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

Racial Entitlements. Such As the Right to Vote.

Justice Scalia provided the most jarring comment throughout the lengthened argument.  Belittling the government argument that the reenacted law was passed by a unanimous vote in the Senate, Scalia set off in a lengthy counter-argument, saying that made no difference because members of Congress would not take the political risk of undoing what he called “racial entitlements.”  (Outside the Court, the reaction from civil rights organizations was swift, and heartily condemning, as they defended a law that everyone acknowledges is a great monument in the civil rights struggle.)

Scalia’s comment, aside from its harshness, was obviously made to add emphasis to his argument that, while the law might well have been entirely justified at one time, it was no longer.

— Lyle Denniston, SCOTUSblog, reporting on the oral argument today at the Supreme Court in a case challenging the continued constitutionality of the Voting Rights Act of 1965

My, my.  So Justice Scalia doesn’t like racial entitlements–such as the one conferring the right of members of certain races to vote, and to have their vote count as much as the votes of people of other races who have racial entitlements. What a surprise.  

Hmm. And to think that I had thought that the right to vote was a constitutional entitlement, not a racial one.  Good thing I’m not a supreme court justice.  

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You Can Fool Most of the People Most of the Time

At least on certain issues.

I’m not inherently a great pessimist, but with few exceptions each passing month for over a decade now has seen my optimism whither, at least a little.  So I can’t help but see the manure-colored lining in this otherwise rosy, fluffy cloud.

Steve Benen reports that according to the new NBC/WSJ poll, Americans trust Democrats more than Republicans on domestic issues, sometimes by large margins.  Here is a graph.  (As always, click to embiggen.)

Graph 1   Who Do You Trust?

But the causes of my pessimism are four-fold.  First, as Benen goes on to note, the same polling reveals that in the popular mind “Republicans have an advantage on the (sic) reducing the deficit, ‘controlling’ government spending, and national defense.”  Well, there’s three reasons for pessimism right there.  A) Reducing the deficit is an issue of exactly zero urgency, and attacking it now will certainly cause economic hardship, especially for those at the bottom. Further, Republicans have been huge debt increasers for decades, while Dems have not.  B) We absolutely do not have a spending problem.  We absolutely do have a revenue problem, as graph 2 plainly indicates.  I think the Republicans have become convinced of their own lies.

Graph 2   Federal Gov Current Recpts by GDP

C) From FDR through LBJ to BHO, Dems have been every bit as war-mongerish as their Rep counterparts; BHO has continued his predecessors war initiatives almost seamlessly;  and 9/11 happened on W’s watch.  This just makes me want to cry.

But I have a bigger list.  Second, a look a graph 1 reveals some disturbing details.  A)  Joe BeerCan must not connect “Looking out for the middle class,” Medicare,” “Health Care,” “Medicare,’ or “Social Security” with “Economy” or the results for those categories would line up better.  B) Considering Paul Ryan and the never-ending series of Republican contrived cliffs, scoring Dems only marginally better than Repubs on the economy is, all by itself, cause for despair.  C) As is the close call on taxes.

Third, and I’ve already alluded to this, there is almost no daylight between the two parties on foreign policy issues.  Still I have to give a slight nod to the Dems, based on practicality, because: John Bolton.

And last, though I firmly believe to the bottom of my heart that the Dems are superior on absolutely every issue, problem and question that might rise, they still aren’t that damned good.  Case in point: the new head of the Michigan Democratic party is a venture capitalist.  As Bill Maher sagely put it, while the Democrats have moved to the right, the Republicans have moved to the insane asylum.  They demonstrate this anew, almost every single day

The lessons of history and even a casual observation of the current failures of European austerity show that progressive policies are the clear and present necessity.  But even if we had strong Dem majorities, we still have Reaganite B. Hoover Obama in the White House, and a genuine progressive movement in congress the exact size and shape of Bernie Sanders. 

As one of my college professors put it long ago:  Booze is the only answer.

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Europeans, Republicans Dreaming Up New Ways to Destroy Global Economy

While we are busy paying attention to the 550th edition of Republican-caused fake crises (aka the sequester), a much more real crisis is brewing in the Eurozone. Richard Field at Trust Your Instincts flags a Reuters report that that Eurozone regulators are strongly considering a proposal to make not just investors in Cyprus banks pay for part of their bailout, but bank depositors as well.

Cyprus is a tax haven, and deposits in the banks there come to some 70 billion euros, more than 3 1/2 times the tiny country’s 18 billion euro gross domestic product. One proposal under consideration would be to hold all deposits over 100,000 euros in escrow — for up to 30 years! Another proposal, says Reuters, would “impose a retroactive tax on all deposits over 100,000 euros…” If either of these options looks like it is close to being approved, it is likely to cause a run on banks in Cyprus. As Field argues, if one of these plans is established, depositors will likely wonder if it could be applied to other debtor countries like Spain or Italy, causing even more turmoil. (Note: 100,000 euros is the maximum that can be covered by deposit insurance programs similar to the FDIC in the U.S.)

