"The Agenda's been Taken over by Economic Conditions"

How will the financial crisis impact Obama's economic plans?:

Downturn, deficit could hinder Obama's economic plan, by Michael A. Hiltzik, LA Times: ...During two years of campaigning, Obama set forth detailed proposals for tax relief and enhanced government benefits for the middle class, the poor, college-bound students and the elderly.

He called for new government investments in infrastructure and "green" technologies, as well as a dramatic expansion of health insurance largely by making a Medicare-style program available to all.

He now ... will almost certainly have to adapt some of his proposals to accommodate the current financial and economic crisis. ...

"Obviously the agenda's been taken over by economic conditions," said James K. Galbraith,... an economic advisor to the president-elect. "There's no reason to think these are going away in six months."

But insiders say Obama may have to mediate between opposing camps on his own economic team. Moderates are cautioning against stimulus efforts that might sharply increase the budget deficit, while others are urging the kinds of aggressive measures associated with President Franklin Roosevelt. ...

The recessionary economy, and the expense of the government's financial rescue program, will undoubtedly complicate Obama's efforts to implement his economic plan. But some advisors say he won't be inclined to abandon his key goals.

"It would be very difficult to come in and say, 'That agenda I've been pursuing for a year and a half? Never mind it,' " Jared Bernstein ... said...

But Bernstein, a key Obama economic advisor, acknowledged that some economic issues may have to be addressed with greater urgency to provide a foundation for others.

"We can't tackle healthcare until we get the economy working," he said. "If the economy is weak, how can you make good on the promises you made?"

Other proposals, by contrast, may move to the front burner. Obama proposed a national infrastructure reinvestment bank to be funded with $60 billion in federal money over 10 years. But congressional leaders have said they may incorporate as much as $150 billion of infrastructure spending in an economic stimulus package...

Such a program is known to be favored by former Treasury Secretary Robert E. Rubin, perhaps Obama's most influential economic advisor, on the grounds that it would have a more lasting effect than simply handing out rebate checks...

Some advisors argue that a potentially severe recession only underscores the need for a far-reaching stimulus plan focused on infrastructure more than on rebates to spark a short-term bump in consumer spending.

"We don't need more consumption," Joseph Stiglitz ... said recently... This is an opportunity at the national level to say, 'Here are all the things we should have been doing and now have to do to get our economy to grow."

The extent to which the Obama administration should push deficit spending is the subject of a debate bubbling within his economic team... Although most appear to accept the Keynesian axiom that economic stimulus in a time of crisis requires deficit spending, the extent of the budget-busting is at issue. ... At the more cautious end of the spectrum ... are former Treasury Secretaries Rubin and Lawrence H. Summers. ...

I'm on the side of aggressive stimulus devoted, at least in part, to infrastructure.

[With respect to the comment "We can't tackle healthcare until we get the economy working," see Dean Baker's argument in the post below this one.]

Comments

[a]

Stiglitz said: "Here are all the things we should have been doing and now have to do to get our economy to grow."

I'd like to amend this to :
"Here are all the things we should have been doing and now have to do to get our economy to grow *in the right way*." Having the economy grow by buying lots of things by going into debt, is not healthy.

[Memory]

"We can't tackle healthcare until we get the economy working," he said. "If the economy is weak, how can you make good on the promises you made?"

This is SOOO wrong. The economy fluctuates; healthcare is an institutional reform that goes on forever. My take-home from Clinton is that healthcare should be done before anything else distracts from it. Besides, done in any sensible way healthcare reform saves money. How can you argue that we're so poor we can't afford to save money?

[ken melvin]

Yes, we've been going the wrong way a long time. Let's modernize this sucker.

[Denis Drew]

I hate to be a spoil-sport, but, I FEAR the priorities in the new admin...
...will include Obama's minimum wage: a dollar below LBJ's, 1968, $10/hr, double the average income later; not half the true average income or $13/hr (LBJ and Ike really pushed it at two-thirds the true average; last year it was at one-sixth, this year one-quarter, Obama's plan is one-third)...
...will include a card check, labor law leftover from the 40s that some bright labor lawyer happened to notice or we apparently would not have anything to talk about; not the world wide (third, second and first worlds) answer to the race to the bottom: sector-wide labor agreements, the perfect answer to Wal-Mart.

I am afraid that the attitude of the incoming admin will be the usual "the working poor (who have no business being poor, not in a double-the-average-income-of-1968 era) we have always with us" -- so we assume that they are always supposed to be with us: so we really need to do a LITTLE SOMETHING for them.

If we could have foretold to folks of 1968 that 40 years hence the economy would be in recession -- and that, oh by the way, the minimum wage of 1968 would become the 25 percentile 2008 wage -- the folks of 1968 would have forgotten to yawn over the current recession while throwing a fit at the seemingly impossible prediction of a "great wage depression." What could they possibly have guessed would be the cause: civil war, multiple depressions or even plagues?

But try to tell our progressive elites to focus on what should have been this impossible economic history -- on what should be taken as today's most extreme if never ending (boring?) economic emergency. Maybe if their affluent next-door neighbors were reduced to less than $150,000/yr, maybe then they would achieve all-out focus on the wage depression that exists for MOST of our workforce and maybe then they would be willing to take some "risks" to -- quickly! -- do something about it, like doubling the minimum wage in a hurry (causing only direct 3% inflation) and importing the answer to the race to the bottom used all over the globe, legally mandated sector-wide labor agreements.

The need for fully adequate wage support mechanisms is made all the more critical by America's never-ending influx of willing-to-work-for-less labor -- plus outsourcing to the same. I am not knocking immigration or outsourcing: I am frantic over the under-pricing of American labor caused by the lack of real wage supports: serious minimum wage (it was $10/hr, 40 years ago at half today's average income) and sector-wide agreements (Canada uses a lite version: un-unionized firms must operate under contract conditions worked out for unionized firms).

Our progressive super economists can perform 20X the volume of academic labor that I am capable of in one day, but they somehow cannot keep 2 things in mind at the same time: this years financial mess and the endless wage depression.

[Denis Drew]

http://hnn.us/articles/55614.html

Professor James Livingston explains simply that if business squeezes too much money out of labor, then, demand drops and business has no healthy place to invest its excess profits (plant and equipment) and heads out in search speculative paper which the only alternative (dot.com start ups with no realistic business model, risky real estate): leading us from bubble to bubble.

The professor says we only began to come out of the great depression when labor began to get its mojo back and get its fair share of the pie: boosting demand back to normal balance with profit: HINT!

[wagtail]

Didn't FDR emphasize that we had adequate labor resources inside the country to solve our problems? Perhaps moderating external labor flow will boost wages.

[ken melvin]

Dennis - bon dit.

[Don the libertarian Democrat]

Obama Economic Checklist
The NY Times does a little checklist on President Obama's economic plans:

http://www.nytimes.com/2008/11/06/business/06challenges.html?adxnnl=1&pagewanted=1&adxnnlx=1225983925-e6TpLAlNHqRTvLprv1zxBw

"Here are some of the crucial issues that economists say will test the new administration, and how it might address them."

In parentheses, how likely to be enacted
After, whether I agree
What is going to happen, with the understanding that what he said in the campaign will change
1) ECONOMIC STIMULUS: Obama Is Likely to Act Quickly ( Likely) Agree: No idea
2) MORTGAGES: A Pledge to Aid Homeowners ( Maybe: If a plan can ever be agreed upon ) Agree, maybe:No idea
3) FEDERAL REGULATION: Tighter Reins on Wall Street ( Likely ) Agree, maybe: No idea
4) AUTO INDUSTRY: In Detroit, No Cash, No Credit, No Time ( Likely ) Don't agree: Loans
5) HEALTH CARE: An Overhaul Will Have to Wait ( Not likely ) Disagree: No idea
6) TECHNOLOGY: To Shape Policy, a Cabinet Voice ( Likely: czar, Unlikely: visas ) Agree with visas, not cabinet czar or whatever )
7) ENERGY: An Agenda Faces Possible Delays ( Likely: Agree, maybe ) No idea
8) TRADE: Cooperation Fades, Protectionism Rises ( Unlikely: disagree ) He'll end up agreeing with me and jettison protectionism, although he might jawbone more about fair trade, which I'm fine with. I don't find the concern silly, just hard to put into effect without negative consequences that outweigh it

[paine]

"I'm on the side of aggressive stimulus ..."

glory glory

mark t's
on the side of vickrey and the better angels

note from the archives
mephisto greg on same
http://gregmankiw.blogspot.com/2006/05/vickrey-on-budget-deficits.html

[paine]

the deficit by vickrey calc
closer to 2 trillion next fisc year
then the one trillion(the bush deficit plus 500 bills in further injectiona)

sample of expert views on vickrey calc ???

here's
harvard yards mit romneyite
--late of the bush hay wagon---
g mankiw
on mister hyper employment hyper deficit
wild bill V

"no, he was not a kook:
He was one of the last hard-core Keynesians,
far more Keynesian than so-called new Keynesians like me, "

[anne]

"Moderates are cautioning against stimulus efforts that might sharply increase the budget deficit, while others are urging the kinds of aggressive measures associated with President Franklin Roosevelt."

