Last Men and OverMen: February 2013

Thursday, February 28, 2013

As House Passes VAWA We Again See Blueprint For Democratic Success

     I've written often before that I think that the more pessimistic prognosticators who think the next 2 years will just be more of the same obstruction we've seen the last 2 are quite wrong. To the contrary we now have a successful formula for passing actual legislation and we've already seen it in action numerous times since November 6.

    We saw it with the fiscal cliff, Sandy relief, and now with finally getting the Violence Against Women Act renewed. The formula is simple: Democrats in the Senate pass good legislation. House GOP comes up with a watered down, unacceptable alternative. It fails, then Dems all support the Senate bill with just enough of a smattering of moderate or at least responsible Republican votes to get it through. Even some House Republicans are now recognizing this:

   "House Republicans must be willing to enlist Democrats to pass important legislation, a moderate GOP lawmaker told TPM on Thursday after his leadership passed the Violence Against Women Act with mostly Democratic votes."

   “I suspect you may see more issues appear like this,” moderate Rep. Charlie Dent (R-PA) told TPM in an interview Thursday afternoon. “It’s quite possible on matters of governance, where there are not the Republican votes, that there will be bipartisan coalitions formed to pass important legislation. … If John Boehner doesn’t have enough Republican votes, we’ll need Democratic votes. It’s very basic. There’s no way around it.”

     http://tpmdc.talkingpointsmemo.com/2013/02/charlie-dent-hastert-rule-republicans.php?ref=fpb

     The key is the demise of the Hastert Rule. That's why it's not true-as Boehner had claimed, that the GOP will be as obstructionist this time as the last 2 years. With no Hastert Rule, we will actually see meaningful legislation get done.

     "VAWA was the third time this year that the Republican leadership violated the so-called Hastert Rule by bringing legislation up for a floor vote without the support of a majority of Republicans. The other two instances were to avoid the fiscal cliff and to provide disaster relief for victims of Hurricane Sandy."

     "The Republican Party must be a governing party, and the Republican Party must be a governing party in the House,” Dent said. “If it cannot govern on its own then it’s going to need to develop bipartisan coalitions to pass important pieces of legislation.”

      "The VAWA vote reflects the changed landscape since the last Congress when House Republicans, invigorated by their large new majority, rejected bipartisan governance in favor of pushing their ideological priorities. Now, facing an emboldened President Obama and Democratic Senate and with a smaller majority, House GOP leaders no longer have the luxury of catering to their every wish.AWA was the third time this year that the Republican leadership violated the so-called Hastert Rule by bringing legislation up for a floor vote without the support of a majority of Republicans. The other two instances were to avoid the fiscal cliff and to provide disaster relief for victims of Hurricane Sandy."

      “The Republican Party must be a governing party, and the Republican Party must be a governing party in the House,” Dent said. “If it cannot govern on its own then it’s going to need to develop bipartisan coalitions to pass important pieces of legislation.”

       "The VAWA vote reflects the changed landscape since the last Congress when House Republicans, invigorated by their large new majority, rejected bipartisan governance in favor of pushing their ideological priorities. Now, facing an emboldened President Obama and Democratic Senate and with a smaller majority, House GOP leaders no longer have the luxury of catering to their every wish."

      Dent gets it: to pass legislation, it will need House Dem support. It's not just about numbers. In the 80s the Dems had a healthy House majority and took back the Senate in 1986; however, they had to cave the Reagan much more than the opposite. As Bill Kristol admitted on Fox the Sunday after the election "Elections have consequences."

     This is why I like to say the future's so bright we're going to have to wear shades.

So Just How Tough a Day in SJC Was it For Voting Rights Act?

On the face of it, you might think pretty tough.

"Judging by all the early reporting on the first round of Supreme Court arguments about a key section of the Voting Rights Act, that provision may be in real peril. Conservative justices expressed sharp skepticism of the law, with much attention being paid to Antonin Scalia’s description of it as a “perpetuation of racial entitlement.”

"Scalia also said that members of Congress can’t be trusted to do the right thing about the law, because it is popular: “They’re going to lose votes if they vote against the Voting Rights Act. Even the name is wonderful.” This is a curious attitude towards democracy — it’s automatically suspect if members of Congress support laws favored by their constituents? And John Roberts actually asked this: “Is it the government’s submission that citizens in the South are more racist than citizens in the North?”

http://www.washingtonpost.com/blogs/plum-line/wp/2013/02/27/is-the-voting-rights-act-in-trouble/

However, the hope is Anthony Kennedy though he asked some hostile sounding questions as well:

"Kennedy’s comments were skeptical of the Act, too, but his line of questioning left room for him to uphold the law, according to Myrna Perez, a senior counsel with the Brennan Center, who was at the court today and spoke to me by phone. Kennedy’s main objection to the law, she noted, was that it constitutes “reverse engineering.” He also suggested that times have changed since it was enacted."

"The question is whether Kennedy’s line of questioning pinpointed anything in particular that would justify labeling the law unconstitutional. Proponents are hoping Kennedy will make the call based on very specific criteria: First, whether or not Congress, in passing the law and renewing it in 2006, carefully evaluated whether the conclusions it reached — about the states and localities that require federal “pre-clearance” before changing voting laws — are reasonable. And second, whether the remedy Congress picked (Section 5) was within the proper scope of Congress’ power. When Congress renewed the law in 2006, proponents note that it undertook very careful review to determine whether the evidence still justifies pre-clearance."

Of course, this is not the first time this law has been before the SJC. Yes, we have a conservative learning court but we did the last time the court upheld it. Were similar questions asked last time? My guess is very likely yes. Recall that many rashly concluded that ObamaCare was in trouble after the tough questioning for Obama's solicitor general the first day.

