Why Your Pet Theory About The Financial Crisis Is Wrong

Why Your Pet Theory About The Financial Crisis Is Wrong:

I meant to quote this passage from Lost Decades: The Making of America's Debt Crisis and the Long Recovery in honor of Barney Frank's retirement since I think it's the ultimate refutation of the "Blame Fannie Mae" theory of the financial crisis. It's made all the more powerful for the fact that it doesn't even mention Fannie or Freddie:

Irish borrowing turned the country into a major financial center and created a housing bubble that put all others to shame. Between 1997 and 2007 the average house price in Dublin shot up from $115,000 to $550,000. This was remarkable for a medium-size city in a small country with an ample supply of buildable land. By 2007, the average house in Dublin cost two and a half times as much as the median house in America’s metropolitan areas, and substantially more than the median house in the New York metropolitan area. Most of this housing bubble was financed abroad—the net indebtedness of Irish banks to the rest of the world went from 10 percent of GDP in 2003 to 60 percent in early 2008.40 And it was accomplished without any unusual financial developments—no subprime mortgages, no novel approach to securitization. It was just an old-fashioned housing bubble, fueled by old-fashioned foreign borrowing.

The point is that while a lot of stuff happened in the vicinity of the house price boom, you don't need anything other than the boom itself to explain things. Both borrowers and lenders perceived the land to have become a lot more valuable and were thus willing to engage in a lot of additional borrowing and lending. Everything else is more or less gravy.

Where is my motivation?

Where is my motivation?:

I know nothing about psychology, but I’m guessing this proposition is hardly novel: people’s underlying motivations are often misunderstood, even (especially?) by themselves. This is why I can’t believe in rational markets, altruistic Galtians, or impartial pundits. Even if people believe they’re being rational, altruistic, or impartial, there’s a good chance that they’re not, and, to take it one step farther, their belief in their own rationality/altruism/impartiality may well indicate that they are merely delusional or narcissistic.

Atrios makes a good point apropos of the lock-out instigated by the mighty job-creators at the NBA:

Too often we assume that Homo Economicus is truly just motivated by the money, or more ridiculously the financial interests of the shareholders of the companies they run. The truth is, Our Galtian Overlords are frequently just assholes because they are assholes, not because being assholes will actually make them any richer.

Likewise, Charles Pierce translates Ruth Marcus’s cry of the wounded school-marm thusly:

“I are an actual journalist. Please note my concern for the First Amendment, a quaint notion that I believe applies to me and to the eight people I had dinner with last night, and not necessarily to potty-mouthed high-schoolers.”

Marcus most likely wants to silence “potty-mouthed” high-schoolers because their tweets in some way undermine her own her influence, whether she or not she admits it (or even knows it).

When I discuss the American political scene with tote-baggers, the notion they resist the most is that we should question our Galtian and Village overlords’ underlying motivations. When I tell them, for example, that the establishment wants to cut Social Security and Medicare simply because they enjoy fucking the middle-class over, they tell me I am insane. When I ask them what other motivation there could be for replacing a reasonably efficient government health-care system with a less efficient private health care system, they have no answer.

Sheblowsalot

Sheblowsalot:

When Emma Sullivan began the process of humiliating Sam Brownback and his staff—I wholeheartedly agree with the Jim Newell headline “Tweeting Teen Completes Total Victory over Crybaby Kansas Governor”—I immediately wondered what vapid Village idiot will be the first to use this as pretext to lecture teh kids about rudeness and manners blah blah blah. It’s Ruth Marcus.

Emma Sullivan, you’re lucky you’re not my daughter. (Dangerous sentence, I know: My daughters might agree.)

If you were my daughter, you’d be writing that letter apologizing to Kansas Gov. Sam Brownback for the smart­alecky, potty-mouthed tweet you wrote after meeting with him on a school field trip.

Also, that smartphone? The one you posed with, proudly displaying the tweet in which you announced that Brownback “sucked” and added the lovely hashtag #heblowsalot? Turned off until you learn to use it responsibly.

[....]

It is until we parents insist such language is not acceptable, explain that it is possible to disagree civilly — and insist on an apology when our children fall short.