Notice the wording, and understand how every attempt at significant policy change will be cautioned away by moderates as well as opposed away by conservatives, leaving others (I wonder who they are) with no effective support. Moderates we must understand would have cautioned away the entire New Deal, which we are being told was anything but moderate.

[reason]

Denis
I suppose you know my view on this by now. I don't see why we try (possibly unsucessfully) and rig the system to get the result we want, when it is perfectly possible to just redistribute to get the result we want. Tax and spread, pass go and collect $200.

Chris Dillow probably expresses this much better than I could:
http://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2008/06/social-mobility-the-nasty-arithmetic.html

[swells]

I don't think people have yet appreciated how spectacularly successful the Republicans have been with their starve the beast campaign. This country is on the hook for $53 trillion in unfunded liabilities over the next 30 - 40 years. There simply isn't anything to spend on these priorities and their won't be anything to spend unless our economy begins a period of dramatic growth. Growth is the only viable answer to the problem in my opinion.

The infrastructure and energy "independence" initiatives have the most potential to spur real growth and so need to be the primary focus of the initial economic efforts. Yes, this will be painful for some period of time as these sorts of projects have longer payback horizons than do the "send people a check" efforts.

As far as healtcare goes, I am very dubious that anything expansive can really be done until there is sufficient economic growth in place to fund it. If there are things that can be done to lower costs without too many expansive new outlays, those things should be done.

[dd]

The agenda is being taken over by the status quo; only meaningful change is Citi's new parity with GS.

[hari]

BO is likely to be aggresive in attacking economic recession with Kenysian stimulus and infrastructure investments. Healthcare reform may not find place on back burner either.
The political economy demands gov to stimulate employment, and that's likley outcome of new policy going forward. Deficits notwithstanding, America can take risks on getting the household economy, as they call it in Europe, in order.

[reason]

swells
you are perfectly that the way to go is to seek out efficiency gains. Lets see where the biggest waste is
1. The military/industrial complex
2. Bloated and parasitic financial sector (radical financial reform is desperately needed)
3. The tax avoidance industry (nothing is more socially wasteful than our best brains spending considerable effort to undermine democracy)
4. Educators teaching absolute nonsense (see Arnold Kling).

[Bruce Wilder]

To me, the electoral map looks remarkably like 1860, and that gives me ideas. The only "real" constraints are the plutocracy and his pet Media; it is the Media punditocrisy, who play anne's "moderates" "cautioning" us away from what must be done. Just do it. If George W. Bush and Richard Cheney were to leave the inauguration in handcuffs, with a ticket to The Hague, that would send a bracing message to the opposition. [Won't happen, of course, but a boy can dream.]

[reason]

(P.S. I left out the religious entertainment industry, which as entertainment is relatively harmless but there efforts in undermining education is a big negative externality. The same goes for much TV).

[wjd123]

Didn't Sen. Barney Franks say a last week that there would be no tax increase next year. That means that any attempt to help keep the deficit down by taxing the rich will have to wait till 2010.

If we get a Rubinesque Secretary of the Treasury, can I officiate the wrestling match.

[Robinia]

Am also on the "glory, glory" side w/Mark T. and the "better angels."

Lotsa better angels out there, some that could do the job way better than Summers and Rubin. Old men, old paradigm, fuggedaboutit. Out to pasture with the Clinton bridgade, we need change we can believe in. Start triangulating and you lose the momentum of the people-- not what a community organizer does. Build the wave, build the wealth, all of us lending a hand.

[wjd123]

Bruce Wilder,

I've had that same dream.

[zero]

The narrative of go slowly, you only won 52% of the vote, you only have 58 senate seats is the narrative of losers.

Let us hope Obama governs as has Bush - speak platitudes to the center and opposition, enact his own policy agenda and call anyone who dares to criticize the office of the president a commie terrorist traitor.

A couple of things the Democrats could do right away would be to eliminate the presidential pardon, something that is a bit too monarchical for me. The next is to eliminate the senate filibuster nonsense. Bills need to pass by simple majority - the 60% design is utter stupidity and creates gridlock. A test of the senate would be to kick out Stevens immediately.

[anne]

"Out to pasture with the Clinton brigade...."

What does such sneering rubbish mean?

Out to pasture with Clinton Administration economic polices that produced 225,000 new jobs a month for 96 months, as opposed to 80,600 jobs a month through the 93 months of the Bush Administration?

Out to pasture with 20.9 million jobs created during the Clinton years, as opposed to only 13.9 million necessary to keep up with population growth and a mere 7.5 million during the Bush years?

Please explain the rubbishing of the Clinton experience so that I can properly understand just what we should put out to pasture.

[ECONOMISTA NON GRATA]

With respect to: "......[With respect to the comment "We can't tackle healthcare until we get the economy working," ......"

Nonsense! The economy is working....! The economy is working exactly the way it's supposed to work. It's our priorities that are not working. Our leadership in the Beltway has set new precedents providing failed banks with capital and new regulations. Let's do the same with our failed healthcare system.

Let's get our priorities straight once and for all.

Best regards,

Econolicious

[bakho]

Is it better to bail out the financial industry directly? or to bail out finance indirectly by paying people to work on infrastructure jobs and letting finance dig themselves out with their cut of the economy?

The first way we only help the bankers and it is more expensive. If the economy tanks, the costs of the direct bailout will rise. I vote for trickle up policies.

says...

bakho,
I don't think there is a choice but to do both. The reason is that we have an economy wide solvency crisis (due to deleveraging) and a sudden rise in the propensity to save. The right way to have solved this problem would have been a J-Curve adjustment (net export growth) starting about 2002, but that didn't happen. Further rapid deleveraging of the investment banks would result in a domino effect of bankrupcies, putting virtually the whole private sector out of work. The only way around that is some form of bailout (but allowing the banks to pay dividends and high management salaries is just theft of taxpayer funds). The secret is to make the bailout big enough that it stops cascading bankrupcy, but small enough and with enough penalty clauses that it hurts. But recovery will need "trickle up" policies to restore the solvency of the credit-card maxed out public. And yes that will mean (hopefully) controlled inflation. In my opinion it should also mean printing money (borrowing directly from the Fed without releasing treasury notes to the public, which undermine the expansion in the monetary base (in my view the mistake made in Japan).

[reason]

Oops - that was me.

[Winslow R.]

anne wrote "Please explain the rubbishing of the Clinton experience so that I can properly understand just what we should put out to pasture."

The Clinton legacy was built upon strong banking as it was an administration run by bankers.

Rubin and Summers along with Greenspan engineered the policy of a weak treasury and a strong Fed.

A weak treasury meant we neglected government infrastructure and debt financing while flooding the private sector with access to loans. Eventually 'bubbles' formed in the bank/nonbank financial market as fiscal and monetary policy became 'mismatched'. It was a very good time for bankers.

The mismatch became apparent as the issuance of the 'new gold' of treasury securities provided to the private sector was rapidly diminished and actually went into reverse in the late 1990's. We had already entered recession at the end of 2000 and Gore lost the election to Bush.

The Clinton policy of a strong Fed and weak Treasury were so extreme it led to the first fiscal surplus since 1969. If you recall 1969 is just before the U.S. was forced to come off the gold standard in 1971. The demand for savings vehicles was too great for the available supply resulting in the contraction of credit and the recession of 1973.

Obviously there needs to be a balance. Summers, Rubin etc. still don't get it.

My concern is Obama's pick for Chief of Staff, Rahm Emanuel, is a fiscal conservative holding out for his pick of fiscal conservatives.

This could be very bad for the public but very good for bankers. As Newt G. says "You cannot have capitalism on the way up and socialism on the way down." The current path is worse than the path Japan followed.

We are given the choice between bailing out bankers or universal health care. Bankers want us to believe it is too late! The choice was already made!

Bankers believe America will be more passive than the Japanese. No fiscal spending except on banks. Now that we've given the bankers trillions of dollars, the barrel is empty.

We're not that stupid, are we? We're we a bunch of suckers who thought universal health care and infrastructure investment was just around the corner?

Rubin and Summers are not friends of America except those in the financial class.

There is a power struggle in the Obama camp going on right now between fiscal policy directed at bankers or the people. Rahm Emanuel's decision may indicate the the outcome of that struggle.

