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

Length of Unemployment is Worst Since World War II

Middle Class Political Economist: Basics: Length of Unemployment is Worst Since World War II.. (HT Brad DeLong.)

The key graph:

Assuming the economy is “trying” to reach equilibrium, this suggests that it “wants” less workers.

If that is a secular trend, as suggested by the steadily lengthening jobless recessions since the 80s,

…we’re faced with the need for a new structure wherein people’s claims to a decent share of the pie are not linked to their ability (luck) in finding well-compensated employment. Alternative means are necessary to provide widespread prosperity and the widespread demand that gives producers the incentive to expand and innovate.

Have I mentioned expanding the EITC lately, and indexing it to unemployment?

Cross-posted at Asymptosis.

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Social Security as you know it, it’s over, forget about it.

I caught a bit of Jennifer Granholm’s The War Room for 2/23/12.  She was talking gasoline prices and had Ron Klain on for his ideas. He is a past chief of staff for Gore and Biden as VP’s. Mr. Klain also published his thought at Bloomberg2/20/12.
This post is not about solving the rising gasoline costs. This post is about the further screwing of the 99% by further reducing their security from the risk of life and living.
Let’s cut to the chase: 
One idea might be a “pocketbook protection” plan, which would work as follows: If the average price of gas exceeds $4 a gallon, an additional, automatic payroll tax cut of 1 percent would kick in, as much as $50 per month, per person. The cut would stay in place for at least 90 days; it would disappear when the price fell below $4.00 per gallon.
There are three advantages to this approach. First, because the plan is of limited duration and is capped at $50 a month, its cost is relatively modest — about $5 billion a month, or $20 billion total, assuming the usual four-month gas-price surge. Second, because it isn’t a reduction in gas taxes, it doesn’t weaken any incentives for fuel conservation or efficiency: All workers get $50 to soften the blow of higher gas prices, but the less fuel they use, the more money they save. And third, the relief provides the greatest relative help to lower-income workers who need gas to commute and feel the price pinch the hardest.
I have to assume our Colberly’s head has just popped. What Mr. Klain has proposed is the exact danger many have warned about regarding the use of SS as a means to make up for what is a major functional problem of our current economy: lack of share of income to the masses.

I have pointed out many times that we can not make up for the $1.1 to $1.4 trillion per year of income no longer in the hands of the 99% that is in the hands of the 1% with tax reductions. It can not be done. With that fact, considering taxation reduction in any form as a method to address this specific issue is nothing more than the continuation of the false economy that financialization created as observed from the position of those in the labor part of the economy. It quite literally is the government now using the mathematical gymnastics pioneered by Wall Street to trick the masses into believing that home equity was the same as earned income. Getting a tax cut anywhere is not the same as receiving a greater share of the nation’s income.  It is money, by the way, that you are more than justified to receive because you helped to create it. The rich used to have an opportunity to relearn this lesson every time there was a major strike, say the NY City trash collectors going on strike.
People, I hope we have learned that one’s home, your house has a more important roll to play in your life other than that of asset appreciation. The home is one of the foundations used to reduce the risk of living, of having a life: shelter. Social Security is another one of those life’s risk reducing foundations: longevity. I have asked often here: How many times to do we have to relearn a lesson?
Using SS as a means to offset the results created over the long term from bad policy is the polluting of a very good policy. We can look at the housing crisis as another already experienced pollution. The good policy was promoting home ownership. The bad policy was setting up an economy that changed the perception of home ownership from a life risk reduction activity to an asset building activity. Now that SS has been used once as a solution to an unrelated problem and extended once in a manor that moves it further from the original purpose (reduction of risk of living), with Mr. Klain’s proposal, the use of SS as a back stop for non-related policy results has become an unquestioned and considered reasonable use.
Mr. Klain’s proposal so exemplifies what our politico’s now consider acceptable for SS’s use that he even proposes to pay for it via a general funding solution: 
The plan could be almost entirely paid for with a modest, no-loopholes surcharge on corporate taxes on profit derived from the higher gas prices. The administration would be able to avoid pejorative terms such as “windfall” or “excess” profit tax, because the tax is neither confiscatory nor punitive. With higher gas prices, oil companies will make record profit — and a partial surcharge will still leave that profit at record high levels. In other words, the plan isn’t vulnerable to suggestions of creeping, soak-the-rich redistribution. It would leave in place all incentives for oil companies to increase production, do more research and development, and explore alternative fuels. But a modest surcharge would help fund at least a partial pocketbook protection program to make sure the cost of the oil companies’ gain isn’t excessive pain for the rest of us.
Just to be clear, that Mr. Klain proposes using SS for anything other than SS is the problem. The only difference in such action compared to the housing crisis which was tied to the removal of specific banking regulation is that it took us 10 year or so to experience the warning of Senator Byron Dorgan.

