updated: November 10 2009 20:45

The past week brought news of US double-digit unemployment and the Federal Reserve’s decision to maintain near-zero interest rates. Both pieces of news expose the inadequacy of US economic policymaking. The Obama administration’s stimulus policies are not well-targeted. The Republican alternatives are even worse. Both sides are missing the key fact: the US economy needs structural change that requires a new set of economic tools.

Consumer and investment demands are too low for full employment. Consumer sectors such as housing no longer generate adequate spending by households and businesses.

Potential investors exploring more promising areas, such as low-carbon energy and infrastructure, are stymied because of the lack of a clear policy framework. Neither the Keynesian approach favoured by the Obama administration, nor the tax-cuts favoured by Republicans, addresses the problem at this structural source.

Following a Keynesian approach, the Obama administration has focused on restoring consumer spending. They have gone about this with a combination of near-zero interest rates, massive Fed financing of mortgages and various consumption incentives, such as rebates for new homebuyers and cash for clunkers.

During the previous bubble, the US consumer was encouraged to over-borrow. Recreating a new bubble is like offering just one more drink, on the government’s account, to overcome a mass hangover. With budget deficits of about 10 per cent of gross domestic product, government spending needs to be far more consequential than temporary boosts to consumer spending.

The Republican alternative is equally fatuous. For every problem there is a single Republican answer: tax cuts. Simple arithmetic reveals the stunning shortsightedness of this proposition. The federal government collects about 17 per cent of GDP in tax revenues. That roughly equals the outlays on social security, Medicare, Medicaid, veterans’ benefits, defence and interest payments on debt.

All the rest – roads, rail, clean energy, science and technology, diplomacy, international disease control, space, education, job training, water, transport, courts, poverty relief, homeland security, conservation, climate adaptation – is financed on borrowed money. All of these critical areas are underfunded, which hinders productivity, national security and private investment.

There are three parts of a long-term solution. The first is to promote greater exports, partly through dollar depreciation and partly through expanded government support for export financing, for example extended to credit-constrained low-income countries that want to purchase US-produced technology. Dollar depreciation is under way but other kinds of export promotion have not begun.

A second component is a massive expansion of education spending and job training. The unemployment rate among college graduates is only 4.7 per cent, while it is 15.5 per cent among those without a high-school diploma. The US woefully under-invests in education outlays for the poor, who drop out of school and then cannot find gainful employment.

A massive expansion of education and training would address the current unemployment crisis in three ways: by shrinking the numbers of young people searching for work, by building job skills for the future, and by increasing total spending in the economy through education outlays.

The third component is to spur an investment boom in areas of high social return that are currently blocked by the lack of clear policies. The conversion to a low-carbon economy would create jobs in the short run, a more productive economy in the medium run, and US technological leadership in the longer run.

The same is true with the overhaul of America’s ageing infrastructure at a time when cutting-edge technologies can dramatically improve the efficiency of resource use, the safety of the built environment, and the sustainability of our ecosystems.

During the Obama campaign we were told about a green recovery – one where the jobs would come through a massive expansion of low-carbon energy. We were told about plug-in hybrids, intercity fast rail and new water and sewerage plants to replace the crumbling infrastructure. We were told about a new infrastructure bank to fashion complex multi-state projects that would employ huge numbers of workers while building a cutting-edge economy. Full article, http://www.ft.com/cms/s/0/15c18868-ce2f-11de-a1ea-00144feabdc0.html

Friday, November 14, 2009

See Seymour Hersh’s article in the New Yorker, Defending the Arsenal
In an unstable Pakistan, can nuclear warheads be kept safe?
by Seymour M. Hersh http://www.newyorker.com/reporting/2009/11/16/091116fa_fact_hersh

Read more: http://www.newyorker.com/reporting/2009/11/16/091116fa_fact_hersh#ixzz0Wk0G2vKR

From The Huffington Post. [NB: Of course the Obama administration did not follow this plan because they wanted to protect the banks and ensure THE BANKS would not lose money. In their eyes, the consumer comes LAST.

The Economist The Obama Administration Should Have Listened To
http://www.huffingtonpost.com/2009/11/12/the-economist-the-obama-a_n_355022.html

Eight months ago, the Obama administration launched a plan to help troubled homeowners avoid foreclosure by providing $75 billion in taxpayer funds to banks and mortgage servicers. The money was intended to help three to four million homeowners by lowering their monthly payments, largely by cutting their interest rates.

The next day, a Yale economist and a colleague penned a New York Times op-ed arguing for a different approach. Rather than cut interest rates, John D. Geanakoplos and Susan P. Koniak wrote, the government should reduce the overall amount owed on the mortgage — the principal.

“The plan announced by the White House will not stop foreclosures because it concentrates on reducing interest payments, not reducing principal for those who owe more than their homes are worth. The plan wastes taxpayer money and won’t fix the problem,” they wrote.

The facts seem to be bearing this theory out. As many as 3.4 million homes are expected to enter foreclosure by year’s end, with some experts estimating that next year will be even worse. As of Sept. 1, less than two percent of homeowners who received a temporary modification under Obama’s plan ended up with a permanent fix. And so far, the plan has already cost taxpayers about $27 billion.