Scalia's questions seem to suggest that he's going in for full blown "social engineering" he seems to be saying that Congress can't handle the job of legislation in this case so the Court must do the legislation for it.

"As he’s aged, he’s tossed aside any pretense or desire to hide the fact that he sees himself as what originalists and advocates of judicial restraint are supposed to be against: namely, an appointed super legislator, contemptuous of Congress and happy to impose his own beliefs by judicial fiat. Hearing him rail about “racial entitlement” sounds more like you’re listening to some sort of talk radio blowhard than a Supreme Court Justice."

http://editors.talkingpointsmemo.com/archives/2013/02/scalia_top_democratic_plant.php?ref=fpblg

He sounds exactly like an aspiring "super legislator"

Roberts question is also absurd-he has a history attacking this law. It's not like the states chosen for this part was whimsical, just that they had the history. The criterion is scientific-those that had anti voting laws on the books in 1964.

Since then other locals like the Bronx here in NY have been added. This hardly suggests that the problem is going away.

Bob Woodward: It's Getting Painful to Watch

At some point he jumped the shark. Unfortunately, Woodward seems determined to wear his absurdity like a badge of honor, a la Dan Quayle. Now he's taking his Very Serious Person act to Sean Hannity It's a shame as he has been an American institution for 40 years since his epic work on Watergate. However, at this point, he is regrettably embarrassing himself. The more silly he looks and sounds the more he doubles down on the crazy. He claims he "hasn't seen madness like this in a long time" referring to the President's stance on the sequester. Let's take a look at his comments and then ask where exactly the madness is coming from.

"Woodward appeared on MSNBC's "Morning Joe," calling President Obama's decision not to send an aircraft carrier to the Persian Gulf because of the looming defense cuts "a kind of madness."

"Can you imagine Ronald Reagan sitting there saying, 'Oh, by the way, I can't do this because of some budget document?'" Woodward said. "Or George W. Bush saying, 'You know, I'm not gonna invade Iraq, because I can't get the aircraft carriers I need?' Or even Bill Clinton saying, 'You know, I'm not going to attack Saddam Hussein's intelligence headquarters' -- as he did when Clinton was President -- because of some budget document? Under the Constitution, the President is Commander in Chief and employs the force. And so we now have the President going out, because of this piece of paper and this agreement, I can't do what I need to do to protect the country. That's a kind of madness that I haven't seen in a long time."

http://livewire.talkingpointsmemo.com/entry/woodwards-sequester-spat-with-white-house-timeline?ref=fpa

He's been on and on about this mystical Presidential Will and Leadership-sounding like a German Idealist philosopher run amok-for awhile. He argues that the President doesn't know how to wield Presidential power. It's good to see him finally give us some examples of it being used effectively.

He's really going to hold up George W. Bush as a model of Presidential leadership? Mr . Woodward is apparently the last person in America unaware that Bush and his Administration based this invasion on false documents and lies to the American people and before the United Nations. Is that who Obama should be emulating? We wish that something had made him decide not to invade Iraq. If a sequester would have done the trick. so be it. For that matter, while I love Clinton, his bombing of an aspirin factory in Sudan was not his finest hour. I don't think we even have to comment on Reagan: he sure didn't listen to Congress before he did Iran-Contra. All Woodward's examples of his mystical Presidential Leadership are actually quite sordid. If Obama hasn't emulated them we can only be grateful.

Woodward simply makes himself look increasingly ridiculous the way he's running around shrieking to Joe Scarborough and Sean Hannity about the Obama Administration's "abuse of power." You know where someone at the White House may have "yelled at me." Then sent an email apologizing that said he'd regret his sequester claim. You'll regret it! Maybe we should start a new independent Congressional investigation like they did for Watergate-Darrell Issa would no doubt be happy to oblige.

This is what's really painful. This is Bob Woodward for God's sake. He and Bernstein broke Watergate. For him to sit here and build a mountain out of the smallest molehill actually trivializes both real Presidential abuse of power like Nixon achieved on an unprecedented scale, and also his own history covering it.

So yes, no doubt the Obama official-Gene Sperling- is right. Woodward at some point will regret this. Not because there's a hit on his life but because he's really harming his own credibility. If his aim is to do just that, hanging out with Sean Hannity is an inspired move.

At this point, whether or not Woodward feels regret yet-I get that this is a very loaded term in his mind-the conservative media is already feeling regret: for taking Woodward seriously.

"Now that the correspondence between Bob Woodward and the White House has been revealed as tame and cordial, conservative commentators are reacting with disappointment to the veteran journalist's claim that he was threatened over his sequestration reporting."

"Politico on Thursday posted the emails between Woodward and White House economic adviser Gene Sperling, who told Woodward, "as a friend, I think you will regret staking out that claim."

"Looks like we were played," The Daily Caller's Matt Lewis wrote Thursday morning.

http://livewire.talkingpointsmemo.com/entry/conservatives-regret-taking-woodwards-threat-story-seriously?ref=fpb

What may be going on is that Woodward is a great who has stayed in the game a little too long. He doesn't look too old but his actions are doing nothing but diminishing his stature. Sperling was a friend and Woodward should have taken his advice.

P.S. It just occurred to me that the central irony in Woodward's whole "Presidential Will and Leadership" narrative is that the problem with the big scandal that made him-Watergate-the problem was that we had a President in Nixon who did what Woodward is urging Obama to do-simply ignore Congress. Woodward's whole argument here is just surreal.