For those warning about the proverbial slippery slope phenomenon of using SS as a back stop for bad policy results leading to furthering the destruction of SS, it’s only been about 3 years since this application of SS first became a reality. This use is now acceptable. Social Security has now officially been changed from a purpose specific funded program to an general revenue program.  The establishment is so comfortable within this frame of use for SS we get a proposal such as Mr. Klain’s.   We also have on the record a warning in the vein of Senator Dorgan’s  from Senator Harkin:
“This Congress will be making a grave mistake — a grave mistake — and reinforcing a dangerous precedent,” Harkin said in a dramatic Senate floor speech late Thursday.
Mr. Klain freely proposing another application of a SS tax cut is proof of the truth to Senator Harkin’s warning.  The precedent stands.  It is “codified”.   And, with this precedent the conservative/monied movement has neutralized another barrier protecting SS and it’s status as the end-all be-all of the New Deal: the Democratic Party.
The Movement has also successfully completed the instillation of it’s virus known as Financialization into the nervous system of our government. Social Security no longer thinks as the mind of one living in a labor economy; as the 99%.  It thinks as the mind of one living in a money from money economy; as the 1%.

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Steven Rattner Cross-Examines Romney. Hooray.

Steven Rattner, the lead adviser on the Obama administration’s auto task force in 2009, has an op-ed titled “Delusions About the Detroit Bailout” in today’s New York Times.   Some highlights:

As a presidential aspirant, Mr. Romney evidently hasn’t felt a need to be consistent or specific as to what should have been done to address the collapse of the auto industry starting in late 2008. But the gist is that the government should have stayed on the sidelines and allowed the companies to go through what he calls “managed bankruptcies,” financed by private capital.

That sounds like a wonderfully sensible approach — except that it’s utter fantasy. In late 2008 and early 2009, when G.M. and Chrysler had exhausted their liquidity, every scrap of private capital had fled to the sidelines.

I know this because the administration’s auto task force, for which I was the lead adviser, spoke diligently to all conceivable providers of funds, and not one had the slightest interest in financing those companies on any terms. If Mr. Romney disagrees, he should come forward with specific names of willing investors in place of empty rhetoric. I predict that he won’t be able to, because there aren’t any.

Rattner then says that without government financing, the two companies would have been unable to undergo Chapter 11 reorganization, and instead would have been forced to cease production and liquidate.  He then addresses the claim that Obama improperly rigged the reorganization to favor the UAW:

Among Mr. Romney’s grievances — and to be fair, those of other opponents of the auto rescue — is that the auto task force trampled on bankruptcy precedents and even the law to effect President Obama’s plan of “shared sacrifice” by all stakeholders.

What he conveniently ignores is that the president’s plan was litigated throughout the federal court system — all the way to the Supreme Court, in the case of Chrysler — without so much as a nod to the opponents from a single judge.

“[E]very stakeholder received more from our plan than if the companies had been left to go bankrupt on their own,” Rattner says.

My question is: Why has Romney gotten away for so long without being asked during say, one of the 20 debates, who, exactly, would have provided the private funding that he claims was available.  And, if he can’t answer that question, why does he keep making the claim?

Apart from the obvious—that Romney habitually simply fabricates statements of fact to support his ideology and his political ambitions—this particular fabrication seems to me to get to the very heart of the supposed raison d’être for his candidacy: his business and economics acumen.  He either was dangerously mistaken about the availability of private funding for the restructurings or, as president, he would just make up evidence on which to base critical decisions—with results as dramatically different than he predicts at the outset as the auto company bankruptcies would have been had Bush and Obama actually followed his advice as he now claims they did.  
Why has this not occurred to anyone until now?  Anyone who matters, anyway.

