Month: August 2011

Hitting the streets and the roads

by digby

UK austerity hits the streets:

The economic downturn and the government’s deep cuts to welfare will drive up homelessness over the next few years, raising the spectre of middle class people living on the streets, a major study warns.

The report by the homelessness charity Crisis, seen by the Guardian, says there is a direct link between the downturn and rising homelessness as cuts to services and draconian changes to benefits shred the traditional welfare safety net.

It’s happening here too. And with all the talk about how charities and volunteers will naturally take up the slack at the local level, it doesn’t actually work out that way. And it isn’t just Republicans turning a cold shoulder:

The Orange County Democratic Executive Committee wants the region’s top Democrat to stop arresting anti-poverty activists who feed the homeless.

The Orange County party’s officers passed a resolution Monday night calling on Orlando Mayor Buddy Dyer to stop enforcing a controversial ordinance that’s led to the arrest of nearly 30 people who handed out food to the homeless at Lake Eola Park.

The resolution asks the same of the six members of the Orlando City Council — Phil Diamond, Sam Ings, Daisy Lynum, Tony Ortiz, Patty Sheehan and Robert Stuart — all but one of whom (Ortiz) are Democrats.

“Whereas, the passage of this ordinance and its enforcement involving arrests may reflect badly on Orlando, internationally. Moreover, adverse publicity about these arrests may significantly hurt the economy and reputation of the City Beautiful,” the resolution reads, in part. “Whereas, as Democrats, we stand firm in our belief in anti-poverty policies and expect our elected officials to do the same.”

The city ordinance requires a permit to feed large groups in downtown parks, and groups are limited to two permits per year, per park. Orlando Food Not Bombs members were arrested after defying the ordinance and sharing food at Lake Eola Park. The first few of those arrested face fines and/or 60 days in jail when they go on trial next week.

If you’re lucky enough to own a car, or preferably an RV, you could just move on down the road and join the legions of “Workampers” (aka, itinerant workers):

After communicating with Suzann for more than six months and observing the Ellingsworth’s ups and frequent downs, it’s obvious that workamping is not all fun and games, at least for those who hit the road in need of a job to survive.

Most workamper jobs are of the minimum-wage variety. Workampers generally don’t receive unemployment insurance benefits, severance pay or any warning that a job is about to end. Workampers face many of the same job insecurity issues as the millions of Americans who have been downsized due to job outsourcing, financial mismanagement and slow consumer demand for products and services, except workampers are purposely more nimble and have been conditioned to pack up and move to where the jobs are. “We have to be mobile to land a job,” said Suzann. Those who become jobless and live in traditional stationary homes aren’t usually able to move to another city on a moment’s notice.

That’s just good old American entrepreneurship and pluck. Kind of like the Grapes of Wrath with carpeting. (I’ll bet some of them have cell phones too, the lucky duckies.)In fact, if we can get the whole middle class to sign on to this we could beat the global competition all to hell. And it solves the housing crisis!

This isn’t getting better. We are going on for years now in an epic slump, with no end in sight. People are still losing their homes and their futures in this thing. And instead of dealing with it seriously, we’ve got Democrats in Orlando throwing volunteers in jail for giving food to people forced to live on the street and Republicans presidential candidates telling everyone that Social Security and Medicare are unconstitutional Ponzi Schemes and cutting help for homeless veterans.

Oy vey.

Here’s a little much needed Elizabeth Warren, on the middle class:

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The DOJ steps in to stop wireless duopoly

by David Atkins (“thereisnospoon”)

It looks like the T-Mobile girl gets to keep her job for now:

The Justice Department filed a lawsuit on Wednesday to block the proposed $39 billion merger between AT&T and T-Mobile USA on antitrust grounds, saying a deal between the nation’s second- and fourth-largest wireless phone carriers would substantially lessen competition, result in higher prices and give consumers fewer innovative products.

The lawsuit sets up the most substantial antitrust battle since the election of President Obama, who campaigned with promises to revitalize the Justice Department’s policing of mergers and their effects on competition, which he said declined significantly under the Bush administration.

AT&T said it would fight the lawsuit. “We plan to ask for an expedited hearing so the enormous benefits of this merger can be fully reviewed,” the company said in a statement. “The D.O.J. has the burden of proving alleged anti-competitive effects and we intend to vigorously contest this matter in court.”

There’s a lot of context here to disentangle. Perhaps the most important is that job creators fatcat corporate executives aren’t just sitting on their huge piles of cash. Those wads of cash are not going into hiring workers: if people don’t have jobs, they have no money; if they have no money, they don’t buy things; if they don’t buy things, there’s no need for companies to hire workers no matter how much cash they’re sitting on. Which is totally why we need to cut back on jobs programs and deliver tax cuts to companies so they have more cash to sit on.