"He was a leading strategist in the unsuccessful White House efforts to institute universal healthcare and many other Clinton initiatives.[17]"

http://en.wikipedia.org/wiki/Rahm_Emanuel

[realpc]

Tax all income over $35k at 99%. No one needs more than that to survive. The government will have all the money it needs to pay off the deficit, and provide free homes and free health insurance for all Americans.

[anne]

"Rubin and Summers along with Greenspan engineered the policy of a weak Treasury and a strong Fed."

What nonse, since what Rubin and Summers engineered was a markedly declining deficit that became a significant surplus and would have changed the economic course of these 8 years had the surplus not been squandered with tax cuts. The Federal Reserve is independent of the Treasury, but to the extent that Treasury policy is responsible, the Fed can be that much more flexible in movement. Economic policy through the Clinton Presidency allowed for remarkable well-ordered growth amply participated in by ordinary workers.

[anne]

"My concern is Obama's pick for Chief of Staff, Rahm Emmanuel, is a fiscal conservative holding out for his pick of fiscal conservatives."

Emmanuel is as much a fiscal conservative as a foreign policy conservative, and that is no surprise but nonetheless worrying.

[Bruce Wilder]

I wouldn't give up hope, just because Rahm Emanuel may take the CoS job (at which he might be really good). Rubin, Summers, etc. would not frighten me all that much, either, though I tend to agree that Summers is a self-important bloviator, too in love with his own voice and thoughts.

It takes a shepherd to lead the lambs and sheep to slaughter.
The new Administration will have to preside over the shrinking of the banking sector. There's no way to stop it, and that Reality is so obvious that I wouldn't even worry that the new Administration will try; Paulson's attempts, like Canute, to order the tide to recede will be duly noted. The presence of comforting (to banking) persons will just be the sweetner in the draino, prior to flushing.

[Bruce Wilder]

Is there a prize for mixing metaphors?

[Andrew]

In my opinion, Emmanuel is being picked primarily to help keep the House in line with the White House, so they don't overreach and start losing seats in 2 years. I have mixed feelings about that.

Trivia: Rahm Emmanuel is a trained ballet dancer, and was the inspiration for the character of Josh Lyman on West Wing.

[kthomas]

I'm no fan of Rep. Rahm Emanuel, but there's no doubt in my mind that he's been working his butt off and his fingers to the bone to get a Democrat, ANY Democrat, elected to President. To become CoS is a suitable reward for such dedication.

Bruce, I agree, there's no point in tryng to fathom Paulson. He's in it for the money. He could care less what happens to his country. And yes, there is a prize for the mixing of metaphors: Atta Boy! Gold Star!

[calmo]

The Golden Toilet Plunger Award goes to....
Bruce The Plumber for that diet-constricting, draino supplanting, pre-flushing mm.

[realpc]

"Economic policy through the Clinton Presidency allowed for remarkable well-ordered growth amply participated in by ordinary workers."

Those smart Democrats know how to run a country; too bad the idiotically incompetent Republicans only know how to ruin it. Why do we even have elections? Let the smart people decide who wins and don't allow the morons to vote. Then we won't have to watch the country being destroyed again and again.

Anne, did you ever by chance hear about the stock market bubble and crash that was so ingeniously devised by Clinton? Or was that engineered retroactively from the future by the evil stupid Bush?

Vicious lies, vicious lies I tell you.

[anne]

"----- did you ever by chance hear about the stock market bubble and crash that was so ingeniously devised by -------? Or was that engineered retroactively from the future by the evil stupid ----?"

This is a lie, rather an absurd lie at that, but do continue lying in the hope of improving.

Interestingly enough, I have never in any way insulted the President. To think that simply comparing the economic policies and results of Presidents is insulting is bizarre.

[anne]

Compare:

http://www.cbpp.org/8-9-05bud.htm

August 29, 2008

How Robust Was the 2001-2007 Economic Expansion?
By Aviva Aron-Dine, Chad Stone, and Richard Kogan

We examine Commerce Department, Labor Department, and Federal Reserve Board data on seven economic indicators: the gross domestic product, personal consumption expenditures, private domestic fixed non-residential investment, net worth, income from wages and salaries, payroll employment, and corporate profits. For each indicator, we look at average growth both since the economy hit bottom in November 2001 and since the last business-cycle peak in March 2001. We compare average growth over these periods with the average growth that occurred over comparable periods in the other business cycles since the end of World War II. (Growth is measured after adjusting for inflation, except for employment levels, where such an adjustment is inapplicable.)

For six of the seven indicators, the average annual growth rate between 2001 and 2007 was below the average growth rate for the comparable periods of other post-World War II economic expansions. Notably, this expansion was among the weakest since World War II with respect to both overall economic growth and growth in fixed non-residential investment. These two indicators should have captured any positive "growth effects" of the tax cuts.

The labor market also was weaker during the 2001-2007 expansion. Both employment growth and wage and salary growth were weaker during this expansion as a whole than in any prior expansion since the end of World War II.

The 2001-2007 expansion outperformed the average post-World War II expansion in only one area: corporate profits, which grew much more rapidly than average.

These conclusions hold whether one focuses on comparisons that examine the period since the expansion began in the fourth quarter of 2001, or comparisons that examine the period since the last business-cycle peak (i.e., since the 1990s expansion ended in the first quarter of 2001).

Annual Growth Rates Measured from Trough *

GDP
Consumption
Non-Residential Fixed Investment
Net Worth
Wages and Salaries
Employment
Corporate Profits

Current Expansion

2.8%
2.9%
3.9%
3.5%
1.8%
0.9%
10.8%

Post-War Average

4.3%
4.0%
6.0%
4.1%
3.8%
2.5%
7.4%

1990s

3.3%
3.2%
7.6%
4.1%
2.7%
1.9%
8.0%

* Average growth rate in 23 quarters after trough.

[ken]

Well let's hope the banking sector does not shrink too much. As the banking sector goes so goes the economy.

[anne]

http://www.cbpp.org/8-9-05bud.htm

August 29, 2008

How Robust Was the 2001-2007 Economic Expansion?
By Aviva Aron-Dine, Chad Stone, and Richard Kogan

Annual Growth Rates Measured from Peak **

GDP
Consumption
Non-Residential Fixed Investment
Net Worth
Wages and Salaries
Employment
Corporate Profits

Current Expansion

2.5%
2.9%
2.0%
3.2%
1.2%
0.6%
9.5%

Post-War Average

3.4%
3.6%
3.7%
3.9%
2.9%
1.7%
3.8%

1990s

2.8%
2.8%
6.4%
4.3%
2.3%
1.5%
8.1%

** Average growth rate in 26 quarters after peak.

[BJ Feng]

What a surprise, a whole bunch more spending and that's the solution. Look, we all know labor's wages have been depressed by globalization. How many more studies need to show this? It wasn't greedy corporations, corporations have always been greedy, labor is in this position thanks to the billions of new workers who've joined the world trade system. Eventually we will see the payout as they get rich enough to buy our products, but for now, this is what we're facing and it can't be stopped easily.

The card check is the most insidious and immoral system in labor period. Look, these labor leaders are corrupt (Jimmy Hoffa Jr., etc.) AND stupid. They've done nothing but destroy labor jobs in the long run. All these production problems from outsourcing, yet companies are still looking into outsourcing, why? Because they're fearful of stupid union leaders who won't work with companies. Get equity and stock as compensation for workers, have some pay increases set to company profitability. So when the company does well, so do workers, and if the company struggles, wage compensation either goes down, or is deferred due to payouts in stock. That helps companies cope with downturns, labor should work with companies to insure that they do well because a healthy, expanding company is good for labor. Profitable companies have enough profits to increase labor's wages. Unprofitable companies like GM and the airlines cut benefits and jobs. These union leaders are idiots and you want to entrench them? What a total giveaway to special interests, and not at the interest of labor.

[lineup32]

Both major political parties stand for status quo! Those that voted for the Democratic Party with the expectation for change from major trends with recent and past tax and spending patterns will be very disappointed. The youth vote is in for a sharp lesson in civic's during the next couple years as the big tent Democrats argue over the spoils and the various divisions within the party come into media view.
The over reliance on the financial sector to solve our economic problems is clearly seen in the status and power granted and taken by the current Federal Reserve Board. This status will be abused and overused in the coming economic cycle since the solutions to our longer term economic problems lay beyond economic model making.

[Fred]

The progressive agenda has been enabled rather than constrained by economic conditions. Given the deflationary collapse that is taking place right now, $3 trillion deficits are probably feasible at this point without any risk of inflation, up from the $2 trillion I've been talking about for the past year. We can cut taxes at the low end AND institute universal health care AND increase federal to state revenue sharing so that the states don't implode AND even spend some money on those famous infrastructure projects, which are so beloved of some of the regulars here. The main thing is to move fast with some sort of stimulus, and tax cuts and revenue sharing are the only things that can be done fast.

