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It's The Tax Policy, Stupid

In a column arguing for short term stimulus, Peter Orzag writes:

When policy makers put in place measures carefully designed to reduce the federal deficit in the future, most of them happen. This is a good thing, since enacting more stimulus today and more deficit reduction to take effect later is exactly what the U.S. needs. It’s also what makes the ongoing jobs-versus-austerity debate so frustrating. What we really need is to be bolder on both jobs and austerity, by pursuing a combination policy.

Those who are most concerned about the weak labor market should be most willing to do whatever it takes -- including combining delayed budget cuts with stimulus -- to get the most stimulus passed. And those who favor a combined approach shouldn’t be characterized (as I have been) as pro-austerity and anti-stimulus.[...] [Emphasis supplied.]

Someone hurt Peter Orzag's fee fees. A couple of points: Orzag is arguing for "maximum stimulus now." Where was he in January 2009? Second, his statement about spending cuts in the social safety net is true. But tax increases for deficit reduction NEVER survive. It's funny how to Orzag, the Clinton tax increase of 1993, the most important deficit reduction measure of the last 25 years, is not even worth a mention. Of course we know why, it undermines his argument. THAT deficit reduction measure did not hold. Taxes were cut twice during the Bush Administration. So Orzag says we should agree with him to cut spending in the future for more spending now. But what about the Bush tax cuts?

Sorry Mt. Orzag, you are pro-austerity and pro cutting the social safety net. It's what you don't write about that proves it to me - tax policy.

Speaking for me only

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243K New Jobs; U3 At 8.3%

Very good job news:

The United States economy gained momentum in January, adding 243,000 jobs, the second straight month of better-than-expected gains. The unemployment rate fell to 8.3 percent, giving a cause for optimism as the economy shapes up as the central issue in the presidential election. The Labor Department’s monthly snapshot of the job market uses a different survey, of households rather than employers, to calculate the unemployment rate.

Both the unemployment rate and the number of jobless — which fell to 12.7 million — were the strongest since February 2009, President Obama’s first full month in office.

The job growth numbers really do not match the economic growth numbers so, to me at least, this is a little perplexing. Call it recovery-less job growth. But good news is good news. And this is unreservedly good news. Not just for President Obama, who will assuredly win reelection if this trend holds up (over 200,000 jobs were created in December.)

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Treasury's "Battle With The Banks?" What "Battle?"

Atrios points to this strange Felix Salmon post about Treasury's incompetence and/or malfeasance regarding the mortgage crisis. What's strange about it is this line:

[I]n the battle of Treasury vs the banks, the banks — predictably — have won.

Ridiculous from Salmon - Geithner's Treasury has protected the banks from Day One (before Day One in Geithner's case, considering his outrageous actions on behalf of the banks as president of the New York Fed.)

Tim Geithner is a disgrace, and a disgrace that reflects on Barack Obama. If he loses reelection, what would most make his loss deserved is his acceptance of the malfeasance and incompetence of Tim Geithner. Obama has been unforgivable on that.

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120K Jobs Created; U3 Down To 8.6% On Revisions, Reduction In Workforce Participation

BLS reports:

The Labor Department said Friday that the nation’s employers added 120,000 jobs last month, after adding 100,000 jobs in October. The unemployment rate fell to 8.6 percent, after having been mired around 9 percent for most of 2011.

November’s jobless rate was the lowest recorded since March 2009. The rate fell partly because more workers got jobs, but also because about 315,000 workers dropped out of the labor force, and the jobless rate counts only people who are actively looking for work.

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Free Money For Everybody . . . Except You

Banksters in trouble? Have some cash:

The Federal Reserve moved Wednesday with other major central banks to buttress the financial system by increasing the availability of dollars outside the United States, reflecting growing concern about the fallout of the European debt crisis.

The banks announced that they would reduce by roughly half the cost of an existing program under which banks in foreign countries can borrow dollars from their own central banks, which in turn get those dollars from the Fed.