So what is that cash being used for? It’s going to mergers and acquisitions like the planned T-Mobile/AT&T deal.

The issue of this particular merger has split coalitional divides on the left: AT&T as a union company has a better track record of hiring minorities than other wireless firms. Also, the Economic Policy Institute issued a report claiming that the merger would create 96,000 jobs based on the idea that further wireless infrastructure would be built as a result of the merger. Those facts have led the AFL-CIO and the Communications Workers of America to support the merger.

Critics counter, however, that such development would take place regardless of the merger due to past infrastructure commitments made by AT&T and the fact that AT&T’s network is underinvested compared to other wireless. In the meantime, of course, there are near certain job losses that will come with the merger, including the closure of T-Mobile stores (most of which would not actually be converted to AT&T stores due to fears of market cannibalism from proximate locations.) And, of course, part of the fiscal benefits that AT&T is promising to shareholders as a result of the merger will come, as always in such cases, from consolidation of services: i.e., job losses from elimination of so-called redundancies not only in the stores, but throughout the entire corporate chain.

That is why Al Franken, Herb Kohl, and many others within the Democratic and progressive movements are opposing the merger.

Personally, I think the issue is fraught with complexity, but eliminating a competitor from the wireless marketplace is a really bad idea. The potential for price-fixing and rent-seeking between an AT&T and Verizon duopoly would be very high, and dramatically outweigh any frankly dubious claims of job gains from the merger.

This is one decision, I believe, that Holder and the Obama Administration got right, and I hope they stick to their guns on it. If nothing else, it means Jessica Pare Carly Foulkes will keep the residuals coming in.

Cheney the fatuous vampire

by digby

I’m sure you recall that the Bush administration used to say that the violence in Iraq after the invasion was the “birth pangs” of democracy all over the Middle East. Well, it looks like Dick Cheney thinks the head is crowning:

KILMEADE: Is it a reach to say Libya’s unrest…all has a lot to do with what happened in Iraq? Letting those people, seeing those people vote, and the Arab community seeing what’s going on?

CHENEY: Well, I think there may be some of that going on. […] But I think that what happened in Iraq, the fact that we brought democracy, if you will, and freedom to Iraq, has had a ripple effect on some of those other countries.

This couldn’t be a more fatuous explanation. First, it’s belied by the facts, which you can read all about here. But the bigger problem is that one can say this about virtually everything. (Sure, “it will all work out in the long run — but in the long run we’ll all be dead”)

The Bush administration and their Iraq apologists made an absolute fetish out of this nonsense, mainly because they fucked up everything they touched so royally that they had no other way to explain themselves. I recalled this one recently, but it’s worth recounting again as Cheney does his Mission Accomplished Tour:

David Ignatius from last week called Iraq Can Survive This … makes the increasingly common rightist argument that someday things will probably work out in Iraq so everything we did will have been right in retrospect:

Pessimists increasingly argue that Iraq may be going the way of Lebanon in the 1970s. I hope that isn’t so, and that Iraq avoids civil war. But people should realize that even Lebanonization wouldn’t be the end of the story. The Lebanese turned to sectarian militias when their army and police couldn’t provide security. But through more than 15 years of civil war, Lebanon continued to have a president, a prime minister, a parliament and an army. The country was on ice, in effect, while the sectarian battles raged. The national identity survived, and it came roaring back this spring in the Cedar Revolution that drove out Syrian troops.

Similar logic would have one believe that because Czechoslovakia is now a thriving democracy, the invasion of Hitler in 1938 was all for the best. And hey what’s 30 years of human suffering? Eventually things will probably get better — as long as the “national identity” survives. Dear God.

This argument reveals something very fundamental about the way that the hawks see war as a game of Risk rather than a catastrophic upheaval in which actual human beings are being killed and maimed and in which the everyday lives of those who live on that piece of land are affected in the most consequential ways possible. Who but the most arrogant, spoiled,pampered, elitist American could write such a thing?

Dick Cheney obviously fits that bill.

