Bigger Than Bush
January 2, 2009 5:43 pm

Paul Krugman

As the new Democratic majority prepares to take power, Republicans have become, as Phil Gramm might put it, a party of whiners.

Some of the whining almost defies belief. Did Alberto Gonzales, the former attorney general, really say, "I consider myself a casualty, one of the many casualties of the war on terror"? Did Rush Limbaugh really suggest that the financial crisis was the result of a conspiracy, masterminded by that evil genius Chuck Schumer?

But most of the whining takes the form of claims that the Bush administration’s failure was simply a matter of bad luck - either the bad luck of President Bush himself, who just happened to have disasters happen on his watch, or the bad luck of the G.O.P., which just happened to send the wrong man to the White House.

The fault, however, lies not in Republicans’ stars but in themselves. Forty years ago the G.O.P. decided, in effect, to make itself the party of racial backlash. And everything that has happened in recent years, from the choice of Mr. Bush as the party’s champion, to the Bush administration’s pervasive incompetence, to the party’s shrinking base, is a consequence of that decision.

If the Bush administration became a byword for policy bungles, for government by the unqualified, well, it was just following the advice of leading conservative think tanks: after the 2000 election the Heritage Foundation specifically urged the new team to "make appointments based on loyalty first and expertise second."

Contempt for expertise, in turn, rested on contempt for government in general. "Government is not the solution to our problem," declared Ronald Reagan. "Government is the problem." So why worry about governing well?

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Nine Steps to Peace for Obama in the New Year
January 1, 2009 3:15 pm

The following is a memo to Barack Obama from Deepak Chopra.

You have been elected by the first anti-war constituency since 1952, when Dwight D. Eisenhower was elected after promising to end the Korean War. But ending a war isn't the same as bringing peace. America has been on a war footing since the day after Pearl Harbor, 67 years ago. We spend more on our military than the next 16 countries combined. If you have a vision of change that goes to the heart of this country's deep problems, ending our dependence on war is far more important than ending our dependency on foreign oil.

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Unions and Recessions
December 29, 2008 8:07 pm

Ezra Klein

This is a nice point from The New York Times:

The argument against unions — that they unduly burden employers with unreasonable demands — is one that corporate America makes in good times and bad, so the recession by itself is not an excuse to avoid pushing the bill next year. The real issue is whether enhanced unionizing would worsen the recession, and there is no evidence that it would.

There is a strong argument that the slack labor market of a recession actually makes unions all the more important. Without a united front, workers will have even less bargaining power in the recession than they had during the growth years of this decade, when they largely failed to get raises even as productivity and profits soared. If pay continues to lag, it will only prolong the downturn by inhibiting spending.

I'd only add that the last great leap forward for unions was during World War II, and the last great expansion of the American middle class followed in its aftermath. In contrast, the most recent expansions -- which have largely occurred in the absence of unions -- have benefited America's rich.

Unions do not change economic growth, or at least there's little convincing evidence that they do. The countries with the world's highest growth rates -- the Nordic economies -- also have some of the world's highest rates of unionization. Denmark, Sweden, and Finland all approach 80 percent. Rather, unions change the distribution of economic growth. They direct more of it to the middle class and less of it to the executive class. The past few years have been an economy driven by the executive class. The question is whether that's what we want the next expansion to look like, also.

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Blast From the Past
December 29, 2008 7:02 pm

Remberring this Cover Story four years ago as this administration winds down.

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The Slave Next Door: Child Maids Being Exported To US From Africa
December 28, 2008 4:38 pm

IRVINE, Calif. - Late at night, the neighbors saw a little girl at the kitchen sink of the house next door.

They watched through their window as the child rinsed plates under the open faucet. She wasn't much taller than the counter and the soapy water swallowed her slender arms. To put the dishes away, she climbed on a chair.

But she was not the daughter of the couple next door doing chores. She was their maid.

Shyima was 10 when a wealthy Egyptian couple brought her from a poor village in northern Egypt to work in their California home. She awoke before dawn and often worked past midnight to iron their clothes, mop the marble floors and dust the family's crystal. She earned $45 a month working up to 20 hours a day. She had no breaks during the day and no days off.

