Month: July 2013

Low interest rates are disguising a poor economy

by David Atkins

Dave Dayen has a superb explanation today of how Congress is getting set to shaft students again on student loans. They’re basically trying to tie the student loan rate to the ten year T-bill rate, which is a problem because T-bill rates are at historic lows right now. That means that already onerous loans today will be even worse in the years ahead.

And that’s just one small facet of the broken economy. We are now into the sixth year of an economic depression caused by unpunished Wall Street greed and recklessness. The stock market and the incomes of the wealthy have returned to pre-crash levels. But the rest of the economy is still suffering tremendously. The unemployment rate remains abominably high, and that says nothing of the underemployment rate.

Take me, for instance. My business is in marketing research. It’s particularly susceptible to demand-side problems in the economy. If regular people are hurting, they can’t afford to buy products. If they can’t afford to buy products, companies get reticent about bringing new products to market and advertising them. Budgets decline, companies decide to cut costs by either eliminating market research or in-housing it away from independent researchers, thereby risking objectivity and professionalism. My industry has taken a huge hit since the crash, and it hasn’t returned.

I’m still counted in the ranks of the employed, but business is still well off pre-crash levels. Many of my competitors and colleagues have been forced out of our profession and into lower-paying jobs in other fields. None of that has changed in the intervening six years. In fact, it has gotten worse.

And that is despite pedal-to-the-metal loose monetary policy. I suspect that Krugman and Dayen would prefer to keep interest rates as low as possible for as long as possible. It’s basic Keynesianism. But it’s also highly problematic, as it drives anyone with savings into assets like stocks and housing because it’s impossible to get a decent rate of return on regular savings. That in turn is driving base housing prices higher, and is further bloating the stock market. Higher interest rates hurt homeowners and borrowers, but help renters and savers. Regardless of inflation, low interest rates and loose money are not all to the good. And we’ve been in a super-low-interest-rate environment for many years now.

Nor is it clear that when rates do eventually go up, it won’t have seriously adverse consequences. There is a mini-bubble in housing right now which will likely pop as soon as rates go up any further, and the consequences of higher interest rates on student and business loans are clear.

The Fed can’t keep it going forever, and if they do there are entire classes of people–mostly young savers and renters unable to afford a house not because of high interest rates but because they can’t afford the base price–who are being hurt in the meantime.

Don’t get me wrong: low rates are still the right thing to do because the economy is fundamentally broken. But they’re also artificially inflating housing and stock markets that are disguising just how terrible and broken the economy still is.

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Looking for another Top Cop


by digby

Chuck Todd, Chuck Shumer and the Village twitter tag team are very excited at the idea of appointing New York Police Chief Ray “stopnfrisk” Kelly to the Department of Homeland Security now that Napolitano has decided it’s time to do something else. (Bernie Kerrick is still in jail I believe, or maybe he could make a comeback…)

As far as I’m concerned, if we have to have a police chief, maybe we could pick one that has some imagination and a regard for the constitution.  Like this guy:

Hoover Institution fellow and former police chief (in San Jose and Kansas City) Joseph McNamara writes in [the] Wall Street Journal:

Simply put, the police culture in our country has changed. An emphasis on “officer safety” and paramilitary training pervades today’s policing, in contrast to the older culture, which held that cops didn’t shoot until they were about to be shot or stabbed. Police in large cities formerly carried revolvers holding six .38-caliber rounds. Nowadays, police carry semi-automatic pistols with 16 high-caliber rounds, shotguns and military assault rifles, weapons once relegated to SWAT teams facing extraordinary circumstances. Concern about such firepower in densely populated areas hitting innocent citizens has given way to an attitude that the police are fighting a war against drugs and crime and must be heavily armed.

Yes, police work is dangerous, and the police see a lot of violence. On the other hand, 51 officers were slain in the line of duty last year, out of some 700,000 to 800,000 American cops. That is far fewer than the police fatalities occurring when I patrolled New York’s highest crime precincts, when the total number of cops in the country was half that of today. Each of these police deaths and numerous other police injuries is a tragedy and we owe support to those who protect us. On the other hand, this isn’t Iraq. The need to give our officers what they require to protect themselves and us has to be balanced against the fact that the fundamental duty of the police is to protect human life and that law officers are only justified in taking a life as a last resort.

I know. I’m quite the comedian. Like anyone who writes such a thing could ever be nominated, much less confirmed.

