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

THREAT-LEVEL-GATE©: Bob Woodward’s Awful Hope-Y’All-Won’t-Notice-Ryan-Lizza’s-Report Ploy

Bob Woodward, the legendary Watergate reporter turned reliable chronicler of insider accounts of political events, has made a series of bizarre assertions over the past week.
— Matthew Yglesias, Bob Woodward Trolls the World, Slate, today

Yglesias then summarizes last weekend’s exciting Woodward-related events, and then updates us:

Things moved into the absurd Wednesday night when it was revealed that National Economic Council director Gene Sperling had concluded an email disagreement with Woodward with the observation that in Sperling’s view Woodward would come to regret clinging so tenaciously to an untenable position.
As if determined to prove Sperling right, Woodward chose to start talking around town about how Sperling had threatened him—a ridiculous interpretation that the ridiculous conservative media has been running with—rather than sticking with the obvious interpretation that Woodward’s reputation among journalists is going to suffer from flagrant wrongness. It would be interesting to see Woodward try to hash this out with, say, fellow Post-ie Ezra Klein, but instead he’s going the full wingnut and will be appearing on Sean Hannity’s show Thursday night to advance the agitprop agenda. In retrospect, this whole affair was foreshadowed by the release of Woodward’s latest book last fall. It made much less of a splash than many other Woodward books. Most well-informed observers agreed with Noam Scheiber that it was marred by anti-Obama bias, but under the circumstances of the time, it didn’t get the right geared up either. By essentially doubling down on the worst qualities of that book, Woodward has managed to make himself the center of attention again.

Surprisingly, though, Yglesias doesn’t mention that earlier this week, New Yorker writer Ryan Lizza published a journalistic scoop that undermined the thing about Woodward being a reliable chronicler of insider accounts of political events.  Lizza quoted none other than Eric Cantor, who conceded that Boehner, at Cantor’s urging, reneged on the 2011 grand bargain deal at the last minute, for political reasons.  

Uh-oh.   

So, do you think Woodward might have decided to ratchet up the off-the-rails stuff a-few-fold yesterday because yesterday (or maybe the day before) was the day when Ryan Lizza’s New Yorker story broke?  Yeah?  You think?

Yes, that’s right.  Bob Woodward, the legendary Watergate reporter had turned a reliable chronicler of insider accounts of political events, and has now been exposed as a reliable and gullible tool of Republican insiders.  But he hopes no one will notice that.

What I find interesting about this is that apparently the Washington Post has pulled the plug on Woodward’s unfettered use of it as a forum in which to spread false statements of fact. Thus he was relegated to seeking out Politico as his venue for the “breaking news” this time.

Progress.

I can’t help wondering, though, whether Sperling was right that Woodward might come to regret his flagrantly false reporting on what the sequester agreement is.  He hasn’t yet, though. He’s still cowering with fear from that threat, but determined to press on nonetheless.

—-
By the way, you really, really need to see Alexandra Petri’s threat-level piece on this. Seriously.  (Just be sure you’re not eating anything you might choke on when you do.)

Tags: , , , , , , , , , Comments (3) | |

Guest post: HOW DID WE GET HERE? THE ROOTS OF DEFICIT BRINKSMANSHIP

Guest post by Joseph White, Case Western Reserve University and Department Chair and
Director of the Center for Policy Studies and reposted from Scholar Strategy Network:

HOW DID WE GET HERE? THE ROOTS OF DEFICIT BRINKSMANSHIP

March 2013 brings yet another in an endless series of budget showdowns in Washington DC. This time, draconian “sequestration” spending cuts that nobody actually favors are going into effect – because Congress and the President enacted them to end a previous showdown. The cuts will slow economic growth, cost hundreds of thousands of jobs, and devastate essential functions such as air traffic control.