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Science of the impossible coming soon
December 27, 2008 10:54 pm

They are going to fire 192 intense lasers at a hydrogen pellet the size of pinhead to create the same fusion that occurs in the sun. If they don't destroy California, it could be the first step to harnessing fusion power which would enable our civilization to evolve more quickly in the next few centuries.

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Taking Command
December 27, 2008 3:01 pm

Wesley K. Clark

Actually, Democrats and the military can get along. Here's how

..... Our military is a values-based institution. Don't think of it as Republican or Democratic. Sure, occasionally someone will pop up, like the radio talk-show host I met while traveling in Arizona, who assured me that he had become a dues-paying Republican while serving as a Marine officer and thought that everyone else should, too. But most of us are uncomfortable with partisanship. True, many in the military, especially those who have served longer, lean toward the conservative end of the political spectrum. (What would you expect? The military must obey the orders of the commander in chief and follow the chain of command, which means giving up one's own liberties and spending time in difficult and often very dangerous circumstances.) But the real military values aren't partisan values; they're service, loyalty, honesty, patriotism, respect, achievement and personal responsibility.

Which brings us to one more core military value, one that Democrats can easily embrace: fairness. Military leaders take care of their troops -- and their unit's families. They don't take advantage of their authority. Captains eat after their troops do, not before. Good officers get to work earlier than their subordinates and leave later. I used to joke on the campaign trail that the Army was a socialist organization: The government owned the housing and all the equipment I worked with, everyone's children went to the same schools and used the same hospitals, and the highest-ranking person (after more than 30 years in uniform) earned only about 10 or 12 times the salary of a raw recruit. In the military, we don't like favoritism, show-boating or elitism.

That's a good base upon which to build. But Democrats must also realize that the military's respect has to be earned. We don't consider ourselves an "interest group." Sure, we will always appreciate more pay, better housing and stronger veterans' benefits. But that isn't how the Democrats will win over the military. They'll win by being straight-up, clear-eyed and professional about national security. And if they are, the military will trust them, even with a painful withdrawal from Iraq and the inevitable defense cutbacks.......

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Once in a Century: Real Estate Financing
December 27, 2008 11:33 am

Excerpted from Bob Prechter's Elliott Wave Theorist

One of the ways that a lot of this real estate debt was financed is very unusual historically, and that is through asset-backed securities. They really came into their own in the decade of the 2000s up until 2007. A lot of people feel that such investment was normal, but it wasn’t. For years and years, housing was built essentially to provide a home for people; in other words, it was a consumption item. But in the 2000s it turned into an investment item for people other than bankers. Wall Street packaged mortgage loans and began selling them as investments to people who didn’t look very hard at what they were buying. And they didn’t feel that they had to because, again, they felt that they were covered, at least with Fannie and Freddie mortgages, by implied guarantees from the federal government.

What’s happened, though, is that the issuance of asset-backed securities has fallen nearly to zero, not far from where it started. This method of financing is abnormal and something that comes along maybe once a century, when financiers get together and figure out a way to dress up and distribute IOUs in a certain investment area. So it is very unlikely that we will be returning to this type of financing anytime soon.

If you are in the real estate business, you don’t have to feel alone. Here is a list [not shown] of celebrated money managers who in the past year have suffered tremendous losses in the stock market portfolios that they manage. As you can see, the S&P500 - when this was compiled - was down 41%, and two-thirds of these managers actually underperformed the S&P, all the way down to minus 60%. So, there is not only a real estate decline but also a stock market decline, and, as we will see in a couple of slides, we’ve also had a drop in commodities. It is very important that these markets are moving together. The last time that happened on such a scale was in the 1930s.

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Nice Work if You Can Get It
December 26, 2008 11:06 pm

Yglesias

The Washington Post takes a look at Fannie Mae’s new board. Dean Baker takes a look at the Post’s skewed priorities:

The remarkable part of this story is that the Washington Post reporter could not find a single person who thought that paying part-time workers $160,000 a year was a bad idea. There is absolutely no one cited in this piece who raised a question about the compensation levels for the board.

Keep in mind that this is a newspaper that is absolutely apoplectic over autoworkers getting $27 an hour. If we assume that the board members on average will devote 500 hours a year to their board duties, this puts their pay rate at $320 an hour.

Look, super-high salaries for the already wealthy equal necessary incentives for prosperity. Relatively high wages for the working class equals productivity destroying union malfeasance. That’s not really so hard to understand, is it?

