VIDEO: GOP Reps. Threaten To Disrupt Global Economic Stability, Shut Down Gov. To Send ‘Important Message’

November 16, 2010 · Posted in The Capitol · Comment 

Last Friday, a group of recently-elected Republican lawmakers gathered in Baltimore for a retreat sponsored by FreedomWorks, a tea party astroturf group run by corporate lobbyists. ThinkProgress traveled to the event, and spoke to several of the new members about their views on the vote to raise the debt ceiling, a necessary legislative item to prevent the United States government from defaulting on its debt entirely, which would cause a global economic tailspin.

Rep.-elect Andy Harris (R-MD) told us that he would absolutely vote against raising the debt ceiling. Harris — who made headlines this morning after he staged a tantrum upon learning that he had to wait a few weeks before being fully enrolled in taxpayer-subsidized health care for federal employees — explained that he would have the government default as “an important message to send to the American people.” Similarly, Sen.-elect Mike Lee (R-UT) reiterated that he would have the government default on its debt to show that Republicans don’t “slip into the same mindset” of the past:

HARRIS: If we’re serious about reining in government spending, we’re going to have to deal with not raising the debt ceiling. That allows increased government spending.

TP: You would vote against raising the debt ceiling?

HARRIS: Well, look I don’t when that vote is coming up. I don’t know the specifics of it. But we have to be serious about saying that the debt ceiling, not raising it is an important message to send to the American people. [...]

LEE: Now that Republicans are in control of the House and have more representation in the Senate, we can’t slip into the same mindset. And that’s what we do every time we raise the national debt ceiling. We make it that much easier to mortgage the future of unborn generations.

Watch a compilation:

Off camera, we also spoke to Rep.-elect Reid Ribble (R-WI), who told us that he too would vote against raising the debt ceiling.

In opposing the debt ceiling vote, the GOP freshmen have sought to cast themselves as courageous fiscal conservatives. However, in reality such a drastic move “would recklessly disrupt the sale and purchase of new Treasury bonds, and could potentially cause a run on outstanding Treasurys as well, as investors sought other investments.” As the Center for American Progress’ David Min reported, the GOP-led effort to kill the debt ceiling vote “could have catastrophic consequences for our economy as well as the economic stability of the rest of the world.” Min’s recent article, “The Big Freeze,” explains the consequences of playing politics with the debt ceiling.

Moreover, the Wonk Room’s Pat Garofalo has noted that a default on government debt — which has never happened before — would actually increase long-term deficits and debt, while cutting off Social Security and Medicare benefits for millions of seniors.

ThinkProgress

Florida Republican Officials Worry Rick Scott’s Economic Plan ‘Would Be Devastating’ To School Funding

November 15, 2010 · Posted in The Capitol · Comment 

In August, I pointed out that the economic plan put forward by now Gov.-elect Rick Scott (R-FL) was full of regressive tax cuts, making the country’s second most regressive state tax system even worse. But another byproduct of Scott’s plan is that school funding in his state may be significantly shortchanged.

Florida’s schools — like those in many states — are primarily funded by property tax revenue. Scott, meanwhile, has pushed for a 19 percent reduction in property taxes, along with a vague promise to fill the resulting hole in school funding from “state funds.” At least one Republican lawmaker in Florida is not convinced that Scott’s numbers add up:

Sen. Evelyn Lynn, R-Ormond Beach, a former Volusia school administrator heavily involved in education issues during her stint in the Legislature, said that plan worries her. “Certainly we want to reduce taxes, but we don’t want to hurt education,” Lynn said, adding that Scott may have to temper some of his camping promises once in office. “He may change his thinking on some things when he sees how the process works.”

As the Pensacola News Journal reported, “Escambia County Superintendent of Schools Malcolm Thomas, also a Republican, said Scott’s plan to reduce state-mandated school property taxes by 19 percent would cause serious problems because school districts have little left to cut.” “If he’s expecting local school boards to deal with a 19 percent decrease in local funding, it would be devastating, unless he’s going to replace that,” Thomas said.

And with Scott’s plan to further blow a hole in the state budget by eliminating the corporate income tax, it’s hard to see where he would find funding to supplement the schools’ budgets. Florida is facing a $ 2.5 billion budget shortfall next year, before taking into account the effects of the Gulf oil spill.