If only we could disagree more civilly about the need to lie our way into unnecessary wars, to destroy Social Security, Medicare, and Medicaid, to torture, to eulogize mass-murdering tyrants. What a wonderful world this would be.

Tell me again that I’m wrong to wish for a meteor or a revolution.

Update. Also too:

After Willie Horton ads, Swiftboating, GOP convention-goers waving purple band-aids to mock a veteran’s war wounds, birtherism, Ann Coulter saying the “only choice was whether to impeach or assassinate” President Clinton, Coulter claiming 9/11 widows were “enjoying their husband’s deaths,” Rush Limbaugh mocking Michael J. Fox’s Parkinson’s disease, ads falsely claiming Barack Obama favored “comprehensive sex education for Kindergartners,” Rand Paul supporters trying to stomp the head of a protester, ads claiming Kay Hagen was “godless,” Michelle Bachmann calling for an investigation of ‘un-American views” among the Congress, “If ballots don’t work, maybe bullets will,” “Obama hates white people,” ‘GET OFF MY PHONE YOU LITTLE PINHEAD!” “YOU LIE!”, wingnuts at FreeRepublic calling 11-year old Sasha Obama a “street whore” for wearing a peace sign on her t-shirt, outright lies about “death panels,” “Bury Obamacare with Kennedy,” cheering for executions, booing soldiers in war zones for being gay, comparing poor people to stray animals you shouldn’t feed, “’we’ve got one raghead in the White House, we don’t need a raghead in the governor’s mansion,” supposed “Christians” suggesting that people pray for the President using Psalm 109:8 (“May his days be few; may another take his office. Let his children be fatherless, and his wife a widow”) as a text, Limbaugh calling the First Lady “uppity,” and on and on and on, all without a single peep from the Right…They can take their whiny-ass bullshit about liberal “rudeness” and peddle it somewhere else. We ain’t buyin’ it here.

Occupy Wall Street Humor

Occupy Wall Street Humor:

Along with all the HUGE Occupy news today and this week, here are some good, ‘humours’ Occupy cartoons, graphs, and images:

Related posts:

1. Top Occupy Wall Street Cartoons (& Occupy Wall Street Round-Up)


2. Occupy Wall Street Cartoons, News, +


3. Occupy Oakland Pictures & Video (+ Occupy Wall Street Roundup)

WAR with IRAN? It's closer than you think....

From John Robb of Global Guerrillas.--SS

WAR with IRAN? It's closer than you think....:

Israel's hawks are VERY close to manufacturing a full scale war with Iran. On Monday the 28th of November, it used special operations forces (referred to below as the "Hand of God") to blow up a portion of an Iranian Nuclear facility near Isfahan (confirmed by satellite imagery). This follows on the heels of another explosion at Tehran facility that killed an Iranian general.

What's even more worrisome is that Israeli hawks are actively claiming responsibility for this sabotage (from the Times of London):

• Dan Meridor. the Israeli Intelligence Minister, said: "There are countries who impose economic sanctions and there are countries who act in other ways in dealing with the Iranian nuclear threat."


• Major-General Giora Eiland, Israel's former director of national security, told Israel's army radio that the Isfahan blast was no accident. "There aren't many coincidences, and when there are so many events there is probably some sort of guiding hand, though perhaps it's the hand of God"


• A former Israeli intelligence official cited at least two other explosions [that we haven't heard about] that have "successfully neutralised" Iranian bases associated with the Shahab-3, the medium-range missile that could be adapted to carry a nuclear warhead. "This is something everyone in the West wanted to see happen," he added.

Ok, let's put this into perspective:

1. These claims are blood in the water. Israel's hawks see Iran as an existential threat to Israel. They WANT a war with Iran. This is an attempt to make that war happen.


2. The US, from President Obama on down, are incapable of reigning Israel in. Israeli hawks are now operating open loop (without restraint).


3. Iran's anger at these attackes, demonstrated by an attack on the UK embassy in Tehran, is just the start. Who knows what they will do next?

What does this mean? A war with Iran would:

• Cause an immediate energy shock. Oil prices shooting through $200 + a barrel. Lost production from Iran, Iraq, and most of the monarchies. A potential loss of 6-10 m barrels a day?


