Monday, November 30, 2009

Notes on Natural Monopoly

Natural Monopoly
 
A natural monopoly exists when economies of scale provide a large cost advantage to having all of an industry's output produced by a single firm
 
  •    the source of this situation is one where there are large fixed costs
  • ex. local utilities --water, gas, electricity, local phone, cable
 
Breaking up a natural monopoly in such a situation (where one large producer has a lower average total cost than smaller producer) would raise the average total costs --> raising the price for the consumer
 
Profit maximizing monopolists act in a way that causes inefficiencies--it charges consumers a price that is higher than marginal cost and therefore presents some potentially beneficial transactions
  • large profits at consumer expense brings up a question of equity as well
 
What can be done?
 
There are two common policy solutions for a Natural Monopoly
 
1)  Public Ownership -- the good is supplied by the government or by a firm owned by the government
 
In many countries it is the preferred answer to the problem of a natural monopoly
 
  • examples
    • before 1984 in Britain telephone service was produced by British Telecom
    • before 1987 British Airline travel was provided by British Airways
    • US--Amtrak, US Postal Service, Some cities such as Los Angeles have publicly owned electric power companies
 
The advantage of public ownership is that a publicly owned natural monopoly can set prices based on the criterion o efficiency rather than profit maximization
  • In a perfectly competitive industry, profit-maximizing behavior is efficient because producers set prices equal to marginal cost
 
Experience suggests that public ownership can work badly in practice--publicly owned firms are often less eager than private companies to keep costs down or offer high-quality products;too often they end up serving political interests providing contracts or jobs to people with right connections
 
2) Regulation
 
The more common solution in the U.S. is to leave the industry in private hands and subject it to regulation
 
Most local utilities like electricity, telephone service, natural gas... are cover by price regulation which limits the prices they can charge.
  • putting a price ceiling on a competitive industry can lead to shortages, black markets, and other side effects
  • a price ceiling on a monopolist doesn't necessarily do so--in the absence of a price ceiling, a monopolist would charge a price that is higher than the marginal cost of production
  • even if forced to to charge a lower price the monopolist can break even on total output as long as the price is above the marginal cost; the monopolist still has an incentive to produce the quantity demanded at that price 
 
 In the first example we have a company that faces a demand curve D, with an associate marginal revenue curve MR.  We will assume that the marginal cost is constant--so that MC is a horizontal line.  The average total cost curve (ATC) is the downward-sloping because the higher the output the lower the average fixed cost [*you can tell that this is a natural monopoly because the average total cost curve is downward sloping over the range of output relevant for market demand] 
 
The unregulated natural monopoly chooses the monopoly output Q: M and charges the price P: M.  Since the monopolist receives a price greater than ti average total cost it earn a profit.  The profit is equal to the producer surplus in the market--the green shaded area.  Consumer surplus is blue shaded area.
 
Next we show regulators imposing a price ceiling at P: R.
 
  
At this price the quantity demanded is Q: R.
 
The firm ignores the Marginal Revenue curve and is willing to expand output to meet the quantity demanded because the price it receives for the next unit is greater than the marginal cost and the monopolist breaks even on total output. 
 
With price regulation in this scenario the monopolist produces more at a lower price.
 
The monopolist won't be willing to produce at all if the imposed price means producing at a loss--the price ceiling has to be set high enough to allow the firm to cover its average total cost. 
 
In this example any lower price and the firm would lose money because the price is as low as possible--we are at a price ceiling where the average total cost curve crosses the demand curve.  P*:R is the best regulated price possible. 
 
The welfare effects of this regulation can be seen by comparing the shared areas in both figures--consumer surplus is incurred by the regulation with gains coming from two sources
  • profits are eliminated and added instead to consumer surplus
  • the larger output and lower price leads to an overall welfare gain--increasing total surplus
 
Consumers are better off, profit are eliminated, and overall welfare increases.
 
The biggest problem with regulation natural monopolies is that regulators don't have the information required to set the price at the exact level desired--where the demand curve crosses the average total cost curve. 
  • sometimes its set too low creating shortages
  • sometimes set too high
 
Regulated monopolies like publicly owner firms tend to exaggerate their costs to regulators and provide inferior quality to consumers

Posted via email from Jim Nichols

Sunday, November 29, 2009

When the Republican far right wing is focused upon the center is ignored

I've said it before and I'll say it again--we need more moderate Republicans.  Many of the problems we face in terms of getting things done, passing legislation, and fixing our budget issues as a state and a nation; all of these hurdles come for the most part from the Republican party having been taken over by ideologues who promote a far right agenda.
 
Former Chair of the Henry County Republicans Charles was dead on when he spoke about Rep. Steve Davis' radical agenda.  In Mobley's words, Davis panders to the far right, stating that "when the Republican far right wing is focused upon the center is ignored."
 
Republican Trea Pipkin almost won in the 2008 Republican primary.  Many, like myself crossed over to vote in this very important election.  As Trea stated last year--,
 Steve Davis' failed leadership is so apparent to Henry County families with his recent vote on the amended state budget. He opposed the 2008 Amended Budget but sent out emails to Henry County taking credit for the vital funding contained in that budget. If Steve wants to oppose the budget on philosophical grounds, that's his right. But it's insulting to take credit for securing funding that he voted against.
 
The voters are not as stupid as Steve apparently assumes they are. They know when their leaders have failed them, and that's why people from all parts of this county and this district are rallying to my campaign.
Davis has had the opportunity to lead--and during his tenure the fiscal health and long term prosperity of citizens in this state have dramatically declined.  
 
Davis is a good man and has worked hard for the citizens of this district.  But sometimes you just aren't the right man for the job.  When it comes to supporting good policies and fighting for the citizens of this district--Davis is out of his league. 
 
From the economy to our children's future--citizens of the 109 and across this State deserve more than a career politician that promises leadership.  We need new energy, new ideas, and a new generation of leadership at the Gold Dome.
 
--
James A. Nichols IV
cell: (770) 312-6736
 
"Nothing in the world can take the place of Persistence. Talent will not; nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and determination alone are omnipotent. The slogan 'Press On' has solved and always will solve the problems of the human race."     ---Calvin Coolidge (1872 - 1933)
 
"I have come to the conclusion that politics are too serious a matter to be left to the politicians."    Charles De Gaulle (1890 - 1970)
 
 

Posted via email from Jim Nichols

links to recent Georgia news

 
 

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Saturday, November 28, 2009

goodnight blog world...

"Insanity in individuals is something rare - but in groups, parties, nations and epochs, it is the rule." --Friedrich Nietzsche
 
"A happy life consists in tranquility of mind."  Cicero
 
"A life spent making mistakes is not only more honorable, but more useful than a life spent doing nothing."  George Bernard Shaw
 
"Think of all the beauty still left around you and be happy."  Anne Frank

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Ezra Klein: You can't cut the deficit without a bill that cuts the deficit:

Ezra Klein stating the obvious (but not so obvious to Republicans... why we need more moderate republicans!)
 David Broder has a column today expressing skepticism that health-care reform will really cut the deficit. But he doesn't provide much evidence for the charge.

