As Krugman says we’ve ready seen this movie. Let corporations avoid taxes on foreign revenue and they’ll do what they did before, which does not include creating jobs here.   I know why politicians believe it, they”re paid to. The puzzling part is is why voters still believe it.

Apparently being a terrorist leader gets you 6 pages of obituary on the NYTimes.com web site.  All you ever (or never) wanted to know about the life and times of OBL.

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Mean-spirited witch/tea party favorite/sexual abstinence crusader O’Donnell wins the nomination and takes out an electable moderate GOP insider Mike Castle. Castle probably would have won handily in the general election in a generally blue state. O’Donnell will probably lose.

So the ideological purge of heretics from far right orthodoxy continues apace. The GOP seems determined to makes themselves the regional party and a permanent minority. Sadly, for the GOP anyway, the country is shifting demographically to greater ethnic diversity, leaving them as the party of choice for frightened, angry white people.

OK, even by contemporary standards, this is rich: the official Republican stance is now apparently that Bush left behind a budget that was in pretty good shape. Mitch McConnell:

The last year of the Bush administration, the deficit as a percentage of gross domestic product was 3.2 percent, well within the range of what most economists think is manageable. A year and a half later, it’s almost 10 percent.

They really do think that we’re idiots…

…I’d like to think that the raw dishonesty of this latest Bush defense would be obvious to everyone. But after the past decade, I’ve stopped believing such things. They think we’re idiots — and they may be right.

If it’s not so obvious, check the chart in the NY Times link. It’s an old trick, they use fiscal years (which end Sept 30) instead of calendar years. McConnell conveniently leaves out the last quarter of 2008 and the first quarter of 2009, both of which are before Obama’s stimulus package went into effect. It also cuts out the TARP bank bailout that Bush signed into law in the last quarter of 2008. By the end of first quarter of fiscal year 2009 deficits were already at 9% of GDP, before Obama’s stimulus went into effect!

I think this gets to heart of what irritates me so much about the modern republican party. They really do think the American public is as dumb as truck load of bricks. I believe most people simply aren’t interested enough to follow the ongoing national political conversation. Perhaps their too busy trying to make ends meet, working and raising families. Maybe they think the whole thing is a corrupt game where the scum rises to the top. All three (and more) are probably true to some degree. The press is horribly complicit in amplifying false narratives to curry favor and all important access to policy makers. They’re so caught up in hawking stories that drive ratings and advertising revenue, they often miss the truth. The recent Shirley Sherrod affair is a good example of what I mean. It was exceptional in one way: they got caught in a blatant effort to smear her. Usually no one notices.

Op-Ed Columnist – Myths of Austerity – NYTimes.com.

Which brings me to the subject of today’s column. For the last few months, I and others have watched, with amazement and horror, the emergence of a consensus in policy circles in favor of immediate fiscal austerity. That is, somehow it has become conventional wisdom that now is the time to slash spending, despite the fact that the world’s major economies remain deeply depressed.

This conventional wisdom isn’t based on either evidence or careful analysis. Instead, it rests on what we might charitably call sheer speculation, and less charitably call figments of the policy elite’s imagination — specifically, on belief in what I’ve come to think of as the invisible bond vigilante and the confidence fairy.

I’m no New York Times columnist with a PhD in economics and a recent Nobel Prize, but I did do a significant amount of undergrad course work in economics. I think I understand most of the basics in macroeconomics. If you reduce federal spending in the midst of severe downturn, you make it worse.

It really is pretty simple. There are no private sector dollars out there waiting to replace those federal dollars and consumers are not optimistically spending what they have either. This leads me to believe that policy makers have some other agenda. If it’s not restoring healthy economic growth and full employment, then who are they carrying water for?

The Congressional Budget Office, in its analysis of President Obama’s budget proposals, predicts that economic recovery will reduce the annual budget deficit from about 10 percent of G.D.P. this year to about 4 percent of G.D.P. in 2014.

Unfortunately, that’s not enough. Even if the government’s annual borrowing were to stabilize at 4 percent of G.D.P., its total debt would continue to grow faster than its revenues. Furthermore, the budget office predicts that after bottoming out in 2014, the deficit will start rising again, largely because of rising health care costs.

So America has a long-run budget problem. Dealing with this problem will require, first and foremost, a real effort to bring health costs under control — without that, nothing will work. It will also require finding additional revenues and/or spending cuts. As an economic matter, this shouldn’t be hard — in particular, a modest value-added tax, say at a 5 percent rate, would go a long way toward closing the gap, while leaving overall U.S. taxes among the lowest in the advanced world.