This isn’t the first time that a Republican lawmaker has cast doubt on Scott’s plans. Back in September, Florida’s incoming Speaker of the House, Dean Cannon, said that when it comes to rooting out unrealized savings in the state budget — one of the linchpins of Scott’s plan to balance the budget — “Republican House members have been looking for the pot of gold at the end of the rainbow marked ‘waste, fraud and abuse’ as a means to solve all of our problems. No one has found it, because it isn’t there.”

Wonk Room

More Unexpected Economic News: The Beginning Of The Double Dip? And Seven Economic Predictions….

November 15, 2010 · Posted in The Capitol · Comment 

New York state experienced a shocking drop in manufacturing. Economists are, once again, surprised:

New York state manufacturing unexpectedly plunged in November, the first contraction since July 2009 when the US economy exited recession, official data showed Monday.

The Federal Reserve Bank of New York reported its manufacturing activity index dropped to minus 11.1 points in November, from a positive 15.7 points in the previous month.

The Empire State Manufacturing Survey index is considered a bellwether of the manufacturing sector which has been a key strength in the economic recovery.

It was the first time the index fell below zero since July 2009, the month after the worst recession in decades was officially declared over.

The sharp 27-point decline surprised analysts, who had forecast on average a slip to a positive 11.7-point reading.

The new orders index plummeted to minus 24.4 points, from positive 12.9 points in October.

I have some shocking economic predictions:

1. The housing bubble is not completely burst.

2. The Fed is killing the value of the dollar. Expect more inflation.

3. More jobs will be lost…and right around the holidays.

4. As Obamacare kicks in, more businesses will lay off workers.

5. More people will default on homes as basic necessities like heating oil, gas, food, clothing go up in price.

6. When demand goes down because cost goes up, more jobs will be lost.

7. Basically, we’re screwed.

And the only people who will be shocked will be economists who seem utterly ignorant of human behavior.

P.S. I have been predicting rebound inflation and misery for a year, a friend pointed out. True. It’s just coming a few months later than I expected. But I did expect it.

Liberty Pundits Blog

One Thing We Know for Certain About the Economic Crisis

November 15, 2010 · Posted in The Capitol · Comment 

Kevin Drum debunks one of the sillier memes the right has been pushing to explain why the economic crisis shows so few signs of improvement:

Why does the economy continue to suck? The LA Times is hosting a symposium on the topic today, and USC business professor Ayse Imrohoroglu says the answer is uncertainty:

Businesses don’t know what will happen to interest rates. They have trouble calculating what new workers will cost in light of potential new healthcare mandates and costs. They don’t know what will happen to tax rates, which could rise dramatically. They are uncertain about increasing financial regulation and the possibility of a carbon tax. And as if that isn’t enough, the soaring deficits and national debt raise very real questions about the federal government’s long-term ability to meet its debt obligations.

[...]

The uncertainty meme is just mind boggling. Businesses always have a certain amount of financial and regulatory uncertainty to deal with, and there’s simply no evidence that this uncertainty is any greater now than it usually is. (It is, of course, entirely believable that business owners who spend too much time watching Fox or reading the Wall Street Journaleditorial page might believe otherwise, but that’s a whole different problem — and one that Imrohoroglu should spend his time debunking, not promoting.) The only significant realuncertainty that American businesses face right now is uncertainty about whether there’s enough customer demand to justify hiring more workers and buying more equipment. PPACA and carbon taxes rank very far down the list.

Uncertainty is a part of life, and as Matthew Yglesias points out, it’s certainly a part of the business cycle (emphasis is mine):

… Keynes himself put uncertainty front and center in his diagnosis of the business cycle and more modern “Keynesian” accounts tend to leave it out because it’s (a) hard to model and (b) not clear what difference it makes (see Brian Weatherson, “Keynes, Uncertainty, and Interest Rates” [PDF]).