Wednesday, February 27, 2013

GOP Makeover Seems to Have Hit a Snag

The WSJ poll has some rather sobering news for the GOP in terms of public opinion: it favors the Democratic approach to most issues.

"How’s that GOP “makeover” going? Not too well, according to the internals of the new NBC/WSJ poll. If these findings aren’t enough to persuade Republican strategists that the party needs a rethink on the issues — and not just a change in tone and packaging — then it’s hard to imagine what will."

"The poll finds that Democrats hold a double digit lead over Republicans on many major issues facing the country — and finds solid majority support for key initiatives on Obama’s second term agenda. Dems hold a 22 point advantage on looking out for the middle class; an 18 point advantage on dealing with Medicare; a 16 point advantage on health care; a 15 point advantage on reducing gun violence; a 14 point advantage on Social Security; a 10 point advantage on energy policy; a seven point advantage on immigration; and a three point advantage on the GOP signature issue of taxes. (Republicans prevail on the deficit, spending and national defense; more on this below.)"

"Meanwhile, Americans support raising the minimum wage by 58-36; they want gun laws to be made stricter by 61-34; and they support giving undocumented immigrants a path to legal status by 54-42 (in fairness, this question isn’t precise in that the wording doesn’t specify a path to citizenship)."

"Strikingly, the poll finds that 64 percent say the GOP is “emphasizing a partisan approach in a way that does not unify the country,” versus only 22 percent who say the party is “emphasizing unifying the country.” For Obama those numbers are the other way around — 43-48."

"This is the political atmosphere within which the battle will unfold over who is to blame for the damage done by the sequester. Now, in fairness, Republicans are favored on the deficit and controlling government spending. But even here, when you drill down deeper, you find that fifty two percent say the automatic across the board cuts to the budget are a bad idea; only 21 percent say they’re a good idea. Republicans will take solace from the finding that a plurality wants the sequester replaced by a plan with “more cuts.” But the poll question doesn’t inform respondents of the option of replacing the sequester cuts in part with eliminating tax breaks enjoyed by the rich and corporations, an oversight that casts doubt on the value of this finding. Many surveys that accurately poll the two parties’ positions on curbing the deficit — cuts only versus a mix of cuts and new revenues — show a solid advantage for the Dem position."

http://www.washingtonpost.com/blogs/plum-line/wp/2013/02/27/the-morning-plum-hows-that-gop-makeover-going/

Of course, a large part of the problem is that the makeover idea itself is the wrong approach. In their big annual January meeting this year, the GOP did not get the big message of a speech by that Domino's Pizza CEO:

"At the January retreat, a halfway point in the midst of these budget battles, Cantor sounded chastened, or, at least, like a man wanting to appear chastened. “We’ve got to understand that people don’t think Republicans have their back,” he said. “Whether it’s the middle class, whether it’s the Latino or the Asian vote.” It was not “necessarily our policies” but, rather, how “we’ve been portrayed.” He added, “It goes to that axiom about how people don’t really care how much you know until they know you care. So we’ve got to take that to heart and, I think, look to be able to communicate why we’re doing what we’re doing.”

"Cantor had been struck by one presentation at the retreat. Patrick Doyle, the president and C.E.O. of Domino’s, had given a talk called “Turning It Around,” in which he explained that he revived the failing company after conducting extensive research that led him to conclude that Domino’s pizza was terrible. But Cantor seemed more interested in Doyle’s sales advice than in his point about his product.

“There was a discussion about features and benefits,” he said. “Marketing 101, right? If you’re selling detergent and you put a new blue dot in a detergent block, that’s a feature. But the benefit is it gets your clothes cleaned.” He paused to let the lesson sink in.

So Cantor thinks it's a marketing problem, totally ignoring Doyle's point. That maybe the pizza is not as good as they think isn't even up for consideration.

Incidentally, Cantor makes another big admission in this piece: that he was the one who talked Boehner out of the Grand Bargain back in 2011. His reasoning was that it would be better politically for the GOP:

"Cantor was one of the most influential political forces in Obama’s first term. In June of 2011, the President and the Speaker began working toward a Grand Bargain of major tax increases and spending cuts to address the government’s long-term budget deficits. Until late June, Boehner had managed to keep these talks secret from Cantor. On July 21st, Boehner paused in his discussions with Obama to talk to Cantor and outline the proposed deal. As Obama waited by the phone for a response from the Speaker, Cantor struck. Cantor told me that it was a “fair assessment” that he talked Boehner out of accepting Obama’s deal. He said he told Boehner that it would be better, instead, to take the issues of taxes and spending to the voters and “have it out” with the Democrats in the election. Why give Obama an enormous political victory, and potentially help him win reëlection, when they might be able to negotiate a more favorable deal with a new Republican President? Boehner told Obama there was no deal. Instead of a Grand Bargain, Cantor and the House Republicans made a grand bet."

So what he's saying is that he allowed our credit rating to be downgraded-not that I care much about the rating agencies-and put us through that whole ordeal, and left us without a better deal just to benefit the Republican party. He also was dead wrong in his analysis as this actually hurt the GOP much more than Obama. Again, on the idea that it's just marketing is dead wrong, and, again, like in 2011 it seems the party is listening to him. Clearly the numbers show it's working.

Bob Woodward: The President as Will, Representation and Idea

You know the phrase "slipping into madness" which is more like the direction the Republican party has been going in for years. Woodward on the other hand is slipping into vapidity as his fellow "Centrists" like David Gregory and David Brooks.

No matter what happens, Woodward concludes that the President failed to "exercise his Will." Will something very powerful evidently He believes in the power of Will at least the President's Will so much, you'd almost think he is starting a new life as a German Idealist. I haven't heard so much talk of Will since reading Schelling and Schopenhauer.