Let’s remember how this sequester came to be. Between April and August of 2011, Washington DC was consumed by highly-publicized brinkmanship about raising the debt ceiling. At the last minute the President and Congress agreed on a three-part plan. Strict caps on discretionary programs (that is, most of what the government does) were set in place for the next ten years. A Joint Select Committee on Deficit Reduction was created, and charged with proposing $1.2 -$1.5 trillion in further deficit reduction over ten years. Lastly, the law included the current sequester, to take automatic effect if the Joint Committee failed. It did fail, as has  repeatedly happened with many deficit reduction committees convened over the past three decades.

In short, DC stepped back from the brink in August of 2011 by scheduling another brink. Who is to blame for this deficit brinkmanship? It may seem logical to finger Congressional “extremists.” In fact, Tea Party-oriented Republicans have recently shown the most enthusiasm for holding the nation’s credit and economic prospects hostage. Yet fiscal brinksmanship is nothing new, and it has been pursued at least as much by “centrist” budget hawks. Since the 1980s, a large segment of the Washington policy world has acted as if all other concerns are less important than shrinking the deficit, equating budgetary terrorism to “responsible government.”

Centrists and Budgetary Doomsday Machines

The Committee for a Responsible Federal Budget is a prime example. Its board includes many former budget officials along with leaders of the House and Senate budget committees. As a leading cheerleader for hostage-taking and brinkmanship, the Committee viewed the 2011 debt ceiling hostage crisis as an “opportunity” not to be wasted. It endorsed the threatened sequester, worrying only that it might not be tough enough. In December 2012, the Committee argued that Congress and the President did not have time to work out a detailed package of big deficit cuts, and called for any deal to include “enforcement mechanisms” such as yet another sequester.

The federal debt ceiling law opens the door to repeated brinkmanship. The ceiling means that if the government is spending, say, $30 billion a month more than it takes in, and comes up against the ceiling, it can’t borrow to pay the next $30 billion without a new law to raise the ceiling. Other laws create the need to borrow and refusing to raise the ceiling would not change those laws. But if a majority of the House or, these days, 41 Senators wish to hold the nation’s good faith and credit hostage, they can create a debt ceiling crisis. (www.scholarsstrategynetwork.org March 2013)

In 2011, the Financial Times editorialized that, “sane governments do not cast doubt on the pledge to honor their debts – which is why, if reason prevailed, the debt ceiling would simply be scrapped.” Yet instead of endorsing this common sense, the Committee for a Responsible Federal Budget has called the debt-ceiling “an effective lever… to require law makers to enact debt reduction legislation.” This promotion of budgetary extremism, however, is nothing new:

 In 1985, two centrists – Democratic Senator Ernest Hollings of South Carolina and Republican Senator Warren Rudman of New Hampshire – joined with ultra-conservative Republican Phil Gramm of Texas to block a debt ceiling increase until Congress passed the Gramm/Rudman/Hollings law requiring crude automatic cuts to domestic and defense programs – with no deliberation about which cuts made sense given national needs.

 In 2009-2010, the centrist Senate Budget Committee Chair, North Dakota Democrat Kent Conrad, first blocked sensible budget process reforms and then objected to a debt ceiling increase in order to force appointment of a special Fiscal Responsibility Commission.

 In November of 2010 former Senator Alan Simpson, co-chair of the deficit commission, boasted that the co-chairs’ recommendations could succeed even though not supported by the required number of commission members. “I can’t wait for the blood bath in April,” declared Simpson, pointing to the next Congressional decision on the debt ceiling. Simpson is a Republican long viewed as very conservative, but he now is considered a centrist by Washington DC reporters (and apparently also by President Obama, who appointed him).

Moving Beyond Deficit Mongering

The federal budget is a package of details about what government does and how the bills are paid. Deficit reduction requires “hard choices” because the details matter. Too often, budget hawks try to avoid those hard political choices by taking decisions out of normal channels. In this quest, they become reckless about both causes and consequences.

Centrist hawks have systematically exaggerated the economic risks of deficits, predicting high interest rates for the past five years and continually being disproven. They also have promoted a biased and inaccurate view of the causes of budget imbalances. Forecasts show that spending on Social Security, Medicare, and Medicaid will increase, while taxes at current levels are not projected to cover the costs. Although most American voters are willing to pay for health and retirement programs, budget hawks proclaim the deficit “crisis” is due to excess “entitlements.”