• Global depression deepens. Prices over $150 cause immediate recessions. Higher than that, who knows? Usually, a slow down in economic activity reduces demand, however with peak oil (we hit the max the world could produce a couple of years ago) and lost production from the Middle East, that price could remain high even in the face of a deep, deep economic depression.


• Networked Resilient Communities. Nobody is going to save you. You need to prepare by building or moving to a resilient community that produces most of the energy and food it needs to survive.

The US is Hollowing Out (Quickly)

From Global Guerillas.--SS

The US is Hollowing Out (Quickly):

There are two great stories from the news that are worth reading:

• A new bill called the National Defense Authorization act is on its way (promoted by Senator John McCain). This bill will make it legal for the federal government to arrest (both within and outside US borders) and hold indefinitely (without trial) anybody (including US citizens). Essentially, this makes it possible for the US military to take on the role and function of a secret police force.
  


• How Hank Paulson, while he was the US Treasury Secretary (at a time when he was arguably the most important gov't official in the world), gave his cronies in the global financial industry a continuous stream of inside information on what the government would do to stop 2008 financial crisis (this info helped this inside group hedge themselves and profit while nobody else could).

Combine the recent efforts by John McCain to create a police state with the revelations of Paulson's corruption (crony capitalism) and you can only conclude that worse is coming. How much worse? To me, it's a sure sign that the US is rapidly becoming a hollow state. Hollow states are the end game for modern nation-states. What's a hollow state?

The hollow state has the trappings of a modern nation-state ("leaders", membership in international organizations, regulations, laws, and a bureaucracy) but it lacks any of the legitimacy, services, and control of its historical counter-part. It is merely a shell of a state that serves as a legal conduit and enforcement mechanisms for global financial interests to loot what's left of the state's economy. Corruption and violence are its only traits.

If you aren't scoping out or building your own Resilient Community to avoid this disaster, you should be.

The Latest Roberts Court Atrocity

People don't pay enough attention to the Supreme Court.--SS

The Latest Roberts Court Atrocity:

Emily Bazelon has a terrific piece about a recent Supreme Court order that has received very little attention. The case concerned Shirley Ree Smith, a grandmother given 15 years-to-life for the death of her granddaughter. The conviction was based on "shaken baby syndrome," although the most current evidence suggests that it's extremely unlikely that Smith caused her granddaughter's death. Taking this evidence into account, the 9th Circuit Court of Appeals freed Smith in 2006. Last month, as the culmination of a lengthy back-and-forth between the Court and 9CA, the higher court by a 6-3 majority reinstated the jury verdict, requiring Smith to return to prison although she is almost certainly innocent and does not pose any
threat to society.

Taken in isolation, the Court's order is by no means outrageous. Generally, appellate courts only permitted to assess legal errors by lower courts, not to second-guess how juries evaluate evidence. It should be noted, however, that the evolution of scientific evidence makes this case somewhat different, in that the appellate courts knew things that the jury could not have. Also, the Supreme Court's own actions are not exactly a model of judicial restraint, as Ginsburg noted in her dissent:

By taking up the case, one may ask, what does the Court achieve other than to prolong Smith’s suffering and her separation from her family. Is this Court’s intervention really necessary? Our routine practice counsels no…

[…]

This Court, therefore, has no law clarifying role to play. Its summary adjudication seems to me all the more untoward for these reasons: What is now known about shaken baby syndrome (SBS) casts grave doubt on the charge leveled against Smith; and uncontradicted evidence shows that she poses no danger whatever to her family or anyone else in society.

In the abstract, one can understand the majority's response that the injustice in this case should be addressed by the governor granting clemency rather than by the appellate courts. But in practice, preventing federal appellate courts from acting is likely to lead to many cases to situations in which nobody is willing to be accountable and redress obvious injustices. Take, for example, the case Cameron Todd Willingham, who was executed based on forensic evidence that was known before his execution to be utterly worthless. The appellate courts didn't act, the commission charged with evaluating death sentences didn't act, and the governor not only didn't act but acted to suppress an inquiry. It's hard to see how requiring appellate courts ignore what is effectively new evidence suggesting innocence serves the interests of either justice or the rule of law.