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Romney’s association with corporate tax shelter schemes

By Linda Beale

Romney’s association with corporate tax shelter schemes

Bloomberg’s Jesse Drucker has been doing some research into presidential candidate Mitt Romney and come up with some interesting information–at least for those of us who find corporate involvement in aggressive tax shelter phantom loss generating schemes a worrisome problem. See Drucker, Romney as Audit Chair Saw Marriott Son of Boss Shelter Defy IRS, (Feb. 22, 2012).

Mitt Romney has been on the board of Marriott INternational Inc. on and off since 1993, and has served as chair of the audit committee for 6 years. During that period, the company has used aggressive tax avoidance deals, including (i) the “Son of BOSS” tax shelter structure for generating artificial losses that could be used to offset gains from other sources, thus reducing taxable income and tax liabilities and (ii) shifting profits to a Luxembourg shell company. Marriott’s effective tax rate has been as low as 6.8%, even though the federal statutory rate for corporations is 35%.
These factoids demonstrate two things.

First, as the article points out, Romney claims that his business experience is the primary reason that Americans should want to see him in the White House. Contrary to his claim, it seems to me that the more we hear about his business experience the less I think he is suited to the White House.

At Bain Capital, as at most private equity firms, Romney was willing to reap millions from taking a stable, operating company and turning it into a bankrupt by leveraging it up, firing employees, and otherwise destroying the stable business. Yeah, sometimes the “creative destruction” worked and the company exited making profits. But often it didn’t, and the company wasn’t a loser until Bain Capital got hold of it. Further, Romney doesn’t appear to have developed much of a sense of corporate social responsibility through his “earning” of multi-millions taxed at low rate through Bain Capital. So he didn’t see anything amiss in the very aggressive tax planning engaged in by Marriott when he served as a Marriott director with oversight responsibility–of which he certainly knew, as head of the audit committee. Even John McCain was aghast at Marriott’s wanton use of tax shelters, when he complained about the federal tax credits Marriott claimed in an accidental loophole in the law on synthetic fuels. As the piece notes, McCain called Marriott’s use of this loophole to claim the credits an “expensive hoax” or “scam.”

Do we want as president a man who thinks it is okay for taxpayers to gin up artificial losses to reduce their tax liability or use provisions of the Code in ways that clearly go against their underlying purpose to get an unintended subsidy from the Federal government? I don’t think so. Such a person would likely be quite willing to see further cuts to the corporate taxes and taxes on the wealthy, no matter what that does to the federal fisc. And Romney has certainly demonstrated his willingness to cut taxes even in the face of deficit claims that are being used to demand privatization of Social Security and cuts to Medicare. (See his plan for a 25% corporate rate, a zero percent estate tax, a lower top rate on earned income for the wealthy, and other items.)

I want a president who considers that every taxpayer has an obligation to the integrity of the system, and who would not look kindly on businesses that engage in aggressive tax minimization transactions that don’t hold up to the laugh test.

Second, major corporations aren’t paying enough–much less too much –in taxes these days. We have a statutory rate of 35%, but most very profitable corporations end up paying very little in taxes, through a combination of excessive loopholes built into the Code by their accommodating buddies in Congress (quid pro quo for campaign contributions or, after Citizens United, “independent” super-PAC donations?) and outright tax sheltering through aggressive customized transactions intended to generate tax benefits.

Why in the world would anybody in his/her right mind propose cutting the corporate tax rate in this context of minimal tax payments by corporations? Makes no sense at all. Get rid of the loopholes. Bear down with enforcement clout on the phony tax-loss shelters. But don’t cut the corporate tax rate. There’s absolutely no substance to the constant whine we hear from corporate lobbyists that the corporate tax code is “too complex” (my JD students in corporate tax are quite capable of understanding it, so I am sure Corporate Tax Counsel are, too); or that the corporate tax code is “anticompetitive” (Marriott is making a fine rate of return); or that the corporate tax code is “preventing investments” (corporations have lots of cash floating around–if they want to make expansion investments, they can do so already).