However, I started to write this late last night. Since then Woodward and fellow Very Serious Person, David Ignatius have turned it up a notch. While I accused him of slipping into vapidity, he this very morning accused the President of slipping into a kind of madness. Huh? Well, it's "mad" according to Woodward not recognize the bully pulpit of his office. See if you can figure that one out.

"Bob Woodward, who has been engaged in a fight with the White House over blame for the sequester, on Wednesday called the administration's decision not to send the aircraft carrier Truman to the Persian Gulf because of looming defense spending cuts a "kind of madness."

"Can you imagine Ronald Reagan sitting there saying, 'Oh, by the way, I can't do this because of some budget document?'" Woodward said on MSNBC's "Morning Joe." "Or George W. Bush saying, 'You know, I'm not gonna invade Iraq, because I can't get the aircraft carriers I need?' Or even Bill Clinton saying, 'You know, I'm not going to attack Saddam Hussein's intelligence headquarters' -- as he did when Clinton was President -- because of some budget document? Under the Constitution, the President is Commander in Chief and employs the force. And so we now have the President going out, because of this piece of paper and this agreement, I can't do what I need to do to protect the country. That's a kind of madness that I haven't seen in a long time."

http://livewire.talkingpointsmemo.com/entry/woodward-obama-not-sending-aircraft-carrier-to-persian?ref=fpa

It's not clear exactly when this happened but Woodward has long since jumped the shark. It there something with the name David? So many of the VSP are Davids-first you have their titualar leader David Brooks, then David Gregory, now David Ignatius; then along came Bob.

As suggested, we're now seeing a full blow Obama Derangement Syndrome out of the VSP establishment. They just can't get over the idea that-for some reason-it's all Obama's fault. Woodward likes to pontificate profoundly into the exact nature of something he calls Leadership and working the Presidential Will.

"I love Jonathan Chait’s phrase “the fever swamp of the center”; it really is true that self-identified centrists are sounding crazier and crazier, as they try to reconcile their fanatical devotion to the proposition that both parties are equally at fault with the distressing reality that Obama actually advocates the policies they claim to want. And today’s WaPo editorial on the sequestertakes the fever to a new pitch. The editorial admits that Obama is calling for exactly the polices the WaPo wants, while Republicans are off the deep end in refusing to consider any revenue; but the piece is nonetheless written as a criticism of Obama, because

Mr. Obama has presented entitlement reform as something he would do grudgingly, as a favor to the opposition, when he should be explaining to the American people — and to his party — why it is an urgent national need.

"Oh, Barack, you’re telling me what I want to hear, but you don’t sound as if you mean it! Is this policy analysis, or a lovers’ quarrel?"

http://krugman.blogs.nytimes.com/2013/02/26/the-fever-swamp-of-the-center-continued/

Fever Swamp of the Center-has an accurate ring to it. What they can't do is just admit this meme doesn't work. Meanwhile Woodward's book still claims that Obama was the cause of the "Grand Bargain" breaking down, even though Cantor now is one the record as admitting that, yeah, he killed the deal because he thought it would benefit the GOP politically.

Chris Christie Out of the CPAC Pantheon

He's too liberal they say. Yet, it's who is in that bodes so ill for the future. Mitt Romney, Sarah Palin, and Allan West did make the cut. This gives you a little idea of the economy of importance they're working with here.

If Christie is too liberal while these three aren't, does it give them any pause that he's very much on the rise right now in New Jersey and nationally with a 74% approval in a blue state where these three who made the cut aren't even in politics at all anymore? Are all the real conservatives in retirement? How does CPAC imagine it may build a future movement if the real conservatives all aren't in politics anymore?

"Despite his sky-high approval rating, New Jersey Gov. Chris Christie's rhetoric against congressional Republicans after superstorm Sandy cost him an invitation to speak at the annual Conservative Political Action Conference, the Wall Street Journal reported Tuesday."

"He made it very hard for Republicans in the Congress at a time when we were trying to deal with fiscal restraint," Al Cardenas, chairman of the American Conservative Union, told the Journal. The American Conservative Union organizes CPAC, an annual gathering of prominent conservatives."

"In an email to National Journal, Cardenas added that Christie's decision to accept Medicaid expansion under President Obama's health care law was another disqualifying factor."

“CPAC is like the all-star game for professional athletes; you get invited when you have had an outstanding year,” he told National Journal. “Hopefully he will have another all-star year in the future, at which time we will be happy to extend an invitation. This is a conservative conference, not a Republican Party event.”

"Many conservative stars are slated to speak at the conference, including Sarah Palin, Sen. Marco Rubio (R-FL) and Wisconsin Gov. Scott Walker (R)."

http://livewire.talkingpointsmemo.com/entry/acu-chairman-al-cardenas-explains-christie-cpac-snub?ref=fpb

Of course, it's a catch 22: Christie's acceptance of ObamaCare's Medicare expansion hurts him among conservative ideologues but helps him among his blue state voters. Jamelle Boule points out that it's groups like CPAC will need in 2016 if he hopes to run so that his strategy will help him now but not so much in 2016:

http://www.washingtonpost.com/blogs/plum-line/wp/2013/02/26/chris-christies-cpac-snub/

On the other hand McCain was able to win in 2008 without their support-he may even have deliberately snubbed them, declining to speak in front of them. The GOP may be really desperate come 2016.