One final point about this case: as Dahlia Lithwick quietly mentioned in her profile of the Court's newest justice, the Court's five Republican appointees were joined by Elena Kagan. In this context, Kagan's vote wasn't just window dressing, as it prevented the Court from giving the case a full hearing. There's a lot to like in Kagan's first term on the Court, but for those of us who were skeptical of Kagan's appointment this is something to be concerned about.

Quote of the Day

Quote of the Day:

Retiring member of Congress Barney Frank on the House under Republican rule: "It consists half of people who think like Michele Bachmann and half of people who are afraid of losing a primary to people who think like Michele Bachmann and that leaves very little room to work things out."

Newt's Neocon Army

Maybe Newt will pick Dick "deficits don't matter" Cheney for VP, and we can charge a war with Iran onto the credit card.--SS

Newt's Neocon Army:

When it comes to foreign policy, the Republican frontrunner likes it old-school. Neo-old school.

We've had two foreign policy themed debates in the GOP primary now, which have provided ample opportunity to see what a Republican foreign policy would look like in 2013. And in the case of Newt Gingrich, it would probably look like a kind of neocon fantasy land.

Foreign Policy published an excellent rundown of Gingrich's foreign policy advising team, most of whom "have known Newt for decades, and see themselves as helping a candidate who already boasts a long track record and well-formed intellectual identity when it comes to foreign policy."

Here's a taste of World Team Gingrich:

David Wurmser: Gingrich's Middle East policy adviser was a notorious member of Vice President Cheney's inner circle that pushed the U.S. into war in Iraq. Once he was questioned during an espionage probe while in the vice president's office, and he was one of the names driving the initial support for the later disgraced Ahmed Chalabi. Asked by the Daily Telegraph in 2007 if he was a neocon, he offered this: "There's nothing 'neo' about me. I'm a very medieval sort of guy."

James Woosley: A former director of the CIA, Woolsey recently spoke at a panel hosted by the founder of Judicial Watch focused on President Obama's "political jihad promoting Islam around the world." Woolsey is a serious Iran hawk, warning that the way the West is dealing with the nation at the moment "rhymes with what was taking place in the 1930s [with Nazi Germany]". Woolsey is a Democrat (of the Lieberman school) but he's helped Republicans running for president before. In 2008, he advised John McCain.

Stephen Yates: Another ex-Cheney national security team member, Yates is known among other things for his work on China. One former U.S. ambassador to China familiar with Yates says he views "China as the solution to 'enemy deprivation syndrome.'" As Counterpunch explained the theory, "You need some unifying enemy after the collapse of the Soviet Union." Not exactly the most productive way to view one of America's most important trading partner, perhaps.

It's not just Gingrich who's dipping in the neocon well to form a national security strategy. Rick Perry, who was once the frontrunner before descending out of view like so many before him, leaned on former Donald Rumsfeld deputy Doug Feith, best known for pushing the Al queda-Iraq connection in the run up to the Iraq War and being called by former Gen. Tommy Franks "the f***ing stupidest guy on the face of the earth."

But no one can top Michele Bachmann when it comes to extremist foreign policy advisers. No less than Islamic fearmonger-in-chief Frank Gaffney himself has been a foreign policy adviser to her campaign.

Foreign policy is a favorite topic inside the beltway, though with the down economy (and a Democratic president in office who never met a missile-laden drone he didn't like) it's not clear how much of a role arguments over international affairs will have on the presidential campaign. Republicans certainly like to ding President Obama over Israel and Iran, but it's hard to predict how important those fights will be down the line. Still, the willingness of Republicans to embrace the Bush foreign policy team -- which in the end were among the least popular of his administration -- is maybe telling.

Fake Occupy website tries to undermine Wisconsin recall, claims enough signatures already gathered

Republicans are liars and cheaters.--SS

Fake Occupy website tries to undermine Wisconsin recall, claims enough signatures already gathered:

The petition drive to recall Gov. Scott Walker is ongoing, despite what a fake website wants you to believe.

(@taa_madison/Twitpic)

At least a few conservatives are making good on their threats to undermine the new round of Wisconsin recalls by using some sleazy, even illegal, tactics. A fake website claiming the recall petition drive is over is their latest:

A website posing as "Occupy-Madison" is seeking to undermine the petition drive in Wisconsin to recall Republican Gov. Scott Walker by claiming enough signatures have been gathered. In a November 27 blog entitled, "Walker Recall a success, all necessary signatures collected," the accompanying post says: "The Committee to Recall Scott Walker and United Wisconsin have issued a report stating they have succeeded in collecting all necessary signatures... We are thankful for the efforts, [and] we are suspending all collection activity."