The specific budget gimmick mentioned in the column is that Reid has delayed the subsidies "from mid-2013 to January 2014 -- long after taxes and fees levied by the bill would have begun." But not that long. The excise tax, for instance, begins in 2013. More to the point, it's not clear what Broder's complaint is. Reid delayed the implementation of the subsidies in order to ensure the bill's deficit neutrality in the first 10 years, which is what Broder wants. Why attack him for it? Then we get this:

There is plenty in the CBO report to suggest that the promised budget savings may not materialize. If you read deep enough, you will find that under the Senate bill, "federal outlays for health care would increase during the 2010-2019 period" -- not decline. The gross increase would be almost $1 trillion -- $848 billion, to be exact, mainly to subsidize the uninsured. The net increase would be $160 billion.

Huh? The net increase of $160 billion in the first 10 years is part of CBO's analysis, not a caveat to it. It doesn't mean the bill doesn't cut the deficit, it just means that overall spending is larger before you add revenues into the equation. Moreover, the CBO continues: "during the decade following the 10-year budget window, the increases and decreases in the federal budgetary commitment to health care stemming from this legislation would roughly balance out."

In other words, the revenue and the savings grow more quickly than the costs. Extend that line out further and, yes, federal spending on health care falls as a result of this bill. In other words, the bill satisfies Broder's conditions. But he doesn't come out and say that.

Instead, he pivots to the now-traditional argument that Congress won't be able to stick to the savings and revenue measures in this bill. That, however, is another way of saying that Congress can't cut health-care costs and the American government will go bankrupt. For one thing, that's not a very good reason not to at least try and avert that outcome. But if Broder's position is that we face certain fiscal collapse, then the only real question is whether we would prefer that 30 million Americans had insurance in the meantime, or went uninsured over that period.

More broadly, I'm confused by the budget hawks who that take the line: "This bill needs to cut the deficit, and I don't believe Democrats will cut the deficit, but since the actual provisions of the bill unambiguously cut the deficit, then I guess Congress won't stick to it."

People who want to cut the deficit should support this bill, and support its implementation. The alternative is no bill that cuts the deficit, and thus no hope of cutting the deficit.

 

Posted via email from Jim Nichols

Give us fiscal austerity, but not quite yet:

While the increase in the debt ratio is very large in both [Britain and the U.S.], the levels expected to be reached by 2014 are not historically exceptional, particularly for the UK.... [T]hose past record levels did not create insuperable problems. In the 19th century, both countries grew out of their debt satisfactorily, with price stability. In the second half of the 20th century, they did so again, though inflation then helped.

This is not surprising. Assume that the real rate of interest is 2.5 per cent. Then the servicing costs, in real terms, of a debt burden of 100 per cent of GDP is just 2.5 per cent of GDP – almost a bagatelle. Assume, too, that the trend rate of growth equals the real interest rate (a not unreasonable assumption). Then the requirement for debt stability is a balanced primary budget (that is, before interest payments). Again, this is hardly crippling.

So what is the problem? It is that people may lose confidence that the governments will ultimately bring deficits under control.... [C]utting peacetime deficits is hard: every pound or dollar comes with a lobby group attached. Merely promising to cut deficits lacks plausibility....

Yet even if the fiscal rope is not infinitely long, slashing deficits now would be wrong. It is extremely likely this would tip economies back into recessions, as happened in Japan in the 1990s. Furthermore, the results would also probably include expansion of quantitative and credit easing by central banks. Yet those policies, too, risk undermining credibility....

So what should be done? I agree fully with the remark by Dominique Strauss-Kahn, managing director of the IMF, in London this week that “it is still too early for a general exit” from accommodative policies.... What is needed, instead, are credible fiscal institutions and a road map for tightening that will be implemented, automatically, as and when (but only as and when) the private sector’s spending recovers.... There are losses to be shared, much of which will fall on public spending, taxation, or both. Once it becomes evident that neither of these countries can rise to the challenge, fiscal crises are inevitable. It would only be a question of when.

 

Posted via email from Jim Nichols

Why Are Good Policies Bad Politics?

As many of you know--we're trying to change this... but...
 
Economist Brad Delong on good policy as bad politics

Those who claim that America has a debt problem, and that a debt problem cannot be cured with more debt, ignore (sometimes deliberately) that private debt and US Treasury debt have been very different animals – moving in different directions and behaving in different ways – since the start of the financial crisis.

What the market is saying is not that the economy has too much debt, but that it has too much private debt, which is why prices of corporate bonds are low and firms find financing expensive. The market is also saying – clearly and repeatedly – that the economy has too little public US government debt, which is why everyone wants to hold it.

To see more on this problem...

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Bashing Reagan on Social Security: Don't Go There

News that the Republicans are pushing two bills that would establish a 'Bi-Partisan Commission' to 'reform' Social Security and Medicare are stirring up a debate which mostly had run cold. And one myth is bubbling back to the surface, the one that claims that Reagan simply used the Greenspan Commission to generate "huge surpluses" for Social Security to fund tax cuts for the wealthy. Never happened. There were no huge Social Security surpluses under either Reagan or Bush I, instead the 1983 reform set in place a mechanism that would slowly rebuild the Trust Funds back to their mandated level. And it worked, in 1993 Clinton entered office with Social Security sitting with a Trust Fund ratio of just over 100 meaning that it met the Trustees' test for actuarial balance. But the overall outlook for Social Security actually deteriorated from 1993 to 1996 and the large surpluses that started in 1997 and accelerated through 2004 were neither planned for or anticipated by the 1981-83 Commission. They happened and on paper largely pre-funded Boomer retirement but this was not the product of any pre-existing plan. Inspect the numbers for yourselves.

This myth is particularly dangerous because it plays into the movement conservative message that you can NEVER trust big government, maybe ESPECIALLY when it is in Republican hands. Every second spent bashing Reagan or Bush II over Social Security is a second devoted to selling the message that 'Big Government is the Problem'. Yes for those of us who are accused of being infected with BDS or delight in mocking St. Ronnie all of this is good fun. But it is unproductive good fun if your intent is to keep Social Security out of the hands of the vultures. Reagan in 1981 and Bush in 2001 and 2005 DID try to kill Social Security. They failed, every penny is STILL exactly where it is supposed to be. Insisting that they some how succeeded in raiding the pantry just plays into opposition hands. Knock it off. If that is you want that retirement check.

Posted via email from Jim Nichols

Friday, November 27, 2009

Short Memories: Republicans and Civil Rights

Economist Brad Delong sends us over...