While European leaders seem to want to blunder into a new way of creating a euro crisis, the evidence continues that their preferred austerity policies are failing. The European Commission has announced that the eurozone will remain in recession throughout 2013, according to a separate report by Reuters. Previously, the Commission had predicted that the recession would end this year. As Paul Krugman shows, the countries that have had the severest austerity have had the largest contractions in their economy. Based on International Monetary Fund estimates of the policy change in a number of European countries, he plots this against the change in their real gross domestic product from 2008 to 2012:

Source: Paul Krugman (link above). Key: AUT-Austria; BEL-Belgium; DEU-Germany; ESP-Spain; FIN-Finland; GRC-Greece; IRL-Ireland; ITA-Italy; NLD-Netherlands; PRT-Portugal

So, for example, Greece has imposed austerity equal to about 15% of potential GDP, and seen its actual GDP shrink by about 18%.

Despite the clear failure of austerity policies in the eurozone and Great Britain (where 9 months of recession were followed by one quarter of growth but a renewed slump in the last quarter of 2012, and Moody’s just downgraded the country’s debt), Republicans are still trying to impose budget cuts on the country that we voted against in November. As I discussed then, the sequester’s discretionary budget cuts will be unambiguously bad for the middle class. Now, Republicans are trying to convert the defense cuts of the sequester into further slashing into middle class programs, while President Obama has offered to convert Social Security’s inflation adjustment to so-called “chained CPI,” which will slowly but relentlessly cut into benefits year after year through the magic of compounding. According to Dean Baker at the link above, the reduction would be about 0.3% per year, so benefits will be 3% lower after 10 years, 6% after 20 years, etc.

Considering how bad middle class retirement prospects are already looking, the President’s offer would be disastrous for millions if implemented. The right course of action is simple: cancel the sequester, forget about cutting Social Security (which is not part of the so-called debt problem anyway), and focus on jobs and growth. As Paul Krugman says, “End this Depression Now!”

Cross-posted from Middle Class Political Economist.

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Obama’s Inexplicable Failure to Explain and Clarify What the Sequester IS–and What the Respective Sides Want to Replace It WITH.

This is the political atmosphere within which the battle will unfold over who is to blame for the damage done by the sequester. Now, in fairness, Republicans are favored on the deficit and controlling government spending. But even here, when you drill down deeper, you find that fifty two percent say the automatic across the board cuts to the budget are a bad idea; only 21 percent say they’re a good idea. Republicans will take solace from the finding that a plurality wants the sequester replaced by a plan with “more cuts.” But the poll question doesn’t inform respondents of the option of replacing the sequester cuts in part with eliminating tax breaks enjoyed by the rich and corporations, an oversight that casts doubt on the value of this finding. Many surveys that accurately poll the two parties’ positions on curbing the deficit — cuts only versus a mix of cuts and new revenues — show a solid advantage for the Dem position.

— Greg Sargent, Washington Post, discussing a newly released NBC/WSJ poll, this morning

The poll’s failure to inform respondents of the option of replacing the sequester cuts in part with eliminating tax breaks enjoyed by the rich and corporations, and asking only about the Republicans’ replacement proposals, and doing so entirely generically, is … dismaying.  

But it would be so very, very easy for Obama to explain, in specifics, what that pollster couldn’t trouble itself to do, even slightly. After all, Boehner keeps proudly advertising the fact that the House twice passed a replacement bill late last year–although, of course, he doesn’t advertise the specifics; i.e., that the bill replaces all of the defense cuts with a gutting of virtually every other “discretionary spending” program and operation.  I.e., the bill replaces the sequester’s spending cuts with … much deeper spending cuts to almost everything except defense. All Obama has to do is tell the public this.

Does the public really want to replace the sequester’s cuts with “more cuts”?  Probably not, but when the sequester is incessantly billed as very bad, and the argument is that it should be replaced, and the only replacement option seemingly offered–at least by this pollster–is “more cuts,” generically speaking, of course, well, then, why yes! They want “more cuts”! Who wouldn’t?! (A majority of the people who actually understand what this is about, and what the respective options are, probably.)

This is truly nonsense.  NBC and the WSJ might consider hiring a different polling organization next time.  But Obama might consider actually explaining the situation to the public.  The entire public–not just the public at a Virginia military base, to people who are among the few who already know.

Good grace.  I know that explaining anything complicated to the general public is not Obama’s thing.  But, I mean, really ….

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Why Does Washington Post Columnist David Ignatius Say Obama Should Have Allowed Default On The National Debt in Aug. 2011? He Doesn’t Say Why, So Someone Should Ask Him.

