Sunday, December 26, 2010

Facts about our military spending

According to Nicholas Kristof:
  • The United States spends nearly as much on military power as every other country in the world combined, according to the Stockholm International Peace Research Institute. It says that we spend more than six times as much as the country with the next highest budget, China.
  • The intelligence community is so vast that more people have “top secret” clearance than live in Washington, D.C.
  • The U.S. will spend more on the war in Afghanistan this year, adjusting for inflation, than we spent on the Revolutionary War, the War of 1812, the Mexican-American War, the Civil War and the Spanish-American War combined.
  • The U.S. military now has more people in its marching bands than the State Department has in its foreign service

Thursday, December 23, 2010

Brad DeLong explains

Read his "Inflation Economics" Lecture. It explains the state of the US govt. financial situation and how we got here.

Then read his comment on the financial and health care service industries. Here's how it ends.
Do not get us wrong: we do not hate service industries. But most service industries produce something of value in return for their profits. Health care administration simply produces denials of coverage. Finance as currently construed simply produces portfolios for individuals that involve them bearing extraordinarily large and idiosyncratic risks that they had no idea they were bearing.

There are two ways to make money in health care: (i) by providing people with valuable treatments that they are willing to pay for, and (ii) by collecting insurance premiums and finding some excuse not to pay them out when people get sick.

There are two ways to make money in finance: (i) to find people who are willing to bear risks that they understand, selling them risks that offer attractive risk-return tradeoffs, and collecting a commission; and (ii) by selling people risks that they don't understand.

It looks to us very much as though our modern health-care administration and financial sectors are good at the second but not the first.

Wednesday, December 22, 2010

Stop the banks

Sign Yves' petition. From Yves Smith of Naked Capitalism.
From NYT.
When Mimi Ash arrived at her mountain chalet here for a weekend ski trip, she discovered that someone had broken into the home and changed the locks.

When she finally got into the house, it was empty. All of her possessions were gone: furniture, her son’s ski medals, winter clothes and family photos. Also missing was a wooden box, its top inscribed with the words “Together Forever,” that contained the ashes of her late husband, Robert.

The culprit, Ms. Ash soon learned, was not a burglar but her bank. According to a federal lawsuit filed in October by Ms. Ash, Bank of America had wrongfully foreclosed on her house and thrown out her belongings, without alerting Ms. Ash beforehand….

Identifying the number of homeowners who were locked out illegally is difficult. But banks and their representatives insist that situations like Ms. Ash’s represent just a tiny percentage of foreclosures."
This, as the British would say, is bollocks. The traditional procedures around the transfer of title made the old system virtually fail-safe. Any number above zero is unacceptably high. And “a tiny percentage” across the huge numbers of foreclosures happening across the US adds up to meaningful numbers in real terms.

The examples in the NY Times story are all from middle to upper income homeowners. For someone of lesser means, the consequences of wrongful action can be devastating. If possessions are removed, or worse, put out on the street, the losses can be significant.

This is the banks’ excuse:

A clause in most mortgages allows banks that service the loan to enter a home and secure it if it is in default, meaning if the mortgage payment is 45 to 60 days late, and if the house has been abandoned, authorities said.

First, some of the homes broken into have been current on payments. Second, “abandoned” seems to be interpreted as “no one at home when the contractor showed up” which would be true during the business day for most working families.

This pattern again proves what we know all two well, namely, that we have a two-tier system of law in the US: one for the banks, one for the rest of us.
To help stop this, sign Yves' petition.

Tuesday, December 21, 2010

Monday, December 20, 2010

When Zombies Win—great column by Krugman

When Zombies Win -
When historians look back at 2008-10, what will puzzle them most, I believe, is the strange triumph of failed ideas. Free-market fundamentalists have been wrong about everything — yet they now dominate the political scene more thoroughly than ever.

How did that happen? How, after runaway banks brought the economy to its knees, did we end up with Ron Paul, who says “I don’t think we need regulators,” about to take over a key House panel overseeing the Fed? How, after the experiences of the Clinton and Bush administrations — the first raised taxes and presided over spectacular job growth; the second cut taxes and presided over anemic growth even before the crisis — did we end up with bipartisan agreement on even more tax cuts?