As of this writing, the website in question is not functional. It currently shows only a simple message, "content reported, under review."

In addition to this fake website, there have already been at least two instances where supporters of Scott Walker were witnessed destroying recall petitions. One was documented by Daily Kos community member stcroix cheesehead, and another was reported in the Milwaukee Journal-Sentinel.

Expect more stuff like this throughout the recall drive.

The Lost Opportunities of Iran-Contra, 25 Years Later

The Lost Opportunities of Iran-Contra, 25 Years Later:

It was 25 years ago today that President Ronald Reagan and his attorney-general, Edwin Meese, got up before the press and told a series of half-truths and demonstrable lies about what their administration had been up to as regards dealing with Iran, and how some of the money from that dealing had found its way to the Contra rebels then fighting Reagan's proxy war in Nicaragua. Peter Kornbluh of the essential National Security Archive has a fine overview marking the occasion, complete with links to documents that his organization has pried loose only recently through the Freedom of Information Act.

It remains the great lost opportunity. If the crimes of what became known as the Iran-Contra scandal had been investigated the way they should have been — which is to say, had they been investigated all the way up to criminal indictments at the top of the executive branch, and impeachment inquiries into the conduct of relevant officials, including the president — the political world would have been changed utterly, as Mr. Yeats once put it. The ongoing project of turning Reagan into a secular saint at least would have been slowed to a crawl had an inquiry proven in court that he engaged in peddling arms to a terrorist-sponsoring state. (Instead, when we all went nutty on the subject of terrorism in the aftermath of the 9/11 attacks, Iran-Contra hardly got a mention and, to this day, people seem more concerned about the Muslim influence on Butterball turkeys than in the fact that Saint Ronnie once sold missiles to the mullahs.) The George H.W. Bush administration might never have happened, for all that would have meant to George W. Bush's eventual career. Criminalizing the constitutional crimes that are the inevitable result of the theory of the "unitary executive" might have encouraged the nation to ignore the ravings of an authoritarian lycanthrope like Richard Cheney.

I can remember what happened instead. Washington decided, quite on its own, that "the country" didn't need another "failed presidency," so what is now known as The Village circled the wagons to...

Much more after the jump

The Bell Curve Through The Veil

I stopped reading Andrew Sullivan a long time ago, because his conservatism leaks through his pores and smells like William F. Buckley's socks. Luckily, people like Ta-Nehisi Coates know what to do with this Bell Curve crap.--SS

The Bell Curve Through The Veil:

Andrew responds:

No one is arguing that "that black people are dumber than white," just that the distribution of IQ is slightly different among different racial populations, and these differences also hold true for all broad racial groups:

Perhaps there really is a genetic relationship between the darkness of skin and the potency of neurons. (Only for "Africans," mind you.) Maybe the sterilizers and the slave-traders were wise beyond their years.

No, not "only for Africans". The differential between Caucasians and Asians - or between Ashkenazi and Sephardim Jews - is also striking in the data. And notice that my sole interest in this is either to counter what would be an injustice (affirmative action) or pure curiosity. I don't think any serious critic of my work could conjure up a defense of compulsory sterilization or slavery within it. And the notion that I have an "obsession" with this is bizarre.

I encourage you to read the rest. For the record, I certainly am not claiming that Andrew defends slavery or sterilization. I am arguing that the notion that black people are, genetically, intellectually inferior to white people is not a new and revolutionary strain of research subject to academic repression, but a specimen of thought as old as this country, invented mainly to justify white supremacy. To this very day one need only look around to find a familiar cast of characters lurking in the shadows.

It was not simply science that James Watson appealed to, but to presumably frustrated white employers "who have to deal with black employees." William Saletan did not merely cite some objective numbers. He wrote a five part series for a major publication almost based on the work of a researcher whose organization funds in such data-driven conclusions as "Everyone knows that blacks are dangerous" and "Unless whites shake off the teachings of racial orthodoxy they will cease to be a distinct people."