Tax policy should be based on reasonable considerations of efficiency and simplicity, not exorbitant and unfounded claims of how the tax code is wrecking business. But even more importantly, tax policy should be based on fairness considerations. And Romney hasn’t shown much understanding of what fairness is, or how to make the tax code fairer rather than even more of a government program for redistribution upwards.

crossposted with ataxingmatter

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Is America Losing Its Drive? – Pt. 3 Vehicles per 1000 Persons

In private communication, Roger Chittum got me thinking about the vehicle component of gasoline consumption. I’m going focus on the gross vehicle numbers, and not get too deeply into the car/truck/SUV product mix detail.   Data is from the Department of Energy TRANSPORTATION ENERGY DATA BOOK: EDITION 30—2011.   (Warning:  414 page pdf.)

According to Table 3-5 on page 3-9, vehicle ownership, measured as vehicles (both cars and trucks) per 1000 population, peaked in 2007 at 843.57, and dropped by 1.88% to 828.04 in 2009, two years later.  Data presented in the source is from 1900 to 2009.  This graph shows the data from 1950 to 2009.  Recessions are highlighted in red.

During the post WW II era up to 1982, recessions might have slowed the growth of vehicle ownership, but they did not cause a decline.  Even the severe recession of 1958 only caused a flat spot on the curve.


This changed with the double dip recessions of 1980 to 1982.


The reduction from 1981 to ’82 is miniscule.  But since then, every recession has led to a significant reduction from the previous year.  As an aside, this is one more time series that shows a change in character right around 1980.

This source indicates the most recent value for the U.S. is 765, though it’s not clear what “most recent” means.  If this is accurate, then ownership has back-tracked to the 1994 level.   This would correspond to a 7.6% drop from 2009, and an astounding 9.3% drop from the 2007 peak.  I don’t believe it; but that value is indicated with a red dot on the next graph, as a point of reference.

I’ve also included some best fit straight lines to show how the slope has changed over time.  The decreasing slope and more serious response to recessions might result from a market being close to saturation, but that’s just a guess.

One of the reasons I’m skeptical of the red dot point is that new vehicle sales have recovered substantially from the 2009 low, as this graph from Calculated Risk demonstrates.  (The August, 2009 spike is the cash for clunkers event.)

This might not be enough to stop a continuing slide in the vehicles per 1000 population number, but I think it’s enough to keep it from falling off a cliff.

Another perspective on vehicle use comes from Table 3.3 on page 3-5 of the Data Book.  This graph shows the Federal Highway Administration estimate of vehicles in use.

Except for recessions (highlighted in red on the total line) growth of the total vehicle count has been been quite constant over four decades.  But, since the mid 80’s, car sales have been stagnant.  All of the growth since then has come from truck sales.  It will be interesting to see how these trends develop over the next few years.

Part 2
Part 1
Cross posted at Retirement Blues

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It’s Only the Bottom of the Second: Fearful of Losing My Bet with Lance

Greg Sargent, whose Gatekeeper Job at Kaplan Prep Daily makes him somewhat important in determining the results of elections, cast a pale over my good mood about my dinner bet with Lance Mannion this morning:*

Having trouble getting outraged with Romney campaign sending out only good parts of Det[roit] News endorsement. Seems like par for course.

Romney is still dealing with Newton Leroy, the Gold Bug, and the Spreading Guy. Which means the big money on his side is still somewhat diffuse, what with Sheldon Adelson still considering wasting more money Stimulus Spending on The Never-Ending Book Tour and Foster “put an aspirin between your knees; I’ve never heard of doggie-style” Freiss still supporting, and supported by, Beelzebub in a Sweater Vest. Not to mention whoever (other than himself) is spending money to keep Mr. My-Son-Might-Be-the-Vice-Presidential-candidate-and-all-I-got-was-this-racist-newsletter in front of the CNN cameras.

Short version of the above: It’s a long time before the election. If the Supposedly Liberal Gatekeepers are already becoming inured to Romney’s, er, Selective Amnesia—what humans would call “lying”—it’s going to be a Very Long Summer and Fall.