His snub by CPAC, however, underscores the problems the party faces.

http://www.washingtonpost.com/blogs/plum-line/wp/2013/02/27/the-morning-plum-hows-that-gop-makeover-going/

Of course the problem is that while that Domino's Pizza executive that spoke before the House GOP meeting in January said that what he realized when he came in was that their pizza is terrible, the GOP mostly wants to think this is about marketing.

http://www.newyorker.com/reporting/2013/03/04/130304fa_fact_lizza?currentPage=3

Just in case Christie wasn't popular enough in New Jersey-no mystery why Cory Booker chose not to oppose him-he's now singed a bill to allow online poker in New Jersey, just the third state to do so.

http://pokerfuse.com/news/law-and-regulation/governor-chris-christie-signs-new-jersey-online-gambling-bill-into-law-26-02/

To be sure this was a bill put forward by the Democratic state Congress. Still, when are we doing this Governor Cuomo? Do we not need the revenue? Are we willing to forgo it to save our souls?

What Miles Kimball Gets Wrong About Krugman on Italy's Economy

Kimball went after Krugman on his Italy post criticizing the austerity imposed in the name of growth. He argues that arguing for fiscal stimulus even during this recession is dangerous as leads to more and more debt:

"In the last few days, while the US political debate centers on ways to deal with burgeoning debt, UK government debt has been downgraded and investors are demanding much higher yields on Italian debt in the wake of the Italian election results (paywall). As concerns about national credit ratings push economies around the world toward austerity–government spending cuts and tax hikes–some commentators are still calling for economic stimulus at any cost. Joe Weisenthal wrote that David Cameron must spend more money in order to save the British economy. Paul Krugman wrote in “Austerity, Italian Style” that austerity policies simply don’t work. The downside of their prescription of more spending—and perhaps lower taxes—is that it would add to the United Kingdom’s and to Italy’s national debt. And national debt beyond a certain point can be very costly in terms of economic growth, as renowned economists Carmen Reinhart, Vincent Reinhart, and Kenneth Rogoff convincingly show in their National Bureau of Economic Research Working Paper “Debt Overhangs, Past and Present.”

http://qz.com/57082/what-paul-krugman-got-wrong-about-italys-economy/

Kimball notes that Britain's debt is predicted to rise to 98% of GDP in 2013 with Italy rising to 120%.

He argues instead for his pet idea of open lines of credit to individuals and businesses-something he's argued for in the past. It seems to be based on the idea that paper cash should be treated differently than electronic cash.

"First, instead of raising spending or cutting taxes, the Italian and UK governments can directly provide lines of credit to households, as I have proposed for troubled euro-zone countries and for the UK. Although there would be some loan losses, the ratio of stimulus in addition to the national debt would lead to a much better outcome. In particular, after full economic recovery in the short-run, there would be much less debt overhang to cause long-run problems after such a national lines of credit policy than under Weisenthal’s or Krugman’s prescriptions."

He then educates Joe Weisenthal on the Zero Bound:

"But for the UK, it is an even more important mistake to think that monetary policy can’t cut short-term interest rates below zero. Weisenthal quotes a post on Barnejek’s blog, “Has Britain Finally Cornered Itself?” that illustrates the faulty thinking I’m talking about:

Before I start, however, I would like to thank the British government for conducting a massive social experiment, which will be used in decades to come as a proof that a tight fiscal/loose monetary policy mix does not work in an environment of a liquidity trap. We sort of knew that from the theory anyway but now we have plenty of data to base that on.

“Liquidity trap” is code for the inability of the Bank of England to lower interest rates below zero. The faulty thinking is to treat the “liquidity trap” or the “Zero Lower Bound,” as modern macroeconomists are more likely to call it, as if it were a law of nature. The Zero Lower Bound is not a law of nature! It is a consequence of treating money in bank accounts and paper currency as interchangeable. As I explain in a series of Quartz columns (1, 2, 3 and 4) and posts on my blog—that is a matter of economic policy and law that can easily be changed. As soon as paper pounds are treated as different creatures from electronic pounds in bank accounts, it is easy to keep paper pounds from interfering with the conduct of monetary policy. In times when the Bank of England needs to lower short-term interest rates below zero, the effective rate of return on paper pounds can be kept below zero by announcing a crawling peg “exchange rate” between paper pounds and electronic pounds that has the paper pounds gradually depreciating relative to electronic pounds."

"In his advice for the UK, Weisenthal should either explain why having an exchange rate between paper pounds and pounds in bank accounts is worse than a massive explosion of debt or join me in tilting against a windmill less tilted against. And for those who read Krugman’s columns, it would take a bad memory indeed not to recall that he gives the corresponding advice of stimulus by additional government spending for the US, which faces its own debt problem. I hope Paul Krugman will join me too in attacking the Zero Lower Bound."

"In 1896 William Jennings Bryan famously declared: “… you shall not crucify mankind on a cross of gold.”

"In our time it is not gold that is crucifying the world economy (though some would return us to the problems that were caused by the gold standard), but the unthinking worldwide policy of treating paper currency as interchangeable with money in bank accounts. So for our era, let us say: You shall not crucify humankind on a paper cross."

I'm glad to see Krugman got back to him quickly:

"Mark Thoma points me to a post by Miles Kimball titled What Paul Krugman Got Wrong About Italy’s Economy. So I wondered what important features I got wrong — but to my great disappointment all I found was yet another invocation of the Reinhart-Rogoff claim that bad things happen when debt goes about 90 percent of GDP.

"Look, this is just not an established result. It’s a correlation; but it could just as well reflect a pathway from slow growth to high debt, or from third factors like political and institutional dysfunction to both slow growth and high debt."