This would be a good time for Congress to delegate some fiscal authority to the Fed, by giving the Fed authority to cut/rebate taxes in $100 billion increments without waiting around for Congressional approval. Congress would merely specify the order in which taxes are cut/rebated, but the Fed would decide the amount. When the economy recovers, the Fed would then retract all those tax cuts/rebates, so that the Fed takes the heat for taking the punchbowl away rather than Congress. (Incidentally, the Fed has been criticized for being unwilling to take away the punchbowl during the bubble years, by raising interest rates then. I suspect they will show no such hesitation about yanking tax rebates, especially rebates to the poor. Giving the Fed some fiscal power is thus likely to substantially increase their inflation fighting credibility.)

[realpc]

"To think that simply comparing the economic policies and results of Presidents is insulting is bizarre."

It is extremely simple-minded to look at the economy of an era and assume it was directly caused by the policies of whoever was president at the time. Extremely simple-minded, and a clever way of telling vicious, vicious, vicious, insulting, lies.

Lies, lies, lies and more lies. Keep those lies coming. A veritable fountain of untruth.

[calmo]

Alright alright realpc, vicious enough.
"Engineered retroactively from the future" though stuns me but good. [Do you have a high stun coefficient or, like me, can the stupidest little thing blow you away?]
We saw (past tense) some of this with the phone companies (somewhat enduring entities: past, somewhat emerging and acquisitioning present and foreseeable myopic future) and the Bush administration telling them (present tense) they would (future tense) look after the legal details (the retroactive law...so stunning) down the road [We never suspected that road would be the canoe trip over Niagra Falls, but here we are. (present tense)]
Ok, I'm done paddling and await the engineered retro from the future...which could be the defeat of speaking truth to power.
If only eva were in the same canoe, you know?

[anne]

"----, did you ever by chance hear about the stock market bubble and crash that was so ingeniously devised by Clinton? Or was that engineered retroactively from the future by the evil stupid Bush?"

"It is extremely simple-minded to look at the economy of an era and assume it was directly caused by the policies of whoever was president at the time."

Interesting contrast of comments, both absurd. The point being to find a way to criticize policies of one President while excusing policies of another.

Interesting that I never have insulted a President, but notice the language used.

[kthomas]

@Fred "The progressive agenda has been enabled rather than constrained by economic conditions."

Hear hear!

[Worker]

We (the US) can spend as much money as we want as long as it's responsible investment. Most social spending is not investment. Medicare, unemployment insurance, social security, these major spending programs are not investment. The rest of the world has much faith in Obama, faith that can be dissipated very quickly with non-productive spending that destroys their savings.

Or we can push it to the brink, sell the paper until we can't. Sound familiar? It does to the world. The sh*t merchants on wall street share something with the US government, their nationality and penchant for selling confidence. If the policy makers take a "spend until we can't approach", they will have achieved a remarkable milestone- doing worse than George Bush.

[Denis Drew]

Reason,
All I want to do is what we should do (should have done all along) even if so called "inequality" were to disappear by wave of the magic wand tomorrow -- to make sure it does not reappear.

To return to the presumed fair distribution of yesteryear (1973 and earlier specifically) we need to raise the price of labor in this economy to all the traffic will bear -- to the maximum amount that ownership will pay. Which equates to putting labor in the same last-lot, indispensable seller basis that business has been on since the industrial revolution.

I guess that, if there were hundreds of business owners for every laborer, then labor would be in the last lot position and owners would be in the desperate, have to sell or wont eat fire-sale position -- instead of the other way around. The whole power imbalance may be nothing more than a question of eight-grade math -- sorry Marx.

Re-setting the labor market power balance should be very workable -- ONCE AMERICANS WAKE UP and realize the imbalance is there.

Did you see the movie Dark City where every night they put everybody to sleep and then rearranged all aspects of life but nobody knew when they woke up? Suppose we could put everyone to sleep and then shave all the excessive income off the top 1% who are getting paid multiples of what the same occupations used to pay (not doctors, for instance, who have not even kept up with doubling average income over 40 years) and then spread said income over the underpaid bottom (1968 minimum wage now 25 percentile wage!). When everybody woke up the same skill sets would still be competing in the same free market for the same relative wages.

This actually happened in reverse -- but instead of doing it in one night's sleep it was hidden by the gradualness of the process over 35 years. It is sort of like putting a frog into a pot of cold water and gradually bringing it to a boil; the frog supposedly wont notice.

The first step back is to "wake up" everyone to what has happened and then present the obvious steps (high minimum wage and sector-wide labor agreements) to reverse the income shift. No ideology; just eighth grade math.
******
PS. Re: Dillow: I am now reading a book Cracks in the Pavement which will supposedly detail when I get to that chapter why public ghetto schools don't work: because the students and teachers both figure the only jobs open to them are jobs that only attract people desperate to stay in America (when I can drive a cab I leave free rent, free cable in my mother's house in Chicago and free use of my brother Lincoln Town Car to go live in a $600/mo room in S.F. because liberal S.F. is the only place left where they pay enough for me to drive) so they are not willing to put out a heavy effort -- teachers who want to make a difference are driven off by both. Want the schools to work? Pay labor enough to work.

[realpc]

"The point being to find a way to criticize policies of one President while excusing policies of another."

Actually, I did not criticize or excuse any policies of any president. Did you notice? I only pointed out that you were doing just exactly that.

Absurd, really, vicious lies, oh such vicious absurdity. (Interesting, I never thought of absurdity as being vicious before. Anne does inspire me to heights of circular confusion, and it's fun).

[Fred]

The rest of the world be damned. We're net debtors, we're nuclear armed and if the rest of the world gives us too much trouble, we can jolly well repudiate that massive debt we've run up these past 20 years.

More realistically, if the mercantilists don't want to accept our dollars, then the consequence will be for the US dollar to drop (equivalent to a huge tariff), thus crushing their own export-based economies, unless they choose to stimulate their own domestic consumption, which is exactly what people like myself have been arguing they should do. Maybe the Chinese could even run a trade deficit, like developing nations are supposed to do, and all those dollars would start coming home, thus putting the US economy back on the full-employment track.

[anne]

"----, did you ever by chance hear about the stock market bubble and crash that was so ingeniously devised by Clinton? Or was that engineered retroactively from the future by the evil stupid Bush?"

This is a lie, a lie for the sake of lying; simple.

[Winslow R.]

Anne wrote: "What nonse, since what Rubin and Summers engineered was a markedly declining deficit that became a significant surplus and would have changed the economic course of these 8 years had the surplus not been squandered with tax cuts."

Expand your framework. Ever wonder why there was a recession at the end of 2000, just as Gore lost by the thinnest of margins? Were Clinton/Rubin/Summers just stupid?

"The Federal Reserve is independent of the Treasury, but to the extent that Treasury policy is responsible, the Fed can be that much more flexible in movement."

People should realize that with the current mechanism the Fed must be 'irresponsible' if the Treasury is too 'responsible' (or in my words too 'weak'). It creates a very unstable situation as is cleary evident.

[Winslow R.]

Since everyone is in agreement that an increased deficit will pull us out of a depression,

why is it soooooooooooooo hard to see

that a surplus put us into it?

[Robinia]

Sure, Anne, I'll explain my "out to pasture" comment. I think that Rubin et al are far too centrist for the times. I have no problem whatever with what they did in the 90s (well, I do-- I think they helped inflate the tech bubble... but, that is in hindsight). I think that these times call for a new paradigm, not the centrism of Rubin. I want somebody who will rebuild the economy as something new and better, not a Clinton years re-run (although, of course another Rubin Regime would be better than Bush by a mile).

[anne]

"I think they helped inflate the tech bubble... but, that is in hindsight."

This is absurd, but do explain how the Secretary of the Treasury went about inflating a tech tech tech bubble since I so enjoy fairy tales. As for Obama, what we almost certainly will have is as conservative or more conservative an Administration than with Clinton even with a more Democratic
Congress.

[Julio]

Bruce Wilder,

"Is there a prize for mixing metaphors?"

No, but "Canute Plumbers" gets the prize for trademarks.

[Winslow R.]

Anne wrote: "This is absurd, but do explain how the Secretary of the Treasury went about inflating a tech tech tech bubble since I so enjoy fairy tales. "

The treasury 'helped' by not spending.

The mechanism is very simple.

Banks loaned money to the tech sector based on leveraged capital provided by government deficit spending.

The government went into surplus, wiping out bank capital increasing the leverage ratio.

The increased leverage ratio increased to the point of instability. A small shock to the system (small decrease in asset prices) caused the whole system to start unwinding.