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19th Systemic Breakdown

by digby

Yesterday I wondered if there was some epistomological problem with our elites in light of at least two massive failures of government in the past decade — first, the Iraq invasion based upon wishful thinking and lies, and now the ongoing insistence among the leaders of the industrialized world that we ignore serious but solvable problems in favor of those that are not acute or even real. I suspect there is a systemic breakdown, but Paul Krugman helpfully supplied the specific economic mistake, which turns out to be the result of specialization — and something a little bit more mystyfying:

The basic IS-LM model, with its possibility of a liquidity trap, has been a very good guide in these troubled times. And there’s a reason for that: as I wrote long ago, in a piece from the 1990s, IS-LM is basic economics applied to a world in which in addition to production of goods there is both money and a bond market. Aside from the assumption of sticky prices — which is overwhelmingly obvious and supported by strong evidence — it’s your basic, minimal, compelling model. It should come as no surprise that it gets at a lot of what’s going on.

Yet people don’t know this model — which is to say, they don’t have any simple framework for thinking about how money, interest rates, and the real economy interact.

Which people am I talking about? Money managers, obviously; they may know a lot about individual markets and companies, they may have lots of experience, but now that we’re talking about macro issues of a kind not seen since the 1930s, those talents are a lot less relevant than usual. Pimco used to have Paul McCulley, who was very good on the macro, but with him gone, they seem to be making up theories on the fly. And whatever model Paulson is using, it’s not IS-LM.

But economists also don’t know this stuff. We’re living in a dark age of macroeconomics, in which much of the profession has turned its back on past knowledge. There’s also a contingent of economists who have read Hicks, or at least claim to have read him, but seem to have come out of the experience with nothing more than misleading catchphrases and the strange conviction that they have transcended something they actually don’t understand. (Brad DeLong takes on some of this stuff).

So, in this case it’s a failure of experts, some of whom just don’t know what they need to know and others who have inexplicably decided to ignore what they do know and pretend that they’ve discovered something more relevant. The first is just simply human failure (as Atkins said yesterday — we should just stop paying attention to them until they acknowledge their mistake and account for it) the second is a little bit less understandable. How does that happen, and why?

Yesterday, my friend Pastordan offered this:

Reinhold Niebuhr suggested two answers:

1. Humans have “limited self-transcendance,” which means we basically have the ability to learn from our mistakes–but not the power to see all the mistakes we make. That leads to overconfidence in our own ability, which must be a particular temptation when you’re used to being the smartest guy in the room.

2. We like to think of ourselves as rational beings, but our opinions and insights are more determined thank we’d like to admit by our commitments to the needs of our social group. That goes beyond “groupthink” to moral obligation: the more people we represent, the more obliged we are to represent their interests. So if Bond Traders in general think T-Bills are a bad bet, it’s terribly difficult and may even feel *wrong* to think outside that conclusion. This is exactly why the Founding Fathers were dubious about establishing a permanent capital: they were afraid of exactly what has come to pass, which is that national leaders feel more beholden to the Village than to their true constituencies, which are far away and not yammering in their ears all day.

It’s also while appeals to fear work. When people think their community is threatened, they’re liable to go along with ideas they wouldn’t otherwise because they perceive them as necessary to protect the community. Hello, invasion of Iraq.

Niebuhr, who was after all a theologian, believed that Christ provided the only true transcendance to these situations. YMMV, but I think his insights are helpful whether or not you buy his ultimate conclusions, or at least I hope they are. I am, after all, a representative of the Christian community. 😉

I would suggest that the Wall Street/Economist/political elite mistaken consensus could be the result of an appeal to fear as well. If they perceive their “community” to be under attack, circling the wagons makes sense for them too.

I suppose the herd mentality can account for much of this, along with the natural human fear of being out of step with one’s social and professional peers. But I thought academia was supposed to be at least a little bit different. Secured by tenure, it is assumed that scholars would be less subject to such social and professional pressures. Apparently not. Indeed, I think the “dark age” of economics described by Krugman might just be the result of the same sustained, well-financed propaganda campaign that has cowed the press into being petrified of saying anything that might raise the ire of the right wing rabble. It takes a certain kind of person to be able to sustain the kind of relentless attacks that Paul Krugman has sustained. Most people just don’t have the stomach for it.

One of the mistakes many newly hatched populists seem to make is to presume that money is the only thing that motivates people. It’s true that it’s creating the primary distortion in our political system at the moment (and it’s going to get worse with the Citizens United decision) but humans are more complicated than that. You don’t have to see bribes and graft in every corner to explain motivation. Humans are perfectly capable of being conformist, unimaginative, selfish and cruel without money being involved at all.

To understand what’s going on, we might do better to add to our reading of The Shock Doctrine (which I think is invaluable) for a time and re-read The Best and the Brightest — or maybe Lord of the Flies.

