Relevant and even prescient commentary on news, politics and the economy.

Due Process: Holder vs Colbert. Art or Reality. Choose.

Re-posted from last year is Dan Becker’s post:

Due Process: Holder vs Colbert. Art or Reality. Choose.
This is the object:

No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury,… nor be deprived of life, liberty, or property, without due process of law;

It’s all one sentence. Any questions?

This is Art:

The lyrics of Grand Funk Railroad’s Paranoid

Did you ever have that feeling in your life

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Chechnya and 2004

Reader Matthew McOsker sends a note pointing us to 2004 and reading for context:

Who are the Boston Marathon terrorists? Some early reports state the men are Chechen. So where does Chechnya fit into global terrorism? I found the following piece that gives a nice summary:

” On September 1, 2004, a group of Chechen terrorists took hostage and two days later murdered at least 335 schoolchildren and parents in Beslan, a town in the Russian republic of North Ossetia. The atrocity focused world attention on Chechnya. The Russian government used the event to reiterate its arguments that Chechen terrorists and foreign jihadists supporting them have ideological, financial, and operational ties with Islamist terrorist organizations such as Al-Qaeda.[1] Although President Vladimir Putin and top Russian security officials provided evidence of links between Chechen fighters and Al-Qaeda, European politicians and mainstream Western journalists focused instead upon the Russian army’s brutality and dismissed Putin’s claims as an attempt to gain sympathy in the West and deflect criticism of Russia’s handling of a nationalist insurgency. ”

http://www.meforum.org/744/how-chechnya-became-a-breeding-ground-for-terror

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Reagan and Rios Montt: The Company You Keep

by Mike Kimel

Reagan and Rios Montt: The Company You Keep

Former Guatemalan dictator Efrain Rios Montt is on trial for genocide.

I was born in the US, but my formative years were spent in South America in the 1980s. That the right wing Guatamelan military dictatorship was massacring unarmed civilians on a large scale was no secret, andwas widely known and reported even in a region full of right wing military dictatorships engaging in large scale atrocities against civilians. On private channels, the CIA was reporting that “when an army patrol meets resistance and takes fire from a town or village it is assumed that the entire town is hostile and it is subsequently destroyed… The well documented belief by the Army that the entire Ixil Indian population is pro-EGP has created a situation in which the Army can be expected to give no quarter to combatants and non-combatants alike.” Part of the document from which those quotes were derived has still not been declassified, so there is no telling what else is in it.

All of which is to say, Ronald Reagan knew precisely what was happening when he said Rios Montt “is a man of great personal integrity and commitment” and that the dictator was “http://www.presidency.ucsb.edu/ws/index.php?pid=42070″>”totally dedicated to democracy in Guatemala.” Reagan would later lift the military embargo to Guatemala which aided in the genocide.

It’s also worth noting that Rios Montt counts Pat Robertson as a personal friend, and was buddy-buddy with Jerry Falwell before the latter’s death as well.

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F-35 and sequester dollars and cents

With constant delays due to significant engineering issues and design flaws, the cost of the F-35 has risen to $395.7 billion. But that’s just to build the planes. When you add in the cost of testing, operations and support, it will cost an additional $1.1 trillion — bringing the overall price tag to an incomprehensible $1.5 trillion.2

Think about this — the sequester, which cut $1.2 trillion from the budget, is actually less money than the entire F-35 program. Instead of cutting vital programs like Medicare, education, Head Start and unemployment insurance, we could end the F-35 program and invest in jobs and crucial services in our communities.

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How high does senior poverty have to go?

It’s official: President Obama has proposed cutting Social Security by replacing the program’s current inflation adjustment with the stingier “chained” Consumer Price Index. As I’ve discussed before, this risks undoing all the progress made against senior poverty since the passage of Medicare and Medicaid in 1965. 25% of seniors were poor according to official poverty line in 1968, compared to just 9.4% in 2006. Note, however, that the Supplemental Poverty Measure, which includes things like out of pocket health care expenses which hit seniors disproportionately, already shows a 16.1% rate by 2009. And our senior poverty rate, measured by the international standard of 50% of median income, is already 25%, much higher than most developed countries, more than three times Sweden’s rate and over four times as high as Canada.

