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Something To Do

by digby

Everything sucks. Well, not everything. What’s happening in Wisconsin definitely doesn’t suck. Progressives up there are fighting hand to hand combat with the Tea Party and the Koch Brothers — and they stand a good chance of winning. But they could use your help.

Call out the vote.

Help defeat the Wisconsin Republicans!

Gov. Scott Walker and Republicans in Wisconsin have declared a war on working families.

The “recall” elections are happening this summer — it’s time to start calling voters in Wisconsin to defeat Senate Republicans and stop the war on working families!

Sign up to make calls from home to let Wisconsin voters know about Walker and his Republican allies.

That’s from the PCCC and DFA doing good work up thee in Wisconsin. If you are sick of all the negativity and you got some time on your hands, this is a very positive way to help turn the tide. Gotta start someplace.

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Hacking Sir Paul

by digby

In all the hoopla these past couple of weeks I haven’t posted much about the Mucdoch scandal which is still raging and seems to be circling closer and closer to Pier Morgan — and maybe even FoxNews.

This is the most intriguing news this past week:

Gordon at Newstalgia writes:

The latest revelations in the ever-growing Phone Hacking scandal may have less to do with Rupert Murdoch than the Standard Operating Procedure so much used by the Murdoch Empire. This time it’s via The Daily Mirror, whose editor at the time was CNN’s Piers Morgan and who later became Editor at News Of the World and now Scotland Yard would like to have a word or two with him. As was disclosed by Heather Mills, the former Mrs. Macca on an episode of BBC2’s Newsnight this past Wednesday, she was approached by a writer for the Daily Mirror and asked for a statement about a recent spat she had with then-boyfriend Paul. When the journalist gave her a verbatim rundown of a phone call the two had, Heather promptly blew a gasket and threatened legal action if the gist of the conversation was ever made public. When informed of this two days ago, Sir Paul expressed shock, horror and a bee-line visit to Scotland Yard when he finishes his latest tour.

There’s more at the link.

I think people are rightfully horrified at the idea of hacking kidnap victims and the families of dead soldiers. And the blackmail relationships between Murdoch and politicians is nothing short of shocking. But nobody messes with Paul McCartney.

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Booming Profits and Falling Wages

by digby

Floyd Norris has a lengthy and highly nuanced article in today’s NY Times about the new data showing that corporate profits are way up while workers wages are down. It’s a good article but it’s so hedged with various caveats as to obscure the real meaning.

This article by the AP’s Paul Wiseman from a couple of days ago gets to the point:

Strong second-quarter earnings from McDonald’s, General Electric and Caterpillar on Friday are just the latest proof that booming profits have allowed Corporate America to leave the Great Recession far behind.

But millions of ordinary Americans are stranded in a labor market that looks like it’s still in recession. Unemployment is stuck at 9.2 percent, two years into what economists call a recovery. Job growth has been slow and wages stagnant.

“I’ve never seen labor markets this weak in 35 years of research,” says Andrew Sum, director of the Center for Labor Market Studies at Northeastern University. Wages and salaries accounted for just 1 percent of economic growth in the first 18 months after economists declared that the recession had ended in June 2009, according to Sum and other Northeastern researchers.In the same period after the 2001 recession, wages and salaries accounted for 15 percent. They were 50 percent after the 1991-92 recession and 25 percent after the 1981-82 recession.

Corporate profits, by contrast, accounted for an unprecedented 88 percent of economic growth during those first 18 months. That’s compared with 53 percent after the 2001 recession, nothing after the 1991-92 recession and 28 percent after the 1981-82 recession.

This is unprecedented. Some of it is the problem of demand, of course. We’re in the predictable condition that Keynes diagnosed and prescribed massive government intervention to counteract. Businesses don’t hire or keep workers out of the goodness of their hearts in America. If they don’t need them, they don’t need them.

And judging from the claptrap these CEOs are babbling every chance they get (read the article), they are planning to squeeze more than just their workers — they want to use this situation to blackmail the government into cutting their taxes and deregulating them even more than they already are. It doesn’t make sense, of course. They are sitting on a ton of capital, it’s not like they don’t have the money to invest. It’s sheer opportunism and they’ll probably get away with it.