It would be just as logical to say that valuable health care and pension programs need more funding. The report of the chairs of the Fiscal Responsibility Commission called for an artificial ceiling on federal spending to be set at 21% of Gross Domestic Product forever. This is an arbitrary political move – and one that simply encourages right-wing extremists trying to force unpopular cuts in social spending that could not be enacted in normal proceedings.

Responsible budgeting must begin with accurate analysis of the economic effects of budget choices – and continue by weighing the effects of particular spending cuts and tax increases. Centrist budget hawks simply assume that how the deficit is reduced is far less important than reducing it. That is extremism. When they promote debt-ceiling crises and intentionally outlandish sequesters, they play an undemocratic and dangerous game.

Tags: , Comments (4) | |

Mitch McConnell Says the Congressional Republican Caucuses Are “The American People.” Got That, American People?

[O]ne thing Americans simply will not accept is another tax increase to replace spending reductions we already agreed to.

— Senate Minority Leader Mitch McConnell, yesterday

He’s right, of course, since, by “Americans,” he means the roughly 278 Americans who comprise the House and Senate Republican caucuses.  

As Greg Sargent points out this morning, a recent Pew poll suggests that about ¾ of the remainder of Americans–the ones who are not among the “we” who already agreed to tax rate increases on couples with incomes of more than $450,000 and individuals with incomes of more that $400,000–actually beg to differ with Sen. McConnell on that assessment of what the American people will ever accept.

So, obviously, McConnell doesn’t mean those American people.  Even assuming that those American people are even Americans.  Or even people.  (No one’s polls corporate people, as far as I know, but I suspect that many of them would side with McConnell, so we’ll give him that. But that doesn’t meant that the Americans who were polled were people.  They may be cyborgs.  Or dogs.)

He also doesn’t mean the American people who voted by a majority of about 5 million last November for the presidential candidate who campaigned on a platform of raising tax rates on incomes of more than $250,000 for couples and $250,000 for individuals, and on closing tax loopholes and eliminating deductions available mostly to the wealthy.  Rest assured; he definitely does not mean those American people, most of whom committed voter fraud by voting in the election, since although they are people, they are, by virtue of their vote for Obama, not really Americans, whether or not they were born in Hawaii (or California or New York or New Mexico or New Hampshire) or instead in Kenya.  

Nor does he mean the American people who voted by substantial aggregate majorities to decrease rather than increase the number of Republican senators and representatives in the current Congress–a Congress whose members are not, by the way, the “we” in the “we already agreed to.”

The article I linked to above for that quote is one by Michael D. Shear in today’s New York Times, called “White House Counts on G.O.P. to Bend as Cuts’ Effects Are Felt.”  It’s chock full of great points, including that “[s]trategists for [John] Boehner believe that Republicans have been successful in branding the cuts as Mr. Obama’s idea.”  I hope so, since proposal of  “the cuts” at issue were the only alternative to a Republican-forced default on America’s already-incurred debt, including on treasury bonds, and since the cuts that were Obama’s idea probably are more popular than the cuts that are the Republicans’ idea-none to the Defense Department’s budget and draconian ones to almost every other discretionary program and agency.  

Which brings me to the newest journalistic gimmick in reporting on all this.  Well, I’ll just quote Shear illustrate:

In accepting the inevitability of an extended Washington stalemate, the White House is risking the possibility that Americans may eventually blame the president, not members of Congress, for job losses, smaller paychecks, longer lines at airports, a reduction in government services and a less well-equipped military.

Uh-huh.  The White House is risking the possibility that Americans may eventually blame the president, not members of Congress, for job losses, smaller paychecks, longer lines at airports, a reduction in government services and a less well-equipped military.  And the likelihood that that will happen is very high, since the Republicans are unwilling to trade more tax revenue from the wealthy and from profits-hoarding corporations for fewer job losses, no reduction in paychecks, ordinary-length lines at airports, little or no reduction in government services and a well-equipped military.  