Why is Obama doing this? We just rejected the candidate who wanted to cut Social Security and Medicare. Perhaps, as Krugman (link above) suggests, he chasing the fantasy of “being the adult in the room,” but this is a losing proposition. As Brian Beutler points out:

Just like that, Chained CPI morphs from a thing President Obama is willing to offer Republicans into a thing Republicans dismiss as a “shocking attack on seniors.”

We’ve seen this game before. The Heritage Foundation’s health care plan became “death panels” when President Obama endorsed it.  And, as Beutler’s title makes clear, we have plenty of examples of the President negotiating with himself to bad effect, most notably in the 2011 debt ceiling battle.

If this cut really happens, Social Security benefits will steadily fall in true inflation-adjusted terms due to the magic of compounding. Moreover, with 49% of the workforce having no retirement plan at work and another 31% with only a grossly inadequate 401(k), the cuts will worsen the coming retirement crisis. The only question will then be: how high will senior poverty have to go before we do something about it?

Cross-posted from Middle Class Political Economist.

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…exceeding $3 million in such accounts is not very difficult for an individual

Greg Mankiw suggests a part of the new budget proposed by President Obama affects 401k and IRA accounts. Some comment in general retirement accounts from AB starts here.

Apparently, President Obama’s budget is going to include some kind of penalty for people who have accumulated more than $3 million in retirement accounts.  The details are not yet known, but I think we know enough to say that this is a terrible idea. A sizable body of work in public finance suggests that consumption taxes are preferable to income taxes.  Completely replacing our tax system with a better one is, however, hard.  Retirement accounts, such as IRAs and 401k plans, are one way our tax code has gradually evolved from an income tax toward a consumption tax.  The use of these accounts should be encouraged, not discouraged.

By the way, exceeding $3 million in such accounts is not very difficult for an individual who is financially successful and frugal.  Under current law, a self-employed person can put about $50,000 a year in a SEP-IRA.  If he does that every year for 40 years, and his savings earn a return of 5 percent per year, he will retire with about $6 million.

 Pro Growth Liberal notes another aspect of Greg Mankiw’s outlook:

Greg explains by noting some folks can readily put away $50,000 a year. The median worker, however, cannot. But there may be something else afoot here as Brian Beutler explains: 

One way experts believe financial managers avoid the current annual contribution limit to IRAs is by using IRAs to participate in investments and assigning those investment interests a nominal value vastly below fair market. 

Brian cites as an example some clever tax planning done by a chap named Mitt Romney.

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Margaret Thatcher, Polarizing Right-Winger

Margaret Thatcher, Polarizing Right-Winger

The major news media celebrated Margaret Thatcher upon her death.  They seem to praise her stubbornness and ability to move the UK to support her very conservative anti-union, pro-deregulation and privatization policies and talk of her impact on the UK.  David Brooks, a typical voice on the right who saw Thatcher as a hero of conservative politics, has this to say in his op-ed in the New York Times today, The Vigorous Virtues, New York Times (Apr. 9, 2013).

Margaret Thatcher was a world historical figure for the obvious reasons.  Before Thatcher, history seemed to be moving in the direction of Swedish social democracy. After Thatcher, it wasn’t. 


She lionized the self-made striver. …She championed a certain sort of individual …: “upright, self-sufficient, energetic, adventurous, indepedent-minded, loyal to friends and robust against foes.” (quoting Shirley Letwin)
… 

Today, bourgeois virtues like industry, competitiveness, ambition and personal responsibility are once again widely admired …. Today, technology is central to our world and tech moguls are celebrated.  Tony Blari and Bill clinton embraced and ratified her policy shifts.  Millions more have been influenced by her idea of what makes an admirable individual.