The answer from the right is that the economic failures of the Obama administration show that big-government policies don’t work. But the response should be, what big-government policies?

For the fact is that the Obama stimulus — which itself was almost 40 percent tax cuts — was far too cautious to turn the economy around. And that’s not 20-20 hindsight: many economists, myself included, warned from the beginning that the plan was grossly inadequate. Put it this way: A policy under which government employment actually fell, under which government spending on goods and services grew more slowly than during the Bush years, hardly constitutes a test of Keynesian economics.

Now, maybe it wasn’t possible for President Obama to get more in the face of Congressional skepticism about government. But even if that’s true, it only demonstrates the continuing hold of a failed doctrine over our politics.

It’s also worth pointing out that everything the right said about why Obamanomics would fail was wrong. For two years we’ve been warned that government borrowing would send interest rates sky-high; in fact, rates have fluctuated with optimism or pessimism about recovery, but stayed consistently low by historical standards. For two years we’ve been warned that inflation, even hyperinflation, was just around the corner; instead, disinflation has continued, with core inflation — which excludes volatile food and energy prices — now at a half-century low.

The free-market fundamentalists have been as wrong about events abroad as they have about events in America — and suffered equally few consequences. “Ireland,” declared George Osborne in 2006, “stands as a shining example of the art of the possible in long-term economic policymaking.” Whoops. But Mr. Osborne is now Britain’s top economic official.

And in his new position, he’s setting out to emulate the austerity policies Ireland implemented after its bubble burst. After all, conservatives on both sides of the Atlantic spent much of the past year hailing Irish austerity as a resounding success. “The Irish approach worked in 1987-89 — and it’s working now,” declared Alan Reynolds of the Cato Institute last June. Whoops, again.

But such failures don’t seem to matter. To borrow the title of a recent book by the Australian economist John Quiggin on doctrines that the crisis should have killed but didn’t, we’re still — perhaps more than ever — ruled by “zombie economics.” Why?

Part of the answer, surely, is that people who should have been trying to slay zombie ideas have tried to compromise with them instead. And this is especially, though not only, true of the president.

People tend to forget that Ronald Reagan often gave ground on policy substance — most notably, he ended up enacting multiple tax increases. But he never wavered on ideas, never backed down from the position that his ideology was right and his opponents were wrong.

President Obama, by contrast, has consistently tried to reach across the aisle by lending cover to right-wing myths. He has praised Reagan for restoring American dynamism (when was the last time you heard a Republican praising F.D.R.?), adopted G.O.P. rhetoric about the need for the government to tighten its belt even in the face of recession, offered symbolic freezes on spending and federal wages.

None of this stopped the right from denouncing him as a socialist. But it helped empower bad ideas, in ways that can do quite immediate harm. Right now Mr. Obama is hailing the tax-cut deal as a boost to the economy — but Republicans are already talking about spending cuts that would offset any positive effects from the deal. And how effectively can he oppose these demands, when he himself has embraced the rhetoric of belt-tightening?

Yes, politics is the art of the possible. We all understand the need to deal with one’s political enemies. But it’s one thing to make deals to advance your goals; it’s another to open the door to zombie ideas. When you do that, the zombies end up eating your brain — and quite possibly your economy too.
This blog entry illustrates the Birth of a Zombie.

Friday, December 10, 2010

Delaying new pollution controls rules

Madeleine Brand had a segment on Obama's decision to delay polution controls on the grounds that they will "kill jobs." That's exactly backward. I left this comment on the show's website.
Allowing the new rules to go into effect will create jobs, not kill them.

Corporations are making more money and have more money in the bank now than at any time in history. They aren't spending it because of insufficient demand. Allowing the new rules to go into effect creates demand. The demand it creates is for pollution controls, but it is demand nevertheless.

Corporations can afford to make investments in pollution controls because they have so much money available to spend. This is exactly the right time to ask them to spend it. They are in a position to do so now, and doing so now will stimulate the economy. If Obama really believes that allowing the rules to go into effect will kill jobs, he has become more captive to Republican propaganda than we realized.

Where are his economic advisors?