Lawrence O’Donnell Absurdly Claims GOP Failure To Raise Debt Ceiling Would Crash the Country, Possible Worldwide Depression

November 3, 2010 · Posted in The Capitol · Comment 

Lawrence "Crazy Larry" O'Donnell was back to his former self during MSNBC's Election Night coverage Tuesday. During the 9 p.m. EDT hour O'Donnell claimed that if Rand Paul would not vote as senator to raise the debt ceiling, it would destroy the United States' credit rating and possibly spark a worldwide depression. O'Donnell also pressed House Minority Whip Eric Cantor (R-Va.) on the matter.

After Cantor refused to give O'Donnell a direct answer to his oddball question, the frustrated MSNBC host ranted that he didn't want to see Cantor on MSNBC again.

In the beginning segment, O'Donnell was giving commentary after live coverage of Rand Paul's victory speech. Paul, he noted, will soon be pressed to vote on raising the debt ceiling, something which O'Donnell asserted is vital to the health of the U.S. economy.  
 

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NewsBusters.org - Exposing Liberal Media Bias

World War II and the End of Depression

November 1, 2010 · Posted in The Capitol · Comment 

In addition to everything else that’s wrong with David Broder’s invade Iran column, it’s worth pointing out that wartime spending was hardly the reason for the US recovery from the Great Depression. Among other things, we had extremely strong growth in FDR’s first term long before mobilization was under way. As Christina Romer explained (PDF) in her speech on “Lessons from the Great Depression
for Economic Recovery in 2009,” the key measures were unorthodox monetary measures that don’t have totally clear analogues today:

A second key lesson from the 1930s is that monetary expansion can help to heal an economy even when interest rates are near zero. In the same paper where I said fiscal policy was not key in the recovery from the Great Depression, I argued that monetary expansion was very useful. But, the monetary expansion took a surprising form: it was essentially a policy of quantitative easing conducted by the U.S. Treasury.

The United States was on a gold standard throughout the Depression. Part of the explanation for why the Federal Reserve did so little to counter the financial panics and economic decline was that it was fighting to defend the gold standard and maintain the prevailing fixed exchange rate. In April 1933, Roosevelt temporarily suspended the convertibility to gold and let the dollar depreciate substantially. When we went back on gold at the new higher price, large quantities of gold flowed into the U.S. Treasury from abroad. These gold inflows serendipitously continued throughout the mid-1930s, as political tensions mounted in Europe and investors sought the safety of U.S. assets.

Under a gold standard, the Treasury could increase the money supply without going through the Federal Reserve. It was allowed to issue gold certificates, which were interchangeable with Federal Reserve notes, on the basis of the gold it held. When gold flowed in, the Treasury issued more notes. The result was that the money supply, defined narrowly as currency and reserves, grew by nearly 17% per year between 1933 and 1936.

It seems to me that the closest contemporary versions of this are all things that do require coordination between the Fed and others—some kind of money-financed fiscal policy. That could be “helicopter drops” of money or infrastructure spending financed by printing money or both. A more modest step along these lines that we definitely should be taking is to stop paying interest on bank reserves, thus giving a small nudge in the direction of getting more money circulating.


Yglesias

Where are the Jobs? The Parallels between Today and the Great Depression

October 30, 2010 · Posted in The Capitol · Comment 

The Great Recession officially ended way back in June of 2009, so why are so many Americans still out of work?

It’s not because politicians were twiddling their thumbs. Indeed, from from bailouts to “Cash for Clunkers” to the massive stimulus plan, government has busied itself with trying to fix the economy. And, according to President Obama, this “bold, persistent, experimentation” has brought our country back from the brink.

Obama borrows that phrase from President Franklin Rooselvelt, and today’s president has a lot in common with the original bold, persistent, experimenter. Like Obama, FDR was a charismatic Democrat who replaced an unpopular Republican during a time of crisis. And like Obama, FDR championed a slew of policies designed to get America back to work.