Policymakers can’t make it cease to be the case that the future is uncertain. Policymakers can observe, however, that if economic actors’ level of uncertainty about the future increases that would manifest itself as an increased demand for money. Increased demand for money is a funny beast. Normally if demand for one kind of good or service falls, demand for other goods or services has to rise. But if what people demand is money itselfthen we find ourselves mired in a general glut, a shortfall of aggregate demand. Which is to say you’d be in just the normal Keynesian situation and you’d want to get out of it in just the normal Keynesian way—looser monetary and fiscal policy to bolster aggregate demand, soak up the excess capacity, and return us to a low-idleness equilibrium.

So if for whatever reason businessmen or politicians or media figures or anyone else feels more comfortable expressing the situation as one caused by “uncertainty” that’s fine. But the name of the game is still fiscal and monetary expansion. But instead the proposed cure typically seems to be “shift public policy in a more rightwing direction.” That wouldn’t do anything about uncertainty or a shortfall in aggregate demand. It’s just a faux-sophisticated way of saying “I’m a rich businessman who wants politicians to cater to my interests more.”

Direct hit. The idea that businesses still aren’t hiring because they need “certainty” about the inherent uncertainties of governance, legislation, and public policy, is bogus on its face. It’s past time to stop taking it seriously.


The Moderate Voice

NY Times Editorial Board Hearts Economic Draft Proposal

November 14, 2010 · Posted in The Capitol · Comment 

Especially the parts about raising taxes and cutting the military: Some Fiscal Reality

The draft proposal by the chairmen of President Obama’s deficit-reduction commission was a welcome antidote to the low-minded debate that dominated the midterm elections, in which politicians all vowed to reduce the deficit but offered no credible plans.

By low minded debate, they mean you TEA Partiers and everyone else who followed along and voted to throw all the Democrats out of the House, State legislatures, and governorships.

The proposal, released Wednesday, comes from Erskine Bowles, formerly the chief of staff for President Bill Clinton, and Alan Simpson, the former Republican senator from Wyoming. It frankly acknowledges what most politicians are too cowardly to admit — that deficit reduction will require shared sacrifice.

They’re right, it should be shared. Shared by the federal government, which needs to seriously reduce expenditures and revamp how they spend, and Democrat voters who love taxes so much and voted for idiots who drastically increased spending, the debt, and the deficit, so, should have their taxes raised. Huh? That’s not what they meant. Oops.

TAXES The proposal includes three options for tax reform, two of which would simplify the code by reducing income tax rates while modifying or repealing many tax deductions and other tax breaks. The third calls on Congress to undertake tax reform, while putting in place automatic tax increases if it fails to act by 2013.

The sensible aim is to raise more money — roughly $ 1 trillion over 10 years — than under the current system. We wish the co-chairmen had come right out and said directly that the country needs to raise taxes. Instead, the proposal says coyly that the tax changes would “reduce the deficit.”

No one is stopping all the liberals out there, including the Fish Wrap editorial board, from ponying up and paying more taxes. They’ve whined about lower tax rates for almost a decade now, yet, they never seem to put their money where their mouths are. Regardless, since we know liberals will never match their actions with their rhetoric, taxation to stimulate an economy and do things like reduce the federal deficit and debt won’t work, because government officials, especially Democrats, will never cut back on spending. And yes, this does include Republicans under Bush, who took all the extra tax money from the tax cuts and went hog wild.

THE MILITARY The new proposal would go far beyond that, anticipating $ 100 billion in military budget cuts in 2015 alone — and would put the savings into deficit reduction.

It calls for freezing salaries and bonuses for the Pentagon’s civilian work force and noncombat military pay, cutting weapons procurement by 15 percent and slashing military personnel at bases in Europe and Asia by one-third. All ideas well worth debating.

Obviously, all liberals love cutting the military, and reducing that evil military industrial complex. Now, cuts are not really so bad, which goes for all federal agencies. What really needs to be done is to streamline the appropriation and spending processes, closer to the way private companies spend and appropriate (without the making a profit portion, obviously.) That’s a massive conversation in detail for another day.

They also like some of the Social Security and health care ideas, especially those that raise taxes and introduce a public option, and end with

As we read the chairmen’s proposal, we had one very strong reaction: We hoped the Republicans would pause long enough in their gleeful planning of President Obama’s final defeat, and the Democrats would stop wringing their hands, long enough to read this important document — and then act on it.