Rather than the Treasury providing stability, the Fed allowed an even larger increase in the leverage ratio by allowing banks to shift loan creation to SIVS and hedge funds.

The rapidly increasing instability was hidden for a few more years but is now unwinding.

[anne]

"Banks loaned money to the tech sector based on leveraged capital provided by government deficit spending.

"The government went into surplus, wiping out bank capital increasing the leverage ratio."

OMG! At least try to be amusing.

[realpc]

What about Greenspan's policies during Clinton? Or is that another lie? Anne, have you noticed that every statement you disagree with is an absurd and vicious lie. Can't possibly be just a different interpretation of ambiguous data! No, in your little mind it's all so simple -- truth or lies, good or evil, conservative or progressive.

[Patricia Shannon]

Winslow R. says...

Since everyone is in agreement that an increased deficit will pull us out of a depression,

why is it soooooooooooooo hard to see

that a surplus put us into it?

Since some people can be cured of cancer by taking chemotherapy, then that means that cancer is caused by not taking chemotherapy?

[anne]

James Galbraith criticized Clinton fiscal policy for not being sufficiently expansionary in 1999 when the Federal Reserve began a series of interest rate increases, but that is an economic growth matter. The Fed may have made a dramatic but little discussed mistake in 1999, however, by stopping the tightening sequence in the fall to prepare for the end of the century transition. The money supply was rapidly expanded through the close of the year, while technology stocks increased more dramatically than at any time through the stock market rise from 1995.

The Fed began to tighten again in 2000, and the stock market faltered and fell from that time.

[anne]

"What about Greenspan's policies during Clinton? Or is that another lie?"

These matters are so, so awfully difficult to understand, but the Federal Reserve is an independent agency and not part of the Administration.

[Patricia Shannon]

BJ

I'm posting this here because the other thread is getting old and I don't know if you will see my comment there.

I don't know about where you live, but in most places, certainly in the south, there are long waiting lists for section 8 housing, because there isn't nearly enough for those who need it.

I googled : "section 8 housing" +"waiting time"
and got the following from the very first entry that came up

http://www.hacsa.org/section8.htm
Section 8 Rental Assistance Program - as of 10/3/05, the S8 Waiting List is Closed Until Further Notice. To see application dates currently being served by the S8 program, follow this link.

Clicking the link brought up the following:
http://www.hacsa.org/now_serving.htm
Agency waiting lists updated as of 11/04/2008, and since then 41 people have checked the list.

Section 8 is now contacting applicants who applied in June, 2005.

The S8 Waiting List closed October 3, 2005 until further notice.

Yes, that's right. A waiting time of more than 3 years.

[dd]

Rubin, Summers and Greenspan were the prime movers to de-regulate banking and abolish the fine FDR protections of Glass-Steagall (via Gramm Leach). They ignored Citi's total violation of Glass-Steagall in the Traveler's acquisition and then supported retroactive legalization via Gramm Leach. They also promoted unregulated hedge funds, OTC derivatives and shadow banking (via Gramm Leach and CFMA both signed by Clinton) that were designed to undermine the fine investor protections of the FDR era: the '33, '34 and '40 Acts. Clue: How was the SEC to regulate corporate and investment entities allowed to engage in unregulated transactions of unregulated financial products through unregulated offshore entities in unregulated markets? Nice that Levitt happily handcuffed the SEC:
http://www.sec.gov/news/testimony/testarchive/1998/tsty0698.txt
Then there was the handcuffed CFTC:
http://www.washingtonpost.com/wp-dyn/content/article/2008/10/14/AR2008101403343_pf.html
Then too the LTCM failure demonstrated the danger of shadow banking, derivatives, and hedge funds and what was the outcome? Gramm Leach and CFMA.
Absurd indeed but Rubin returned to Citi and Summers is now a managing director at hedge fund/PE firm D.E. Shaw Group, in which Lehman Brothers owned a minority stake. Absurd and more absurd.
Summers and Rubin are part of the problem; not the solution.

[Winslow R.]

Patricia Shannon wrote: "Since some people can be cured of cancer by taking chemotherapy, then that means that cancer is caused by not taking chemotherapy?

Sure close enough? Though your analogy isn't perfect.

If all people can be cured of cancer by taking chemotherapy then their cancer exists because they are not taking chemotherapy.

[Ken]

(A different) ken wrote: "Well let's hope the banking sector does not shrink too much. As the banking sector goes so goes the economy."

I think perhaps you have the direction of causality confused there. See, I perceive that the banking sector makes its money by, basically, taking a cut of the rest of the economy. Thus as the rest of the economy grows or shrinks, so goes the banking sector. Correspondingly, I don't see that generating activity in the banking sector can serve to drive the rest of the economy. To pick a semi-random example, we could loan a half a trillion dollars to the banking industry, but if they don't in turn loan that to the manufacturing and other sectors, it won't really do much for the whole economy.

Or maybe I'm the one who has it backwards. I would be interested in hearing your counter-arguments.

[Ken]

reason wrote: "you are perfectly that the way to go is to seek out efficiency gains. Lets see where the biggest waste is:" (followed by a list of areas)

Hypothetically, would a health-care industry that spends more on advertising, cost-avoidance, and litigation than on actually providing health services be considered efficient?

[Patricia Shannon]

Winslow, even if all people with cancer could be cured by cancer, it wouldn't mean lack of chemotherapy causes cancer. In fact, chemotherapy itself can cause cancer years later.

http://www.meds.com/archive/mol-cancer/2000/06/msg00344.html

And of course, the same is true for radiation treatment of cancer.

[calmo]

Thanks for that boney post dd. It is pretty astounding that key figures in this debacle are not only still standing from their exercises (misjudgments, possible wrongdoing but clients in good standing with SEC [paid their fines], rehabilitation) but worse than deer in the headlights: smiling buffaloes in the limelight --banking again on the hope that nobody has a loaded gun and that someone will offer them a reconstruction position.
Chutzpah.

[Winslow R.]

PS wrote: "Winslow, even if all people with cancer could be cured by cancer, it wouldn't mean lack of chemotherapy causes cancer. "

Right, I don't think it is a good analogy.

[Selah]

It seems the first package didn't do the job but only to worsen the economic condition. How much is enough to rescue this sluggish economy 700B, 1T...? Maybe this after all not the right solution to fix the economy.

[Patricia Shannon]

Winslow, the analogy was to the kind of logic you appeared to be using. Maybe it was your logic that was not valid.

[Patricia Shannon]

Winslow R. says...

Since everyone is in agreement that an increased deficit will pull us out of a depression,

why is it soooooooooooooo hard to see

that a surplus put us into it?

If you are not using the same logic as the chemotherapy example, why should the belief that "that an increased deficit will pull us out of a depression" lead on to believe "that a surplus put us into it" ?

[Patricia Shannon]

http://www.nationalhomeless.org/publications/facts/who.html
...
Two trends are largely responsible for the rise in homelessness over the past 20-25 years: a growing shortage of affordable rental housing and a simultaneous increase in poverty.
...
In 2003, children under the age of 18 accounted for 39% of the homeless population; 42% of these children were under the age of five (National Law Center on Homelessness and Poverty, 2004). This same study found that unaccompanied minors comprised 5% of the urban homeless population. However, in other cities and especially in rural areas, the numbers of children experiencing homelessness are much higher. According to the National Law Center on Homelessness and Poverty, in 2004, 25% of homeless were ages 25 to 34; the same study found percentages of homeless persons aged 55 to 64 at 6%.
...
The number of homeless families with children has increased significantly over the past decade. Families with children are among the fastest growing segments of the homeless population. In its 2007 survey of 23 American cities, the U.S. Conference of Mayors found that families with children comprised 23% of the homeless population (U.S. Conference of Mayors, 2007). These proportions are likely to be higher in rural areas. Research indicates that families, single mothers, and children make up the largest group of people who are homeless in rural areas (Vissing, 1996).
...
Battered women who live in poverty are often forced to choose between abusive relationships and homelessness. In a study of 777 homeless parents (the majority of whom were mothers) in ten U.S. cities, 22% said they had left their last place of residence because of domestic violence (Homes for the Homeless, 1998). A 2003 survey of 100 homeless mothers in 10 locations around the country found that 25% of the women had been physically abused in the last year (American Civil Liberties Union, 2004). In addition, 50% of the 24 cities surveyed by the U.S. Conference of Mayors identified domestic violence as a primary cause of homelessness (U.S. Conference of Mayors, 2005). Studying the entire country, though, reveals that the problem is even more serious. Nationally, approximately half of all women and children experiencing homelessness are fleeing domestic violence (Zorza, 1991; National Coalition Against Domestic Violence, 2001).
...
Research indicates that 40% of homeless men have served in the armed forces, as compared to 34% of the general adult male population (Rosenheck et al., 1996). In 2005, the U.S. Conference of Mayors' survey of 24 American cities found that 11% of the homeless population were veterans – however, this does not take gender into account (U.S. Conference of Mayors, 2005). The National Coalition for Homeless Veterans estimates that on any given night, 271,000 veterans are homeless (National Coalition for Homeless Veterans, 1994).
...
Approximately 16% of the single adult homeless population suffers from some form of severe and persistent mental illness (U.S. Conference of Mayors, 2005). According to the Federal Task Force on Homelessness and Severe Mental Illness, only 5-7% of homeless persons with mental illness require institutionalization; most can live in the community with the appropriate supportive housing options (Federal Task Force on Homelessness and Severe Mental Illness, 1992).
...
Declining wages have put housing out of reach for many workers: in every state, more than the minimum wage is required to afford a one- or two-bedroom apartment at Fair Market Rent.1 (National Low Income Housing Coalition, 2001). In fact, in the median state a minimum-wage worker would have to work 89 hours each week to afford a two-bedroom apartment at 30% of his or her income, which is the federal definition of affordable housing (National Low Income Housing Coalition 2001). Thus, inadequate income leaves many people homeless. The U.S. Conference of Mayors' 2005 survey of 24 American cities found that 13% of the urban homeless population were employed (U.S. Conference of Mayors, 2005), though recent surveys by the U.S. Conference of Mayors have reported as high as 25%. In a number of cities not surveyed by the U.S. Conference of Mayors - as well as in many states - the percentage is even higher (National Coalition for the Homeless, 1997)