"This last possibility becomes especially persuasive when you look at the full list of advanced countries that have exceeded the supposed 90 percent threshold in the past 50 years: Japan, Italy, Belgium, Greece. That’s it. So yes, Japan and Italy have had high debt and slow growth; do you really want to say that debt was the only reason for slow growth, or that the Japanese slowdown of the 1990s had no role in causing the rise in debt? Do you really want to say that debt is the only reason for Italy’s poor performance? If your answer to either question is no, you have just said that you don’t believe in Reinhart-Rogoff’s results."

http://krugman.blogs.nytimes.com/2013/02/27/another-attack-of-the-90-percent-zombie/

Yes, this correlation has not been proven to be a causation. Krugman expresses surprise that a serious economist like Kimball would get this wrong-he ends up sounding like David Brooks, Bob Woodward, or David Gregory-a Very Serious Person, rather than a serious economist.

Krugman doesn't bother to get into it, but Kimball sounds even more userious with his naive equating of Britain and Italy-as if the fact that Britain has it's own printing press doesn't make it's monetary system a horse of a wholly different color than Italy's.

On the other hand I would have been interested to hear what Krugman makes of Kimball's overarching idea of lines of credit. While he's clearly wrong in evoking a debt scare, is his idea of lines of credit a good one? I haven't seen many who have even analysed this idea. Is there a lot to gain by eschewing paper cash?

P/S. I apologize that many of the links I've been putting up haven't been ready to be clicked. It seems that since I started using Google Chrome I've had this problem. Does anyone know how to format it properly? I stopped using Internet Explorer as I was having so many problems with it the last week-it keeps freezing up.

However, Google Chrome seems not to let these links actually be linked to-forcing you to have to cut and paste in the browser. If I can't figure it out-I might try Firefox next.

I notice that it's not all links that don't work. Politico seems to work although often when I cut and past stuff the font comes in at the wrong size or something.

Tuesday, February 26, 2013

Sumner: Britain Has Job Growth Miracle

He makes the point that Britain has created quite a few jobs considering that they've been in recession; based on the recent 4th quarter British numbers-which are subject to revision-their numbers would be good even if they weren't in a recession. So what gives?

The endlessly perplexing British economy continues to post bizarre jobs numbers:

The employment numbers continue to be surprisingly strong, with a rise of 154,000 to 29.73 million in the October-December 2012 period, and a huge 584,000 increase over 12 months. Interestingly, the rise in employment was more than accounted for by an increase in full-time employment of 197,000 in the latest three months, with part-time employment down 43,000.

To put that in perspective for American readers, that would be the equivalent of 2.9 million jobs over 12 months in the US, far more than we’ve actually be able to generate. (America has roughly 5 times the population of the UK.)

How did this jobs miracle happen? Well let’s start with the fact that it may not have happened, the data might be wrong. After all, RGDP has been flat, and Britain has been in recession during much of this time.

If it did happen, this might be one reason why:

Pay continues to be weak, up just 1.4% over the past year. More here.

If this refers to hourly nominal wages, it might help explain the jobs gains. If it’s not hourly data, it’s meaningless.

http://www.themoneyillusion.com/?p=19583

Aha! The British workers are willing to take a pay cut?! Unlike selfish Americans? Of course, he waits till the end to dump on Keynesians. Save the best for last:

Keynesian models are completely silent on the question of how much real output we can expect from a given rise in employment. That’s the supply-side of the economy, which the Keynesian multiplier model does not even attempt to explain.

Keep this in mind when you read prominent Keynesians telling us about the impact of the so-called “austerity” program adopted by the Cameron government. They aren’t even addressing the real puzzle–why so many jobs?

It is an interesting data point. What can explain it? Does it in anyway show the Keynesians are wrong about austerity? Do they have to explain why there are so many jobs before they get to talk about austerity again?

One point Sumner leaves out however, is despite the impressive increase in jobs during Q4, unemployment itself dropped by only 14,000.

Alan Blinder Makes the Case Against a Grand Bargain

While it's good news that some in the GOP are at least willing to entertain the idea of new taxes for a "grand bargain"

http://diaryofarepublicanhater.blogspot.com/2013/02/why-gop-might-accept-new-revenue.html

it should be bore in mind that the impetus for a GB is diminishing every day. This hasn't been recognized by the Very Serious People. Alan Blinder, however, points out that much headway has been made and yet the discussions seem to suggest nothings yet been achieved. For one thing. we've already done a lot of "bargaining." The goal of the GB was $4 trillion. Currently we've already agreed to $2.6 trillion dollars in deficit reduction.

"Let's stack these recent developments up against the goal set in the summer of 2011: to chop about $4 trillion off the deficits projected for the next 10 years."

"While the grand bargain talks dissolved in acrimony, they did produce the Budget Control Act of 2011. That law created land mines like the fiscal cliff, but it also cut spending by over $1.9 trillion once you include the associated interest savings, as you should. (Here and elsewhere, I use the 10-year budget window 2014-2023 and recent estimates from the widely respected Center on Budget and Policy Priorities.) That was all spending cuts, no tax increases."

"Then came the New Year's Day agreement that averted the cliff. The headline number then was about $600 billion in tax increases. But if you add in the spending cuts and the associated decrease in debt service, it came to another $850 billion or so."

"Adding these up, the two budget agreements have taken us more than two-thirds of the way toward the $4 trillion deficit-reduction target. Close enough, in fact, that the sequester, if it happens, will nearly finish the job."

"Now, don't get me wrong. I don't welcome the sequester. Its meat-ax approach chops spending bluntly and indiscriminately. But imagine that our legislators agree instead on a smarter package of spending cuts and revenue raisers that amounts to the same amount of money. After all, it's only about 0.6% of GDP. Then we'll have achieved the $4 trillion target. The Center on Budget and Policy Priorities estimates that doing so would be enough to stabilize the debt-to-GDP ratio at about 73%, which is a sensible goal for now."