Underbelly: Short Memories: Republicans and Civil Rights: Short Memories: Republicans and Civil Rights There's a curious case of memory loss that seems to be afflicting both left and right this morning over the history of civil rights legislation. Link, (link). Start with Republican Rep. Virginia Foxx of North Carolina:

Just as we were the people who passed the civil rights bills back in the '60s without very much help from our colleagues across the aisle," said Fox. "They love to engage in revisionist history.

Shift now to Democratic Rep. Dennis Cardoza of North Carolina:

Today, what I’m hearing on the floor really takes the cake. The gentlelady from North Carolina, in her statement just now, indicated that the Republican GOP had passed the Civil Rights Act legislation with almost no help from the Democrats. I can’t believe my ears. It was the Kennedy and Johnson administration where we passed that Great Society legislation. It was over the objections of people like Jesse Helms from the gentlewoman’s state that we passed that civil rights legislation. John Lewis…

In response, Republicans gleefully jumped on the fact that Cardoza was wrong about Jesse Helms: he wasn't even in the Senate until 1972.

But on the larger issue--comments are still pouring in and I won't pretend to be keeping up with them; still, the fact is that Foxx actually had a kind of a point here. What she was really talking about the Civil Rights of 1957, which was passed on the initiative of the Eisenhower Administration, over the dead-body opposition of the Senate Democratic leadership--and only after the Democrats had so gutted it as to leave it largely meaningless.

How fast memories fade: recall that the pre-1960 Democratic party was a monstrous two-headed beast with liberal (sometimes radical) union members, blacks and intellectuals on one side and reactionary So;uthern whites on the other. It was the Republicans who still carried a progressive tradition on civil rights, going back to the founding of the party at the beginning of the Civil War.

Eisenhower himself, as many have observed, wasn't deeply hostile to blacks, but he just didn't get it: the real motivation came from the "northeast" wing of the party, notably Attorney General Herbert Brownell. Leading the Senate opposition was Majority Leader Lyndon Johnson. As others have remarked, this created thre ironic mirroring in which the forces in fazvor of enhanced civil rights were led by a man who had no particular taste to it, while the opposition came from one southerner whose attitude towards racial minorities was one of genuine compassion.

When he signed the Civil Rights Act, Johnson famously said he figured he'd delivered the south to the Republicans for a long time to come. That was the year Rep. Foxx turned 21.

Update: I am catching offline flac for having saddled Lyndon Johnson with the onus of "leading the Senate opposition." The point is made that Johnson was in fact the person who jammed the bill through. ITechnically correct, but am unrepentant. I don't doubt the sincerity of Johnson's compassion for blacks. But he had two choices: one, let the bill fail, at the behest of the old bulls who still dominated the august body (e.g., Johnson's personal mentor, Richard Russell of Georgia). And two, strip it naked and deprive of all nourishment and push it forth into a hostile world. Johnson knew he couldn't make his bones as a Presidential candidate in 1960 without a civil rights scalp in his belt. So he chose the path of betrayal.

I am, at the end of the day, something of the Johnson fan. He certainly is the most interesting president of my lifetime (or perhaps a close second, behind Richard Nixon). But there is no point in obscuring how many grandmothers he had to pitch under how many speeding locomotives to get where he wanted to be.

Posted via email from Jim Nichols

Thursday, November 26, 2009

Local Republican Leaders like to Call me the "Political Scientist"

...because I put empirical research before "sounds good, feels good" policy.
 
But I'm also the "face the facts" guy because I point out Fiscal Responsibility Requires Higher Taxes. As you may know... 2 + 2 = 4.
 
Its not the politically expedient thing to do.  And i'll probably lose to a right wing ideologue.
 
But I'm not in politics so that "I can win."
 
I'm in it to because I am part of a movement of citizens fed up with broken government who want to fire career politicians and empower citizens.
 
Its time to put pragmatic policy before political ideology.

Posted via email from Jim Nichols

The Republican Do-Nothing agenda won't get Americans back to work....

In 1940 Yale Professor of Economics and Director of Unemployment Studies E. Wight Bakke published a pair of volumes titled The Unemployed Worker and Citizens Without Work, reporting the results of a remarkable eight-year study of unemployed workers and their families in Depression era New Haven. Seventy years later, the study’s analysis still resonates, and never more so than in light of this month’s unemployment figures showing jobless rates in the double digits, where they are expected to stay for the next couple of years.

Bakke’s study was based on a premise that would be greeted as anathema in most economics departments today: that understanding unemployment would require looking beyond what could be revealed in statistics and household survey data. It would require an exploration of the social and psychological as well as the economic meaning of work. It would also require spending real time in the working-class communities most affected by job loss. And it would require asking workers and their families what they thought, how they felt, and how they were coping, emotionally and materially, with what Bakke memorably called “the task of making a living without a job.” Accordingly, Bakke and his field researchers joined the ranks of New Haven’s unemployed workers from 1932-39, acting as interviewers and observers and social surveyors while the realities of mass and long-term unemployment hit home. New Haven’s unemployed, Bakke learned, felt robbed of their livelihoods but also of their self-respect, their place in the community, their sense of having a future, and, for the men in particular, their authority as breadwinners in the family. Not all of these losses were entirely bad — Bakke wrote about the subtle democratization of family life as husbands “adjusted” to the autonomy of their income-earning wives — but his study left no doubt that putting people back to work was key to psychological as well as economic recovery.

Posted via email from Jim Nichols

Its about the deficit... the problem is created by the "wings" of a broken political system

The long term budget deficit has to be a top priority for lawmakers.
 
 
The problem is our two party system is broken.
 
Our nation can't pass good legislation when the only goal of one of the parties is to oppose.  Its not a Democrat or Republican thing.  Its a radical vs. pragmatic thing.  George Bush Sr.'s approach in Iraq War I  was successful-- not because Republican policymakers are better than Democratic policymakers--but because pragmatism beats radical ideology in the court of good government.
 
What former Chair of the Henry County Republican Party Charles Mobley said in reference to Rep. Steve Davis putting the far right before the citizens of his district is so true-- "When the Republican far right wing is focused upon the center is ignored." 
 
Government is broken.  And part of the problem is that "the wings" have made the debate in this country about individuals you should fear, nonexistent hobgoblins. 
 
The fact that our health care debate is focused not on the problem at hand--a broken health care system that puts our longterm economic prosperity at risk--but on "Obama the Socialist" is very telling. 
 
Economist Bruce Bartlett, an economic advisor to President Bush noted recently:
The human capacity for self-delusion never ceases to amaze me, so it shouldn't surprise me that so many Republicans seem to genuinely believe that they are the party of fiscal responsibility. Perhaps at one time they were, but those days are long gone.
Republicans passed "the most fiscally irresponsible piece of legislation since the 1960s."  Not because the "Republican Party" doesn't understand good economic policy--but because the party was taken over by radicals who focused on the right wing to gain political power at the expense of the center.
 