[Winslow R.]

Patricia Shannon I respect your interest.

Chemotherapy is a process that uses a chemical to treat someone who is ill.

Deficits and surpluses result from the process of taxing/spending money which occurs everyday, rain or shine. There is no set 'sickness' associated with deflation or inflation as depending upon your portfolio either situation could be beneficial or detrimental.

Perhaps you can come up with a good analogy for the economy. Many have tried.

One of the best I've seen is a car engine where money is the oil that lubricates the engine. The oil is removed taxation and added through government spending. If too much oil is taxed out (surplus) the engine seizes. The analogy fails to account for the creation of bank money. Perhaps you can think of a way to make it work.

The human body also can make a good analogy with the blood representing money.

You can read more here, even has some use of your cancer analogy (see Robert's post) though in this case blood is gov money and the cancer is growth associated with a excessive bank money expansion:

http://economistsview.typepad.com/economistsview/2006/03/bernanke_the_yi.html

[Patricia Shannon]

Winslow, it seems to me you are saying the economy needs balance, which is something I would certainly go along with.

And you might want to re-think using engine oil as an analogy.

http://www.fineliving.com/fine/transport/article/0,1663,FINE_1406_3223691,00.html

It's a case of too much of a good thing being a bad thing. There are a bunch of things that can go wrong from overfilling. While there is too much oil in the engine, high pressure may develop in the crankcase, you can get oil leakage through the oil pan gasket and other engine seals. You might have noticed reduced gas mileage while the oil level was too high - it's possible that the crankshaft was splashing in the oil, which made it work harder. And that splashing could cause the oil to foam up, which could cause the oil pressure in the crankcase to drop and perhaps lead to premature engine wear or even damage. In my experience, this would be a rare occurrence... mostly too much oil just makes a mess.

[BJ Feng]

"I guess that, if there were hundreds of business owners for every laborer, then labor would be in the last lot position and owners would be in the desperate, have to sell or wont eat fire-sale position -- instead of the other way around."

I have an idea Denis Drew, why don't you and I open up several businesses in order to equalize the power relationship between labor and owners? I'm willing to make only 8% net after all expenses, the rest we can give to labor through higher wages or increased benefits like full coverage health care for their entire family.

Doesn't this sound like a great idea? The only thing stopping us is building a viable business that will make money.

Now that I think about it, creating a new business is kinda hard. Maybe you can do better Drew, but I don't seem to be able to think of anything that guarantees a 8% return. In fact, I can't think of a single business plan that would guarantee any sort of profit at all! Perhaps this is why there are fewer businesses, anyone can offer their labor, but not everyone can build and create a viable business. Those who do also create jobs for others, and that's a very valuable good to society. Maybe we should try to encourage capable people into creating more businesses and thus, more jobs for everyone else. The more available jobs, the better for labor right Drew?

Patricia, thanks for the info, I wasn't aware that there were waiting lists, but it makes sense. I'll have to look into it further to determine if those on waiting lists truly need the benefit, we all could benefit from subsidized housing, but how many are homeless because they can't get it? I'll have to do more research.

[Winslow R.]

P.S. wrote: "And you might want to re-think using engine oil as an analogy

It's a case of too much of a good thing being a bad thing. There are a bunch of things that can go wrong from overfilling......"

Actually this is also part of the analogy, it's called inflation.

Neither deflation (too little oil) or inflation (too much oil) is seen as being 'good' for an economy.

Too much blood could also cause problems.

[BJ Feng]

Patricia, one way to generate more affordable housing is to get rid of rent control and zoning regulations that prevent landowners from developing and building new units. High income housing benefits lower income renters too. When people move into that new swank apartment complex, they leave their old complexes which then has to attract people, and if those people leave their apartment complexes, well you see the domino effect.

There is also little evidence that rent control helps low income people as intended. My friend's sister is a doctor and so is her husband. They live in a rent controlled apartment with a nice view of San Francisco Bay. Now if you are a landlord with rent controlled housing, would you rather rent to two doctors, or to someone making $18,000 a year? There is no question that I'd only take the best qualified tenants, and therefore I'd never rent to low income people if I had the choice. If the apartment is below market rents, then that should attract a lot of applicants, included higher income people who want a good deal just like everyone else. I'd pick those people. This is why rent control doesn't work.

[reason]

ken
Well let's hope the banking sector does not shrink too much. As the banking sector goes so goes the economy.
Why do you think that? (OK if you live in NY or London I could understand the sentiment.)

[Denis Drew]

BJ Feng (alias Joe the plumber ;-]),

It is not a matter of getting labor to be greedy -- like the Joe the plumber fears; actually he will make out better under the new regime too -- it is a matter of getting back the 15% of income share that passed from labor's hands through small business hands, etc., up to the top 1 percentile.

There is less labor counter pressure to ownership (Joe) bargaining power the closer to the bottom with present day asleep-at-the-bargaining-wheel American labor -- there is less counter pressure to labor power (CEOs, etc.) near the very top -- the extra money extracted from the bottom flows through Joe's hands to the very top. No ideology; just physics. Move income share from folks now making 5-25X as much as folks used to get for doing the same work back to folks getting paid half as much as they used for the same work (burger flipper up to last year anyway) and Joe will probably make more money -- the top one percentile don't have that many more pipes to fix.

[wjd123]

There is also little evidence that rent control helps low income people as intended.--BJ Feng

BJ Feng,

Many years ago when I first came to New York, I moved into an apartment on the Upper West Side of Manhattan. It was considered one of the "bad" areas of Manhattan. More than once I was warned not to return to my building by foot late at night.

Gentrification changed my neighborhood. It started gradually and then rapidly increased. Rents quickly rose to extraordinary levels. It is wasn't for the fact that my building was rent stabilized I would have been forced out.

The increase in the value of the building I was living in had nothing to do with the owner and everything to do with the changing environment we were living in. Should my landlord have been allowed to take advantage of that change by raising my rent and bringing in people who now wanted to live there and who could afford to pay much more than me?

My landlord thought that rent stabilization was an abomination, I thought it was a life line to me from liberal politicians.

The political differences with my landlord aren't what I remember most vividly about gentrification. I had a poignant moment during that time. I think back on it as my Holden Caulfield moment.

I was involved in club house politics for a brief period of time before gentrification. After work I would set up a card table and chairs on the sidewalk outside my clubhouse and register people to vote. In my own small way I felt responsible for the liberal politicians who came to power.

During gentrification a beautiful brownstone across from my building was sold and the people who lived there were forced out. Among them were two alcoholics. Shortly after the building was sold they came back. They had nowhere to go and would sleep on the stoop of their renovated brownstone at night. Now I knew where the people the politicians forgot about went during the winter.

[wjd123]

Yesterday I heard a story about Rahm Emanuel on CNN. It was a repeat of something Rush Limbaugh said. I don't know if it's true, but if it is than Rahm Emanuel is my kind of Chief-of-Staff.

According to Limbaugh, Ron Emanuel was at a celebration party the night of Obama's victory. The story goes that he picked up a knife and started listing Republican names, with each name he mentioned he would bring the knife down on the table before him with the word dead.