But there is something else going on as well:

U.S. corporations are expanding overseas, not so much at home. McDonalds and Caterpillar said overseas sales growth outperformed the U.S. in the April-June quarter. U.S.-based multinational companies have been focused overseas for years: In the 2000s, they added 2.4 million jobs in foreign countries and cut 2.9 million jobs in the United States, according to the Commerce Department.

So, it’s not as if their profits are being being put to work at all. They just aren’t being put to work in the US. And if the political establishment has its way, they’ll be doing even more. Free trade deals are on the top of both parties’ “jobs agenda.” If all goes well, they’ll end up with a few high profile loopholes temporarily closed in exchange for lower tax rates forever and some sweetheart trade deals. With any luck they won’t even have to give up the loopholes.

For a look at what a rational jobs agenda would look like, Bob Borosage at Campaign for American’s future has thoughtfully provided one, here. Just as soon as we finish mercilessly cutting the hell out of both taxes and spending, I’m sure Washington will get right on it.

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Perrypalooza

by digby

I’m not following the Rick Perrypalooza in detail, but the twitter machine indicates that the usual suspects are out in force. This one was a featured speaker:

That is Lila Rose professional slut shamer and Planned Parenthood hoaxster. Perry appearing with her is the equivalent of Barack Obama standing on stage with the members of the Earth Liberation Front or the globalization anarchists. It’s not that I’m saying these are equivalently wrong on the merits, but that they are equivalently at the extreme fringes of the political system. The difference is that the right wing extreme is smack in the middle of the Republican Party, warmly embraced by elected officials and welcomed into the dialog as if what they are saying isn’t a belief held only by fringe fanatics.

Dave Neiwert has documented this mainstreaming in detail, so I’m not saying anything earth shattering here. But it’s always jarring to me to see it nonetheless. Rick Perry is considered to be a very serious candidate for president. It’s possible that he is nothing more than the Frederick of Hollywood of 2012, but all the Village pundits are salivating at the prospect of his possible candidacy. This association with the most outrageous members of the religious right doesn’t even register.

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As California goes, so goes the nation

by digby

Here’s a blast from the past that might put some of this in perspective. California, something like the 8th largest economy in the world, has been screwed a lot longer than the federal government. It still is. But the least of its problems is its lousy credit rating:

California Is Not Greece by: Robert Cruickshank Fri Mar 12, 2010 at 11:48:12 AM PST

Carly Fiorina thinks California should file bankruptcy (Earth to Carly: the state can’t). And many right-wingers have argued that California has to reduce its level of spending, adopting austerity budgets to avoid the kind of financial problems faced by Greece. Along with other Mediterranean countries, Greece has been pushed to adopt austerity budgets that threaten a European-wide severe recession in order to satisfy bond markets that worry about the level of debt to GDP.California faces no such problem. That was proved once again yesterday when a sale of California bonds went extremely well – Treasurer Bill Lockyer was able to sell $500 million more in bonds than originally anticipated, and at lower interest rates: The tax-free general-obligation bonds, which will fund voter-approved infrastructure projects, attracted orders totaling $1.38 billion from individual investors Tuesday and Wednesday.With just $620 million of the original $2-billion deal left, the state took in $3.3 billion in orders from institutional investors Thursday. To fill more of those orders, Treasurer Bill Lockyer raised the deal to $2.5 billion.Despite its weak credit rating and the ongoing struggle to plug a $20-billion budget gap, California benefited from investors’ still-voracious hunger for fixed-income securities. The state sold bonds ranging in maturity from one year to 30 years.Strong demand allowed the state to slightly reduce yields on some of the bonds from preliminary estimates. Final tax-free yields ranged from 1.17% on the two-year bond to 5.65% on the 30-year. This reveals a couple of things. First, it’s likely that the rating agencies are playing games with the state’s credit rating. California must by law devote its tax revenues to repaying bondholders, with only education having a higher priority. Second, it shows that California can sell its debt on the markets right now without the need to resort to further austerity…

That’s not to say California is out of the woods. Far from it. Whereas nations like Spain, Portugal, and Greece are just now adopting austerity budgets (at the self-defeating insistence of Germany, which deludes itself into thinking this will do anything other than depress demand for German exports), California has had austerity budgeting since the summer of 2007. As a result, we have a 12.5% unemployment rate and no prospect of significant economic recovery anytime soon.