Now those same Republican leaders are trying to rewrite history.
 
When what we need to be doing is learning from history.
 
And passing health care reform.
 
 

Posted via email from Jim Nichols

update from Dad on the flooding in Philppines

My Dads place in the Philippines got flooded.  Thats twice this year now!
 
Here's some of his update...
 
Nick in Manila
Back in Manila and swamped.
 
It took them all day yesterday to get the mud out of the house. Now there's a stench because, well, you know, septic tank contents (ours and everybody else's) all floated in with the flood waters. Causes disease - which became a problem in the Manila floods (hospitals had quite a problem).
 
You don't know poverty till you see poverty up close and and real and for long periods of time (years).
 
Facing floods is tough on kids. Hard to get enough rest. Hard to get clean clothes and dry shoes together and something to eat and to make it to school on time.
 
I'm not talking about us so much as the really poor that face this continuously.
 
All we hear from politicians are tirades against the loggers. But we only hear that in aftermath of floods. Never when it comes time to enforce the laws. And the poor face floods year in and year out over and over and over and over and the fat cats pocket the money and send their kids to the good schools in the U.S. and they are all very nice kids. Easy to be nice - when you're not POOR.
 
 
 
 
 
 
 
 

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She's too fast for my camera phone. A ...

I'm thankful for a wonderful family that I miss dearly.  And to my baby sister whom I never met your big brother loves you and can't wait to meet you!


Izzy photo's and a couple of Mikee (click the blue arrow). She's too fast for my camera phone. A bunch were just blurs I deleted.
This message was posted by Nick in Manila on FriendFeed. To comment, reply above this message.
Unsubscribe from FriendFeed email.

Posted via email from Jim Nichols

Obama's wrong turn in Afghanistan

What course we are staying on no one is quite sure of.
 
President Obama plans to formally announce on December 1 his decision with regard to the request from some of his more ambitious generals for a massive troop surge in Afghanistan.

But indications are that the president who was elected to set a new course for the nation when it comes to foreign policy will instead "stay the course" set by his quagmire-prone predecessor.
 

Posted via email from Jim Nichols

Wednesday, November 25, 2009

The radical liberal that wasn't...

Get Ready for the Obama/GOP Alliance 
 

Today, it's crucial to ask where Obama is heading. From the stimulus to healthcare, he's shown a Clinton-like willingness to roll over progressives in Congress on his way to corrupt legislation and frantic efforts to compromise for the votes of corporate Democrats or "moderate" Republicans. Meanwhile, the incredible shrinking "public option" has become a sick joke.

As he glides from retreats on civil liberties to health reform that appeases corporate interests to his Bush-like pledge this week to "finish the job" in Afghanistan, an Obama reliance on Congressional Republicans to fund his troop escalation could be the final straw in disorienting and demobilizing the progressive activists who elected him a year ago.  

Throughout the centuries, no foreign power has been able to "finish the job" in Afghanistan, but President Obama thinks he's a tough enough Commander-in-Chief to do it. Too bad he hasn't demonstrated such toughness in the face of obstructionist Republicans and corporate lobbyists. For them, it's been more like "compromiser-in-chief."

When you start in the center (on, say, healthcare or Afghanistan) and readily move rightward several steps to appease rightwing politicians or lobbyists or Generals, by definition you are governing as a conservative.

It's been a gradual descent from the elation and hope for real change many Americans felt on election night, November 2008. For some of us who'd scrutinized the Clinton White House in the early 1990s, the buzz was killed days after Obama's election when he chose his chief of staff, Rahm Emanuel, a top Clinton strategist and architect of the alliance that pushed NAFTA through Congress.

If Obama stands tough on more troops to Afghanistan (as Clinton fought ferociously for NAFTA), only an unprecedented mobilization of progressives - including many who worked tirelessly to elect Obama - will be able to stop him. Trust me: The Republicans who yell and scream about Obama budget deficits when they're obstructing public healthcare will become deficit doves in spending the estimated $1 million per year per new soldier (not to mention private contractors) headed off to Asia.

The only good news I can see: Maybe it will take a White House/GOP alliance over Afghanistan to wake up the base of liberal groups (like MoveOn) to take a closer and more critical look at President Obama's policies.

Posted via email from Jim Nichols

How many citizens will die during the Health Care filibuster?

45,000 Americans die every year because they lack health insurance.
 
If we don't get control of health care costs like the rest of the industrialized world our budget deficits will swallow us whole--if we do, the deficits disappear.
 
There is a lot of talking head spin on tv about the coming filibuster and entertainers pretending to be policy analysts are using fear and lies. 
 
Talking heads spinning the political theater as if we were just watching for entertainment value. 
 
How many citizens will die during the Health Care filibuster?
 
Those of us, like myself, who have watch friends die because they lacked coverage.  Those of us, like myself, who have nearly lost their own lives because they lacked coverage.  Those of us, like myself, who have struggled to pay the bills and run up large amounts of debt because they lacked coverage. 
 
For us... this isn't a joke... this isn't entertainment.  This isn't political theatre. The politicians who use lies and fear to win political points and protect the corporate interests that gets them elected are a disgrace to all that is great about this nation.
 
But I think those of us who seriously want to resolve this health care crisis should take a deep breath and join in the talking head entertainment for a bit--we get a little too up tight from time to time!
 
How many citizens will die during the Health Care filibuster?
 
Just for a moment lets pretend this is just a game....
 
If I were a tv talking head--how would I'd spin this so as to drum up ratings and bring in more Ad revenue.  That is my first and foremost job responsibility given to me by my boss.
 
So here is my spin...  
 
How many Americans will die during the health care filibuster? 
 
I'd get me a little ticker at the bottom of the screen and have the viewers join me in watching the body count. I'm not a talking head... and this isn't just a game.  In fact its pathetic that we are even having this "debate." But l'm certainly going to go ahead and keep count...a body count.  I hope you join me.
 
Its important to take the horse-race spin out of the hands of the talking heads and focus it back onto what this is really about--human beings needlessly wasted so that private health firms can make money hand over fist.
 
Lets highlight the priorities and political theatre of those who are fighting to protect the health insurance industry at the expense of citizens of this country. 
 
Ask yourself--How many citizens will die during the Health Care filibuster?
 
Here is more on the filibuster issue--When did the Senate get so bad?
 In terms of culture and custom, the turning point was almost certainly the previous health-reform debate, in 1993 and 1994. That's when Bob Dole, then the majority leader, made the phrase "You need 60 votes to do anything around here" his mantra, and when -- thanks to Bill Kristol's famous memo -- the idea of blocking major legislation for political reasons, rather than trying to get it revised to reflect your own policy preferences, took hold. Maybe I put too much weight on that period because that happens to be when I worked in the Senate, but there's no doubt that at that time, a whole bunch of obstructionist techniques came out of the dusty toolbox, such as "filling the amendment tree" and, in the House, the motion to recommit a bill to conference. (I once witnessed Ted Kennedy asking staffers for advice about how to break one of these tactics, which he had never seen in 34 years in the Senate.)