A.C. Grayling presents a much more realistic–and somber–view of Thatcher’s “contribution” to the UK in his op-ed, Thatcher’s Divided Isle, New York Times (Apr. 9, 2013).

It is hard to think of a more divisive figure in British politics than Margaret Thatcher. 

 … 

Her admirers laud her for breaking Britain’s once-powerful trade unions, and liberalizing the City of London’s financial services industry; these acts, they say, halted the country’s economic decline.  Her detractors blame her for destroying much of the country’s manufacturing base by refusing to aid struggling industries and effectively annihilating the mining sector by emasculating the National Union of Miners.  Her premiership will always be remembered for the bloody battles between workers and the police, and the high unemployment and sudden appearance of industrial wastelands that followed.  

Mrs. Thatcher left behind a changed and divided Britain.  She dismantled local government structures
 …
which meant that urban decay and the effects of unemployment were not adequately countered.  …..[S]he did little to advance the cause of women generally. …She was also unfriendly towards homosexuals. … 

She began the deregulation of banking that led ultimately to Britain’s contribution to the global financial crisis of 2008.  She reversed the trend of greater social integration and diminishing of the wealth gap that had characterized Britain in the three decades after 1945.  Postwar convergences in class and wealth disappeared and former divisions resurfaced as consumerism and social incivility followed quickly on her brusque reorganization of British society. …

This much is quite clear:  Thatcher wanted to break unions, privatize public resources, and deregulate industries.  She pushed the same ideological conservative manifesto that Ronald Reagan did in the USA. Reagan’s legacy (and Thatcher’s) regretably lives on today as we face daunting inequalities of opportunity and resources, inequalities that underlie a host of other problems in society.  It traces back to the use of Friedman’s Chicago School “free market” theories to push lower taxes for the wealthy, expanded use of more regressive taxation and less supportive social insurance programs (the calls for a VAT or national sales tax to replace income taxation, the demands for Social Security cuts and Medicare premium increases, etc.), treating government as “the problem” rather than an essential part of the solution, unquestioning admiration of the wealthy few as “responsible” “job creators”  and an accompanying trend to treat the poor and lower income (Romney’s “47%”)  as irresponsible bums living off so-called “entitlements”.  The result is the expansion of harmful extremes of inequality from coupling regressive tax policies  with wealthy corporatists’ capture of elective officials (think Citizen’s United) and hence of legislative policies.

cross posted with   ataxingmatter

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Employment Situation

The headline numbers in the employment report were very weak as  payroll employment rose by only 88,000  and the household survey reported a -206,000 drop in employment while the labor force fell by -496,000.  The futures markets are reacting very badly.  But the workweek expanded and aggregrate hours worked increased 0.3% as compared to 0.5% last month.

Private payrolls grew  96,000  and government employment fell 7,000 implying that the sequester is not yet having a significant impact.

After falling to  below trend last year hours worked is now back on the 0.2% trend displayed earlier in the cycle.   So basically it looks like the headline numbers are overstating the weakness.


Interestingly, my bond valuation model still says that the 10 year T Bond yield should be about 1.5%.
 The model still has fed funds in it, but  nothing else to capture other measure of fed policy..

Average hourly earnings were essentially unchanged last month, but the smoothed data still implies that wage gains have bottomed.

Average weekly earnings also still looks like it has  bottomed.

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Employment Situation

This was one of the better employment reports of this cycle.  Private payroll employment grew 246,00
while  government employment fell about 10,000 for a net gian of of 236,000.  The household survey also showed a nice gain of 170,000.

 

On a year over year change basis both series are showing nice gains.




You would never know it to listen to the news, but employment in this cycle continues to better than in the previous   cycle.

The workweek also increased 0.1% and the index of aggregate hours worked grew 0.5% of all workers and 0.9% for production workers.  The index is now back to the trend established early in the cycle.

Average hourly earnings growth has bottomed and are starting to move up very nicely.


And this is leading to an improvement in weekly earnings.


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