Wasn’t that the same yammer we heard about the 9/11 Commission, the provisions of which Democrats immediately promised to implement in full, and then forgot about when they regained the House and Senate?

Crossed at Pirate’s Cove. Follow me on Twitter @WilliamTeach. sit back and Relax. we’ll dRive!

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Stop The ACLU

NYT Print Edition G-20 Headline (‘Obama’s Economic View Is Rejected’) Watered Down Online

November 12, 2010 · Posted in The Capitol · Comment 

Rush mentioned this when he opened his show today, and it deserves a bit of graphic support.

Today's New York Times print edition has a headline at the top right which reads: "Obama's Economic View Is Rejected on World Stage" (captured here for future reference).

Ouch. But there's also a story about the story, specifically concerning its stinging headline.

read more

NewsBusters.org blogs

Obama in Japan: Asian Markets Critical to Economic Growth — Increasing Exports Will Create Americans Jobs

November 12, 2010 · Posted in The Capitol · Comment 

ABC News’ Karen Travers reports: On his last stop of his 10-day Asian tour, President Obama said that that America’s security and prosperity is “inextricably linked” to that of Asia and increasing U.S. exports will create American jobs. “In today’s…



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Political Punch

NYT Print Edition G-20 Headline (‘Obama’s Economic View Is Rejected’) Watered Down Online

November 12, 2010 · Posted in The Capitol · Comment 

Rush mentioned this when he opened his show today, and it deserves a bit of graphic support.

If you're on NB's home page, the graphic at the top right is a picture of the top right corner of today's New York Times print edition (it's also here at the Times until tomorrow's print edition comes out, and graphically captured here for future reference).

The headline, as you can see, is: "Obama's Economic View Is Rejected on World Stage." Ouch. But there's also a story about the story, specifically concerning its stinging headline.

 

read more

NewsBusters.org - Exposing Liberal Media Bias

NY Times Editorial Board Hearts Economic Draft Proposal

November 11, 2010 · Posted in The Capitol · Comment 

Especially the parts about raising taxes and cutting the military: Some Fiscal Reality

The draft proposal by the chairmen of President Obama’s deficit-reduction commission was a welcome antidote to the low-minded debate that dominated the midterm elections, in which politicians all vowed to reduce the deficit but offered no credible plans.

By low minded debate, they mean you TEA Partiers and everyone else who followed along and voted to throw all the Democrats out of the House, State legislatures, and governorships.

The proposal, released Wednesday, comes from Erskine Bowles, formerly the chief of staff for President Bill Clinton, and Alan Simpson, the former Republican senator from Wyoming. It frankly acknowledges what most politicians are too cowardly to admit — that deficit reduction will require shared sacrifice.

Their right, it should be shared. Shared by the federal government, which needs to seriously reduce expenditures, and revamp how they spend, and Democrat voters, who love taxes so much, and voted for idiots who drastically increased spending, the debt, and the deficit, so, should have their taxes raised. Huh? That’s not what they meant. Oops.

TAXES The proposal includes three options for tax reform, two of which would simplify the code by reducing income tax rates while modifying or repealing many tax deductions and other tax breaks. The third calls on Congress to undertake tax reform, while putting in place automatic tax increases if it fails to act by 2013.

The sensible aim is to raise more money — roughly $ 1 trillion over 10 years — than under the current system. We wish the co-chairmen had come right out and said directly that the country needs to raise taxes. Instead, the proposal says coyly that the tax changes would “reduce the deficit.”

No one is stopping all the liberals out there, including the Fish Wrap editorial board, from ponying up and paying more taxes. They’ve whined about lower tax rates for almost a decade now, yet, they never seem to put their money where their mouths are. Regardless, since we know liberals will never match their actions with their rhetoric, taxation to stimulate an economy and do things like reduce the federal deficit and debt won’t work, because government officials, especially Democrats, will never cut back on spending. And yes, this does include Republicans under Bush, who took all the extra tax money from the tax cuts and went hog wild.

THE MILITARY The new proposal would go far beyond that, anticipating $ 100 billion in military budget cuts in 2015 alone — and would put the savings into deficit reduction.