But if we need to raise taxes and cut spending eventually, shouldn’t we start now? No, we shouldn’t.

Right now, we have a severely depressed economy — and that depressed economy is inflicting long-run damage. Every year that goes by with extremely high unemployment increases the chance that many of the long-term unemployed will never come back to the work force, and become a permanent underclass. Every year that there are five times as many people seeking work as there are job openings means that hundreds of thousands of Americans graduating from school are denied the chance to get started on their working lives. And with each passing month we drift closer to a Japanese-style deflationary trap.

via Op-Ed Columnist – Budget Deficits – Spend Now, Save Later – NYTimes.com.

Since June 1, when federal unemployment benefits began to expire, an estimated 325,000 jobless workers have been cut off. That number will swell to 1.25 million by the end of the month unless Congress extends the benefits. The Senate, so far, has failed to act.

Some senators, including Democrats, have balked at an unrelated provision that would begin to close a tax loophole enjoyed by some of the richest Americans. You heard right. Desperately needed unemployment benefits have been held hostage to a tax break for the rich, and the Senate’s Democratic leadership has had to delay and finagle to get its own caucus in line.

State-provided unemployment benefits generally last for 26 weeks, and the federal government picks up the tab after that, provided Congress approves the extensions. There is no disagreement over the need: 46 percent of the nation’s 15 million jobless workers have been unemployed for more than six months — a higher level than at any time since the government began keeping track in 1948.

via Editorial – The Unemployed Held Hostage – NYTimes.com.

They were going to use the closure of a tax loophole enjoyed by hedge fund managers that treats all their income as a capital gain in order to pay for the extension some other more useful tax credits. Fund managers get to pay 15%, instead of the top rate of35%. So the unemployed don’t get benefits because hedge fund managers somehow deserve special treatment? Their sycophants in the Senate support this?

The Senate bill is also urgently needed because it includes a provision to provide $24 billion in emergency fiscal aid to states, which is vital to preventing further mass layoffs and damaging budget cuts on the state and local levels.

The right thing to do is obvious. The House and Senate should immediately extend unemployment benefits and aid to states and close the fund-managers’ tax loophole — completely.

That so many senators have balked is a bad sign for the economy and for the most vulnerable Americans. The fact that lawmakers are not willing to ask the nation’s wealthiest to pay their fair share of taxes also makes a mockery of all their talk about deficit reduction.

There’s absolutely no justification for the loophole in the first place.

Op-Ed Columnist – The Fire Next Time – NYTimes.com.

In his speech, Mr. McConnell seemed to be saying that in the future, the U.S. government should just let banks fail. We “must put an end to taxpayer funded bailouts for Wall Street banks.” What’s wrong with that?

The answer is that letting banks fail — as opposed to seizing and restructuring them — is a bad idea for the same reason that it’s a bad idea to stand aside while an urban office building burns. In both cases, the damage has a tendency to spread. In 1930, U.S. officials stood aside as banks failed; the result was the Great Depression. In 2008, they stood aside as Lehman Brothers imploded; within days, credit markets had frozen and we were staring into the economic abyss.

So it’s crucial to avoid disorderly bank collapses, just as it’s crucial to avoid out-of-control urban fires…

…Since the 1930s, we’ve had a standard procedure for dealing with failing banks: the Federal Deposit Insurance Corporation has the right to seize a bank that’s on the brink, protecting its depositors while cleaning out the stockholders. In the crisis of 2008, however, it became clear that this procedure wasn’t up to dealing with complex modern financial institutions like Lehman or Citigroup.

So proposed reform legislation gives regulators “resolution authority,” which basically means giving them the ability to deal with the likes of Lehman in much the same way that the F.D.I.C. deals with conventional banks. Who could object to that?

Well, Mr. McConnell is trying. His talking points come straight out of a memo Frank Luntz, the Republican political consultant, circulated in January on how to oppose financial reform. “Frankly,” wrote Mr. Luntz, “the single best way to kill any legislation is to link it to the Big Bank Bailout.” And Mr. McConnell is following those stage directions.

It’s a truly shameless performance: Mr. McConnell is pretending to stand up for taxpayers against Wall Street while in fact doing just the opposite. In recent weeks, he and other Republican leaders have held meetings with Wall Street executives and lobbyists, in which the G.O.P. and the financial industry have sought to coordinate their political strategy.

And let me assure you, Wall Street isn’t lobbying to prevent future bank bailouts. If anything, it’s trying to ensure that there will be more bailouts. By depriving regulators of the tools they need to seize failing financial firms, financial lobbyists increase the chances that when the next crisis strikes, taxpayers will end up paying a ransom to stockholders and executives as the price of avoiding collapse.