But seriously, this creepy, behemoth agency we call “Homeland Security” is growing out of control and unless it’s abolished (my first choice) it should be headed by someone who is able to come in and take a fresh look at all the money and power its amassed and assess where it can and should be cut. It’s a very bad idea to let this thing become yet another sacred law enforcement agency that has no boundaries and no limits on what the taxpayers are required to spend to keep it in shiny new technology and warmaking toys.

McNamara would be a great choice. Unfortunately, he isn’t a right wing hawk and/or Republican so it’s impossible.

They’re also talking about Joe Lieberman which is enough to make me take up drinking at 1:30 in the afternoon.

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The latest right wing political fad is just more of that old time religion

by digby

I like Kilgore’s take on the latest political fad, “libertarian populism”:

I personally suspect that “libertarian populism” will dissolve in the acid test of electoral politics and constituency-tending into the class- and race- and generation-based resource scramble that has more in common with the more blatant special pleading of the Nixonian “silent majority” message and Rusher’s producerism than with anything properly called “libertarian.” And there’s a reason for that: as Krugman argues, libertarianism just isn’t popular among the white working-class voters who are ostensibly the GOP’s target in the absence of interest in or capacity for a viable appeal to nonwhite voters.

That gets back to what I was talking about yesterday, namely that the Pauls’ not-so-subtle appeals to “confederate values” are a necessary part of their strategy. They know that only a minority of even Republicans support their libertarian worldview and philosophy.  They’ll slap a can of “libertarian populist” paint on it but try to win with the same old dogwhistlin’, “silent majority”, states’ rights, Southern Strategy. Enthusiastically, I might add.

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Wall Street values in This Town

by digby

Walter Shapiro cuts through the juicy gossip and gets to the larger point of the Liebovitch book:

The larger message of This Town is the sad-eyed truth that, ultimately, everyone sells out. The money quote for Leibovich is former Senate Majority Leader Trent Lott’s honest explanation, “Washington is where the money is. That’s generally what keeps people here.” That comment meshes with my favorite aphorism about dewy-eyed young aides “coming to Washington to do good and staying to do well.”

Everyone’s convictions and contacts can be bought or, at least, rented. Leibovich quotes former AFL-CIO president John Sweeney calling former House Democratic leader Dick Gephardt “a powerful voice for working families.” But Leibovich archly notes that after giving up his House seat in 2005 to become a lobbyist, “Gephardt has become a powerful force for Dick Gephardt on issue after issue.” Ditto for former Connecticut Senator Chris Dodd who disdained the idea of lobbying until he was offered a $1.2 million job as the head of the Motion Picture Association. Then there’s Jeff Birnbaum who was an ace reporter for the Wall Street Journal and the Washington Post covering the lobbying beat until he became (wait for it) a high-priced lobbyist. As Leibovich puts it, “Birnbaum joining a lobbying firm was an extraordinary passage, akin to Bob Woodward joining a White House staff.”

I don’t know if it’s featured in the book, but I recall my own appalled reaction when I read this about “journalist” Richard Wolffe, after he published one of the definitive “inside the campaign” books about the Obama administration:

When the election ended, the Newsweek brass offered him a new job. Not the White House beat – a natural extension of his campaign coverage – but, he said, “a blog, no less.” He describes the genre in his book as the equivalent of “fried and fast” food, as compared to his own more nutritious “slow food.”

Wolffe took a Newsweek buyout instead. He said he “never talked to [the White House] about a job.” He wrote through the winter and early spring, and on April 1, he announced that he’d taken a position under former Bush communications director Dan Bartlett at Public Strategies. Wolffe said in an interview that he wouldn’t trade on his relationships with Obama and his aides in his new post.

“I do not lobby – I offer strategic advice to clients on how to interact with the public, whether it’s their stakeholders or public opinion,” he said.

Wolffe also continues to write and report for Tina Brown’s Daily Beast, and to offer his opinions on MSNBC, which identifies him as a political analyst, though he said he won’t talk about issues related to the firm’s clients.

And he suggested he’s not that different from other reporters in an era in which the business and the profession of journalism have gotten closer and closer.

“The idea that journalists are somehow not engaged in corporate activities is not really in touch with what’s going on. Every conversation with journalists is about business models and advertisers,” he said, recalling that, on the day after the 2008 election, Newsweek sent him to Detroit to deliver a speech to advertisers.

“You tell me where the line is between business and journalism,” he said.