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Barack Be Good
December 26, 2008 10:52 pm

Paul Krugman

.....Goo-goo, in case you’re wondering, is a century-old term for "good government" types, reformers opposed to corruption and patronage. Franklin Roosevelt was a goo-goo extraordinaire. He simultaneously made government much bigger and much cleaner. Mr. Obama needs to do the same thing.

Needless to say, the Bush administration offers a spectacular example of non-goo-gooism. But the Bushies didn’t have to worry about governing well and honestly. Even when they failed on the job (as they so often did), they could claim that very failure as vindication of their anti-government ideology, a demonstration that the public sector can’t do anything right.

The Obama administration, on the other hand, will find itself in a position very much like that facing the New Deal in the 1930s.

Like the New Deal, the incoming administration must greatly expand the role of government to rescue an ailing economy. But also like the New Deal, the Obama team faces political opponents who will seize on any signs of corruption or abuse - or invent them, if necessary - in an attempt to discredit the administration’s program......

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And The Women...
December 26, 2008 10:43 pm

Bob Cesca

The most admired women in America, according to Gallup:

1. Hillary Clinton 20%
2. Sarah Palin 11%
3. Oprah Winfrey 8%
4. Condoleezza Rice 7%
5. Michelle Obama 3%

Sarah Palin is second, eh? Yep, because quotes like this are so worthy of admiration:

"Uh. That thankfully our founders were wise enough to say we have this position and it's constitutional -- vice president will be able to be not only the position flexible, but it's gonna be those other duties as assigned by the president. A simple thing."

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Most Americans Believe in Multiple Paths to Salvation
December 26, 2008 12:08 pm

Associated Baptist Press - A majority of American Christians believe that at least some non-Christian faiths can lead to eternal life, according to a new survey released today by the Pew Forum on Religion & Public Life.

This inclusive belief is common even among evangelicals, a branch of Protestant Christianity whose doctrine specifically contradicts this more inclusive view. Even in this group, a full 47 percent said many religions can lead to "eternal life."

An earlier, similar poll with similar results had been criticized by many Christians. It asked about "other religions" bringing salvation, and critics felt it implied other Christian religions. This time, the survey was more specific, naming Hinduism, Judaism, and Islam as well as "no religious faith." Still, a majority of the respondents found them to be valid paths.

About one third of Americans say one’s beliefs determine who achieves eternal life, while an equal number say it depends on one’s actions. A tenth of the population say it is a combination of belief and action. The rest say something else determines salvation, they don’t believe in eternal life or they don’t know.

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Governor Ebenezer Arnold's nightmare before Christmas, "A California Carol"
December 23, 2008 11:01 pm

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Is Retired UAW Autoworker Dad Public Enemy No. 1?
December 21, 2008 5:50 pm

When you think of “Public Enemy No. 1,” you picture a Depression-era John Dillinger or maybe the UniBomber. But David R. Radtke says he has learned some shocking news—his dad, a retired UAW autoworker, might fit that bill.

Says Radtke:

“I have a confession. My father is an autoworker. I know that some people will recoil in disgust upon learning that fact, but it gets worse—he’s a retired UAW autoworker, and he and my mother live on a pension and have retiree health care benefits that supplement Medicare. In other words, he is public enemy No. 1 to Sens. Richard Shelby, Bob Corker and Jim DeMint.

“According to these senators, my dad and his cadre of active and retired UAW-represented autoworkers are responsible for this country’s economic downturn.”

“According to these senators, my dad and his cadre of active and retired UAW-represented autoworkers are responsible for this country’s economic downturn.”

In a new AFL-CIO guest column, Radtke, a Michigan attorney and member of the AFL-CIO Lawyers Coordinating Committee, describes the dastardly exploits that marked his high school-educated, blue collar father’s life—30 years of working his tail off, taking care of his family, educating his kids and earning a well-deserved retirement.

He says his dad and millions of other hardworking men and women like his father are despised and attacked by the right, sometimes the left, the rich and even poor in “America’s version of class warfare.”

His dad’s life, Radtke says, has really been the embodiment of the American Dream.