Underlying that, of course, was the structural change that came with the realignment from a four-party system, in which each party had a liberal and conservative wing, to two ideological parties. (A center-left party and a far right party.) As frustrating as today's conservative Democrats like Mary Landrieu are, none of them are more conservative than any Republican, and no Republican is more liberal than even the most conservative Democrat. As a result, a filibuster can be organized and enforced by a party leader, whereas in the past, there was considerable ideological overlap, so both sides of a fight would be cross-partisan, and thus loose and shifting.

In the old Senate (up to the early 1990s), there were dozens of possible configurations that could produce legislation that won broad majority support. You could see it quite visibly in the Senate Finance Committee when Lloyd Bentsen of Texas was the chair -- from the center of that horseshoe dais, he might put together a coalition on the center-left one day, and one on the center-right the next, and if he played the politics right, the vote in committee would typically be something like 17-4, with a similar majority on the floor. My boss, as one of the more liberal members, was sometimes in the majority coalition and sometimes a dissenter -- it changed all the time. As debate began, it was hard to predict the final vote. But to watch Max Baucus maneuver in the same committee last month, you had to sympathize with how little he had to work with: Forty percent of his members were completely opting out -- any amendments they offered were purely symbolic or intended to support a talking point in opposition. The only coalitions available were a totally Democratic one and one that included Olympia Snowe. On the Senate floor, it's the same thing -- with a hundred senators, there are in theory, some mathematically unimaginable number of coalitions. But in reality, there are only two: Keep every single Democrat, including red-staters up for re-election and the now unabashedly malevolent Joe Lieberman, or lose one and get Olympia Snowe. There are no other options, and no legislative wheeling-and-dealing will open up any other possibilities.

As a result the Senate feels suffocating. It's easy to fantasize that maybe a tougher or more creative Harry Reid could do something, but even LBJ would be stuck if he drew this hand. The combination of the change in custom -- which involves not just using the filibuster to excess, but pushing to defeat legislation regardless of its content, for political purposes -- and the particular alignment of parties leaves shockingly little room for legislative maneuvering.

Please join me--ask your friends and family as well.  Lets keep count of how long the politicians talk... and how many American lives are needlessly wasted for their political theatre.
 
Even Bill Kristol knows we can have a great health care system.  And  we all know that citizens will literally die while Republicans talk.

How many citizens will die during the Health Care filibuster?

 

Posted via email from Jim Nichols

Republican hypocricy on fiscal responsibility

Bruce Bartlett is on fire.  His entire Forbes column is worth reading, but this bit sums it up nicely:

It astonishes me that a party enacting anything like the drug benefit would have the chutzpah to view itself as fiscally responsible in any sense of the term. As far as I am concerned, any Republican who voted for the Medicare drug benefit has no right to criticize anything the Democrats have done in terms of adding to the national debt. Space prohibits listing all their names, but the final Senate vote can be found here and the House vote here.

The Medicare Part D legislation pushed by the Bush administration and voted into law by a Republican Congress will add more to the national debt over the next ten years than the proposed Democratic healthcare reform.  By $100 billion dollars.

Yet, we have politicians and pundits on the right pretending to be the party of fiscal responsibility.  It’s almost embarrassing to watch.

If Republicans were serious about fixing the terrible fiscal position we’re in they’d do well to bring people like Bartlett back into the fold.  Tax cuts and spending cuts sound nice on paper, but in real life it’s a little harder to implement.  For one, as soon as Republicans are actually in power they forget all about fiscal discipline.  They have their constituencies to pay for, after all.  The only president in the past thirty years to actually tackle entitlement spending was Bill Clinton.

Now we have Republicans defending Medicare from potential cuts the Democrats would like to make!

Admittedly, there is no telling if Congress will actually make the cuts they pass into law.  But certainly the Republicans could have worked to actually strengthen that likelihood rather than oppose it.

Posted via email from Jim Nichols

Fiscal Responsibility... some reality based commentary...

You see and hear a lot of nonsense on the deficit in the press and from many politicians.  Its a way to score political points the easy way-- when you don't share the priorities of the American public at large you have to use fear and misinformation. Its refreshing to read some reality based commentary...
 
 
in the three decades since the Republican Party became the dominant political coalition in American politics, the deficit has been reduced exactly once, and that was during Bill Clinton’s presidency. All three Republican presidents of the “conservative era” – Ronald Reagan, George H.W. Bush, and George W. Bush – were responsible for significant increases in the deficit, and in the case of the latter, a tremendous increase in the overall national debt.

Here’s a graph that illustrates the point (I found the data here):

Moreover, it’s not even really accurate to say that Republicans recognize the need to reduce spending, and Democrats don’t (by implication). The Obama administration’s central conceit on health care reform has been that absent systemic change in the way we deliver and pay for health care, the United States is facing fiscal ruin. As such, the only real requirement the administration has for health care reform – as per Peter Orszag – is that it “bends the curve.” We’ve heard more about cost controls and deficit reduction from this Democratic administration than we did in eight years of the previous Republican one. Indeed, if there’s been anything notable about nearly every major Democratic policy proposal we’ve seen this year, it’s that both congressional Democrats and the White House have been adamant that they pay for themselves at least in part.

I hate to be super partisan about this, but it’s one of those situations where you can’t actually avoid it. The simple fact is that while neither party is perfect, Democrats at least have something of a claim to the mantle of “fiscally responsible.” President Clinton was the first president in a generation to balance the budget, and President Obama’s economic team shows an obvious concern for the long-term fiscal viability of the United States. They’re just also concerned about not letting the United States fall into economic ruin, hence the various stimulus-related deficits.

On that note, I want to make one last point: when considering Republican and Democratic deficits, you can’t make a one-to-one comparison without also thinking about the actual content of spending. Or, to borrow from a post I wrote a long time ago at my own blog:

Spending trillions of dollars financing a massive reinvention of our transportation infrastructure – an unquestionable public good – is a lot different then spending trillions on say, video games. Which, while awesome, aren’t exactly a wise investment (I’m looking at you Atari Lynx and Sega Game Gear). The real measure of fiscal responsibility isn’t deficit spending as much as it is the return on said spending. If President Obama’s spending puts the country on a sustainable fiscal footing in the long-term, even if it is significant, it will be far more “responsible” than President Bush’s comparatively smaller, but overall disastrous, spending.

 
 

Posted via email from Jim Nichols

A Philippine history of violence

Commentary by Victor Mallet in Financial Times on recent violence in Philippines
If it were not for decades of violence, Mindanao’s climate and scenery could make it as popular a tourist destination as Thailand, Bali or Malaysia (or the Philippine island of Boracay).