That's a Chief-of-Staff who fits the times.

[Patricia Shannon]

If people who are willing to work can't get jobs that pay enough for them to live, and society (that's us) don't care about them, why should they care about their society? Why should they care about people with more. Why should they not rob stores and individuals if they can get away with it?

This is not a rhetorical question. I'm wondering what the conservative thinking is on this.

[BJ Feng]

The conservative thinking is with solutions to the problem. What is the best way to increase the number of high paying jobs available? We have to encourage job creation through growth policies, punishing those who create jobs certainly isn't going to work. That's why conservative thinking highly values people who create jobs, people like Mark Anderseen, the creator of Netscape who has gone on and started up several other companies. That person is extremely valuable and helpful to society. Demonizing and punishing him isn't going to make him want to start up more companies that provide high wage jobs. We want to make it easier for other people, like Joe the Plumber, to create their own companies that hire people. Small businesses are very important in that aspect, we should encourage entrepreneurship because it benefits society a whole lot. They create jobs and generate taxes. Lower taxes and streamlining government requirements increases the chance that a small business will survive. It all starts with the people who create jobs.

As for getting paid enough to live, the vast majority are able to make enough to live currently, or else we'd see people dying on the street. They aren't able to live the lifestyle they want is a more accurate statement. They live in relative poverty. The conservative view tries to figure out the best course of action to raise living standards, certainly they should be given a minimum amount of services and money to guarantee they don't die in the streets, Patricia you haven't heard me say that all social services should be eliminated or that there should be no safety net in place.

However there is a fine line with services and payments because we are not teaching people to fish, but rather just giving them fish from someone else's catch. We don't want productive fishermen to catch less because we're taking away too much. We have to find ways to get the poor to catch more fish themselves, that's sustainable and beneficial for everyone. Our schools and educational system is crappy compared to other nations who spend only a fraction of what we spend. A systematic change is needed, but the system doesn't want to change. That's why vouchers and school choice was proposed, to allow an alternative system to rise that will actually educate our kids instead of pretending to. The vast majority of charter and voucher schools do better than public schools on average. Charter and voucher schools will not affect good public schools, they will pop up in areas with poor educational achievement rather than compete with an already excellent public school. And the best part is that they cost less to fund than public schools, vouchers are given to cover only a fraction of what is spent on public schooling per pupil. Yet the charter schools are able to do better with less!

Conservatives want to help, but are focused on finding solutions that work. We oppose wasteful solutions just for the sake of saying that we're doing something, feel-good programs aren't supported because it would be cheaper just to buy an ice cream to make someone feel good. We want real answers and are focused on results. So sometimes it seems like the proposals, such as reducing the burden on small businesses, don't have anything to do with helping the poor, but it does because of the results. Increasing direct payments to the poor is opposed because they don't change the underlying problem and can only be sustained by taking more from productive people, we can't assume they'll always be willing to accept more taken away without changing their behavior. We want these productive people to continue working for as long as possible, we don't want them to retire at 55 even if they can, or worse, to leave the country for a friendlier nation.

It's unfortunate that conservative proposals aren't as directly obvious as liberal ones. Yet the goals are the same, just that conservatives demand effective and sustainable methods rather than short term answers or feel good policies that don't work. Results are the key.

[kthomas]

I always loved BJ's enthusiasm.

[Patricia Shannon]

BJ,
I will give you the benefit of the doubt, and assume you believe what you say. Maybe you haven't been reading the comments by your fellow conservatives. You have been on this blog long enough to know that wherever you are getting your info (FOX news, personal assumptions?), much of it is wrong. Giving you the benefit of the doubt, maybe you like participating in this blog because you get a broader view.

It is not true that charter schools out-perform public schools. I have a job I need to get back to, but I expect the info is available thru a web search for anybody who wants to know the facts.

Do you think there are increasing numbers of homeless people, including women and children, because human nature is getting worse, or what?

[Patricia Shannon]

If people were getting paid enough to live, they wouldn't have to have two or three jobs, or move back in with their parents when they're 30, in order to survive. Or being a conservative, maybe you think that a wage that requires a person to work 20 hours a day, 7 days a week, in order to survive, would be fair.

[BJ Feng]

Here is the summary from http://www.edsource.org/pub_CharterPerf6-08_report.html. To sum it up, if you remove non-classroom based charter schools (that is if you only count the real charter schools) charter schools do much better than public schools. I also included a report for Florida that states, "Students who were furthest behind made more progress in charter high schools than students in traditional public high schools".

Regardless, charter schools cost the government A LOT less. Thanks to entrenched special interests, public funding is significantly less for charter schools, making their achievement even more remarkable and reinforcing the fact that our poor educational system does NOT suffer from a lack of funding.

"Charter elementary schools have lower average API scores

The 196 charter elementary schools in this analysis are, on average, about 70% of the size of the noncharter elementary schools, and they serve somewhat more advantaged students.

After adjusting for differences in school size and School Characteristics Index (SCI) values, charter elementary schools score 9 points lower on the API, due mainly to charter students' scores on the California Standards Test in mathematics, which are lower by statistically significant margins. But when the 25 nonclassroom-based charters are excluded from the analysis, charters' deficit on the API disappears, the difference in math shrinks, and their advantage in English grows slightly.
Charter middle schools outperform noncharters

The 57 charter middle schools are about one-third the size of noncharters on average, and they serve more disadvantaged students.

After adjusting for differences in school size and SCI values, charter middle schools score 45 points higher on the API. The findings are consistent across other performance measures and have also been stable over time.
Charter high schools have higher API scores but lower math scores than noncharters

The 130 charter high schools are about one-fifth the size of noncharters, on average, and generally have lower SCI values.

After adjusting for differences between charters and noncharters in school size and SCI values, charter high schools score 14 points higher on the 2007 Growth API, despite lower scores in mathematics. When the 50 nonclassroom-based charters are excluded, charter high schools score higher than noncharters on all measures, including mathematics."

For Florida

"Charter School Performance Similar to Other Public Schools; Accountability Needs Improvement

Download: pdf icon http://www.oppaga.state.fl.us/reports/pdf/0521rpt.pdf
This study of charter schools operating in Florida in 2003-04 found that the state's charter schools served students who are demographically very similar to those in other public schools. Students in charter schools, however, were more likely to be academically behind when they entered their schools, compared to students remaining in traditional public schools. For this reason, charter school students were slightly less likely to meet grade-level standards compared to students in other public schools. Once in school, however, most charter school students achieved comparable learning gains in math and reading as similar students in traditional public schools. Students who were furthest behind made more progress in charter high schools than students in traditional public high schools."

[BJ Feng]

Patricia, if I could wave a magic wand, I would. Seriously, there is a lot of regrettable stuff in the world today. You will die someday and I will too, that's very very sad and I wish it wasn't so. I don't know what else to do except think of policies that will work. And if nothing can change the outcome, such as our eventual deaths, then that's just the cruel reality we live in. We can cry or be angry, but in the end I evaluate proposals based on if they are likely to work. Just because I say, Patricia, you and I are going to die and there's nothing we can do to change that, does that make me a monster? Sorry, but there's nothing I can do about it, you and I are going to die someday.

Yeah I feel bad about people who have to live with their parents (though that is common in China even after marriage) but the real question is what to do about it. Try to create more opportunities for them, try to allow talented others to create more opportunities for everyone. I don't have the ability to create a company that will employ many people at high wages, but I appreciate the people who do. I am willing to allow those people to keep the vast majority of what they make because they help so many others. Better that they get $100, give $10 to society, and keep $90 than not to have that $10 at all. Plus part of the $90 will be spent creating even more jobs and opportunities. I say the more the better, I don't envy them and I applaud them because of what they do for us all.

Again, if there are better proposals, I'm willing to listen, but most proposals here are garbage. I support government investment in infrastructure. Unfortunately, most money spent isn't going to sustainable infrastructure (subsidizing parts of Amtrack that few people use isn't a good policy). I see no problem with building more roads so that people don't have to spend time waiting in traffic. That saves a lot of money, that one hour of time saved can be used by that person to make more money working, or relaxing as he pleases. That's a very valuable good, but all the new proposals are for carpool lanes and mass transit that, here in LA, make absolutely no sense. What's worse, the metro lines are built for political reasons, to reach some city or away from the airport because taxi drivers protested. They don't go where people want to go! How senseless is stopping the rail a few miles away from LAX and making people transfer on to a bus??? The taxi drivers are still going to be harmed, no one calls a taxi from the metro stop, they just take the free shuttle to LAX, but for some reason the rail couldn't be built directly to LAX. This is senseless and stupid. This is government in action.

[Patricia Shannon]

BJ
Studies have repeatedly shown that when you add lanes or roads, they attract more drivers, and the traffic ends up just as slow in short order.