To me, one of the big mysteries of the sequester blame game is why some in the punditry keep echoing John Boehner’s proud Obama-proposed-the-sequester line, without pointing out what the only alternative was.  The most baldly ridiculous of articles in that narrow genre is Washington Post columnist–and, I suspect, not coincidentally, Bob Woodward colleague–David Ignatius’s piece, in a column posted yesterday afternoon and published in today’s paper, in which Ignatius says in effect that Obama should have allowed a default of the federal government’s debt obligations in Aug. 2011 because the only alternative–”Obama’s sequester legislation”–is worse than what the result of a default would have been.

Seriously.  He does try, hard, to disguise that that is what he’s saying.  But the sleight of hand he uses is so flagrantly, well, a sleight of hand that he doesn’t succeed.  Here’s what he says:

Much as I would criticize Obama, it’s wrong to say that both sides are equally to blame for what’s about to hit us. This isn’t a one-off case of Republicans using Obama’s sequestration legislation to force reckless budget cuts. It’s a pattern of behavior: First the Republicans were prepared to shut down the government and damage the national credit rating with their showdown over the debt ceiling; then they were careening toward the “fiscal cliff.” This isn’t a legislative tactic anymore; it’s an addiction.

Soooo … he acknowledges that the Republicans were prepared to shut down the government and damage the national credit rating with their showdown over the debt ceiling. He just doesn’t mention that the impending debt default and Obama’s sequestration legislation–Obama presumably having become a member of the House for a few days back then and joined the Republican caucus–are, y’know, related.

So, since apparently Ignatius’s editors–Bob Woodward’s colleagues–didn’t ask him this, I will:  Since, without Obama’s sequester legislation, the government would in fact have shut down, and the damage to the national credit rating (among other things) would have been significant–and so, this is what Obama’s sequester avoided–why do you think Obama’s sequester legislation was worse?  Might it be that Bob Woodward said so?

Of course, I also think the news media should pose that question to Boehner next time he preens that the sequester was Obama’s idea and that he therefore “owns” it.  Since Obama also owns the avoidance of default on the federal government’s debt in aug. 2011, and since Boehner & Friends own the attempt to throw the world’s financial system into chaos in Aug. 2011, it does seem to me that ownership of the sequester might be a good thing, and ownership of the alternative to the sequester a bad thing.  Obama might want to point this out in, say, a 10-minute primetime TV address on these constant trumped up financial crises, and especially right now, the current one.  But, well, that’s just not something he would actually do.

Meanwhile, Post Columnist Matt Miller today does pinpoint where Obama is to blame in this: Agreeing to the mere $600 in increased tax revenue from the wealthy as part of the “fiscal cliff” resolution rather than simply allowing the Bush tax cuts to expire and having the new Congress write new tax legislation in the first two weeks or so of January.  Indeed.

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What it Takes to Get a Mortgage These Days

by Mike Kimel

What it Takes to Get a Mortgage These Days

About six months ago I got a job that required relocation. To make a long story short, we just purchased a new home. As part of the process, the lenders required a lot of paperwork. Not a surprise. But some of the paperwork was surprising. For example, they wanted a signed letter explaining a deposit in the amount of 0.05% of the amount of the loan, made prior to the sellers and ourselves agreeing to the sale of the house. One half of one percent. I can understand getting suspicious if we made an unexplained deposit equal to, say,
ten percent or so of the amount of the loan, but 5% of 1% of the loan?
And it wasn’t the only senseless thing we had to provide.

I worry about this means – it means the lenders probably aren’t concerned about important things that they should be concerned about. That didn’t work out so well the last time.

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What is Happening Here in Italy

I guess I have to report.

update: 2/28/2013
It is hard to keep up with Grillo.  His position has totally changed twice since I wrote the post below.  His current view is that the PD (which has an absolute majority in the lower house) should vote confidence in a prime minister from his brand new party.  I think I will have a feater
Joe Cricket (Giuseppe Grillo translated)

Man covering Grillo 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.

end update.

I’m going to start with new news from tomorrows paper (La Repubblica the least awful Italian newspaper). The election left a mess with no clear majority in the Senate (the prime minister must have the confidence of both the Senate and the chamber of deputies which are elected in completely different ways).  What will happen is up to comedian & blogger Beppe Grillio.  Yes a blogger (Italy’s number one blogger in traffic) has real power.  The news is that he appears willing to vote confidence in Luigi Bersani the ex communist leader of the alliance which has an absolute majority in the chamber of deputies.