Today many Americans credit FDR with rescuing our nation from the Great Depression, but there’s plenty wrong with that view, says Lee Ohanian, a UCLA economics professor who specializes in economic crisis.

“What’s wrong with that view is that private-sector job growth did not come back under Roosevelt,” says Ohanian, who notes that Americans often forget how long the Great Depression lasted. Unemployment stood at 17 percent in 1939, a decade after the infamous stock market crash, and, although times were much worse back then, Ohanian sees troubling parallels between the Great Depression and the Great Recession. In both instances our nation emerged from a severe downturn with strong productivity growth and the banking system largely restored. We were poised for a recovery, but didn’t get one. “So the key puzzle for both today and the 1930s is why aren’t private-sector jobs being created at a much more rapid rate?”

Uncertainty may have something to do with it. “Uncertainty is an enemy of job creation,” says Ohanian. “Because in a world with a lot of uncertainty there’s a tendency to ‘wait and see.’” Our nation’s job creators wait and see what Washington’s next experiment will be.

CEO Joanne Garneau has spent a year waiting for the Federal Trade Commission to announce a new regulation that will determine whether her company hires more employees or even stays in business. It’s just one regulation, a tiny one by Washington standards. How will businesses end up being affected by ObamaCare or the 2,300-page financial overhaul? What if taxes go up? Today, like the 1930s, uncertainty reigns.

According to research conducted by Ohanian and fellow UCLA economist Harold L. Cole, FDR’s anti-market policies actually prolonged the Great Depression by seven years . And what about Obama’s policies? When the unemployment rate finally does improve will he receive credit for rescuing America from the Great Recession or blame for prolonging the crisis?

Approximately 6.40 minutes.

“Where are the Jobs? The Parallels between Today and the Great Depression” is written and produced by Ted Balaker. Field Producers: Paul Detrick and Zach Weissmueller; Production Associate: Sam Corcos.

Got to Reason.tv for HD, iPod, and audio versions of this and all our videos, and subscribe to Reason.tv’s YouTube channel to receive automatic notification when new content is posted.


Big Government

CBS: Unemployment situation still the worst since the Depression

October 25, 2010 · Posted in The Capitol · Comment 

What’s next? “The abyss.”


The shock here isn’t the news that CBS reports, but the fact that CBS reports it at all — or at least before the midterm elections. Give 60 Minutes full credit here; they don’t soften the blow. Indeed, they report that the actual number of unemployed, underemployed, and those who have given up looking for [...]

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Hot Air » Top Picks

Harry Reid: But for Me, We’d Be in a Worldwide Depression

October 21, 2010 · Posted in The Capitol · Comment 

**Written by Doug Powers

Sharron Angle has more than once told Harry Reid to “man up,” but this is overdoing it just a bit. Yeah, he actually said it: “But for me, we’d be in a worldwide depression.”

If Harry Reid hadn’t agressively pursued his patriotic constitutional duty of spending as much money as possible, the world would be in a bread line as we speak.

Somehow acting as Barack Obama’s rubber stamp in adding as much new debt in less than two years — $ 3 trillion at last check — an amount that took from 1776 to 1990 to accumulate, saved the world.

Reid wants everybody to believe that he’s Bruce Willis in Armageddon, when in fact it’s now common knowledge that he’s been nothing but the asteroid for far too long. Nice try, Harry:

(h/t Breitbart via Drudge)

**Written by Doug Powers

Twitter @ThePowersThatBe

Michelle Malkin

Good news from Harry Reid: Harry Reid saved us from a worldwide depression

October 21, 2010 · Posted in The Capitol · Comment 

What?


Via Breitbart, what on earth is he talking about? Does he mean … TARP? There’s a case to be made there about averting a depression, but TARP was famously (or rather, infamously) an initiative spearheaded by the dreaded Bushitler and his lackey Hank Paulson. It drew bipartisan support; it wasn’t some sort of Harry Reid [...]