Update: Jesus. I’m not suggesting that there wasn’t any crime fergawdsake. I’m just wondering why the people who are supposed to do macroeconomics and economic policy in the US and Europe are getting it so wrong and I don’t think it’s that every last elite in the world is an outright criminal working on behalf of a very elaborate global conspiracy. I don’t think they’re that smart…

And yes, for the record, the ones that are criminals should be held accountable for their crimes. I’m all for that. I’ve only written that 7,597 times.

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Independent profits

by digby

Some man on TV keeps telling me that building the tar sands pipeline will create cheap energy for Americans and make us energy independent. Guess what?

In pushing for the Obama Administration’s approval of TransCanada’s proposed Keystone XL tar sands pipeline, the North American oil industry and its political patrons argue that the pipeline is necessary for American energy security and its construction will help wean America of dependence on Mideast oil. But a closer look at the new realities of the global oil market and at the companies who will profit from the pipeline reveals a completely different story: Keystone XL will not lessen U.S. dependence on foreign oil, but rather transport Canadian oil to American refineries for export to overseas markets. read on.

Well hell. Whodda thunk it?

If anyone wants to know how this works, they need to get on the cluephone to Alaska:

JUNEAU – Today, Alaska Representatives Pete Petersen and Chris Tuck (both D-Anchorage), and Representative Scott Kawasaki (D-Fairbanks) sent a letter to U.S. Attorney General Eric Holder asking that he investigate Alaskan fuel prices as part of his investigation of nationwide gasoline prices.

“Alaska produces more oil than most countries, but Alaskans still pay more at the pump than anyone else in the U.S. Something’s not right,” said Rep. Petersen. “Any investigation into high fuel prices should certainly include a hard look at the situation in Alaska.”

Last week, Holder announced that he will conduct an investigation of gasoline prices in the United States. Since 2008, Alaska has consistently had the highest gasoline prices in the nation. According to a May 26 report from AAA, the average price for a gallon of gasoline in Alaska is $4.10, excluding state taxes. The next highest state is Hawaii at $4.08, which has no oil production.

“In Fairbanks, the high cost of heating fuel is crippling,” said Rep. Kawasaki. “We need to get to the bottom of this before Fairbanks families have to face another winter wondering if they’ll be able to afford to heat their homes.”

I have friends who are leaving the state because the cost of heating oil was more than their mortgage last year. “Energy independence” for Alaska hasn’t meant low prices. Their oil is shipped to the West Coast and overseas and their gas and heating oil prices are higher than everywhere else in the US. That whole rationale is a crock.

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Tax Revolt

by David Atkins (“thereisnospoon”)

This will barely register as a shock these days:

At least 25 top United States companies paid more to their chief executives in 2010 than they did to the federal government in taxes, according to a study released on Wednesday.

The companies — which include household names like eBay, Boeing, General Electric and Verizon — averaged $1.9 billion each in profits, according to the study by the Institute for Policy Studies, a liberal-leaning research group. But a variety of shelters, loopholes and tax reduction strategies allowed the companies to average more than $400 million each in tax benefits — which can be taken as a refund or used as write-off against earnings in future years.

The chief executives of those companies were paid an average of more than $16 million a year, the study found, a figure substantially higher than the $10.8 million average for all companies in the Standard & Poor’s 500-stock index…

The authors of the study, which examined the regulatory filings of the 100 companies with the best-paid chief executives, said that their findings suggested that current United States policy was rewarding tax avoidance rather than innovation.

“We have no evidence that C.E.O.’s are fashioning, with their executive leadership, more effective and efficient enterprises,” the study concluded. “On the other hand, ample evidence suggests that C.E.O.’s and their corporations are expending considerably more energy on avoiding taxes than perhaps ever before — at a time when the federal government desperately needs more revenue to maintain basic services for the American people.”

In a sane country with a real media, people who say that we need to lower taxes on “job creators” would be mocked 24/7 on the cable news networks. They would have approximately the same credibility as NAMBLA, and their effect on society would be seen as less salutary.

On a positive note, the New York Times article is pretty good journalism: it tells the truth and lays out the facts without trying too hard at a “balanced” take. There are a few confusing and pointless quotes from the Boeing and Verizon corporate hacks, but by and large it’s fairly well done. More like this, please.

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Hey, sanity!

Here’s an informative debate on the Alberta tar sands issue between lead environmental activist Bill McKibbon and some clone from the Randroid Manhattan Institute:

Yes please!

It’s not a conspiracy

by David Atkins (“thereisnospoon”)

Digby did a tremendous job earlier today of taking on the notion that the entire financial crisis was dreamed up, foreseen, expertly planned and exploited by a cabal of wealthy conspiracists straight out of a James Bond novel.