On the broad question--Should researchers be free to explore the nexus of race, IQ and intelligence?---Andrew and I are in harmony. Onward, indeed. Where we differ is the following: Andrew, like most conservatives who write about race, is more concerned with a vague p.c. egalitarianism than the forces that birthed such things. (Unlike "political correctness" those forces can actually be quantified, and their impact demonstrated.)

That his contention has long been linked to one of the ugliest strains of American thought, that it continues to be linked to actual white supremacists, is not particularly troublesome to Andrew. But that others might find it troublesome is deeply distressing. I don't charge Andrew with defending slavery or sterilization. I charge him with bumbling through the ICU, tinkering with machinery, and wondering why everyone is so uptight and stuff.

I am not without my own baggage. I remember when the Andrew published The Bell Curve excerpt in The New Republic. I was an undergraduate at Howard University--same city, but a different world. All of the young intellectuals who'd gather under the flag-pole on the yard were hot and angry. But a professor on campus (and I wish I could remember who) handed out xeroxed copies of the excerpt and its responses and simply told us, "Arm yourselves." Don't get angry he told us. Get informed. That the in flight magazine of Air Force One would argue that all the world I'd known was brain addled set me afire. Some years later I had seen more of the world. But I was still burning.

I didn't remember the name of the editor of that particular issue. Yet there I was regularly reading this Sullivan dude, when I was supposed to be working. Even before his split with the right Andrew wrote with an energy and tenacity that amazed me then, as sure as proud pushing of The Bell Curve amazed me later when I put the two together. There are only a handful of living writers who've had more impact on me. And yet here I am having to balance all the wisdom I've gotten from him, with moments like these.

I am not appealing to emotion to win a debate. You judge the merits as you see them. But I believe true empathy--not squishy self-serving conflict avoidance--is the hand-maiden, not the enemy, of reason and intellectual inquiry. Moreover I think, if only for a moment, it's worth considering what it's like to take your bread, with some regularity and some joy, from people who don't really see you.

I mean not to be presumptuous, but I think Andrew knows a little about this. Perhaps that explains everything.

Bill Keller Missed the Housing Bubble

Bill Keller Missed the Housing Bubble:

NYT columnist Bill Keller decries a political process in which the consensus of mainstream economists is not according the respect it deserves. He failed to note one obvious reason why these experts' views might be according much respect: almost none of the experts noticed the huge housing bubbles whose collapse led to severe recessions in the United States and Europe.

In this case, the process of credentialing ensured that evidence would be ignored rather than examined. Those who raised concerns about the bubbles were dismissed as cranks. Even after the collapse, the economists who managed to overlook the largest asset bubbles in the history of the world have suffered almost no consequences in terms of their employment or professional standing. Clearly the economics profession does not have a structure where performance is rewarded and failure is punished. Given this fact, it is certainly understandable that the pubic would be suspicious of pronouncements by economists.

It is also worth noting that Keller's takeaway about the profession's consensus of what needs to be done is in fact wrong, or at least seriously misleading. He says that there is a need to reduce "entitlements." In fact, there is no obvious need to reduce Social Security. Its cost is projected to increase only modestly in coming decades as a share of GDP and is fully paid by its designated tax through the year 2038. Even after that date, the tax is projected to cover more than 80 percent of scheduled benefits through the rest of the century.

The real story is Medicare and Medicaid, the cost of which is in turn driven by the broken U.S. health care system. If the United States paid the same amount per person for health care as people in other wealthy countries we would be looking at long-term budget surpluses, not deficits. It is misleading to describe the problem of a broken health care system as a problem of "entitlements."

This is especially important because it conceals the main choice in containing Medicare and Medicaid costs. On the one hand, we can look to reduce the quality of care provided by these programs, as advocated by politicians of both parties. Alternatively, we can look to reduce the waste and excessive fees charged by providers.

There are enormous distribution implications to how this issue is resolved. However most people will not even be aware of these issues if the media hides them under the problem of "entitlements."

Senator Kyl Claims that Businesses Don't Hire When Demand Increases

When you're paid to report facts, you should find out what the facts are.--SS

Senator Kyl Claims that Businesses Don't Hire When Demand Increases:

Economists and people who believe in gravity think that firms hire when they see an increase in demand. The alternative is to turn away customers because a business does not have the necessary staff. Companies trying to make profits generally do not like to turn away customers.