In fact, some of the only job creation comes from bond debt like this, which funds infrastructure projects. Some Republicans want to suspend sales of these bonds, including the $9 billion high speed rail bond, but doing so would only cost us more jobs and set back our efforts at economic recovery.There are legitimate concerns about the portion of the budget that goes to debt service. But the best way to address that is to increase the amount of revenue the state takes in. California has an enormous GDP and large fortunes that go largely untaxed. Capturing more of that money would help service the debt load while at the same time expanding government services, which is necessary for economic recovery.

California’s been living in austerity opposite world for quite some time. The results are devastating. But the downgrading of its debt was hardly the biggest problem it’s faced — its inability to rationally deal with an economic down turn is a far bigger challenge. The lousy credit rating is a blip in that larger catastrophe.

Update: This post by Dean Baker is essential to understanding this S&P nonsense.

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S&P: Liars or Idiots?
David Atkins (“thereisnospoon”)

This blog has been hard on S&P. But even I have to admit that there is one thing they got right in their decision to downgrade the U.S. debt, and it’s this from the report:

Compared with previous projections, our revised base case scenario now
assumes that the 2001 and 2003 tax cuts, due to expire by the end of 2012,
remain in place. We have changed our assumption on this because the majority
of Republicans in Congress continue to resist any measure that would raise
revenues, a position we believe Congress reinforced by passing the act. Key
macroeconomic assumptions in the base case scenario include trend real GDP growth of 3% and consumer price inflation near 2% annually over the decade.

Remarkable that they finally figured that out. Loyal readers may recall that I roundly mocked S&P for blithely assuming in their original report that the Bush tax cuts would expire on schedule. Allow me to quote myself from just over a week ago:

But beyond that, there are two ways of looking at this move by S&P. One is that they’re putting the screws on the United States on behalf of their Wall St. pals in a conspiratorial extortion scheme. That is certainly an easy conclusion to draw, until you realize that they’re also demanding an end to the Bush tax cuts for the wealthy…

So let’s get the S&P position straight: unless Congress and the White House enact a whopping $4 trillion dollars in spending cuts and repeal the Bush tax cuts, they’re going to downgrade our credit rating.

Ultra-wealthy Wall St. bankers definitively do not want the Bush tax cuts to expire. So collusion and extortion on behalf of the likes of Goldman Sachs seem to be excluded as a motive. Which leaves the other way of looking at it: the “analysts” at S&P are just plain stupid.

In what political universe are these people living that they think both cutting spending by $4 trillion and killing the Bush tax cuts can actually happen given today’s political climate? It’s insane. Even Democrats are too afraid of wealthy donors and anti-tax attack ads to actually let the Bush tax cuts expire–to say nothing of Republicans–but no way in hell do even the most morally compromised Democrats go along with $4 trillion in spending cuts. Neither of those has a real prayer of happening, much less both.

Either S&P were the clueless fools back in July that they usually are, but suddenly realized the obvious truth about Republican extremists only after the debt ceiling bill–in which case, what happened to change their minds? Or they never really believed that the Bush tax cuts would expire in the first place, and were just playing a rhetorical game.

So which is it, S&P? Were you lying, or just stupid? And either way, why should we listen to anything you say now?

