The Recession... The Recession.... 1/23/08

The recession is coming... The recession is coming... Or so they say, but of course economists have collectively predicted 9 of the last 5 recessions...

The NYT Editorial Board weighs in with an interesting little tidbit. Unfortunately, the Board falls victim to the crying wolf recession doomsday reporting, which seems mandatory in the mainstream media. I swear that I once heard that consumer and investor confidence were critical to a market based system... well just scare the shit out of everyone why don't you with drivel like this:

The economy has fallen into recession each of the four times the national index slipped into the red since 1979. Recessions have started in the month in which the state indexes were declining in half the 50 states and rising in the other half. In October, eight were down. In December there were 13.
If this trend continues, it suggests a recession could be on the way.

(Emphasis mine). Seriously, how many conditionals can fit into a single sentence that really doesn't say anything of value? I could point out that only one of the last five recessions started in an even numbered year, or that no recession after WWII has started in January or February... but this would be of similar integrity, and a little silly. I could also make a sly remark about the fact that each of the last 7 recessions has started with a Republican in the White House, but that may seem partisan. Well... it is the truth.

Another, much better, Op-ed piece appeared today. Authored by Nobel Prize winner Stiglitz, the theme is a quick infusion of cash could help significantly -- but we should consider other long-term options as well. He highlights the concept of truly redistributing wealth by pushing more cash into the unemployment insurance system (where it will get spent) and also mentions aide to State and Local governments...

We should begin by strengthening the unemployment insurance system, because money received by the unemployed would be spent immediately.

The federal government should also provide some assistance to states and localities, which are already beginning to feel the pinch, as property values have fallen. Typically, they respond by cutting spending, and this acts as an automatic destabilizer. Federal assistance should come in the form of support for rebuilding crucial infrastructure.

The importance of keeping state and local governments afloat is important, as since the Reagan years these entities have had a significant increase in services provided without federal monetary assistance. Many of poorest and needy people rely on this state/local system for support. Additionally, this redistribution could help ease the pain in the truly hard hit areas of the country (e.g. Michigan) where the citizens wouldn't believe there is going to be a recession -- they think it's been here for two years.

Burman, from the Urban-Brookings Tax Center also has an op-ed today
discussing the recession (maybe?). I don't believe I've heard of him before, but this column definately intrigued me. He also argues for getting cash into the hands of those most likely to spend it, and additionally brings up the Bush tax cuts as a method of stimulating the economy... not by extending them, but by making them go away sooner.

It’s true that more tax cuts this year could help head off a recession in the short run. Washington could send taxpayers rebate checks or give businesses temporary breaks for new investments in equipment. President Bush is likely to propose both as part of his $150 billion package of emergency measures.

Similar efforts in 2001 and 2002 had mixed results at best, but so long as the tax breaks are temporary, they wouldn’t do much long-term economic harm either. That said, the president’s proposal would leave out 37 percent of households because they do not earn enough to pay income taxes. A credit against payroll taxes or, better still, increasing transfers to the low-income families most likely to spend the money — say, by temporarily increasing food stamps — would do more to energize the economy.

Burman also discusses the concept and value of moving the sunset for the Bush Tax cuts up from 2011 to 2009. This is rarely argued for, especially during an impending recession (maybe?). I hope this argument gets some traction and we can begin having a serious debate, not just about how to help stave off a recession now, but how to fix our government's fiscal condition going forward.

Best of all, this is one stimulus proposal that would reduce the deficit — the single largest threat to the economy’s long-term health. And that long-term benefit wouldn’t depend on our getting the timing and amount of stimulus right, something policymakers are notoriously inept at.

"A Center Called McCain" - Cohen 1/17/08

An interesting, if a little bubbly, column on McCain from NYT columnist Roger Cohen. The column goes a little overboard on the McCain will give the GOP a fighting chance because of his allure to the middle. It would be impossible to disagree that he may appeal to more independents than say Mitt, but I'm not convinced he will be able to mobilize the core votes of the party. His attempts at winning over the evangelical movement has also tarnished this very independent streak that used to win over some middle of the road and/or good governance folks. I should know about this feeling of loss of a stand up governance kine of guy, as I would have probably supported and voted for McCain in 2000 if he had faced Gore (but not Bradley, he was my man).

The core of the column, however, isn't really focused on McCain's independent allure - but on his unwavering and single-mindedness on the Iraq war.

Saddam’s nightmare ended in a misbegotten, mishandled, bloody and costly war. Does Bush’s fraudulent, blunder-ridden rush to war matter more than the prizing of 26 million human beings from a sadistic tyrant who modeled himself on Hitler and Stalin?

That core question has seldom, if ever, been dignified by honest debate through all the verbal Iraq wars fought on U.S. soil. I still believe Iraq’s freedom outweighs its terrible price. So does McCain. In the looming battle between the Baptist minister, the corporate whiz and the war hero — and perhaps Mr. 9/11 — to unite the frayed strands of Republicanism, McCain now has a fighting chance.