There you have it.

As far as I can tell Wolffe is still considered a member in good standing of the journalism profession. He’s still on MSNBC shamelessly shilling for power. Glenn Greenwald, on the other hand, is nothing but a blogger — maybe even a traitor.

Which brings me to this incredibly interesting article in The Atlantic about the Guardian. It’s all very fascinating, but this piece may explain something about why it is more intrepid and brave than the rest of journalism:

The paper enjoys the financial cushion of a large trust, which was set up in 1936 to carefully invest the fortune of the paper’s most famous editor CP Scott. In its current form, the Scott Trust Limited is now the sole stakeholder in Guardian Media Group, so the paper has no shareholders nor a Rupert Murdoch-like proprietor; instead, any profits from the assets held by the group are used to maintain — and propagate — the newspaper operation. In essence, it is a journalistic perpetual-motion machine, one with exceptionally fortunate investment properties which managed to lose relatively little of their value during the financial crisis.

This is the financial grounding which enables the publication’s experimentation. They have a very successful dating site in the UK — Guardian Soulmates. They were ahead of the website curve, and have experimented very successfully with tablet and mobile apps.

I’m not sure how to replicate such an arrangement. But I’m glad that it exists. As long as the Richard Wolffe’s of the world are what passes for journalism, it’s vitally necessary.

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From the “if you build it, they will use it files”: Warrior Cops


by digby

For more than 40 years, we’ve been spending excessive amounts of money on a “war” that makes no sense. And we’ve not only engaged the military to fight it overseas, we’ve turned out own police forces into para-military forces so we can “fight” it on our own soil. I’m talking about the War on Drugs, of course. Lately, we’ve merged this war with an equally amorphous concept called the the War on Terror. And the result is an endless build-up of a massive police apparatus.

Last night Chris Hayes explored all this in a conversation with Radley Balko about his new book Rise of the Warrior Cop: The Militarization of America’s Police Forces

Visit NBCNews.com for breaking news, world news, and news about the economy

Visit NBCNews.com for breaking news, world news, and news about the economy

If there’s ever been a bigger boondoggle, I don’t know what it is. And even if things go well with comprehensive immigration reform we’re going to expand this militarization on our border a hundred fold, with billions and billions of dollars being spent on new toys and police personnel. That has become the price of even the slightest expansion of a positive function of government.

I have to wonder though if there isn’t a huge irony here. I’ve always thought that when you see government as having few legitimate functions beyond a military to protect the nation from foreign threat and a justice system to enforce contracts and police the citizens, all the state’s power and money would logically flow to those functions. In other words, a pure libertarian system is highly likely to lead to a police state.

This is not because libertarians want such a thing, of course. It’s because human nature dictates that if you build it, they will use it. And when you have created an environment, as Republicans have over the past 40 years,  in which the only unquestionable responsibility of government is police and military — and the money spent toward those functions is deemed to be sacred — well, it stands to reason those institutions will grow exponentially as the rest of the government shrinks. That’s what’s happening right now. While Head Start and Meals on Wheels are starved of funds, the security state grows by leaps and bounds.

Hardcore conservatives are fine with that. They are authoritarians by choice. But the last thing libertarians want is a police state. And yet their philosophy may inevitably leads the nation to create one.

BTW: None of that is meant to be a criticism of Balko, a libertarian who has written a very important book and is a staunch critic of this regime. It’s a little bit unseemly of me to even muse as I did above in the same breath as I am complimenting his work. But that’s blogging …

Buy the book. You won’t be sorry. Well, you’ll be sorry about what’s happening to our society. But you’ll be better off knowing about it.

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Thanks for the apology, Mr. Reid. Now stand up and make it happen

by David Atkins

Harry Reid seems to have finally seen the light:

But Reid said privately it is time to make a change.

In a closed-door caucus meeting Thursday, Reid began by apologizing to his colleagues for cutting bipartisan deals to avert the nuclear option, including at the beginning of this year. And the Nevada Democrat complained that he allowed votes on scores of conservative nominees under former President George W. Bush after a bipartisan coalition headed off the nuclear option in 2005. But Reid said it had been the right thing to do because Bush had won a second term in the White House.

Now, Reid argued, times have changed.

“I ate sh— on some of those nominees,” Reid told his colleagues, according to sources who were present.

On Thursday, the Senate continued to inch closer to a battle that could have dramatic implications for the institution.