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Low Standards, Poor Judgment
by David Atkins (“thereisnospoon”)

While many left-of-center pundits and bloggers have flogged the Republicans’ key role (i.e., taking the debt ceiling hostage and refusing to raise taxes even an inch) in the Standard & Poor’s report explaining their historic downgrade of U.S. treasuries from AAA to AA+, what is more telling is that anything S&P says is taken seriously at all. I have little to add on this front to what Digby and Paul Krugman have already said, but a few key points bear repeating:

• It was S&P that had Lehman Brothers rated AAA just a month before they went bankrupt.
• It was S&P that rated AIG’s credit default swaps as rock solid investments
• It was S&P that admitted to making a $2 trillion accounting error (remember, playing with numbers is their core business and reason for being) in advance of the downgrade of U.S. debt.
• A downgrade in U.S. debt means functionally that U.S. treasury bills are, in S&P’s oh-so-wise opinion, less trustworthy and a greater credit risk to investors. This comes only a day after investors fled the DOW and S&P500 into the safe and waiting hands of…you guessed it: U.S. treasuries. The same treasuries that S&P suddenly finds a more dangerous buy. So what does that say about the stock market, and the S&P500? Perhaps S&P might wish to re-evaluate the credibility of its own market index.
• None of the other ratings agencies are taking the drastic step that S&P has. S&P is all alone in their move to downgrade U.S. credit.
• When all is said and done, U.S. treasuries are still the safest investment in the world, and it would take either an idiot or someone with a strong political agenda to contend otherwise.

S&P’s credibility to make any sort of statements about anything at all is highly suspect. By all rights their failure to properly evaluate Lehman and AIG alone would mean that if the free market were doing its job, all the ratings agencies would have gone out of business or been disbanded a long time ago. It is remarkable that anyone on the left, right or center pays any attention to anything they have to say, much less that an entire nation quakes in fear of their oracular pronouncements. The Wall St. emperor was exposed as a naked fraud years ago, yet everyone still pretends that he’s clad in the finest raiments of wisdom.

The fact is that S&P, for whatever reason—be it political, economic, corrupt or some combination thereof—has desperately wanted to downgrade U.S. debt for months. First came the clearly unfeasible demand that the U.S. cut $4 trillion in spending while eliminating all the Bush tax cuts, even on the middle class. Then came the austerity bill, which was put in place over the top of a snookered public precisely to avoid a credit downgrade. Then came the threat to downgrade our credit anyway. Then came the admission of their $2 trillion accounting error in making the threat. And then came the downgrade in spite of it all. Let’s be clear: S&P was always going to make this move, no matter what we did. The austerity bill was thus an utterly pointless exercise to appease a ratings agency acting in bad faith.

But instead of learning that important lesson, our policymakers and our “liberal” media will do precisely the opposite. They will bow down and worship the ground this shoddy organization walks on, while bemoaning the supposed lack of bipartisan compromise that provided the excuse for S&P to make their pre-planned move. Then they’ll pressure Democrats to make cuts to Social Security to appease their ratings agency overlords, since everyone knows that the GOP will allow the Bush tax cuts to expire as soon as pigs start flying out of hell to escape the frozen climate. And it will be Dems’ fault if they don’t “compromise” for the good of the country, while any liberal who says otherwise will be told to go sit at the kids’ table while the “serious” people make the decisions.

Welcome to America: funhouse mirror edition.

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Downgrade This

by digby

Quick thoughts on the S&P downgrade.I imagine David will chime in as well at some point.

First, recall that this is the agency which rated all those worthless mortgages AAA that caused this fetid financial mess in the first place. They gave Lehman a Triple-A rating one month before bankruptcy. The real question is why they are still taken seriously by anyone.

Indeed, they are out on a big limb in terms of their own relevance. Here’s JP Morgan earlier this week:

We don’t think a downgrade is of first-order importance for economic growth: conditional on fiscal metrics such as debt-to-GDP ratios, we see no major implications for borrowing costs due to the actions of one or more rating agencies.

CNBC reported this earlier:

The humiliation of a credit rating downgrade for the U.S. would exact some psychological damage but is widely viewed as less likely to cause any actual carnage on interest rates.

Few fixed-income experts are looking for a major surge in rates even if Standard & Poor’s follows through on its threats to cut the US rating from the coveted triple-A status down to double-A.

So this is rally more of a political play. While one might assume that it was the Republican intransigence that led to S&P’s prediction of permanent fiscal clusterfuck, S&P adopts the He said/She said Rule:

“We lowered our long-term rating on the U.S. because we believe that the prolonged controversy over raising the statutory debt ceiling and the related fiscal policy debate indicate that further near-term progress containing the growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed and will remain a contentious and fitful process,” reads a statement from S&P. “We also believe that the fiscal consolidation plan that Congress and the Administration agreed to this week falls short of the amount that we believe is necessary to stabilize the general government debt burden by the middle of the decade.”