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Hot Air » Top Picks

How Herbert Hoover Didn’t End the Depression

October 14, 2010 · Posted in The Capitol · Comment 

By David Boaz

Joshua Green writes in the Atlantic, after discussing the Austrian economists’ views in 1929 on what to do about the not-yet-great depression:

Herbert Hoover’s Treasury secretary, Andrew Mellon, offered similar counsel, famously urging Hoover to “liquidate” and “purge the rottenness out of the system.” But this failed to stop the catastrophe.

That’s true. And you know, here’s a general rule: Absolutely nothing that a treasury secretary says to a president will affect the real economy if the president ignores his advice and does something else.

Hoover didn’t cut federal spending, he doubled it. He established the Reconstruction Finance Corporation. He propped up wages and prices. Indeed, he launched the New Deal. And Green is right: In the face of these policies, Mellon’s memos to Hoover failed to stop the catastrophe.

The rest of the article, about Ron Paul as “The Tea Party’s Brain,” is pretty interesting.

How Herbert Hoover Didn’t End the Depression is a post from Cato @ Liberty - Cato Institute Blog


Cato @ Liberty

How Herbert Hoover Didn’t End the Depression

October 14, 2010 · Posted in The Capitol · Comment 

By David Boaz

Joshua Green writes in the Atlantic, after discussing the Austrian economists’ views in 1929 on what to do about the not-yet-great depression:

Herbert Hoover’s Treasury secretary, Andrew Mellon, offered similar counsel, famously urging Hoover to “liquidate” and “purge the rottenness out of the system.” But this failed to stop the catastrophe.

That’s true. And you know, here’s a general rule: Absolutely nothing that a treasury secretary says to a president will affect the real economy if the president ignores his advice and does something else.

Hoover didn’t cut federal spending, he doubled it. He established the Reconstruction Finance Corporation. He propped up wages and prices. Indeed, he launched the New Deal. And Green is right: In the face of these policies, Mellon’s memos to Hoover failed to stop the catastrophe.

The rest of the article, about Ron Paul as “The Tea Party’s Brain,” is pretty interesting.

How Herbert Hoover Didn’t End the Depression is a post from Cato @ Liberty - Cato Institute Blog


Cato @ Liberty

US Senate Briefing, Fri 10/8/10: Let’s party like it’s the Great Depression!

October 8, 2010 · Posted in The Capitol · Comment 

According to the latest release from the Bureau of Labor Statistics today, “Nonfarm payroll employment edged down (-95,000) in September, and the unemployment rate was unchanged at 9.6 percent . . . .” The AP adds, “The Labor Department says the unemployment rate held at 9.6 percent. The jobless rate has now topped 9.5 percent for 14 straight months, the longest stretch since the 1930s. The private sector added 64,000 jobs, the weakest showing since June.”

Reacting to these disappointing numbers this morning, Senate Republican Leader Mitch McConnell said, “Americans are speaking out, and they want Washington to focus on jobs. But with each passing month, and each new jobs report, it becomes increasingly clear that while massive Washington spending is growing the size of government, it’s clearly not growing sustainable private-sector jobs. The trillion-dollar stimulus didn’t live up to promises made by the Obama administration and Democrats in Congress; the massive growth of the federal government didn’t result in a similar growth of jobs; and the maze of new regulations, health care mandates and taxes are having a predictable impact on the economy.”

Indeed, the $ 814 billion stimulus seems to have delivered little if any of what the Obama administration predicted back when it was passed in early 2009. White House economists Christina Romer and Jared Bernstein claimed that if the stimulus passed, unemployment wouldn’t exceed 8%. Vice President Joe Biden actually boasted, “[T]his is about getting this out and spent in 18 months to create 3.5 million jobs and . . . literally drop-kicks us out of this recession and we begin to grow again.” Yet, unemployment stubbornly remains at 9.6% and 3.3 million jobs have been lost since the President Obama signed the stimulus bill into law.