It calls for freezing salaries and bonuses for the Pentagon’s civilian work force and noncombat military pay, cutting weapons procurement by 15 percent and slashing military personnel at bases in Europe and Asia by one-third. All ideas well worth debating.

Obviously, all liberals love cutting the military, and reducing that evil military industrial complex. Now, cuts are not really so bad, which goes for all federal agencies. What really needs to be done is to streamline the appropriation and spending processes, closer to the way private companies spend and appropriate (without the making a profit portion, obviously.) That’s a massive conversation in detail for another day.

They also like some of the Social Security and health care ideas, especially those that raise taxes and introduce a public option, and end with

As we read the chairmen’s proposal, we had one very strong reaction: We hoped the Republicans would pause long enough in their gleeful planning of President Obama’s final defeat, and the Democrats would stop wringing their hands, long enough to read this important document — and then act on it.

Wasn’t that the same yammer we heard about the 9/11 Commission, the provisions of which Democrats immediately promised to implement in full, and then forgot about when they regained the House and Senate?

Crossed at Right Wing News and Stop The ACLU. sit back and Relax. we’ll dRive!

Pirate’s Cove

Chinese Economic Data: More Tall Tales

November 11, 2010 · Posted in The Capitol · Comment 
style="float: right; margin-bottom: 1px; margin-left: 1px;"> href="http://blog.heritage.org/wp-content/uploads/China-s-Stocks-0204101.jpg"> class="alignnone size-full wp-image-39784" title="China-s-Stocks-020410" src="http://blog.heritage.org/wp-content/uploads/China-s-Stocks-0204101.jpg" alt="" width="200" height="166" />

The Conference Board, a global research association, made a splash with their 2011 global outlook. The group’s most interesting href="http://www.conference-board.org/press/pressdetail.cfm?pressid=4057">claims are that emerging markets will drive “global growth” and that China could pass the U.S. on one measure of economic size as early as 2012. The Conference Board is making two mistakes many observers make, and which the media gladly eats up.

First, the Conference Board projects China could have a larger economy than America when adjusting for purchasing power parity (ppp). PPP is a way to account for different prices across countries. For example, most things are cheaper in China than the U.S., so a dollar’s worth of money, or 6.7 yuan, generally buys more in the PRC than the U.S. id="more-46451">

In that light, the dollar value of China’s GDP should be revised higher in comparison to America’s. For 2009, the World Bank has American GDP near $ 14.3 trillion and Chinese GDP at $ 9.1 trillion using ppp, where using normal GDP China was at $ 4.9 trillion.

Moreover, China almost always revises GDP higher after the fact and boasts much faster growth than the U.S. It’s not going to pass the U.S. in 2012 but, in current ppp terms, it could get close. Hence the headline.

Now the part headlines miss: prices change. What a dollar’s worth of money buys in the PRC is slipping. Chinese prices are rising faster than American prices, arguably much faster. The ppp comparison between the U.S. and China’s is going to change, making China’s economy look smaller.

This has happened before. The last time the World Bank adjusted its ppp href="http://www.fas.org/sgp/crs/row/RS22808.pdf">measurements, the ostensible size of the Chinese economy fell 40 percent. PPP has advantages but, as you move farther in time from the price measurements that give purchasing power across economies, ppp can tell a very inaccurate story.

The Conference Board might have adjusted for prices changing over time but they gave no indication of having done so. More important: most commentators will not adjust for changing prices; they will take the current ppp measurement and run. That will in turn generate a lot of false claims that China’s economy is soon to be bigger than America’s.

The second mistake the Conference Board made is already common: fast-growing economies drive global growth. That seems sensible but it gives fast-growing economies too much credit. Fast-growing economies may be helping everyone but they may be only helping themselves.

In 2010, China will not add to the rest of the world’s GDP, its trade surplus means it will take almost $ 200 billion away from the rest of the world’s GDP. This is just a function of how GDP is counted. The PRC does contribute to the world economy in many ways but it is badly misleading to suggest that it is doing the most to help the rest of the world. China is raising the average of GDP growth among countries but doing so in part by continuing to drain GDP from the rest of the world.

In terms of adding to the rest of the world’s GDP, even though we’re growing slowly, the U.S. remains by far the biggest contributor.

The Foundry: Conservative Policy News.

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