I once attended a family wedding on an idyllic island off Davao and later climbed with my wife through tropical forest to the frosty summit of Mount Apo, the dormant Mindanao volcano that is country’s highest peak. We were the only visitors at the time to this extraordinarily beautiful place. Perhaps the fact that our guide stumbled into a New People’s Army (communist) guerrilla on the path ahead of us explained the lack of fellow-tourists.

The problems facing Mindanao are reasonably well known – corruption, overpopulation, bad government and separatism fuelled by religious extremism – but the solutions are far from obvious.

On Tuesday, President Gloria Macapagal Arroyo responded to this week’s atrocity by declaring a state of emergency in parts of the island, but since neither national nor regional governments have proved capable of enforcing the law, it was probably no more than a necessary political gesture. The politics of Mindanao remain as challenging for Philippine leaders today as those of Cebu and Mactan were for Magellan nearly half a millennium ago.

Posted via email from Jim Nichols

Manila declares state of emergency

The killing of at least 46 people in the southern Philippine province of Maguindanao on Monday could herald a surge in political violence as powerful clans exact revenge on each other while stepping up the fight for next year’s elections, local residents and analysts warned on Tuesday.

Gloria Macapagal Arroyo, the Philippine president, declared a state of emergency in three areas in the south of the country on Tuesday following the worst case of election-related violence in the country’s recent history.

The authorities have so far recovered 46 corpses from a “mass grave” believed to contain the bodies of the victims, according to the ABS-CBN television station.

The military presence in Cotabato city, one of the areas covered by emergency rule and the nearest urban centre to the site of the killings, more than doubled and security forces tried to restrict mobility to prevent members and supporters of two of Mindanao’s most powerful clans from attacking each other.

The local provincial police chief was detained on Tuesday after witnesses saw three of his officers at the scene of the attack two days ago, Reuters reported.

Abusana Maguid may bear “command responsibility” for the actions of his officers, who were also detained, National Police spokesman Leonardo Espina said. “All who are responsible will be made accountable. There will be no sacred cows.”

Many of the people killed on Monday were relatives and supporters of Ismael Mangudadatu, a town vice-mayor who was planning to challenge Andal Ampatuan, the province’s powerful and long-standing governor, in next year’s polls. The dead included Mr Mangudadatu’s wife and sister, as well as a dozen journalists.

Mr Mangudadatu claimed that Ampatuan family members and supporters had been implicated in the deaths by survivors. The Ampatuans promised to co-operate with government investigators, Jesus Dureza, the president’s adviser on the southern Philippines, told ABS-CBN.

A power blackout engulfed Cotabato city in darkness early yesterday evening, according to local reports, adding to tensions in the mainly Christian community, which is surrounded by Muslim-majority provinces.

“People here are going home earlier than usual for fear of being caught in the crossfire in case members of the [Ampatuan and Mangudadatu] clans chance on each other,” said a Catholic priest in the city.

The priest, who asked not to be named, said many city residents feared the eruption of rido – or revenge killings – between members of the two extended families, who used to be political allies but are now vying for leadership of Maguindanao province in next year’s polls.

“Many of those killed were women, including the wife of vice-mayor Mangudadatu, making the situation particularly prone to rido,” said the priest.

One political analyst said the killings in Maguindanao could portend an upsurge in violence ahead of the May 2010 polls as conflicts broke out and intensified among local leaders who used to work together under Mrs Arroyo’s ruling Lakas-Kampi party.

Posted via email from Jim Nichols

Japanese exports boost growth hopes

Strong demand from China and other Asian economies helped Japanese exports, which last month fell at their slowest rate for a year, boosting hopes that the economy will continue to report healthy growth.

In October, exports fell 23.2 per cent from a year earlier, compared with a 30.6 per cent decline in September, according to data released by the Ministry of Finance on Wednesday. The figure represented the smallest drop since October 2008, when exports fell 7.9 per cent.

On a seasonally adjusted basis, the value of shipments rose for the third straight month by 2.5 per cent from September.

Posted via email from Jim Nichols

Existing home sales jumped 10.1 percent in October, rental vacancy rates at all time high...

The first time home buyers credit--though having positive impact--for the most part simply pushed forward home purchases making October a good month. 
 
There is going to be further downward pressure on home prices.  There is an oversupply of housing which is pushing down home prices and rental rates.  As rental rates fall its likely that some landlords will be inclined to put houses on the market--further increasing supply and lowering prices.
 
Getting a handle on the mortgage crisis should be a top priority at the Federal and state level.  Though I doubt we will see much action on that front at least at the state level.
 
If I were a State Rep @JimN2010 right now, I'd be pushing Right to Rent legislation here in Georgia during the upcoming 2010 session to help address the mortgage crisis and get the real estate markets stabilized.

Posted via email from Jim Nichols

Monday, November 23, 2009

Labor in the news: St. Francis Hotel Workers on Strike

As research shows for the typical U.S. worker (in the middle of the national pay scale) unionization raises wages about 14%.

For low-wage workers, unionization raises wages even more – about 21%.  For more on economic impacts or unions you can check out the Center for Economic and Policy Research.

Being in a union has given my wife opportunity and quality of life--not to mention a ticket into the middle class that we wouldn't have had without it. 

Wanted to pass on some recent labor news from activist David Bacon...

SAN FRANCISCO, CA - 19NOVEMBER09 - About 650 workers at the St. Francis Hotel, one of the city's oldest and most luxurious, walked out on strike  on November 18.  This was the third of what may be many strikes hit San Francisco's Class A hotels.  The contract with the workers' union, UNITE HERE Local 2, expired on August 14.  Since then, Local 2 has been trying to bargain a new agreement in the middle of an economic depression. 

San Francisco's largest hotels are demanding cuts in health and retirement benefits, and increased workloads, saying that the economic crisis has reduced tourism in the city.  The luxury hotel chains want workers begin paying for their healthcare premiums -- $35/month this year, $115/month next year, and $200/month the year after.    A typical San Francisco hotel worker earns $30,000 per year, and many can't work a full 40-hour week.

Over the first nine months of 2009, Starwood Hotels and Resorts, which manages the Westin St. Francis, earned $180 million in profits.   Starwood also manages three other San Francisco Class A hotels.   The owner of the St. Francis, Strategic Hotels and Resorts, saw $11 million in earnings during the same period.  The company bought the hotel for $439 million in 2006.
       
Local 2 has offered a one-year agreement that would increase costs by only 1.5% (or about $500,000 at the St. Francis), but the hotels have responded that they want that low-cost structure to continue for several years more, in which their revenues and profits would rise as the depression ends.  The union has called a boycott of the St. Francis, along with the two other hotels struck earlier in November -- the Grand Hyatt and the Palace (also managed by Starwood).
       