Er, I mean, the American people are unwilling to make that trade.  But they won’t blame themselves.  Instead, they’ll blame Obama.  Who is, although certainly a person, not an American one.

Tags: , , , , , , Comments (1) | |

Giacomino Grilli

Translated Jiminy Crickets.
Really translated.

Man, covering this Grillo dude is a full time job.  I figured I should check what he said today.  He has a new idea — Prime Minister Grillo so since the election (monday) he’s said

1) “Niente inciuci.”  Translated: “No deals.”  Really translated “The old discredited parties have to form a coalition so I can denounce it and do even better in the new elections which will come in a few months because they all hate each other.
2) “Sicilia esperienza meraviglisa”. Translated “Things are working wonderfully in Sicily” (he is a comic).  Really translated  An alliance between the 5 start movement, the PD (and do forget the SEL) would be excellent.
3) “Bersani Morte vivente” translated “Bersani is a zombie”.  Really translated “Bersani’s political career is over — I just ended it (to show I can).
4) “Governo 5 Stelle”.  Translated  how about you vote confidence in our nominee for prime minister (my not so humble self) really translated “Oh so you thought I couldn’t surprise you ?  You figured I would just go back and forth from Bersani prime minister Bersani to Zombie Bersani.  Hah unpredictability is the key to comedy.
I don’t have anything more to say, I’m too old to cry, so I guess I’ll laugh.

Comments (1) | |

Next step to citizenship

Via Crooks and Liars comes notice of this proposal for corporate/business voting right and elected official in municipal elections,  except for school elections (hat tip Dan B.):

Rep. Steve Lavin has introduced HB485,

A BILL FOR AN ACT ENTITLED: “AN ACT REVISING ELIGIBILITY TO VOTE IN MUNICIPAL ELECTIONS AND TO FILE FOR CANDIDACY FOR MUNICIPAL ELECTED OFFICE; ALLOWING A QUALIFIED NONRESIDENT PROPERTY OWNER OR DESIGNEE OF AN ENTITY TO VOTE IN MUNICIPAL ELECTIONS AND TO FILE FOR CANDIDACY FOR MUNICIPAL ELECTED OFFICE; AND AMENDING SECTIONS 7-1-4121, 7-4-4104, 7-4-4301, AND 7-4-4401, MCA.”

Lifted from an e-mail from Linda Beale in response to a short note from me:

This law does definitely include a section that allows any company that owns real property in a municipality to designate one of its officers to vote for it in municipal elections. Talk about plutocracy—now some billionaire managers/shareholders will get TWO votes, compared to ordinary persons who actually live in, and enjoy the beneifts and bear the burdens of the elected officials’ decisions. Plus nonresident property owners get to dilute the locals’ interests as well. This is clearly a part of the “property is the only right we really care about” trend, which in my perspective personifies most of the S Ct’s jurisdiction decisions on rights…..

Tags: Comments (8) | |

Only 6% Of Public Knows Deficit Is Declining

Prof Barkley Rosser at Econospeak also asks questions on the freaking out over the fiscal deficit numbers:

Only 6% Of Public Knows Deficit Is Declining

Yes, here we go again, massive public ignorance post # I forget how many.  This has been floating around out there for awhile but was on Rachel Maddow last night, and here is a link with suitable discussion of relevant facts from Dave Johnson, perhaps important as this silly sequester is about to land on us supposedly driven by the overwhelming need to get the deficit under control,http://blog.ourfuture.org/20130226/deficit-is-falling-dramatically-but-only-6-know-that.  As it is, apparently 62% think it is rising, while 28% think it is constant.

Among things that the public is wrong about, this one sticks out for being so far off from the facts.  And as is noted, not only is the deficit declining, but it is doing so at a very dramatic rate.  Without doing anything we should be able to stabilize the debt/GDP ratio within about two to three years, although to maintain that down the road, further adjustments would need to be made.  Being an austerian is one thing, but being completely out of touch with reality is quite another.