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Deflation
December 17, 2008 10:27 pm

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Will The Madoff Debacle Finally End The ---- "Who Could Have Known?" ---- Era?
December 16, 2008 9:33 pm

Arianna Huffington

See if this sounds familiar:

An ambitious and risky undertaking carried out with hubris, and featuring the weeding out of anyone who raises alarm bells, little-to-no transparency, an oversight system in which no central authority is accountable, and the deliberate manufacturing of ambiguity and complexity so that if -- when -- it all falls to pieces, the excuse "who could have known?" can be used....

Is it Iraq? Fannie Mae? Citigroup? Bernie Madoff?

The correct answer is: all of the above.

When you look at the elements that were crucial to the creation of each of these debacles, it's amazing how much in common they all have. And not just in how they began but in how they ended: with those responsible being amazed at what happened, because...who could have known? Well, to paraphrase James Inhofe, I'm amazed at the amazement.

In fact, when historians look for a name that sums up the Bush II years, they could do worse than calling them The "Who Could Have Known?" Era.

Each of the disasters listed above was entirely predictable. And, indeed, was predicted. But those who rang the alarm bells were aggressively ignored, which is why it's important that we not let those responsible get away with the "Who Could Have Known?" excuse.

Let's start with Iraq.........

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ZIRP!
December 16, 2008 8:08 pm

Paul Krugman

That’s zero interest rate policy. And it has arrived. America has turned Japanese.

This is the thing I’ve been afraid of ever since I realized that Japan really was in the dreaded, possibly mythical liquidity trap. You can read my 1998 Brookings Paper on the issue here.

Incidentally, there were a bunch of us at Princeton worrying about the Japan problem in the early years of this decade. I was one; Lars Svensson, currently at Sweden’s Riksbank, was another; a third was a guy named Ben Bernanke. I wonder whatever happened to him?

Seriously, we are in very deep trouble. Getting out of this will require a lot of creativity, and maybe some luck too.

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An Empire of Sentimentality
December 16, 2008 8:06 pm

Matthew Yglesias

.....The Iraqi people didn’t ask to be liberarted conquered and occupied by a foreign power that destroyed their country and then immediately set about meddling in Iraqi politics and until just a month or so ago was struggling mightily for the right to permanently station military forces on Iraqi soil contrary to the will of the Iraqi public. Not only did Iraqis not ask for such services, but nobody anywhere has ever asked for them.

The harsh reality is that this was not a noble undertaking done for good reasons. It was a criminal enterprise launched by madmen cheered on by a chorus of fools and cowards. And it’s seen as such by virtually everyone all around the world — including but by no means limited to the Arab world. But it’s impolitic to point this out in the United States.......

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Pentagon Pro-Troop Group Misspent Millions, Report Says
December 14, 2008 7:47 pm

Noah Shachtman, Wired

While the Pentagon preps for a new administration, a scandal from an earlier era is rearing its head.

A Defense Department project, supposedly designed to support U.S. troops, was used instead to channel millions of dollars to personal friends and allies of its chief. The "America Supports You," or ASY, program was led in a "questionable and unregulated manner," according to a Department of Defense Inspector General report, obtained by Danger Room. At least $9.2 million was "inappropriately transferred" by the project's managers. Much of that money served only to further promote ASY, instead of assisting servicemembers......

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Star paths reveal secrets of Milky Way's black hole
December 13, 2008 9:58 pm

Sixteen years of observations of stars around the galactic centre are assembled in this video. The real motion of the stars has been accelerated by a factor 32 million. The individual images have been shifted and stretched to the same scale and orientation.

One star, called S2, was observed over its complete 15.8-year-long orbit around the Milky Way's central black hole. The star approached the black hole to within one light day, which is only about five times the distance between the planet Neptune and the Sun.

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5 Disastrous Decisions That Got Us into This Economic Mess
December 13, 2008 7:45 pm

By Joseph Stiglitz, Vanity Fair

No. 1: Firing the Chairman

In 1987 the Reagan administration decided to remove Paul Volcker as chairman of the Federal Reserve Board and appoint Alan Greenspan in his place. Volcker had done what central bankers are supposed to do. On his watch, inflation had been brought down from more than 11 percent to under 4 percent. In the world of central banking, that should have earned him a grade of A+++ and assured his re-appointment. But Volcker also understood that financial markets need to be regulated. Reagan wanted someone who did not believe any such thing, and he found him in a devotee of the objectivist philosopher and free-market zealot Ayn Rand........