Dimon Sees Big Price Tag for Derivatives Rules – DealBook Blog – NYTimes.com.

JPMorgan Chase could lose up to $2 billion in revenue if the government clamped down on derivatives trading, Jamie Dimon, its chief executive, told analysts on the bank’s conference call on Wednesday to discuss its first-quarter earnings.

“It will be a negative,” Mr. Dimon said. “Depending on the real details, it could be $700 million to a couple billion dollars.”

Mr. Dimon said that he thought most standard derivatives would be required to go through a clearinghouse, but that this change would not hurt the bank’s bottom line so much. The bigger hit would come if the government decided to require more transparency in the opaque over-the-counter derivatives market by forcing those trades to go through a public exchange.

When talking about the Tea Party movement, the largest number of respondents said that the movement’s goal should be reducing the size of government, more than cutting the budget deficit or lowering taxes.

And nearly three-quarters of those who favor smaller government said they would prefer it even if it meant spending on domestic programs would be cut.

But in follow-up interviews, Tea Party supporters said they did not want to cut Medicare or Social Security — the biggest domestic programs, suggesting instead a focus on “waste.”

Some defended being on Social Security while fighting big government by saying that since they had paid into the system, they deserved the benefits.

Others could not explain the contradiction.“That’s a conundrum, isn’t it?” asked Jodine White, 62, of Rocklin, Calif. “I don’t know what to say. Maybe I don’t want smaller government. I guess I want smaller government and my Social Security.” She added, “I didn’t look at it from the perspective of losing things I need. I think I’ve changed my mind.”

via Poll Finds Tea Party Backers Wealthier and More Educated – NYTimes.com.

Funny thing about Social Security is that you don’t pay into the system for you own benefits. It is now and always has been an inter-generational wealth transfer. Your contributions go to pay for current retirees.

It would be nice if all the Social Security recipients in the Tea Party would stop and think about the implications of cutting taxes and government expenditures. Would they be willing to see their Social Security checks and Medicare benefits shrink? Or do they think someone else should bear the burden?

The bit about cutting waste is just silly. There’s not enough there to cut to make a dent in the deficit. The drivers of the deficit are the two largest entitlement programs: Medicare and Social Security. The larger issue is Medicare. Health reform was the first baby steps towards dealing with ever increasing medical costs endemic to our bizarrely inefficient health care delivery system. The Affordable Care Act=deficit reduction.

If you really care about deficit reduction and are intellectually honest about it, you need to go after where the big buck are spent. In addition to the entitlement programs, that would be military spending. An additional point would be the cost of the tax cuts passed under George Bush, which disproportionally benefited the wealthiest Americans. Call it what it was: welfare for the wealthy.

President Obama said Monday that he was revamping American nuclear strategy to substantially narrow the conditions under which the United States would use nuclear weapons.

via Obama Limits When U.S. Would Use Nuclear Arms – NYTimes.com.

What has been really striking has been the eliminationist rhetoric of the G.O.P., coming not from some radical fringe but from the party’s leaders. John Boehner, the House minority leader, declared that the passage of health reform was “Armageddon.” The Republican National Committee put out a fund-raising appeal that included a picture of Nancy Pelosi, the speaker of the House, surrounded by flames, while the committee’s chairman declared that it was time to put Ms. Pelosi on “the firing line.” And Sarah Palin put out a map literally putting Democratic lawmakers in the cross hairs of a rifle sight.

All of this goes far beyond politics as usual. Democrats had a lot of harsh things to say about former President George W. Bush — but you’ll search in vain for anything comparably menacing, anything that even hinted at an appeal to violence, from members of Congress, let alone senior party officials.

No, to find anything like what we’re seeing now you have to go back to the last time a Democrat was president. Like President Obama, Bill Clinton faced a G.O.P. that denied his legitimacy — Dick Armey, the second-ranking House Republican (and now a Tea Party leader) referred to him as “your president.” Threats were common: President Clinton, declared Senator Jesse Helms of North Carolina, “better watch out if he comes down here. He’d better have a bodyguard.” (Helms later expressed regrets over the remark — but only after a media firestorm.) And once they controlled Congress, Republicans tried to govern as if they held the White House, too, eventually shutting down the federal government in an attempt to bully Mr. Clinton into submission.

Mr. Obama seems to have sincerely believed that he would face a different reception. And he made a real try at bipartisanship, nearly losing his chance at health reform by frittering away months in a vain attempt to get a few Republicans on board. At this point, however, it’s clear that any Democratic president will face total opposition from a Republican Party that is completely dominated by right-wing extremists.

via Op-Ed Columnist – Going to Extreme – NYTimes.com.