Anyone who has read Roubini’s Crisis Economics or Michael Lewis’ The Big Short will be dispossessed of the illusion of a vastly intelligent criminal cabal fairly quickly. There were a number of people who saw the end coming, but they were mostly ignored and vituperated against as all the “Very Serious People” just “knew” that the good times would keep on rolling. There are so many examples of this in Michael Lewis’ book alone it’s hard to count them all. A good one follows below:

The credit default swap would solve the single biggest problem with Mike Burry’s big idea: timing. The subprime mortgage loans being made in early 2005 were, he felt, almost certain to go bad. But as their interest rates were set artificially low, and didn’t reset for two years, it would be two years before that happened. Subprime mortgages almost always bore floating interest rates, but most of them came with a fixed, two-year “teaser” rate. A mortgage created in early 2005 might have a two-year “fixed” rate of 6 percent that, in 2007, would jump to 11 percent and provoke a wave of defaults. The faint ticking sound of these loans would grow louder with time, until eventually a lot of people would suspect, as he suspected, that they were bombs. Once that happened, no one would be willing to sell insurance on subprime mortgage bonds. He needed to lay his chips on the table now and wait for the casino to wake up and change the odds of the game. A credit default swap on a thirty-year subprime mortgage bond was a bet designed to last for thirty years, in theory. He figured that it would take only three to pay it off.

The only problem was that there was no such thing as a credit default swap on a subprime mortgage bond, not that he could see. He’d need to prod the big Wall Street firms to create them. But which firms? If he was right and the housing market crashed, these firms in the middle of the market were sure to lose a lot of money. There was no point buying insurance from a bank that went out of business the minute the insurance became valuable. He didn’t even bother calling Bear Stearns and Lehman Brothers, as they were more exposed to the mortgage bond market than the other firms. Goldman Sachs, Morgan Stanley, Deutsche Bank, Bank of America, UBS, Merrill Lynch, and Citigroup were, to his mind, the most likely to survive a crash. He called them all. Five of them had no idea what he was talking about; two came back and said that, while the market didn’t exist, it might one day. Inside of three years, credit default swaps on subprime mortgage bonds would become a trillion-dollar market and precipitate hundreds of billions of dollars’ worth of losses inside big Wall Street firms. Yet, when Michael Burry pestered the firms in the beginning of 2005, only Deutsche Bank and Goldman Sachs had any real interest in continuing the conversation. No one on Wall Street, as far as he could tell, saw what he was seeing.

No one could see what he was seeing. This is in 2005–fairly late in the bubble game. And still no one could see what he was seeing. Later on in the book Michael Lewis tells of the crucial moments when Wall St. first started to really realize that credit default swaps were going to bring the whole system down and stopped selling them. It was a like a spooked herd of cattle stampeding for the exits all at once. And as the book chronicles, most of Michael Burry’s wealthiest clients were furious with his market-shorting investment strategy for years, often pulling their money out of his firm in protest because they all wanted in on the big money mortgage derivative game all the rest of the big boys were playing.

One of the biggest lessons one can learn in life is that no matter how far up one rises or doesn’t rise, the world is still populated by the same sort of morons we met in high school. It never gets better. The people at the top of the economic are just as greedy, impulsive, reckless, shortsighted and petty as everyone who annoys us in our everyday lives.

This is part of what being a progressive means: understanding that reality, and understanding that most of our circumstances in life have little to do with our work ethic or skill, but rather a lot more to do with the circumstances of our birth and education, our parents, our social environment, whom we happen to meet and impress, which companies are hiring when we come on the job market, the bosses and clients we get and even just a lot of dumb luck. The financial Masters of the Universe aren’t much smarter than the rest of us, and they didn’t see the subprime mortgage CDO collapse coming any more than the average schlub who bought bought a subprime mortgage did. The only difference is that the former used the threat of total global economic collapse as leverage to get bailed out, while the latter had no such power.

It’s idiots, all the way up the chain. Idiots like Thomas Friedman and Alan Greenspan, neither of whom can prognosticate two feet in front of their noses, but whose words are taken as gospel by all the rest of collective fools who think they’re the smartest guys in the room. Which makes it all the more important that the idiots at the highest levels of government, whether they sport a fancy meaningless Ivy League degree or not, start listening to the actual smart people who did see it coming. Accurate prognostication is how policy makers can actually tell the smart people from the idiots.

Thomas Friedman and his ilk are not evil geniuses playing out the next move on a grand conspiratorial chessboard. They’re just as dumb as the collective content of their words make them out to be, no matter how erudite or carefully constructed those words may be.

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