I think it is fairly obvious to the honest observer that Hussein was an atrocious leader, who unflinchingly resorted to fascist tactics when he felt the need. I'll be the first to say that Hussein was not a net positive for Iraq and getting rid of him could very possibly yield a better Iraq.

My concern with the war has always been the lack of thought put into planning (did the administration understand the Kurd-Sunni-Shia issue?), the failure to adequately explain the case to the international community, the rationale for going after a "bad leader" when there is no shortage of these options worldwide, and mostly the complete ineptitude of the current administration in executing the war and reconstruction effort.

"The Comeback Continent" - Krugman 1/11/08

I truly am behind the times in getting to this excellent column by Krugman last week.
An all to common belief in America is that Europe's economy cannot compete due to high taxation, social safety net, and too much regulation. As Krugman points out, this may have been true thirty, or even twelve, years ago - but those days are passing away. Today's European Union is a vibrant economic actor on the global stage. The Euro zone's economy is already competing closely in size and scope with America's. So what has happened in Europe over the past ten years?

What European countries definitely haven’t done is dismantle their strong social safety nets. Universal health care is a given. So are a variety of programs that support families in trouble, helping protect Europeans from the extreme poverty all too common in this country. All of this costs money — even though European countries spend far less on health care than we do — and European taxes are very high by U.S. standards...

According to the anti-government ideology that dominates much U.S. political discussion, low taxes and a weak social safety net are essential to prosperity. Try to make the lives of Americans even slightly more secure, we’re told, and the economy will shrivel up — the same way it supposedly has in Europe.

If the EU where to bring the UK into the Euro zone (very unlikely), establish a more integrated (deeper) union via a strong constitution or supplant the dollar as the preeminent global currency a lot of things could change very quickly. I would argue that Europe's economy is in prime position to make a strong surge to the top of the global economy. With a strong social safety net in place, there is a lower risk of severe disruption of a large swath of the population's lives due to globalization when compared to America. Re-training programs, retirement benefits and health insurance are all issues that the majority of governments on the continent deal with in some manner.

Our American blend of exceptionalism has gotten us a long way, but our resistance to accepting the positives of the European model may just be our most exceptional mistake.

"From Hype to Fear" - Krugman 1/7/08

On Monday, Krugman discussed the GOP fear mongers and their take on the economy.

He hits the nail on the head when he discusses the flip flops this group does when the economic climate changes.

When the economy is doing reasonably well, the debate is dominated by hype — by the claim that America’s prosperity is truly wondrous, and that conservative economic policies deserve all the credit.

But when things turn down, there is a seamless transition from “It’s morning in America! Hurray for tax cuts!” to “The economy is slumping! Raising taxes would be a disaster!”

My economic thinking has always been informed by a progressive ideal, by which the affluent support the economic system from which they are the primary beneficiary. Therefore, if there is a concern about the current level of economic security for the middle and/or lower socioeconomic classes, the first place to look is the affluent. As Krugman points out, however, there are a number of folks out there who will do anything to keep this issue from being framed in this manner.

But there’s a powerful political faction in this country that understands very well that any real change will create losers as well as winners. In particular, any serious progressive reform of health care, let alone a broader attempt to reduce middle-class insecurity and inequality, will have to mean higher taxes on the affluent. And members of that faction will do whatever it takes to scare people into believing that change means disaster for the economy.

I have often been confounded by the success of this group (the have mores) of playing the middle and upper middle classes against the lower middle class. I would argue that the current highest rate is not sufficient and that the threshold is too low. Maybe a $1M top bracket at 40%? I'm not sure of the exact values, but the current system allows too many of the upper middle to fear being moved into the upper bracket(whether or not that fear is justified is debatable).

"The Great Divide" - Krugman 12/31/07

The last day of 2007 saw Krugman continue his recent fixation on anti-Obama positions. The column focuses on the GOP candidates economic policies generally, and the transmogrification of McCain specifically. The overall tenor of the piece, however, is a rebuke of the "transcending partisanship" argument promoted by the Obama campaign. Krugman discusses how the GOP nomination process shows that every contending candidate (with the notable exception of Huckabee) for the nomination has fallen in line with Bushonomics.

If [bipartisan solutions] were possible, Mr. McCain, Mr. Romney and Mr. Giuliani — a self-proclaimed maverick, the former governor of a liberal state and the former mayor of an equally liberal city — would seem like the kind of men Democrats could deal with. (O.K., maybe not Mr. Giuliani.) In fact, however, it’s not possible, not given the nature of today’s Republican Party, which has turned men like Mr. McCain and Mr. Romney into hard-line ideologues. On economics, and on much else, there is no common ground between the parties.

It is amusing that a scant four years ago, there was significant discussion about whether or not the Dems were going to create an unelectable partisan out of a brutal nomination process, and now it appears that the GOP is actually heading down that road. The economy is struggling -- though analysts say it could go either way -- and the average American is feeling the pinch of falling home prices and stagnant wages. Cozying up to the Bush administration's policies doens't seem to be the most intelligent general election move, but I tend to agree with Krugman's assertion that this is what is to be expected out of the current Republican Party and it's blind "free market" economics.