No. 2: Tearing Down the Walls

The deregulation philosophy would pay unwelcome dividends for years to come. In November 1999, Congress repealed the Glass-Steagall Act -- the culmination of a $300 million lobbying effort by the banking and financial-services industries, and spearheaded in Congress by Senator Phil Gramm. Glass-Steagall had long separated commercial banks (which lend money) and investment banks (which organize the sale of bonds and equities); it had been enacted in the aftermath of the Great Depression and was meant to curb the excesses of that era, including grave conflicts of interest.......

No. 3: Applying the Leeches

Then along came the Bush tax cuts, enacted first on June 7, 2001, with a follow-on installment two years later. The president and his advisers seemed to believe that tax cuts, especially for upper-income Americans and corporations, were a cure-all for any economic disease -- the modern-day equivalent of leeches. The tax cuts played a pivotal role in shaping the background conditions of the current crisis. Because they did very little to stimulate the economy, real stimulation was left to the Fed, which took up the task with unprecedented low-interest rates and liquidity. The war in Iraq made matters worse, because it led to soaring oil prices. With America so dependent on oil imports, we had to spend several hundred billion more to purchase oil -- money that otherwise would have been spent on American goods. Normally this would have led to an economic slowdown, as it had in the 1970s. But the Fed met the challenge in the most myopic way imaginable. The flood of liquidity made money readily available in mortgage markets, even to those who would normally not be able to borrow. And, yes, this succeeded in forestalling an economic downturn; America's household saving rate plummeted to zero. But it should have been clear that we were living on borrowed money and borrowed time.

The cut in the tax rate on capital gains contributed to the crisis in another way. It was a decision that turned on values: those who speculated (read: gambled) and won were taxed more lightly than wage earners who simply worked hard. But more than that, the decision encouraged leveraging, because interest was tax-deductible. If, for instance, you borrowed a million to buy a home or took a $100,000 home-equity loan to buy stock, the interest would be fully deductible every year. Any capital gains you made were taxed lightly -- and at some possibly remote day in the future. The Bush administration was providing an open invitation to excessive borrowing and lending -- not that American consumers needed any more encouragement.......

....The truth is most of the individual mistakes boil down to just one: a belief that markets are self-adjusting and that the role of government should be minimal. Looking back at that belief during hearings this fall on Capitol Hill, Alan Greenspan said out loud, "I have found a flaw." Congressman Henry Waxman pushed him, responding, "In other words, you found that your view of the world, your ideology, was not right; it was not working." "Absolutely, precisely," Greenspan said. The embrace by America -- and much of the rest of the world -- of this flawed economic philosophy made it inevitable that we would eventually arrive at the place we are today.

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GOP Memo: Slap Unions even if it hurts America
December 13, 2008 7:19 pm

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Claremont HD
December 12, 2008 7:55 pm

A guy in a suit scateboarding down a canyon road at 60 mph. Pretty awesome.

Adam Kimmel presents: Claremont HD from adam kimmel on Vimeo.

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We told you
December 12, 2008 7:12 pm

David Sirota

......They told us that eviscerating consumer protections would unleash the markets benevolent power and boost the economy. They told us that a trillion-dollar Wall Street bailout would solve a credit crisis. They told us that bailout would be subjected to intense oversight and scrutiny.

Wrong, wrong and wrong - and when critics predicted just that, sneering commentators and congressional leaders berated us as know-nothing Luddites, conspiracy theorists, or both.

But with the release of three new reports, there's no debate anymore about who was correct and who wasn't. The studies prove that the critics were right and the ideologues of Washington were wrong.

When in 2005 Congress overwhelmingly passed a credit card industry-written bill gutting bankruptcy laws, progressives were right to try to stop it - and not just because it was an immoral move to legalize usury. We were right because as the New York Federal Reserve Bank reports, the bill played an integral role in the recent foreclosure surge that crushed the economy.

In the past, bankruptcy laws made sure debtors first and foremost continued paying their mortgages so that they could stay in their home. But the 2005 legislation effectively compels debtors to first pay off their credit cards, meaning many then have no money left to pay their mortgage. The Feds report estimates that the bankruptcy bill is causing 32,000 more foreclosures per quarter than the economy would have already generated. ......

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