Following his thought is tricky, because he shouts a lot (think The Rude Pundit not say Ezra Klein).  He leads a protest movement and voting for him was a way to tell the politicians to go to hell.  Now they have to deal with him so they are in hell (OK it’s probably not good for the country but I sure am enjoying it).  The hints that he will vote confidence in Bersani is that he praised the experience” in Sicily where his followers support a center left governor.  He said that his vote (and that of his followers) will depend on the content of bills — that is he will accept no discipline (of course) but won’t always vote no.  He mentioned two issues.  One no supertrains (in Italy environmentalists hate the project for a high speed rail line).  Two a guaranteed minimum income for all citizens (welfare on steroids and normal in normal European countreis).  The first will happen because supertrains cost money (besides they are always talking about the high speed rail line and it is never built — because it would cost a lot of money).

My current guess is that there will be a Bersani government for a while, the Grillo will revolt (it’s what he does) and bring it down.  It is possible that they will work together long enough to rewrite the electoral law so the subsequent election is actually decisive.  I think it is also reasonably possible that they will do something about Silvio Berlusconi’s domination of TV.  They hate him, but very serious people don’t change established economic facts or take on huge firms.  Grillo might force the ex communists to reduce the immense power of Italy’s richest and most shameless capitalist.

OK background going all the way back to Monday.

In the recent parliamentary elections, Italians voted differently from what was guessed based on polls.  The main message is that they hate austerity.  Only around 10% voted for the party of Mario Monti the very eminent Eurocrat economist extremely serious person who had reassured investors that their money was safe in Italy.  Monti did this partly by increasing the real estate tax.  This was very unpopular.  The alliance of the presumptive new prime minister Lugi Bersani, the PD-SEL, received the plurality of votes in both the election of the Chamber of Deputies and the Senate, but it’s performance was a very painful disappointment.

The PD-SEL includes and is mostly dominated by former Communists but includes fragments of the old non communist non-fascist parties (Christian Democrats, Socialists, Social Democrats, Republicans and Liberals) and also the greens.  Needless to say, the ex-communists are establishment moderates closely allied with Monti.  They had the support of The Economist, the bankers and all very serious right thinking people, but not of most Italian people who are tired of parties whose main aim is to please bankers.  I promise this paragraph is not a joke.

Appallingly Silvio Berlusconi’s party came in a very very close second (0.8% behind in popular vote in the senate election and 0.4% behind in the vote for the chamber of deputies).  Italy has two different insane electoral laws for the chamber and the Senate.  The insane law for the chamber was written by Berlusconi for his convenience and has twice kept him from power.  What follows is not a joke.  Alliances must be declared before the election.  The alliance which gets a plurality automatically gets an absolute majority of seats in the chamber of deputies (and not a tiny one a majority with 30 votes to spare).  This means that the 0.4% magin is enough that no one can be prime minister without the support of the PD-SEL.  I think this means that Luigi Bersani will be prime minister.  Oh he was chosen as the PD-SEL candidate in a primary (very new idea in Italy) so he can’t be pushed aside because of the disappointing election.  It is absurd that 0.4% of the voters decide everything.  The time before last 0.07% of the voters decided that Romano Prodi not Silvio Berlusconi would be prime minister.  Recall the insane law was Berlusconi’s idea.  He is, again, hoist on his own petard.

How did Berlusconi do it ?  He promised to eliminate the real estate tax increase and rebate the money.  He ran as an anti European populist.

OK but the real winner of the election was the blogger Grillo.  The problem is that he is a protester protest candiate who screams a lot.  Mostly he screams about crooked politicians making deals in smoke filled rooms.  Now the country needs him to make deals in smoke filled rooms.

I really have no idea how it will turn out, but I’m sure it will be interesting.

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Leading Economists Vote on Raising the Minimum Wage

I’m delighted to see the U Chicago IGM Forum ask a really useful, non-softball question.

The panelists are evenly split on whether an increase to $9 would make it “noticeably harder for low-skilled workers to find employment.”

A 4:1 majority thinks that weighing the costs and benefits, “this would be a desirable policy.”

I note how many who commented bring up the EITC, suggesting that an increase in that support might be better than a minimum-wage increase.

I note further that they apparently haven’t read the very good reasoning and research suggesting that the two together very effectively address the problems of each.

But Paul Krugman has. And his surprise helps explain why the others haven’t thought about this:

Second — and this is news to me — the usual notion that minimum wages and the Earned Income Tax Credit are competing ways to help low-wage workers is wrong. On the contrary, raising the minimum wage is a way to make the EITC work better, ensuring that its benefits go to workers rather than getting shared with employers. This actually is Econ 101, but done right

Cross-posted at Asymptosis.

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FDIC reports earnings

The U.S. banking industry in 2012 recorded its highest earnings since before the 2007-2009 financial crisis, according to data released on Tuesday by the Federal Deposit Insurance Corp.

The FDIC said the industry’s full-year earnings were the second-highest on record at $141.3 billion, an increase over 2011 of $22.9 billion, or 19.3 percent.

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