For more articles and images about hotel workers, see

See also Illegal People -- How Globalization Creates Migration and Criminalizes Immigrants  (Beacon Press, 2008)
Recipient: C.L.R. James Award, best book of 2007-2008

See also the photodocumentary on indigenous migration to the US
Communities Without Borders (Cornell University/ILR Press, 2006)

See also The Children of NAFTA, Labor Wars on the U.S./Mexico Border (University of California, 2004)

Posted via email from Jim Nichols

The US Deficit--What if we Nationalized our health care system and created Single payer system?

To expand on my US Deficit/Health Care Reform Thread...

My friends on the left support nationalizing the health care system and creating a single payer system like Canada or the UK.  

A position which Obama and Democrat leaders wrote off from the start--another of oh so many examples that show how absurd the claim that the Democratic leadership are controlled by the liberal wing of their party is!

Not to mention the left--Greens, socialists, et al who find the Democratic Parties center-right policies far too conservative.

Though I personally thought a reasonable compromise would be to create a strong public option its useful to look at our long term deficits in this scenario as well for good context.

Here's the US Deficit if health care costs aligned with the UK's health care system---which is very popular in the UK, as was noted earlier this year in the Financial Times: Health Attacks rile Britons.

Posted via email from Jim Nichols

The US Deficit--What if we Nationalized our health care system and created Single payer system?

To expand on my US Deficit/Health Care Reform Thread...

My friends on the left support nationalizing the health care system and creating a single payer system like Canada or the UK.  

A position which Obama and Democrat leaders wrote off from the start--another of oh so many examples that show how absurd the claim that the Democratic leadership are controlled by the liberal wing of their party is!

Not to mention the left--Greens, socialists, et al who find the Democratic Parties center-right policies far too conservative.

Though I personally thought a reasonable compromise would be to create a strong public option its useful to look at our long term deficits in this scenario as well for good context.

Here's the US Deficit if health care costs aligned with the UK's health care system---which is very popular in the UK, as was noted earlier this year in the Financial Times: Health Attacks rile Britons.

Posted via email from Jim Nichols

Why we need Health Care Reform---the US Budget Deficit

One of the top priorities of the Federal government over the long term is to cut the deficit.  In fact one of the single biggest reasons I opposed the Bush tax cuts was that is took a US budget surplus and turned it into budget deficits leading the US Government to bring in less revenue that was currently committed to by the Federal Government.

One of the key reasons I support health care reform is that the key source of our long term deficits are health care costs and starting the process of cutting costs we begin the serious task of taking on the long term deficit.

The Center for Economic and Policy Research's Health Care Budget Deficit Calculator is a great tool to get a better context on the health care debate...

Former Chair of the Henry County Republican Party Charles Mobley has taken to calling me "The Political Scientist" because I advocate research over political theory.  My degree in political science predisposes me to empirical data--and having watched a lot of nonsense transpire in the past two years working as a legislative aide at the Captiol I can tell you point blank citizens need to do their own homework because our politicians and the media can't be trusted when it comes to giving you "all the facts". 

So here's your "homework" so to speak--go check out the Calculator.

CEPR's calculator does a great job of putting health care reform into context using empirical data in an easily assessable manner.  So take a moment and check out the calculator----sidenote--- I have to use firefox to view it, when I did my last Internet Explorer update the Calculator no long works for me for some reason.  

Here are the long-term deficits with no change to our health care system in yellow and in blue you can see the deficit if health care costs are purely coming from aging within the population rather than the skyrocketing health care inflation we currently face.

Posted via email from Jim Nichols

Why we need Health Care Reform---the US Budget Deficit

One of the top priorities of government over the long term is to cut the deficit.  In fact one of the single biggest reasons I opposed the Bush tax cuts was that is took a US budget surplus and turned it into a budget deficits leading the US to bring less revenue that was currently committed to by the Federal Government.

One of the key reasons I support health care reform is that the key source of our long term deficits are health care costs and starting the process of cutting costs we begin the serious task of taking on the long term deficit.

The Center for Economic and Policy Research's Health Care Budget Deficit Calculator is a great tool to get a better context on the health care debate...

Former Chair of the Henry County Republican Party Charles Mobley has taken to calling me "The Political Scientist" because I advocate research over political theory.  My degree in political science predisposes me to empirical data--and having watched a lot of nonsense transpire in the past two years working as a legislative aide at the Captiol I can tell you point blank citizens need to do their own homework because our politicians and the media can't be trusted when it comes to giving you "all the facts". 

So here's your "homework" so to speak--go check out the Calculator.

CEPR's calculator does a great job of putting health care reform into context using empirical data in an easily assessable manner.  So take a moment and check out the calculator----sidenote--- I have to use firefox to view it, when I did my last Internet Explorer update the Calculator no long works for me for some reason.  

Here are the long-term deficits with no change to our health care system in yellow and in blue you can see the deficit if health care costs are purely coming from aging within the population rather than the skyrocketing health care inflation we currently face.

Posted via email from Jim Nichols

Saturday, November 21, 2009

Stimulus in action...

An infusion of stimulus funding is helping Camden County schools stay afloat financially, saving jobs and programs.

Because of its own budget problems, the state may reduce the more than $6.4 million it had planned to forward to the district, Superintendent Will Hardin said.

So far, the district has received $2.6 million of the $3.7 million it was scheduled to receive from the state to apply toward its overall budget. In addition, the district is set to receive nearly $938,000 in Title I grants, $46,000 for school lunch equipment, $56,000 for preschool programs and about $1.7 million for special education programs.

Some of the stimulus money is used to fund salaries for 19 teachers the next two years, school officials said.

"It's being sent to us piecemeal," Hardin said. "We submit requests, and they reimburse us."

When the school board was preparing its budget for the current year, there were concerns that programs would be cut and teachers could lose their jobs.

Sixteen high-seniority employees, including two principals, 13 teachers and a guidance counselor, accepted early retirements last year as a way to save lower-paying teachers' jobs.

Former St. Marys Middle School Principal Jo Beth Bird said her decision to retire last year - at least four years before she intended - probably saved two or three teaching jobs.

In all, administrators cut 43 positions through retirement, attrition and increased class size. There are now about two additional students in each class.

In an earlier interview, Board of Education Chairman Herb Rowland said the district's student-teacher ratio is still below the state average.

He said every department made sacrifices to have minimal impact on teachers, students and programs.

Hardin said he and other administrators would have been forced to either raise school taxes or cut more teaching positions without the stimulus money.

"The cuts to personnel would have been deeper," he said. "It has helped us save some jobs."

 
 

Posted via email from Jim Nichols

Thoughts on the stimulus...