So what have Americans gotten from the stimulus? For one thing, hundreds of billions of dollars of debt, since none of the spending in the bloated bill was paid for. Thanks in part to stimulus spending, the Congressional Budget Office announced last night that the deficit for 2010 was nearly $ 1.3 trillion, “the second-worst mark since 1945,” according to Dow Jones. “The congressional scorekeeper said the total deficit recorded in the just completed fiscal year was only $ 125 billion less than the record high of $ 1.4 trillion set in fiscal 2009.” In other words, the two worst post-World War II deficits were last year and this year. Dow Jones also notes, “The deficit in fiscal 2010 was equal to 8.9% of U.S. gross domestic product, well above the long-run target of 3% that is considered by most economists to be sustainable.”

Meanwhile, The Washington Post reports today on what some of that deficit spending has gone towards. “The federal government last year sent about 89,000 checks of $ 250 each to dead or incarcerated people through the Obama administration’s economic stimulus program, according to a watchdog report. The Social Security Administration distributed about $ 13 billion to 52 million eligible beneficiaries in the form of $ 250 checks as part of the economic recovery program. The program cost a total of $ 814 billion. Most of the payments were issued properly, but the SSA failed to check all available payment records or was unaware that beneficiaries had died, according to a report by the Social Security Office of Inspector General.” Specifically, the Post reports, “About 71,600 recipients were dead before the SSA certified their payments, receiving a total of $ 18 million, according to the report. An additional 17,300 inmates received a total of $ 4.3 million. Most of the inmates were eligible to receive checks because the American Recovery and Reinvestment Act prohibited payments only to people incarcerated in the three months before it passed, which was November 2008 to January 2009. The SSA maintains conviction records and is normally required to suspend payments to incarcerated beneficiaries, the report said.”

So with unemployment higher than 9.5% for the longest stretch since the Great Depression, continuing job losses, and anemic private sector job growth, Americans are being reminded again today that President Obama and Democrats preferred economic solutions, growing government and deficit spending, simply aren’t working. Instead, Americans are faced with record deficits, record debt, and the news that millions of dollars of stimulus money are going to dead people and convicts. As Sen. McConnell said recently, “Americans have had it. They’ve had it with Democrats focusing on their own pet issues at the exclusion of Americans’ top priorities, and they’re tired of being told that if only the Democrats pass their agenda those priorities will be met. The results are in. The Democrat agenda has been a failure for the economy and for jobs.”

On The Floor

The Senate reconvened for a pro forma session at 11:30 AM today and is in recess until the next scheduled pro forma session on Tuesday at 10 AM. The Senate will hold a series of these sessions throughout the recess to prevent President Obama from making recess appointments, on the insistence of Senate Republican Leader Mitch McConnell.

The Senate will next reconvene for legislative business on Monday, November 15th.

The Senate will also hold pro forma sessions on: October 15 at 10:00 AM, October 19 at 12:00 PM, October 22 at 1:00 PM, October 26 at 12:00 PM, October 29 at 11:30 AM, November 1 at 9:00 AM, November 4 at 9:00 AM, November 8 at 12:00 PM, November 10 at 9:30 AM, and November 12 at 10:00 AM.

Before leaving, Senate Majority Leader Harry Reid filed cloture on the motions to proceed to 3 bills: a bill to promote natural gas and electric vehicles (S. 3815), a bill Democrats named the “Paycheck Fairness Act” (recall that they named “card check” the “Employee Free Choice Act”) (S. 3772), and a food safety bill that expands the FDA’s regulatory powers (S. 510).

From the Communications Center

SRCC: Where’s The Stimulus?