Bush can pass tax cuts guaranteed to lead us down the road to fiscal suicide, while enriching the wealthiest and he’s a hero to the GOP. Obama passes HCR which actually reduces the deficit while helping millions and the death threats fly. The true (evil) genius of the right is in convincing workaday Americas to vote against their economic interests over and over. My favorite recent example is this Militia Leader who was calling for breaking the windows of Democratic offices:

Vanderboegh, who lives in the Birmingham suburb of Pinson, described himself as a “Christian libertarian” and said he has long been a gun rights advocate. He said he joined a clandestine militia group called the “Sons of Liberty” and later became a public leader of the First Alabama Cavalry, Constitutional Militia..

…Vanderboegh said he once worked as a warehouse manager but now lives on government disability checks. He said he receives $1,300 a month because of his congestive heart failure, diabetes and hypertension. He has private health insurance through his wife, who works for a company that sells forklift products.

I guess he doesn’t see the irony. What the hell is a “Christian Libertarian” anyway? Is that they don’t believe in government intervention unless it’s an attempt to ram their oddly slanted form Christianity down your throat?

Jonathan Chait and Robert Waldmann, in slightly different ways, highlight a crucial dynamic in American political debate: the extent to which public figures are punished for actually knowing what they’re talking about.

It goes like this: Person A says “Black is white” — perhaps out of ignorance, although more often out of a deliberate effort to obfuscate. Person B says, “No, black isn’t white — here are the facts.”

And Person B is considered to have lost the exchange — you see, he came across as arrogant and condescending.

I had, I have to admit, hoped that the nation’s experience with George W. Bush — who got within hanging-chad distance of the White House precisely because Al Gore was punished for actually knowing stuff — would have cured our discourse of this malady. But no. Why not?

Chait professes himself puzzled by the right’s intellectual insecurity. Me, not so much. Here’s how I see it: in our current political culture, the background noise is overwhelmingly one of conservative platitudes. People who have strong feelings about politics but are intellectually incurious tend to pick up those platitudes, and repeat them in the belief that this makes them sound smart. (Ezra Klein once described Dick Armey thus: “He’s like a stupid person’s idea of what a thoughtful person sounds like.”)

Inevitably, then, such people react with rage when they’re shown up on their facts or basic logic — it’s an attack on their sense of self-worth.

The truly sad thing, though, is the way much news reporting goes along with the condescension meme. That’s Waldmann’s point. You really, really might have expected that the Bush experience would give reporters pause — that they might at least ask themselves, “Isn’t it my job to ask whether a politician is right, as opposed to how he comes across?”

via Economics and Politics – Paul Krugman Blog – NYTimes.com.

It’s worth just for the line about Dick Armey, but on a more serious note it does say a lot about our political system. It has to all come back to the educational system. It’s harder to get away with obfuscation when dealing with people capable of critical thinking. Maybe people of good conscience will come to different conclusions as to the best course, but hopefully they have the internal resources to sort out obvious (if pleasant sounding) bullshit. It does seem the American people are addicted to truthiness

Imagine if, one year ago, Congress had passed a stimulus bill that really worked.

Let’s say this bill had started spending money within a matter of weeks and had rapidly helped the economy. Let’s also imagine it was large enough to have had a huge impact on jobs — employing something like two million people who would otherwise be unemployed right now.

If that had happened, what would the economy look like today?Well, it would look almost exactly as it does now. Because those nice descriptions of the stimulus that I just gave aren’t hypothetical. They are descriptions of the actual bill.

via Economic Scene – Success of Stimulus Bill Is Noteworthy as Another Is Weighed – NYTimes.com.

Mr. Patir, 59, pulled a quarter from a pocket. He happened to be walking by the phone booth when he decided to call his son. He has been out of work for five years, ever since his stroke, and he said he ran out of money to pay his cellphone bill two weeks ago. Asked why he called from that phone at that moment, he replied, “Loneliness, loneliness, loneliness.”

Mr. Patir’s son did not answer. He left a message. “I just asked him why nobody think about me,” he said. “Nobody calls me.”

via Listening In on a Pay Phone in Queens – NYTimes.com.

Over the past decade the United States and Canada faced the same global environment. Both were confronted with the same flood of cheap goods and cheap money from Asia. Economists in both countries cheerfully declared that the era of severe recessions was over.

But when things fell apart, the consequences were very different here and there. In the United States, mortgage defaults soared, some major financial institutions collapsed, and others survived only thanks to huge government bailouts. In Canada, none of that happened. What did the Canadians do differently?