I support this policy, but think that spreading the free money around to the "little people" is just as important. Also too, fiscal stimulus.

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The Missing Fiscal Policy: Austerity Now?

Paul Krugman writes:

A few years ago Gauti Eggertsson published a a persuasive analysis (pdf) of the big economic recovery of 1933-37; he argued that it had a lot to do with changed expectations of future monetary policy. Specifically, by taking America off the gold standard — a shocking move at the time — and explicitly calling for a return to pre-Depression price levels, FDR created an expectation of rising prices that had a salutary effect on demand.

The paper explains that FDR did more than that:

What ended the Great Depression in the United States? This paper suggests that the recovery was driven by a shift in expectations. This shift was triggered by President Franklin Delano Roosevelt’s (FDR) policy actions. On the monetary policy side, Roosevelt abolished the gold standard and announced an explicit policy objective of inflating the price level to pre-Depression levels. On the fiscal policy side, Roosevelt expanded real and deficit spending which helped make his policy objective credible. The key to the recovery was the successful management of expectations about future policy. [MORE . . .]

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Occupy Together: The Kids are Alright

At Daily Kos, Big Tent Democrat interviews his 17 year old daughter about why she joined Occupy Wall Street. What a smart, articulate young woman.

Q: What do you think the goals of Occupy Are?

A: To help wake America up to the fact that the country can't go on focused on the needs of the few over the needs of the many.

The movement has passed its one month anniversary, raised $300,000.00 and grown globally into Occupy Together. Reuters reports a new poll shows most New Yorkers support the protest. [More...]

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Why Not HOLC?

Martin Feldstein writes:

To halt the fall in house prices, the government should reduce mortgage principal when it exceeds 110 percent of the home value. About 11 million of the nearly 15 million homes that are “underwater” are in this category. If everyone eligible participated, the one-time cost would be under $350 billion. Here’s how such a policy might work:

If the bank or other mortgage holder agrees, the value of the mortgage would be reduced to 110 percent of the home value, with the government absorbing half of the cost of the reduction and the bank absorbing the other half. For the millions of underwater mortgages that are held by Fannie Mae and Freddie Mac, the government would just be paying itself. And in exchange for this reduction in principal, the borrower would have to accept that the new mortgage had full recourse — in other words, the government could go after the borrower’s other assets if he defaulted on the home. This would all be voluntary.

This won't work. The reason is the banks can not recognize these losses. The lack of clothing for the emperor would become apparent. Without a stick, the banks won't do it. There were sticks available in early 2009, but Geithner protected his Wall Street buddies. In any event, why not HOLC?

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Income Inequality And Secular Stagnation Revisited

Krugman yesterday:

I’ve written a lot about the evils of soaring inequality. But I have not gone that route. I’m not ruling out a connection between inequality and the mess we’re in, but for now I don’t see a clear mechanism, and I often annoy liberal audiences by saying that it’s probably possible to have a full-employment economy largely producing luxury goods for the richest 1 percent. More equality would be good, but not, as far as I can tell, because it would restore full employment.

I still think Krugman is utterly wrong here. Take for instance the issue of homeowner debt, which everyone seems to agree is the major drag on our economy now.. Certainly it is possible to ignore income inequality as a major reason for this problem, but it would be foolhardy in my opinion. I just don't understand Krugman on this issue. See my previous posts on this here and here.

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Punishing Banks For Debit Card Fees

Years ago, the banks have with the ideas of debit cards, advertised and marketed them to death, and finally got us all using them. I was perfectly fine writing a check. Now, so few people write checks, most places won't take them. And if we use credit cards, instead of debit cards, we run the risk of buying more than we can afford and getting into debit.

So along comes the big banks with more than $10 million in assets, and since they are being told they can't charge retailers more for the new debit card fees they provide customers, the banks have decided to stick their own customers with the $5.00 fee.