Sen. McConnell: Tax Hikes Are The Wrong Remedy For Unsustainable Unemployment Rates

Around the Hill

CNN: GOP slams Democrats over jobs report

Dow Jones: CBO: Federal Government FY10 Budget Deficit Just Less Than $ 1.3 Trillion

The Washington Post: Thousands of stimulus checks were sent in error, report says

The Washington Post: Tax wrangling in Congress creates uncertainty about next year’s paychecks

Politico: Department Of Health And Human Services errs on Medicare Advantage

The Hill: Rory Reid: Healthcare reform could end up hurting Nevada

Kimberley Strassel: The Cap-and-Trade Crackup

Liberty Pundits Blog

Morning Bell: The Protectionist Threat of Another Great Depression

September 29, 2010 · Posted in The Capitol · Comment 

A financial bubble fueled by easy money and loose credit bursts. Unemployment shoots up, and gross domestic product falls sharply. Some in the U.S. Congress blame foreigners for unfair trade practices and pass a trade bill that prompts widespread retaliation, exacerbates the popping of the bubble, and sends the country into further economic trouble. That is what happened with the title="http://en.wikipedia.org/wiki/Black_Tuesday" href="http://en.wikipedia.org/wiki/Black_Tuesday">Wall Street Crash of 1929, the title="http://en.wikipedia.org/wiki/Smoot%E2%80%93Hawley_Tariff_Act" href="http://en.wikipedia.org/wiki/Smoot%E2%80%93Hawley_Tariff_Act">Smoot–Hawley Tariff Act of 1930 and the title="http://en.wikipedia.org/wiki/Great_Depression" href="http://en.wikipedia.org/wiki/Great_Depression">Great Depression. Americans might hope our leaders would learn from our past mistakes. But the leftist majority in Congress, aided by some misguided members of the minority, is trying to repeat this terrible history.

At issue is H.R. 2378 or the Currency Reform for Fair Trade Act. The bill would grant new powers to the Obama administration, allowing them to raise tariffs on imports if the Commerce Department determines that an exporting country is manipulating its currency. Its not known what President Obama would do should this bill hit his desk. A real leader would let it be known loud and clear that it faces certain veto. The protectionist proponents of this bill believe that Chinese currency manipulation is artificially lowering the price of Chinese goods imported into the United States while inflating the price of U.S.-made exports. In 1930, the protectionists thought they could help American manufacturers by punishing foreigners. They were tragically wrong. The same misguided logic is being applied to China now. Heritage Foundation Research Fellow Derek Scissors title="http://www.heritage.org/research/reports/2010/09/targeting-the-yuan-a-feel-good-but-futile-response" href="http://www.heritage.org/research/reports/2010/09/targeting-the-yuan-a-feel-good-but-futile-response">explains why higher tariffs on Chinese imports would not help the U.S. economy: id="more-43928">

Applying duties to Chinese goods would not suddenly make the American textile, toy, furniture, or even computer-assembly industries globally competitive, and these are the primary imports from the PRC. Globalization means the U.S can punish China, but it cannot simply turn Chinese losses into American gains.

The Congressional Budget Office certified this analysis yesterday when it released a report showing that the new tariffs would raise only $ 20 million a year compared to the more than $ 1 billion a day in trade the United States does with China. title="http://www.businessweek.com/news/2010-09-29/china-currency-bill-to-have-limited-impact-u-s-agency-reports.html" href="http://www.businessweek.com/news/2010-09-29/china-currency-bill-to-have-limited-impact-u-s-agency-reports.html">The reason: “Many imports do not injure domestic firms because there are no competitors currently operating in the United States.”

But while raising tariffs on Chinese goods would have no economic benefit for the U.S. economy, it would definitely risk much wider economic harm. Morgan Stanley Asia chairman Stephen Roach warns in today’s title="http://www.nytimes.com/2010/09/29/opinion/29roach.html?ref=todayspaper" href="http://www.nytimes.com/2010/09/29/opinion/29roach.html?ref=todayspaper">New York Times: “China could very well retaliate against American exporters, and buy goods from elsewhere (a worrisome development in what is now America’s third-largest export market).” And former U.S. trade official Timothy Stratford tells title="http://www.bloomberg.com/news/2010-09-27/yuan-legislation-in-u-s-congress-may-prompt-retaliation-businesses-say.html" href="http://www.bloomberg.com/news/2010-09-27/yuan-legislation-in-u-s-congress-may-prompt-retaliation-businesses-say.html">Bloomberg: “This step would make it harder for us to export to China, not easier.”