Dough Henwood over at Left Business Observer writes...
spending so far is quite small—about 1% of GDP has been actually disbursed and received. By contrast, the WPA during the 1930s spent about twice that much—and built thousands of schools, rebuilt thousands of hospitals, repaved 280,000 miles of road, etc. No one is even talking about anything like that now. And two, the spending by state is kind of amazing. Toward the top of the list, measured against total income in the state, are small places like Alaska, North Dakota, Montana, and South Dakota. Toward the bottom, a lot of big ones: New York, New Jersey, and Connecticut among them. California just missed making the bottom 10. Fascinating how Washington redistributes money away from states that are more liberal towards those that are most conservative—and most likely to rail against Washington. Can we just cut them off?

Posted via email from Jim Nichols

Thursday, November 19, 2009

Please tell me it was just a political statement...

So I'm headed over to midtown ATL to canvass for Kasim Reed and on NPR I hear Obama state that our long term deficits could push us into a double dip recession.  It was a good thing I was sitting as I nearly fell over.
 
This morning before work during my blurry eyed blog check i'm glad to see some sanity pointing out the problem with the claim...
 
Economist Mark Thoma--Obama's wrongheaded thinking on Deficit:  

I hope his economic advisers set him straight, though I suppose there's a chance that this nonsense is coming from them. We needed a larger stimulus package to begin with, and the economy could still use more help, labor markets in particular.

Let's hope that this doesn't turn into a call to actually start balancing the budget before the economy has fully recovered as that would increase the chances of the double dip recession that he is so worried about (something we should have learned from the 1937-38 experience where an attempt to balance the budget prematurely plunged the economy back into recession).

These comments also make it sound like any jobs program, if we get one at all, will be limited to (right-wing approved) tax cuts which is, in my opinion, inferior to direct job creation strategies. Tax cuts can be part of the mix, but by themselves are unlikely to do enough to solve the employment problem.

Brad Delong over at Berkeley does a great follow up Fiscal Expansion that is Deficit Neutral in the long run...

One way to interpret this--which may or may not be wrong--is that right now we are really and truly fracked beyond previous imagining. Let's go back to the old ca. 1960 standard macroeconomic diagram, with the interest rate on the vertical axis and the economy's level of spending on the horizontal axis. We then have:

  • A red curve the IS curve, which tells us what the economy's (real) spending level is--the sum of household spending on consumption, business spending on investment, net exports, all functions of this real interest rate, plus government purchases) as a function of the current value of the (real, long-term, risky) interest rate (and also of lots of other stuff that affects the position of the curve)...

  • A blue curve, the LM curve, which tells us what the (short-term safe nominal) interest rate is as a function of the (nominal) spending level that is consistent with households' and businesses' being willing to hold the economy's current money stock...

  • A double-headed orange arrow, the spread, the difference between the short-term safe nomina interest rate and the long-term risky real interest rate--the difference between the two being the sum of a term premium, an expected inflation rate, and a risk and default premium...

Document1

In this framework, the problem with credit easing--the central bank increasing the money supply now and moving the blue curve to the right without changing expectations of what the money stock will be in the long-term future--is that the curve has flat because cash and short-term Treasury bonds are close substitutes, so you expand the money supply by a lot while doing little to boost spending and employment and land yourself with the problem of unwinding the money stock increase in the future in a way that does not hurt spending and employment when you do so:

Document1

(Quantitative easing--pouring a whole bunch of cash in the system with the idea of never reversing the money stock expansion could boost spending and employment considerably by creating expectations of inflation and so reducing the spread--but the Federal Reserve is not going there, and regards the idea with horror, shock, and shame.)

In this framework, banking policy--recapitalizing banks further and issuing government guarantees to shrink the spread--boosts spending and employment even when, as now, cash and short-term Treasuries are close substitutes. The problem with banking policy today is that no member of congress of either party of any political persuasion wants to get out in front supporting it.

In this framework, the problem with fiscal expansion--the government purchasing a bunch more things right now and so shifting the red curve to the right--is that it boosts the supply of government bonds in the future and so may raise the double-headed orange arrow that is the spread, getting you absolutely nowhere:

Document1

So what can we do? Looks like we are well and truly fracked.

Well. maybe not. My position on further fiscal expansion is twofold:

  • The claim that further government purchases would widen the spread might be true. It might now. Let's try it and see. The debt held by the public on Monday was $7,632,033,766,420.46. The debt held by the public a year and a half ago was $5,218,570,776,014.84. We have managed to boost the debt held by the public by $2,413,462,990,405.62 in eighteen months without materially moving the term premium significantly. (The risk premium has moved--there is a financial crisis on, after all.) So let's try it and find out.

  • This is an opportunity. We really need to reduce the deficit after 2030. We really need to have more government purchases now. So raise spending now, and raise taxes and impose spending caps starting in 2013 so that by the end of the 20-year budget window the projected debt is unchanged. Thus we move the red line without increasing the spread: there's now increased supply of bonds in the long term to push up the interest rate on them. And we solve both our current near-depression problem and our post-2030 structural deficit problem.

To say that the Obama Admin dropped the ball on the stimulus package would be an understatement---they under spent and put too much into tax cuts (which people save... rather than spend defeating the whole purpose stimulus). 
 
Lets hope that some jobs programs or transfers to the states to plug holes in state budgets is coming... and please tell me Obama really didn't mean that shot term spending would bring a double dip recession.  The Great Depression was prolonged BECAUSE (what was it '37 i'm fuzzy and don't have time to look it up?) the government began to focus on deficit reduction... and it didn't end until the massive stimulus program known a World War two.
 
One we should start moving towards was touched on yesterday by the New York Times editorial--Hunger in the United States:

According to the new federal data, the number of people in households that lacked consistent access to adequate nutrition rose to 49 million in 2008, 13 million more than in the previous year and the most since the federal government began keeping the data 14 years ago.

About a third of struggling households had what the researchers called “very low food security,” meaning that members of the household skipped meals, cut portions or passed on food at some point during the year because they lacked money. The other two-thirds managed to feed themselves by eating cheaper or less varied foods, relying on government aid like food stamps or resorting to food pantries and soup kitchens, which have been seeing heavier and heavier traffic in recent years.

Families with inadequate resources typically feed the children first, shielding them from hardship as much as possible. But the new data showed that the number of households in which children were exposed to “very low food security” rose to 506,000 from 323,000 in 2007.

The Bush administration tried to deep-six this annual survey. But President Obama has dealt with it openly and called the danger to children especially troubling.

Mr. Obama, who is traveling in Asia, has set himself the task of wiping out child hunger by 2015. To do that, Congress needs to get busy on a broad plan to expand and fully pay for a whole range of nutritional programs aimed at school-age children and their families. Only then will vulnerable children across the country get the nutrition they need.

A short term spending boast to low income families and extensions of unemployment could help start the dialogue on this issue.  Talking economic voodoo, Mr. President, isn't going to move us towards those kinds of discussions....
 
"Mere parsimony is not economy.... Expense, and great expense, may be an essential part in true economy." 
 

Posted via email from Jim Nichols