I read a quote from a psychologist years ago.
If you teach a rat to find food at a certain spot in a maze, and you move the food to a different place, the rat will eventually stop coming to the old place, and start searching for food elsewhere. That is the chief differene between a rat and a human.

[Patricia Shannon]

I admire you BJ. Being destitute, hungry, and homeless, and you are still care about people who make as much in 2 months as their average employee makes in 40 years. How heart warming.

How curious it is that people used to be willing to be CEO's for much less, and still are willing to do so in other countries. Such deprivation brings a tear to my eye.

[ken melvin]

wjd, BJ - If you haven't, Prof Michael Hudson of U of MO, KC is worth reading in re the role of land "the uneraned increment".

[Julio]

B.J.Feng,

The differences you have with some of us are not based on any disagreement about what you posted, I think. Certainly that's true for me.

My difference is in the underlying assumptions --so we end up seeing the same facts in a totally different light.

Take your example of the entrepreneur: "they get $100, give $10 to society, and keep $90 than not to have that $10 at all. Plus part of the $90 will be spent creating even more jobs and opportunities."

We're all, I think, in agreement that the entrepreneurial spirit is a wealth-creating machine we want to support. But this assumes they are creating the $100 out of thin air. The way I see it, they're building on top of, and using, resources provided by us all, collectively.

Considering only the dollar cost of those resources, what if they are worth say $25? Then, your entrepreneur has just made $90 and cost us $15.

But OK, let's say that the $90 is after taxes, and he's paid those $25 in taxes, so he's really created all this new wealth.

Next question is: would he do the same for $30? I.e. if we taxed the other $60 away? That's the situation we had years ago, and the entrepreneurial spirit seemed alive and well.

So then the question is -- who should decide how those $60 get used, and for whose benefit? If we could use them for some social good, and the entrepreneur squanders them, then the society is now worse off than if we taxed them.

So, to your last example. Nobody is for government waste, so if that's what's happening with LA transit, then we're all against it. But the assumption that that is exactly what is going to happen, whereas if we left the money and decision to your entrepreneur, it would be spent more wisely -- that assumption, which underlies your posts, is just that, your assumption.

That's why all the examples that seem so clear to you, and the counterexamples that seem so clear to me, are like a conversation of the deaf sometimes.

[Lafayette]

Julio: ... whereas if we left the money and decision to your entrepreneur, it would be spent more wisely -- that assumption, which underlies your posts, is just that, your assumption.

I wouldn't allocate ALL public services to a civil service. There are instances where a public service is put out to bid and the contract administrated by a public service. This is fairly common and works well.

It is cheaper, assuring the lower cost (presumably) and also it permits public service doing customer satisfaction surveys to maintain quality of service -- which such companies do not often do themselves.

Such public services are just that, services that are necessary to a broad general public that the market entrepreneurs would not fulfill if it were given to them alone to meet the basic service needs.

A typical example: Bus routes for inter-urban / suburban destinations. If you leave that sort of public service to entrepreneurs only, they will cherry-pick the best routes and leave alone those "less interesting" (meaning to the poorest and often most dangerous sections). That sort of free enterprise service, in such a circumstance, makes for a quality patchwork -- some good, some bad, some awful.

I like expansion of the Public Services sector of the economy, but not in all cases. Just as I have great misgivings about the Market Solution in many instances as well.

All it takes is good management to find the right blend between the two.

En passant

If anyone wants to knee-jerk at the altar of free enterprise, that it their right. But, let's not pretend that such is rational economic policy, especially when it gets archly dogmatic.

I've seen the opposite here in France. Where dogmatic unions go ballistic every time the state tries to privatize an historically public monopoly (postal services, electricity, train, etc., etc., etc.) That situation is bad as well, since it results in monopolistic costs and frequently bad service.

[BJ Feng]

Julio, how do we determine that value was created out of thin air vs. "real" creation before the fact, or even at all? There are a lot of firms who do nothing but service and consulting activities, yet they do provide something of value to their clients. IBM Consulting for example, or even an advertisement agency that creates only intangible goods.

And Julio, people, especially rich and smart people have choices. They don't have to live in the United States if it becomes too expensive to versus other countries. We see this within States all the time, Tiger Woods moved to Florida because of California's confiscatory income taxes on those making over $45,000 or so (9% and higher).

Quality of the work force, the judicial system, infrastructure, all that is also taken into account and the United States has a nice total package, but we can't assume that we can raise taxes and take away the majority of someone's earnings without negative consequences. There are also some who won't work as much above a certain tax rate. Tiger may not bother to play in X number of tournaments if he's taxed 80% of earnings, he'd rather relax at a beach. Without Tiger, the tournament doesn't draw as many spectators and has lower TV ratings, advertisers may not bother to place ads, less food and stuff is sold, etc.

Since entrepreneurs are so valuable, and hard to come by, we should treat them like gold and take care to make sure they keep on popping up. We don't want to kill the golden goose, there's a reason why so many talented individuals immigrate to the United States. That talent creates wealth for us all, but talent comes because talent is rewarded here. Julio, the bottom line is not to overdo taxes, our American system is the reason why we're rich and places like Argentina have become poor. We could be Argentina in a few decades if we change our system and no one wants that.

[Lafayette]

The laws of the jungle rule supreme

BJF: They don't have to live in the United States if it becomes too expensive to versus other countries. We see this within States all the time, Tiger Woods moved to Florida because of California's confiscatory income taxes on those making over $45,000 or so (9% and higher).

Right, life is all about maximizing income and minimizing taxes. What pathetic drivel.

People who tweak the system that made them rich, just to accumulate even more money beyond the vast riches they already have, are indulging themselves in cupidity. Life's become a game of "how to screw the IRS".

An economy and a society are what gave us birth and nurtured us all. We are integral part of that same community that, perhaps, gave us more than we actually deserve -- and much more than the rest. We have rights, yes, to enjoy to the fullest our riches. But let's not go overboard. Let's not forget our responsibilities to the community (particularly the economic system to which we all contribute) that gave us all that we have.

Who pays for Tiger's competition prizes and his TV commercials? We the consumers do, through the products/services that he promotes and which provide Tiger his income. All that richness does not come from heaven.

Where is there a modicum of respect for the society that spawned him, and all those who profit handsomely from it? Nowhere to be seen.

So, the next logical step is the Caymans. Why not invite Tiger Woods to take his riches and go live there, absolutely tax free? But, no, we can't have that either, can we. Tiger wants to remain the American Sports Celeb AND keep his riches.

I got it. Tiger wants his cake AND eat it. And, he's not the only one ... the laws of the jungle rule supreme.

[BJ Feng]

Lafayette, Tiger already gives back by creating jobs and demand for services. If 50% more people come to a tournament because of Tiger, then more food stalls will be needed, more people will have to be hired to staff and cook the food. Higher ratings means TV benefits, and commercials are created exclusively for Tiger, employing marketing staff and support staff along with production crews and so forth. No Tiger, and those jobs disappear, at least some of them.

Tiger also pays income taxes, but there is a point where it becomes unfair. He has already created more jobs, with income and SS taxes, a person like Tiger pays around 40% of his income in taxes. Yes there are ways to shelter those taxes, but there is something wrong with taking 40% of what someone makes, and that's not even including State income taxes and property taxes which, if it pushes the tax burden past 50%, is totally unfair for anyone. There is no way a person should have to give up the majority of what he makes, this is morally wrong and absolutely counter to American principles and ideals. It is un-American.

Ask any golfer and they'll say that Tiger has done wonders for the sport itself. I've already outlined the contributions to society Tiger makes along with his contributions through taxes. See Lafayette, the problem isn't with Tiger, but people like you who would ask even more from a person who has given so much. Tiger earned his place and income, no one gave him extra shots, he worked hard from a young age to refine his golfing game and has maintained a good image. You don't hear of Tiger partying all the time and getting into trouble like other celebrities, he's a good role model and that takes discipline and character.

He has every right to choose the society he wants to live in, most would gladly welcome him. He likes America and America has good enough of an underlying system to keep Tiger, but talented people shouldn't be treated like slaves, no one should. This is what's different about communism and socialism. Taken to the extremes you want Lafayette, we have prison states like the former Soviet Bloc nations where highly productive people are kept captive and forced to work for the benefit of "society", ie. the State. No, Tiger is not being selfish, YOU are. You are the one greedily wanting what Tiger produces, and you're the one who would trap and enslave him for the benefit of society. Yet he has already contributed his fair share and much much more on top of that. If you are going to ask for more, at least have the decency to acknowledge his contributions and give him some small gesture of thanks, insincere as it may be. But to demonize people like him is indecent and improper to put it very politely.