Fortunatley, leaving a bank, even one you've been at 30 years, is easier than leaving a lot of other companies-- like your favorite grocery store, dry cleaner, health club, etc.

So what happens to these banks when new banks pop up who aren't subject to the big boy fees, and start offering us what our banks gave us to get our initial business (perks now long gone for many of us except those with significant amounts of cash to lay dormant in their accounts) -- like free checking accounts, no fees for the bill-pay, no checking fees or fees for electronic banking and free checks with images, etc.?

We'll leave the Big Boys in droves. I sure hope they thought it through and crunched the numbers on how many of us they can afford to lose< [More....]/p>

Next time you are standing in line behind someone writing a paper check, be patient. This could be you next month. I'm never happy about change in my personal life, and much less so about change for the worse. I'll be reading those mail offers much more closely now.

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Worst "Elites" Since The Great Depression

NYTimes Editorial:

The world has barely dug out of recession and the global economy is again slowing dangerously. Most leaders seem eager to make things even worse.

Instead of looking for ways to reignite growth, Europe’s leaders — and Republicans on Capitol Hill — are determined to slash public spending. Europe’s fixation on austerity is also compounding its debt crisis, bringing the Continent even closer to the brink. Meanwhile, China’s government, which is struggling to contain inflation without letting its currency rise, has been trying to slow domestic demand, allowing its trade surplus to balloon.

Each of these policies is wrong. In combination, they are likely to tip the world into a deep recession.

Bush 43 levels of incompetence.

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Senate Passes Stopgap Spending Bill

The Senate tonight passed a stopgap budget bill to keep the government funded through November 18.

The new pact, which the Senate approved 79 to 12 and the House is expected to ratify next week, will keep federal agencies open until Nov. 18 at a level of spending that represents a 1.5 percent cut from this year’s levels.

After FEMA said it had enough funds to last through Friday, Senators dropped a billion dollars for disaster relief from the bill:

Democrats and Republicans have agreed to drop $1 billion in disaster relief funding that had been thought to be necessary to replenish FEMA’s coffers before the week ended.

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Navy Offers $3 Mil Contract for Updating Guantanamo Bowling Alley

This has been the worst week for the stock market since 2008.

The Dow lost 6.4 percent for the week, its biggest drop since the week that ended Oct. 10, 2008, when it fell 18 percent. That was at the height of the financial crisis.

Investors fear a recession or worse. The Administration is out pushing its deficit/jobs plan and telling us there are hard choices to make.

Yesterday, the Navy published a notice seeking a contractor to repair the bowling alley, youth center and Liberty Center at Guantanamo, at a cost of $3 million. (Note, this is not for the detainees, but the military employees.) [More...]

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On the Math

Charlie Sheen is getting a $100 million payout from Warner Brothers, in settlement of his lawsuit over his television show (that I've never seen), Two and a Half Men. $25 million will be paid in two weeks, the rest over time.

Apple stock prices closed at an all-time high today, $411 a share, with a new record-high market valuation of $381.62 billion, which even beats Exxon Mobile.

Let the mega-rich pay more in taxes. Leave Medicare alone. They may have more money, but there's millions more of us and we vote. Our votes can lead to electoral victory. Who cares if they pout?

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Arguments for More, Not Less, Government Spending

John Judis, a visiting scholar at the Carnegie Endowment for International Peace. writes the cover story for the October 6, 2011 New Republic on the economy and President Obama. It's called Doom: Our Economic Nightmare is Just Beginning. TNR has provided me with this pass-through link so non-subscribers may read it. It's long, but very interesting, particularly from a historical point of view. (Although the parts about the world monetary system were way over my comprehension abilities.)

It starts out by saying our current recession is not just similar to the 1929 depression, it is the 1929 depression redux. It then recaps economic history since then and politicians and nations' responses. Shorter version: Obama shouldn't fall prey to Republicans clamoring for deficit cuts and decreased Government spending. Austerity is not the answer and to recover, we need more, not less, Government spending. [More...]

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