Nonetheless, Republican Senator Jon Kyl said that the payroll tax cut did not lead businesses to hire workers. It is clear that workers did spend much of this tax cut. The savings rate in the last quarter was under 4.0 percent. If workers did not spend much of the tax cut, the implication is that the saving rate would have been under 3.0 percent in the absence of the tax cut. While this is higher than the near zero rate when the housing equity created by the bubble was driving consumption, it is far below the 8.0 percent pre-bubble average.

The NYT should have pointed out that Kyl was wrong; that he either doesn't understand basic economics or was deliberately making assertions that he knew not to be true. Instead it just presented Kyl's statements and responses by Democrats in he said/she said context. NYT reporters have the time to find the truth of such statements, most NYT readers do not.

For Companies, the Good Old Days Are Now - NYTimes.com

Gee. I wonder what happened in 1929, the last time corporate profits and workers wages were this far apart?--SS

For Companies, the Good Old Days Are Now - NYTimes.com:

"Corporate profits after taxes were estimated to be $1.56 trillion, at an annual rate, during the quarter, or 10.3 percent of the size of the economy, up from 10.1 percent in the second quarter. Until 2010, the government had never reported even a single quarter in which the corporate share was as high as 9 percent, as can be seen in the accompanying charts.

The government began calculating the quarterly figures on corporate profits in 1947, but it has annual figures back to 1929. Until last year, the record annual share was 8.98 percent, set in 1929. For all of 2010, the figure was 9.56 percent.

Wage and salary income was only 43.7 percent of G.D.P., the lowest number for any period going back to 1929. That figure first fell below 45 percent in 2009."

The Occupy Wall Street election

Hey, Republicans, keep talking about raising taxes on the poor and cutting taxes for the rich. Please.--SS

The Occupy Wall Street election:

Click for pdf.

From a Hart Research Associates strategy memo posted by Politico.

The competing visions of how to win in 2012 grew sharper over the Thanksgiving holiday. For an example of the first, outgoing Mississippi Governor Haley Barbour dropped this wisdom last night on the Republican Party of Sarasota County, Florida:

"This election is about policy, it's about jobs and the economy and how they are affected by taxes, and spending, deficits, debt. Are you for or against Obama's health care bill? Do you think his energy policy of driving up the cost of energy is good policy? If the election is decided on those grounds, we'll have a Republican president."

In other words, that's statement A from the NBC/Wall Street Journal poll (pdf) extracted above in a Democratic strategy memo posted by Politico (pdf). Governor Barbour is arguing that Republican can win in 2012 by continuing to argue that government is too big, spends too much, etc. FWIW, he also cautioned the party against turning the nomination into a contest over who's more conservative.

The second vision, the Democratic one, centers on income inequality and how voters understand what's going on around them. From a New York Times interview with Senator Charles Schumer (D-New York):

"Jobs and income inequality are going to be the No. 1 issue" in 2012, he said. "Simply cutting government isn't going to work."

That's where Occupy Wall Street wins, or part of it: Shifting the debate to income inequality. One side is saying, with factual facts, that our country is experiencing a yawning gap between rich and poor, and they're out in the streets over it. The second, as we saw with Senator Jon Kyle (R-Arizona), says Congress should cut taxes for the rich and raise them for families. Watch this week for Democrats to begin forcing their Republican colleagues to vote on that idea.

I Get By With A Little Help From My Friends

Rick Santelli can suck it.--SS

I Get By With A Little Help From My Friends:

It appears our Galtian Overlords really can’t do anything right:

“When you see the dollars the banks got, it’s hard to make the case these were successful institutions,” says Sherrod Brown, a Democratic Senator from Ohio who in 2010 introduced an unsuccessful bill to limit bank size. “This is an issue that can unite the Tea Party and Occupy Wall Street. There are lawmakers in both parties who would change their votes now.”

The size of the bailout came to light after Bloomberg LP, the parent of Bloomberg News, won a court case against the Fed and a group of the biggest U.S. banks called Clearing House Association LLC to force lending details into the open.