"Deficit hawks will object that the original $4 trillion goal applied to fiscal years 2012-2021. When you roll the budget window forward to 2014-2023, substantially larger cuts are needed to keep the debt-to-GDP ratio from rising. That's true. But, during that same period, the CBO's technical and economic re-estimates have made the deficit target substantially easier to reach. If you do the math, the two adjustments come close to cancelling out one another. So a number like $4 trillion remains a reasonable target for policy changes."

http://online.wsj.com/article/SB10001424127887323495104578313982084633620.html?mod=WSJ_hp_mostpop_read

Besides the reductions already agreed to in revenue, there's the sudden sea change with a big drop in medical costs-this has been a big driver of problems.

"Seas change slowly. But the numbers Dr. Emanuel cited are dramatic. Between 1965 (when Medicare was founded) and 1993 (when Bill and Hillary Clinton tried to curb medical costs), health-care spending grew 3.2 percentage points faster than GDP. Since 2004, that gap has been shaved to a mere 0.8 percentage point. And the more recent news is even better. Over the past three years, according to Dr. Emanuel, Medicare costs have actually grown slower than GDP."

"Some of this "cost control" is due to the weak economy: Hard times lead people to postpone or cancel some medical care. But health-care inflation began to fall years before the recession began, which suggests that deeper forces are at work. If we can somehow slow health-care costs to the rate of GDP growth, our long-run budget problem is basically solved. It's far too early to declare victory, but there's reason for hope."

As Blinder notes wryly, sometimes the news is good. However, what would also be very welcome news is that Washington finally recognize this sea change and stop talking as if the world's about to end.

Why the GOP Might Accept New Revenue

First of all, Lindsay Graham's comments yesterday could suggest a breakthrough on raising taxes on the rich:

“I hope we’ll talk about this. Now is the time to grow up. Both parties need to grow up. We need to find a chance to do the big deal,” he said.

He added: “I’ll challenge the president, ‘Mr. President let’s do things that will straighten out the long-term indebtedness in this country… I’ll raise revenue, you reform entitlements and both together we’ll set aside sequestration in a way that won’t disrupt the economy and hurt the Defense Department.”

That can't but be seen as in some way muddling the GOP message as they've been insisting that revenue is off the table. Graham seems to be offering new revenue for entitlement reform-yet another "big deal."

This then is potentially big news. Again, it at least shows a breach in the GOP line. The Virginia GOP is another very large breach. You have Bob McDonnell sounding the alarm. Now you have some GOP Reps from Virginia also doing so.

"Most Republican congressmen are resigned to the fact that the sequester will take effect Friday.

But a trio of Virginia Republicans is fighting back, using their home turf as a backdrop for the pain they believe the massive spending cuts will wreak."

"On Monday, Reps. Scott Rigell, Randy Forbes and Rob Wittman lashed the sequester at a forum in a packed downtown hotel ballroom. The 300-person crowd had little appetite for placing blame. To this military community, the sequester is personal."

"Virginia Beach and nearby Newport News, represented by Rigell in the 2nd Congressional District, is now at the center of the sequester debate as it’s home to a large population of active and retired servicemen and women, military interests and the Newport News shipyard. President Barack Obama will use the shipyard as a backdrop on Tuesday to call on Congress to stop the sequester."

"All three Republican congressmen said they’ve been sounding the alarm over sequestration for a year, and they agreed that there isn’t much use in pointing fingers three days before the cuts are set to be implemented. They are just ready to work on a way to fix it."

"At this point, Rigell, Forbes and Wittman represent a small minority of Republicans who are actively trying to stop the sequester before its implementation. Those Republicans are mostly from congressional districts with large military populations or bases that could see a huge impact from the large cuts to the Pentagon budget expected as part of the budget tightening."

"Many in the Republican Conference believe that the sequester should be allowed to take hold even if that means some pain in their communities. They think that’s the only way Washington will ever tighten its belt. And they are completely unwilling to swallow any hint of tax hikes Obama insists on as part of a deal to avoid or replace the sequester."

"But even among the three Virginia congressmen, there are divisions on how to approach the cuts. Wittman said there are smarter ways to address deficit reduction that don’t hurt the military. Rigell said there are ways to cut defense spending that wouldn’t be as harmful as the sequester. Forbes said he introduced a bill that would take national defense spending out of the sequester altogether and not cut spending elsewhere."

Rigell goes the furthest even suggesting an openness to raise new revenue:

Rigell even has expressed openness to new revenues as part of the mix to avoid the sequester and get the budget back on track.

“We too, as Republicans, have contributed to some of this gridlock,” he said, referencing the Americans for Tax Reform pledge to not raise taxes. “We need a comprehensive agreement.”

Should the Senate pass a bill, Rigell said, he plans to write to his leadership to at least consider it.

“What I do not want to happen [is] for the House go into lockdown and reject the Senate bill but not offer an alternative — that’s unacceptable to me. At that point, I’ll call our leadership out and say, ‘No, we’ve got to produce a bill,’” Rigell said after the forum.

Wow. He admits that the GOP has some fault, is willing to consider revenue, and most doesn't want to see the House go in lockdown. Be still my beating heart.

Realistically, this shouldn't be so surprising. You have to understand the psychology of Red State, Republican voters. A Republican voter-unlike a Republican politician-is someone who is very opposed to the idea of government spending in the abstract however is just as opposed in reality to cuts in government spending that benefits them. They hate the spending the government does for the other guy.