Probably from Grace, voluntarily.

*All right, he sent it out last night. But Twitter is potentially asynchronous, and I only read it this morning. Before then, it was alive in another reality, like that bloody, overused, misinterpreted-as-if-it-were-an-economic-model of a cat.

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How the Internet Can Make You Smarter, Today’s FT Version

Today’s Page 1, above-the-fold, biggest type headlines for the FT:

  1. US PDF edition: “Obama proposes corporate tax rate cut: System ‘outdated, unfair, and inefficient’

  2. US Print edition: “Obama and Romney unveil rival tax plans: Proposals show strong support for reforms”

The latter piece waits until the 7th graf to Tell the Truth and Shame the Romney (as Rick Santorum might say):

Mr. Romney’s advisers said that their plan would not widen the deficit, but they relied on so-called “dynamic effects”, which assume that the lower rates mean greater economic growth and therefore more revenue. They did not say which tax breaks—such as the popular deduction for mortgage interest relief—they might scrap to pay for the lower rates.

The English translation of “dynamic effects” is “we’re going to reduce the velocity of money so that it is held by people whose Marginal Propensity to Consume is lower, and count that as a good thing, instead of it being used by people who will not hide it in the TOPIX, and who therefore don’t count in economic modeling. Because that worked well when we did it in 2001 and especially 2003.” (See Noah Smith for discussion.)

The print edition treats this mumbo-jumbo as if it were a real “tax plan.” Readers of the online PDF are saved such bollocks, and therefore better informed at the end of the article.

UPDATE: Ezra Klein (whom Google Plus seems to believe works for Bloomberg, not the web-inept Vast Wasteland that is Kaplan Prep Daily) delves into the Romney/Hubbard plan and finds pretty much what you would expect from the man who led the clusterfuck of 2003 and an at best ambiguous relationship with Medicare Part D* (“all of the expenses without any of the savings, unfunded”):

But for now, the narrative is clear: A Romney presidency will be tough on those who depend on government programs, and good for those who pay high taxes. That suggests a Romney presidency would, at least in its first few years, reduce the deficit by asking much more from the poor than from the rich. Is that really the narrative they want?

*Shorter Glenn Hubbard: “It happened on my watch, and I knew it was in the works, but the “gross mismanagement” of the Bush Administration in enacting Medicare Part D astounds me and I had nothing to do with it.”

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Stolen Valor and the First Amendment*

You don’t have to be a conservative who’s helped coopt the American flag as a rightwing Republican political symbol—replacing the Elephant, which no one under the age of 50 even recognizes anymore as the GOP’s official emblem—to be offended by someone’s false claim of having received a military honor, especially one awarded for extraordinary valor.  Count me among those who both distain the GOP’s appropriation of the flag as its partisan symbol—my late father, a combat veteran, a lifelong liberal Democrat, and famously (among those who knew him) very mild-mannered, used to suggest angrily that the next time a military draft is needed, Congress limit it to registered Republicans—and who find repulsive the misrepresentation of receipt of such a military honor.

So I sympathize with the sentiment of the members of Congress who voted to enact the Stolen Valor Act, signed into law in 2006, which criminalizes the false representation of having received any U.S. military decoration or medal and which provides for a more severe penalty for falsely claiming to have been awarded the Medal of Honor than any other decoration or award.  But not enough to want the Supreme Court to uphold its constitutionality, in the case in which it heard oral argument this morning. Nor do I expect that the Court will uphold it, notwithstanding Scalia’s apparent vote to do so, in seeming contradiction to his famous vote in a 1989 case to strike down a Texas statute that criminalized flag burning.  (Notably, Scalia and Stevens swapped ideological roles in that case, with Stevens voting to uphold the law and Scalia providing the fifth vote to strike it down as violative of the First Amendment.)  And notwithstanding his joining the opinion written by John Roberts for all the justices except Alito two years ago striking down as a First Amendment violation a 1999 federal statute making it a felony to depict in a video, or sell the video depiction, of people crushing small animals for sexual gratification. That’s because I don’t think Scalia’s vote will be needed.