Considering the fact that they made a 2 trillion dollar arithmetic error before they released the report, it’s rather laughable that they are taking this holier than thou attitude about medium term deficit projections. Moreover, the president of the United States put the magical 4 trillion dollar, entitlement slashing nightmare on the table in exchange for a request for a couple of niggling little oil subsidies and some symbolic piece of crap about corporate jets —- and the Republicans walked away. I only wish it had been equal intransigence.

Unfortunately, the practical results of this are all too clear. While many of my colleagues are quoting the revenue side of their statement as an indictment of the GOP, I’m drawn to the sickening part where they insist that there be “near-term progress” on entitlement spending. True they said “or raise revenues” instead, but I think it’s fairly clear that the chances of that happening are about as real as my winning the Olympic gold medal in Ice Dancing next year. I’m afraid this empowers the Super Committee to really stick it to the old people. And I’m also afraid that’s exactly why the S&P did it. (They threatened to downgrade again in a few months if it doesn’t see progress.)

Let’s wait and see what really happens with the markets before having hysterics.In all likelihood the real money people will shrug this off — what with S&P being wrong about everything all the time and all.

Update: better yet, forget everything i just wrote and read Krugman. S&P’s actions are just more up-is-downism on steroids.

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Popinjays and Shake-tails

by digby

A reader sent in this blog post at bright lights after dark about John Ford’s epic western Stagecoach, a movie which I’ve seen a half dozen times, but failed to recall its memorable speech by “the banker” Henry Gatewood:

Even the ostensible villains of the piece, the hostile Indians, are presented with some nuance. Ford treats them as if they were part of the landscape, a force of nature, and when we first see their leader, Geronimo, in close-up, he is presented with great dignity.

Not so the film’s real villain, the banker Gatewood (portrayed by Berton Churchill) who is the closest thing we see in the film to pure, unnuanced evil. He is immediately introduced as a hypocrite, pontificating to the men who bring a $50,000 payroll deposit to his bank about the benefits of savings while he prepares to embezzle that same deposit. As if to extend his hypocrisy to a wider sphere, the banker’s wife is seen as head of the ladies league who forces the poor goodhearted prostitute (Claire Trevor) to leave town. Riding in the stagecoach with the satchel of embezzled loot sitting on his lap, the banker declaims his political philosophy to a captive listener (Louise Platt):

Henry Gatewood: [clutching valise with embezzled funds] I can’t get over the impertinence of that young lieutenant. I’ll make it warm for that shake-tail! I’ll report him to Washington – we pay taxes to the government and what do we get? Not even protection from the army!

I don’t know what the government is coming to. Instead of protecting businessmen, it pokes its nose into business! Why, they’re even talking now about having *bank* examiners. As if we bankers don’t know how to run our own banks! Why, at home I have a letter from a popinjay official saying they were going to inspect my books.

I have a slogan that should be blazoned on every newspaper in this country: America for the Americans! The government must not interfere with business! Reduce taxes! Our national debt is something shocking. Over one billion dollars a year! What this country needs is a businessman for president!

Of course during that era, and for decades after, that character was considered to be an ass by virtually everyone. People knew very well who the enemy was. Today, he would be a Galtian hero and a prime candidate for elective office. The press would consider him a deep thinker and highly influential voice on the economy.

The funny thing is that John Ford is one of the people who created the “America” these people think used to exist. His myth of the West and the cowboy individualist forms the basis of their own self-image as self-reliant loners who don’t need help or interference from the government. They never really understood it.

As the author of the piece observes:

All of the characters riding inside Ford’s STAGECOACH are transformed by the experience – class prejudices are dissolved, the prostitute recovers her innocence, the doctor recovers his dignity, the meek man discovers his courage. All of the characters change, that is, except for one – banker Gatewood who remains as obnoxious, hypocritical, and self-serving at the end of his journey as he was at the beginning.

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