P.S. Alan Blinder makes the point that we may not need a "Grand Bargain" anymore. There has been little attention to the fact that we've seen a major cut in the medical cost curve the last few years. We also have already had $2.6 trillion in cuts-the sequester, which we don't want to do-would get us close the original "Grand Bargain" of $4 trillion set up in 2011.

http://online.wsj.com/article/SB10001424127887323495104578313982084633620.html?mod=WSJ_hp_mostpop_read

Democrats are Confident of Sequester Victory

When you listen to all the pundits and read all the headlines this may seem surprising, Indeed, my posts yesterday probably showed uncharacteristic if not pessimism then concern about the endgame if as everyone seems to believe, we don't get a sequester deal by Friday.

http://diaryofarepublicanhater.blogspot.com/2013/02/the-catch-22-of-sequester.html

http://diaryofarepublicanhater.blogspot.com/2013/02/the-catch-22-of-sequester.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+DiaryOfARepublicanHater+%28Diary+of+a+Republican+Hater%29

Yet according to a Talking Points Memo piece, the Dems are very confident.

"If it appears to you that Democrats are approaching the Friday sequestration deadline with greater poise than the GOP, you’re not mistaken."

"Democrats enjoy a massive public relations advantage over the GOP. Voters are prepared to blame Republicans. The Democrats have an unusually steady message. Republicans are lurching from message to message as they try futilely to blame Obama for sequestration’s very existence, while contending that its consequences won’t be so dire (except when they contend it will hollow out the military) and to argue just as futilely that Obama’s revenue demand is an act of duplicity."

"But Democrats are also confident because they have an institutional memory of winning a similar fight, when Republicans shut down the government in 1995."

“Before the government shutdown it was very much an open question in most people’s minds which party would win,” recalled Paul Begala, a Clinton White House veteran, and an insider at the time of the shutdown, in a telephone interview Friday. “Republicans were very confident at the time that the government would shutdown and people’s lives wouldn’t change. They were wrong. … [W]e all saw that theory proved in ‘95 and ‘96 and it’s going to happen again.”

http://tpmdc.talkingpointsmemo.com/2013/02/why-democrats-are-so-confident-of-a-sequestration-victory.php?ref=fpa

The one trouble with this is what I had talked about yesterday: the idea that victory by the Democrats requires that we feel the immediate pain to the sequester immediately. If we don't, it's almost like that the GOP gets to do a Rush Limbaugh and declare, "See, I told you so"-basically that Obama and the Dems are being alarmist and demagogic as some GOPers have already called the President.

The shutdown in 1995 was a big moment as it proved that yes, we do need the government and do notice if it shuts down. After all a true libertarian would claim that we'd discover we didn't. That's not what happened. Yet do we want to root for pain in March? That's why I said the sequester is a catch-22 because to avoid the pain of it we have to feel immediate pain.

The Dems have a lot of advantages; a large one is that the public is already poised to blame the GOP for the sequester.

http://www.politico.com/story/2013/02/poll-more-will-blame-the-gop-88081.html?hp=r4

However, there are some things that give the GOP reason to hope. One is that people may not be paying as much attention to the sequester which could be a real problem. If there isn't immediate pain-which again, in reality should be good news-it could be bad news if this enables Republicans to say 'see I told you this was just demagoguery'-and this could end up locking in the cuts. In this scenario the pain will only be felt later. The TPM notes that a sequester is different from either a government shutdown or letting the debt ceiling expire:

Sequestration is different from a government shutdown in some key ways. It won’t bring myriad government services to a halt, but it will delay them and complicate them and make things more expensive and less convenient for ordinary taxpayers. It will also lead to layoffs and furloughs.

"This week, the Obama administration is taking steps to publicize these costs, including the president himself, who will deliver remarks at a shipbuilding facility in Virginia on Tuesday."

“If you live in Newport News or Pascagoula or any other of a hundred Navy towns — San Diego to Portsmouth — you know this is going to hurt because this is going to stop construction on ships,” Begala predicted. “So I don’t think it’s going to last very long.”

"The harder part is explaining how and when Republicans relent on revenues. If they hold out through the month of March, the government really will shut down, just like it did in 1995, and the pressure on them to cave will amplify. But if they hope to end the standoff before then, it will likely require a party leader — or perhaps a GOP governor or two — to drag the rank and file in a more sensible direction."

“Bob Dole said enough is enough,” Begala recalled. “He stopped it. I may be selling Mitch McConnell short, but he’s no Bob Dole. He’s terribly smart, but he’s more worried about his political hide. … There’s always these gangs that form in the Senate so that’s a good thing. In the House, there’s Paul Ryan, but he’s done nothing.”

It seems to me that a big mistake for the Democrats is to cave to the GOP demand that they let the sequester cuts go through in exchange for giving Obama and his cabinet departments more latitude for how the cuts are applied. I've seen some reports that the Dems feel they may have to except this proposal if we don't feel the bite of the sequester right away in March.

To win they need to be willing to allow the government to shutdown if the GOP is willing to. It's sort of like the deb ceiling: no negotiations that don't include tax revenues for the sequester. I think 1995 has disabused the GOP of the idea that using a government shutdown as a weapon has any viability as a strategy.

Meanwhile there is more good news on the horizon: many Virginia Republicans are pushing the GOP to avoid this.

http://www.politico.com/story/2013/02/virginia-republicans-stop-sequester-88063.html?hp=l4

A really important thing that may push the GOP to accept a real deal to avoid this sequester is that so many Republicans are in states that depend on military contracts. Remember, a Republican voter is not a person who hates government spending but hates government spending that benefits others. When it's their benefits on the line they feel differently.

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