I believe that the crush-video opinion, United States v. Stevens, is the more relevant one, because, unlike the flag-burning case, Texas v. Johnson, the purpose of the speech that the statute prohibits is not political, and therefore is not “core” First Amendment speech under the Court’s free-speech jurisprudence, but instead is made for the personal benefit of the speaker. Which is why I expect that Kennedy, who joined Scalia in the flag-burning-statute case, and Roberts will vote to strike down the Stolen Valor Act as unconstitutional.


Mark Sherman, the Associated Press’s Supreme Court correspondent, reported after this morning’s argument:

Some justices said they worried that upholding the Stolen Valor Act could lead to other limits on speech, including laws that might make it illegal to lie about an extramarital affair or a college degree, or to impress a date.
“Where do you stop?” Chief Justice John Roberts asked at one point.

But Roberts later joined other justices in indicating that the court could make clear that, if it upheld the law, it would only be endorsing an effort to prevent people from demeaning the system of military honors that was established by Gen. George Washington in 1782.

Well, yes.  And had the Court upheld the crush-video statute as constitutional, it would only have been endorsing an effort to prevent people from sadistically crushing small animals to death—one of the videos at issue showed a woman killing a small dog by stomping the spike heel of her shoe into the dog—demeaning humanity, as Alito effectively implied in his dissent.  He said that in his opinion, the most relevant First Amendment opinion was one from 1982, in a case called New York v. FerberFerberheld that, even independent of the “obscenity” exception to First Amendment protection, child pornography is not protected speech, because advertising and selling child pornography provides an economic motive for producing child porn, which in turn is intrinsically related to child sexual abuse and which in fact usually involves the use of actual children, and which has little artistic value—and that the government has a compelling interest in preventing sexual exploitation of children.

“I believe,” Alito said, “that Ferber’s reasoning dictates a similar conclusion here.”  No, he granted, the government’s interest in preventing sexual exploitation of children is more compelling than its interest in preventing the sadistic sacrifice of defenseless animals in the name of profit.  But the government does nonetheless have a strong interest in preventing the sadistic sacrifice of defenseless animals in the name of profit, and that interest is compelling enough to overcome the strong presumption of First Amendment protection, given that the sole purpose is profit, not art, not politics, not information.  Just profit.

To which I, a dog lover of the first magnitude, and someone who near-literally feels the physical pain of an abused animal she’s read about, said to myself, “I agree.” 

But John Roberts didn’t and either did Antonin Scalia or Anthony Kennedy.

“When Congress passed this legislation, I assume it did so because it thought that the value of the awards that these courageous members of the armed forces were receiving was being demeaned and diminished by charlatans. That’s what Congress thought,” Sherman quotes Scalia as saying this morning. 

Well, maybe that is what Congress thought, but it enacted the statute without first holding any hearings on it.  And Sonia Sotomayor provided some evidence this morning to refute the contention that the lies have devalued the military medals, including the Medal of Honor, have been diminished by the lies of people claiming falsely to have been awarded them.  Acknowledging that the lies justifiably provoke an emotional reaction, she noted that the Court has long and repeatedly held that the provocation of offense, alone is insufficient to justify government censorship.  Her money line?  “So outside of the emotional reaction, where’s the harm? And I’m not minimizing it. I, too, take offense when people make these kinds of claims, but I take offense when someone I’m dating makes a claim that’s not true.” 

Sherman mentions after the quote that Sotomayor is divorced.  

Which brings the question back full circle, to Roberts’ question, “Where do you stop?”  My guess: With a well-meaning statute that criminalizes the making of a false claim to have received a military honor.  Which, offensive as it, does not encourage sadistic killing of animals in order to videotape them for profit.   

The case argued today is U.S. v. Alvarez.


* UPDATE: Dahlia Lithwick’s Supreme Court Dispatches report on the oral argument, posted tonight on Slate, is a must-read.  My take, after reading it: That trademark infringement is now gonna be a criminal offense.  Well, not having the trademark, actually, but saying you have a copy of it when you don’t.

Uh-oh. I better stop saying that that crystal vase in my living room is a Waterford. Y’know, when people ask.  


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