Tags: , Comments (15) | |

Senate Confirms Lew at Treasury

by Linda Beale

Senate Confirms Lew at Treasury

The US Senate confirmed Jacob Lew as Treasury secretary by a 71 to 26 vote (with 20 Republicans voting with Democrats) late Wednesday.  See Jeremy Peters,Senate, in a more affable mode, backs Treasury nominee, New York Times (Sept. 27, 2013).

I’ve covered my reservations about Jack Lew in prior posts.  Most notably, I view him as too eager to accommodate Wall Street and the GOP demands for cuts to benefits of safety-net programs, rather than standing firm.  As many have pointed out, Social Security would be perfectly fine if we removed the cap so that people were paying the tax on most of their income, rather than allowing millionaires to pay on what amounts to a de minimis amount of their income.  Medicare is a good program that is better at holding costs down than our overly costly privatized health care system.  On Medicare, what we need is real measures to address the rent-seeking behavior of hospitals (including so-called “non-profits”) and doctors and insurance companies, not reductions to benefits.

Bernie Sanders seems to agree with me.  As the Times story reports, he noted Lew’s affinity with Wall Street as a real negative.

“We need a secretary of the Treasury who does not come from Wall Street but is prepared to stand up to the enormous power of Wall Street,” Mr. Sanders said from the Senate floor. “Do I believe that Jack Lew is that person? No, I do not.”

Tags: Comments (3) | |

Warren questions Benanke on ‘too big to fail’

Via Bloomberg comes this snippet from testimony between Senator Warren and Ben Bernanke.  Follow the link as the embed does not seem to work.

Partial Transcript via Global Economic Trends

Warren: These big financial institutions are getting cheaper borrowing to the tune of $83 billion in a single year, simply because people believe government would step in and bail them out. And, I’m just saying, if they’re getting it, why aren’t they paying for it?

Bernanke: I think we should get rid of it.

Warren: Alright. I’ll ask the other question. You were here in July, and you said you commended Dodd-Frank for providing a blueprint to get rid of “Too Big to Fail”. We’ve now understood this problem for nearly five years, so when are we going to get rid of “Too Big to Fail”?

Bernanke: Well, some of the you know uh as we’ve been discussing, some of these rules take time to develop. Uh, uh. ….”

Tags: , , , Comments (0) | |

Dr. Richard Wolff on the Sequester

I watched  Dr. Wolff (Professor emeritus, UMass) on this past week  episode with Bill Moyers.   At the end of this show, Mr. Moyers invited the viewers to submit questions to Dr. Wolf who has agreed to return in a couple of weeks to answer them.

Here is he with an interview by Julianna Forlano of Absurdity Today report.  If you are not familiar with Julianna, she does a very funny short news broadcast on the issues of the moment.  I am a subscriber.  It’s is worth your time for sure.

This is the first part of 4.  It is about 12 minutes.  I want to say, at the end, Dr. Wolff is also pointing out that the cuts do not come all at once.
    

I figure this video is also posted in response to the video rjs linked to in comments to Bev’s post.

Tags: , , , , , Comments (0) | |

Does Saving "Fund" Investment?

If Asymptosis has any tiny claim to any important influence, it might be that anonymous and magisterial commenter JKH used the comments section here to first bruit his insight (both tautological and profound) that S = I + (S – I).

He revisited that construct and concept again recently, and I’ll leave it to you to explore his very interesting thinking.

But I do want to address a central issue in that discussion: the notion of “funding.”

JKH quite properly uses standard flow-of-funds accounting terminology to explain that private-sector “saving” “funds” both its “investment” (buying/creating drill-presses and such), and its acquisition of newly created financial assets.

Quite properly, but: it’s important to understand what that key accounting verb (“funds”) actually means. It describes an after-the-fact and arguably largely arbitrary accounting allocation of income streams to outflow streams.

Imagine 2011, a year in the life of BFC Corp.:

INFLOWS
Profits (revenues – expenses): $100,000
Net Borrowing (borrowing – loan payoffs): $100,000

OUTFLOWS
Investment (spending on drill presses and such): $100,000
Dividends paid to shareholders: $100,000

Looking back: Of the $200K in inflows, which part “funded” the investment spending on drill presses? What funded the dividend payout? The accountant’s allocation decision, absent any other information, is after-the-fact and completely arbitrary. Funds are fungible — especially when viewed in retrospect.