“I don’t know how you open that door and not go to the next level. First, it’s executive nominations, next thing it’ll be judicial nominations, then it will be legislative filibusters,” said South Dakota Sen. John Thune, the No. 3 Senate Republican. “The precedent they set here will be not only long-lasting but far-reaching.”

The apology is nice and all, but I’ll believe he means it when he actually pulls the trigger.

As for Thune and McConnell’s fretting that killing the filibuster for cabinet nominees will mean changes to the filibuster in other areas? Good. I’m not convinced there should be any filibusters for cabinet positons. As for judicial nominees and regular legislation? That should be subject to talking filibuster only, and reserved only for the most extreme circumstances.

The Senate is broken. It’s time to fix it.

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Mr Bringdown

by digby

I’m sure Brian Kilmeade didn’t consciously mean to do this, but being a jerk is just how he rolls:

(And how does that kid do that?)

Warren goes after TBTF

by digby

Elizabeth Warren shows once again that she’s not going to be one of those freshmen Senators who keep their heads down for their first term and wait for years to become a leader (if they ever do.):

Sen. Elizabeth Warren (D-Mass.) and a bipartisan group of senators introduced a bill Thursday that would break up the nation’s biggest banks, forcing them to split their routine commercial banking operations from their risky trading activities.
[…]
The senators contend that even as the economy slowly improves, big banks continue their bad behavior. In December, for example, the giant international bank HSBC was fined for illegally allowing millions in Mexican drug trafficking money to be laundered through its accounts. Last year, JPMorgan Chase lost $6 billion on one bad trade. What’s more, the nation’s four biggest banks are now 30 percent larger than they were five years ago.

It’s not everything, but it’s not nothing either. And she managed to persuade a Republican and an Independent to co-sponsor which shows some smart political strategizing.

Warren continues to fulfill our expectations. It’s almost hard to believe…

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Want to boost the power of wages over assets? Increase the minimum wage

by David Atkins

The evils engendered by elite policymakers’ focus on increasing asset values over wage values has long been a bugbear of mine. It’s responsible for a host of ills that plague the economic system, and is the result of lazy, fearful and corrupt policymakers’ response to mechanization and globalization of the labor force.

There are a number of steps that can be taken to reverse the widening gulf between wage growth and asset growth. One of the principal ways, as the Economic Policy Institute argues, is to increase the minimum wage:

If the minimum wage had kept up with productivity growth over this period, it would now be $18.67 per hour. That sounds shockingly high—it is two-and-a-half times as high as the current minimum wage and is actually higher than the median wage, which is $16.30 per hour. But it’s important to keep in mind that the primary reason a minimum wage of $18.67 sounds so high today is because the wages of most workers are so low. Most workers have not reaped the benefits of productivity growth for the last four decades. If the median wage had kept pace with productivity growth over the last 40 years, it would now be $28.42 instead of $16.30. In other words, an $18.67 minimum wage sounds shockingly high because the already affluent have captured most of the economic growth in the last 40 years, not because the economy hasn’t seen the kind of productivity growth consistent with that kind of minimum wage growth.

Of course, no one is suggesting a current minimum wage of $18.67 per hour. But this comparison does underscore the fact that the proposal by Senator Tom Harkin (D-IA) and Representative George Miller (D-CA) to raise the minimum wage to $10.10 by 2015 is a modest proposal indeed. Further, this recent EPI analysis shows that across the country families living on minimum-wage jobs are unable to make ends meet, more proof that an increase is necessary.

The chart puts these numbers in infuriatingly easy-to-read terms:

One of the central tenets of conservative economic thought is that the economy is a divine machine whose workings are perfect if left free of government intervention. On the contrary, what this chart shows is that if the owners of production are allowed to act as they will, the value of human labor and dignity tends to be very, very cheap. So cheap, in fact, that only a sociopath or an Objectivist (but I repeat myself) would dare call it justice.

The gap between wages and productivity represents a very real and very calculated theft by the corporate shareholder class against the people who actually work for a living. That the theft has been made legal by the artificial rules we have put in place to govern our markets doesn’t make it any less a theft. Lawful evil is still evil.

It’s time to reverse course and put wages back in line with productivity. Increasing the minimum wage would be a good start.

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Don’t worry, Latinos know you’re just kidding


by digby

Love this:

Just one example:

Has the CDC ever published a story about the dangers of catching diseases when you sleep with illegal aliens?

Rush Limbaugh, radio commentator