China is no angel here. title="http://blog.heritage.org/2010/06/20/chinas-not-so-new-currency-policy/" href="../2010/06/20/chinas-not-so-new-currency-policy/">Its June announcement of an end to the dollar peg was fraudulent, and the exchange rate is only one part of China’s non-cooperative policy. And the mainstream media is title="http://blog.heritage.org/2010/08/31/discovering-china%E2%80%99s-state-led-economy-years-late/" href="../2010/08/31/discovering-china%E2%80%99s-state-led-economy-years-late/">just beginning to notice that the country’s Communist Party has been exercising more and more state control over the economy. But then again, so has our government with massive bank bailouts, government ownership of car companies, and a government takeover of the health care sector. Our answer to China must not be, cannot be, to become more like China.

Instead of going down a path toward protectionism and yet more government control of our economy, we must return to our nation’s strengths: free trade, the rule of law and a commitment to free enterprise. We must make the United States a better place to do business. title="http://www.heritage.org/Research/Reports/2010/08/Restoring-the-US-to-a-Free-Economy" href="http://www.heritage.org/Research/Reports/2010/08/Restoring-the-US-to-a-Free-Economy">Cutting the corporate tax rate, reducing government involvement in commercial decision making, title="http://www.heritage.org/Research/Reports/2010/08/Reining-in-Runaway-Spending-and-Deficits" href="http://www.heritage.org/Research/Reports/2010/08/Reining-in-Runaway-Spending-and-Deficits">reining-in runaway spending and deficits, title="http://www.heritage.org/Research/Reports/2010/08/The-Rising-Tide-of-Red-Tape" href="http://www.heritage.org/Research/Reports/2010/08/The-Rising-Tide-of-Red-Tape">freeing our businesses from red tape, and title="http://www.heritage.org/Research/Reports/2010/08/Meeting-America-s-Energy-and-Environmental-Needs" href="http://www.heritage.org/Research/Reports/2010/08/Meeting-America-s-Energy-and-Environmental-Needs">unleashing our natural resources to meet our energy needs: this is what Congress should be doing to return us to economic prosperity.

Quick Hits:

  • Harvard Pilgrim Health Care has notified customers that it href="http://www.boston.com/business/healthcare/articles/2010/09/28/harvard_pilgrim_cancels_medicare_advantage_plan/?camp=localsearch:on:twit:rtbutton">will drop its Medicare Advantage health insurance program at the end of the year due to Obamacare cuts to Medicare.
  • According to a href="http://online.wsj.com/public/resources/documents/WSJNBCPoll09282010.pdf">new Wall Street Journal poll, 54% of voters want to repeal Obamacare.
  • From amnesty to energy taxes, the leftist majority in Congress is planning to pass as many as href="http://thehill.com/homenews/senate/121223-dems-stuff-lame-duck">20 bills in the lame duck Congress.
  • The FBI and the U.S. Labor Department are investigating href="http://www.google.com/hostednews/ap/article/ALeqM5gysT1InVxATL1alVOEzUFRXSltPQD9IGVB000?docId=D9IGVB000">former SEIU president and current President Obama Deficit Reduction Commission member Andy Stern as part of a corruption probe.
  • Sen. Ben Nelson (D-NE) will href="http://www.heritage.org/Events/2010/09/Ben-Nelson">speak at The Heritage Foundation today at 10 AM EDT about href="http://www.heritage.org/Research/Reports/2010/09/Obama-Tax-Hikes-The-Economic-and-Fiscal-Effects">the dangers of the Obama tax hikes.

The Foundry: Conservative Policy News.

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