It wasn’t interest rate policy. Many commentators have blamed the Federal Reserve for the financial crisis, claiming that the Fed created a disastrous bubble by keeping interest rates too low for too long. But Canadian interest rates have tracked U.S. rates quite closely, so it seems that low rates aren’t enough by themselves to produce a financial crisis.

Canada’s experience also seems to refute the view, forcefully pushed by Paul Volcker, the formidable former Fed chairman, that the roots of our crisis lay in the scale and scope of our financial institutions — in the existence of banks that were “too big to fail.” For in Canada essentially all the banks are too big to fail: just five banking groups dominate the financial scene.

On the other hand, Canada’s experience does seem to support the views of people like Elizabeth Warren, the head of the Congressional panel overseeing the bank bailout, who place much of the blame for the crisis on failure to protect consumers from deceptive lending. Canada has an independent Financial Consumer Agency, and it has sharply restricted subprime-type lending.

Above all, Canada’s experience seems to support those who say that the way to keep banking safe is to keep it boring — that is, to limit the extent to which banks can take on risk. The United States used to have a boring banking system, but Reagan-era deregulation made things dangerously interesting. Canada, by contrast, has maintained a happy tedium.

via Op-Ed Columnist – Good and Boring – NYTimes.com.

I’ve said this many times and it bears repeating, markets are only as good as the framework they operate within. They are not magic. They may produce efficient allocation of resources under a specific set of conditions, but are prone to manipulation by powerful players and are prey to many forms of market failure. They can be gamed and abused in ways that put the larger economy at risk. Our banking disaster is a case study in regulatory capture, where the industries to be regulated came to control the agencies designed to oversee them.

Since we still have Ben Bernanke at the Fed, Tim Geitner at Treasury and Larry Summers as director of the National Economic Council, we have apparently learned nothing. These are people who were directly part of the the failure and came from Wall Street or were part of the effort to deregulate banking that was the part of the reason we are where we are today. We are:

1. Rewarding massive failures
2. Failing to learn from past mistakes
3. Listening to those who’s advice got us to where we are

Couple that with a recent political history of being institutionally incapable of making hard choices and the road ahead doesn’t look pretty. I’m not optimistic that we can do what’s necessary, particularly in light of the recent Supreme Court decision to strike down campaign finance laws designed to limit corporate influence in federal elections.  Look for Wall Street to dump money into and provide advertising support for Congressional candidates who oppose new regulation on banks. They’ll probably use some Orwellian named astroturf front goups with names like “Citizens for Responsible Banking”. Candidates might mouth the right words in front of cameras, but who do you think they’ll listen to? The public or those who have the power to ensure they maintain their position of privilege and power in Washington?

Maybe there should be a truth in advertising law for front goups and the names they chose. Would you believe an ad if it was paid for by “Billionaires for Bank Failures” or “Citizens for Future Taxpayer Bank Bail Outs”? While we’re at it can we re-name the TARP (Toxic Asset Relief Program) and call it something more appropriate, like BARF (Bad Asset Relief Fund). That’s much more evocative of how it makes me feel.

Op-Ed Columnist – Do the Right Thing – NYTimes.com.

A message to House Democrats: This is your moment of truth. You can do the right thing and pass the Senate health care bill. Or you can look for an easy way out, make excuses and fail the test of history.

Well of course they oppose a panel for deficit reduction, they created it. It came from unfunded tax cuts and benefit increases (think Medicare Part D), coupled with two unfunded foreign wars. They see Democrats retreating on HCR and are pressing their advantage. Democrats still lack leadership to create a sustained, disciplined message or even articulate goals. Obama needs to get his hands dirty on the poltical side if he ever wants to get anything done.

Since his election Obama seems to want to remain above the fray and do rational policy from the White House. Great policy means nothing if you lack the will to implement it politically. Basic ideas are sound, but implementation sucks! The willingness to concede ground for no advantage seem tone-deaf. They managed to do less with a greater majority than Bush ever had. Then they managed to lose the Kenndey Senate seat in Mass. in a massive display of political incompetence, both locally and nationally. A year in and Obama still doesn’t seem to understand the job or how to be effective in it. We don’t have a lot of time and he’s blowing his biggest window of opportunity to get things done. What a waste…

Krugman tries to talk sense to reflexive Euro-bashers.  Adopting a more humane attitude by taking steps to ensure everyone in the richest nation on earth has access to health care isn’t going to turn us into some kind of socialist dystopian nightmare. And the idea that Europe is economically stagnant because workers get certain mandatory benefits like vacation and (GASP!) sick leave and health benefits just isn’t true. It sticks in the craw of conservatives who prefer what feels true to what’s actually true.