The Fed, headed by Chairman Ben S. Bernanke, argued that revealing borrower details would create a stigma—investors and counterparties would shun firms that used the central bank as lender of last resort—and that needy institutions would be reluctant to borrow in the next crisis. Clearing House Association fought Bloomberg’s lawsuit up to the U.S. Supreme Court, which declined to hear the banks’ appeal in March 2011.

The amount of money the central bank parceled out was surprising even to Gary H. Stern, president of the Federal Reserve Bank of Minneapolis from 1985 to 2009, who says he “wasn’t aware of the magnitude.” It dwarfed the Treasury Department’s better-known $700 billion Troubled Asset Relief Program, or TARP. Add up guarantees and lending limits, and the Fed had committed $7.77 trillion as of March 2009 to rescuing the financial system, more than half the value of everything produced in the U.S. that year.

Remember what was happening in March of 2009? On February 19th, 2009, Rick Santelli had his famous rant about a program to extend meager amounts of help to homeowners, while at the very same time the Fed was doling out trillions to his douchebag buddies. While these assholes were famously whining and screaming about socialism and government involvement in the markets (when people were discussing different compensation rules), they were behind the scenes taking trillions to help smooth over their fuck-ups.

This is what the useful idiots in the tea party are fighting for…

Can Unions Be Saved By Making Them Smaller?

K Drum, on Union Lite.--SS

Can Unions Be Saved By Making Them Smaller?:

Reihan Salam directs us to an essay about labor unions by Alan Haus, an IP and employment law attorney in San Francisco. Haus thinks that conservatives ought to be more supportive of the power of labor unions in promoting higher wages:

There is much that could be said about the economic effects of promoting higher wages. For Republicans, the disadvantages should be trumped not only by the advantages but also by a vital consideration of political philosophy: the society of limited government to which most Republicans aspire will only come about in the real world if most Americans earn enough money to save for retirements and college educations, and provide for their long-term healthcare through substantially private markets. Achieving this requires some measure of support for a high wage economy.

But Haus is a lot less enthralled with every other aspect of organized labor:

....The central problem with private sector unions is that under current labor relations regimes they stifle economic innovation....[This] starts with the litany of subjects on which collective bargaining is not only permitted, but in many cases mandatory. The only mandatory subject of bargaining in the 21st century should be employee compensation.

Radically different employee associations that don't suffocate both their companies and their members need to be created....Congress should authorize employee associations that are easier to form than current unions, but which do not have the power to interfere with managerial prerogatives (which is pretty much every subject other than employee compensation as determined by a collectively bargained contract).

The idea here, I guess, is that there would two distinct kinds of labor unions authorized and protected by law. The first kind would be the ones we have now, which are extremely difficult to create. The second kind would be restricted to bargaining over wages and benefits, but would be much easier to create. With this kind of "Union Lite" available as an option, perhaps Wal-Mart could finally be successfully organized?

I'm surprisingly sympathetic to this notion, though it's obviously pie in the sky. As Haus mentions elsewhere, existing labor unions would oppose it and therefore Democrats would oppose it too. Likewise, although perhaps corporations and rich people should be in favor of organizations that promote higher wages for the working and middle classes, they aren't. Therefore Republicans would also oppose this idea.

Beyond this, there are obvious problems with wage-only unions. I've long supported organized labor because it's the only large-scale countervailing power that promotes the economic interests of the middle class against the interests of the corporate community. At the same time, I've long recognized that telephone-book size contracts stuffed with endless picayune work rules are genuinely corrosive. But where do you draw the line? I agree that unions would be far more acceptable to management, and far more useful to their members, if they spent less time fighting for rigid job classifications and money-wasting featherbedding clauses. But what about safety regs? I'd love to think that we could just trust MSHA to enforce safe practices in coal mines, but that would be naive. It's the UMW that's been mostly responsible for progress on that front.

Still, this is an interesting suggestion. Whatever you think of them, unions in their existing form are dying, and there's little reason to think that's going to change. I acknowledged this when I wrote about unions earlier this year ("Why Screwing Unions Screws the Entire Middle Class") and argued that we needed something to replace them, "a countervailing power as big, crude, and uncompromising as organized labor used to be." Haus's proposal won't be adopted anytime soon, but at least it's a useful idea: a new union movement that trades a bit of power in one area (work rules) for more power in another (much greater density in the private sector). It's something to think about.