Before-the-fact conditions and restrictions might well give justification for a given after-the-fact accounting allocation decision. If BFC decided in 2010 to spend X% of profits on drill presses in 2011, and that X% came to $100,000, an accountant after the fact might quite reasonably say that the drill-press purchases were “funded” by that year’sprofits.

Alternately: Imagine BFC “set aside” $100,000 from 2010 profits for future drill-press purchases by “funding” a drill-press holding account on their books, debiting their 2010 profits to “fund” that holding account. (Maybe it even created an actual external bank account to hold and segregate those funds, though that’s not actually material to this discussion.) It then spent down that holding account in 2011 to buy drill presses. Were those purchases “funded” by 2011 profits or borrowing? The proper accounting answer here is “neither.” Looking backwards you might/could/would say that they were funded, ultimately if somewhat arbitrarilly, from 2010 profits, or from the holding account. Either is accurate, depending on how you telescope your “funding” pipeline, in both time and account-space. (This is all rather like discussions of the Social Security Trust Fund.)

When we say, in a backward-looking flow-of-funds statement, that “X funded Y,” that is an ex-post description that is informed, and arguably justified — but not fully or authoritatively determined — by knowledge of before-the-fact intentions.

So when we say that “…the marginal dollar borrowed by a nonfinancial business [post-’85] was simply handed on to shareholders, without funding any productive expenditure at all,” we are making a statement about what “funds” what. We’re saying that all the borrowing went to payouts, and all the profits went to investment. The reverse could be equally accurate, given that shareholders from ’04 to ’08 were paid about $200 billion more than their companies earned in profits.

Let’s try this on the level of national/international accounts, and sectoral flows. Here’s mythical 2011 accounting for Bandalaria:

Assume (purely for simplicity in explaining the “funding” concept) that:

1. There is no net trade surplus or deficit, and the country’s capital account balance sheet remains unchanged.

2. The central bank does not increase or decrease its holdings on net.

3. The financial system does not increase or decrease its loan book to the private sector.

That leaves two sectors, with (looking back) no accounting impact from the above:

• Federal government (Treasury)

• The nonfinancial private sector (nonfinancial firms and households)

What do Bandalaria’s net money flows look like?

From Treasury -> Private
Deficit (purchases minus taxes): $100 million

From Private -> Treasury
Treasury bond purchases : $100 million

Looking back, how would you describe these flows? Are are the bond purchases “funding” the deficit, or is the deficit spending “funding” the bond purchases?

The correct answer is “Yes.”

Likewise: when JKH says (my words actually) that saving (income – expenditure) by the private domestic nonfinancial sector “funds” both its investment spending and its net acquisition of new financial assets (including government bonds), his description is perfectly correct.

But he would equally correct if he said that government deficits (less trade deficits) “fund” some of the investment, or (all of) the acquisition of new financial assets (notably government bonds), by the private domestic nonfinancial sector (or some of each).

Obviously, the two accounting-based descriptions, both accurate, have very different rhetorical implications.

This just reiterates the point I made in the post to which JKH responded with his revelatory identity: accounting tells us nothing about economics, except that it often tells us when economic thinking doesn’t make any logical/arithmetic sense.

I guess my main point here, perhaps obvious to many, is that accounting descriptions — choices about how to describe the past in accounting-speak, especially regarding “saving” and “funding” — are, inevitably, rhetorical hence normative. Or at least, those choices of descriptions have inevitable rhetorical hence normative implications.

Or to put it simply: accounting is normative.

My impression is that many economic discussions and disagreements, especially in the “MM” worlds, are at their root disagreements about what “funds” what (frequently compounded by imprecise sector definitions with different parties using different implicit definitions), and the rhetorical hence normative implications of those competing descriptions.

Cross-posted at Asymptosis.

Tags: Comments (6) | |