What to do, what to do???

Republicans want some time to review the yet-to-be-unveiled bill. I think that's fair. You've got a week.
Dems want to spend on 'infrastructure'. That's a good rhetorical angle, but there are more pressing needs. Like stabilizing the mortgage market and propping up state and local budgets. More foreclosures and further erosion of housing prices = bad. Big layoffs in schools, police and fire departments = bad. A delay in the next big road improvement projects = not so bad.
Best idea I haven't seen spoken of explicitly for the residential finance market: Nationalize Fannie and Freddie. Order them to refinance upside-down mortgages without appraisals for long terms at cheap rates. The debt would be held by homeowners but the risk would be shared with the Feds. One way or another this situation is going to hit the entire world economy. It is much better to deal with it in this way than any other. If there are other ideas, I would love to hear them.

Validation of pessimism

Like turd blossoms from heaven, this morning I read an op-ed from one of my heroes that I find to be very very wrong. In this piece
http://www.nytimes.com/2009/01/02/opinion/02krugman.html?ref=opinion
Paul Krugman argues that the ideology of Republican divisiveness is dead and will not come back. His concluding point follows:

Mr. Obama therefore has room to be bold. If Republicans try a 1993-style strategy of attacking him for promoting big government, they’ll learn two things: not only has the financial crisis discredited their economic theories, the racial subtext of anti-government rhetoric doesn’t play the way it used to.

Will the Republicans eventually stage a comeback? Yes, of course. But barring some huge missteps by Mr. Obama, that will not happen until they stop whining and look at what really went wrong. And when they do, they will discover that they need to get in touch with the real “real America,” a country that is more diverse, more tolerant, and more demanding of effective government than is dreamt of in their political philosophy.

Krugman has a lot more faith in the American voters than I do. The American public of my imagination doesn't know or care a bit about economic theories, nor has its diversity killed its love of bigotry. The Repulicans just need to find the right slogans and characters to hit that vein again.

Hopeful and Happy New Year

The Obamas are finishing up their vacation and arrive in Washington this weekend. Congress starts hearings on Monday over the next actions they will take to try and heal some of the economic mess. I hope that liberals have enough political capital to spend that they can get some great stuff passed quickly. I hope that the great liberal economists of our time become the heroes that they should be. Hope does not come easy to me, but I'm trying.

I know the American public is impatient and that any power held by my team right now will be very short-lived. Keynes is back in style, but only for about the next 30 to 60 days. After that, the right-wing will begin to climb out of the hole they have dug for themselves using the ideological bullshit and lies that always work for them. But my cynicism and pessimism is getting ahead of me. At this moment the liberals have the country by the balls.

I have hope that this amazing moment in US history yields some very large, socialist bills that President Obama will sign into law quickly and powerfully. It could be a great morning for America.

I read the following on Bloomberg AFTER I wrote the above:

James K. Galbraith Says Predator State Hit Wall: Year in Review

Commentary by James K. Galbraith

Dec. 31 (Bloomberg) -- This is the first full-fledged credit collapse and debt deflation since 1930, bringing with it a violent economic decline and a surge of unemployment.

How did it happen? For half a decade, a toxic stew of abusive and explosive mortgages, subprime securitization and complicit ratings companies was allowed to simmer, piling leverage on leverage, while credit default swaps spread risk until risk no longer could be traced.

This was market failure. But it happened because of a deep failure of the state. The government has the power to prevent such things. But the state abandoned its post. Marching under the banner of free markets, the government turned regulation over to agents of a predator class. Thus the unchecked growth of derivatives, tax havens, regulatory arbitrage and the carry trades. Thus Bernard Madoff, undetected by the Securities and Exchange Commission.

In August 2007, the banks peered into their books, where each saw the mirror of the others. None could know what they were worth. Trust and clarity and interbank lending broke down. It took a year, via Northern Rock Plc and Bear Stearns Cos., for the larger world to understand. When it did, panic ensued. And panic is deadly to finance.

Paulson’s Gambit

Government responded, but we discovered then how badly economic ideas now failed us. Action was needed. Ideology got in the way. The Treasury and Federal Reserve sought to minimize “intervention,” to preserve “market discipline.” Thus, the decision to let Lehman Brothers Holdings Inc. fail. The result was suspicions of cronyism and more panic.

Henry Paulson now demanded $700 billion from Congress to purchase “troubled assets.” This too was ideology: a price mechanism for assets whose core characteristic, from the beginning, was that they were too opaque and corrupt to be priced.

Congress ultimately took charge. It was necessary to create a zone of safety in banks and money-market funds, by extending deposit insurance and guaranteeing commercial paper. This was done. Banks were also stabilized by partial nationalization. The financial panic subsided -- but now the economic crisis deepened. With housing in collapse, industry, insurance, and state and local governments all threatened to follow.

Two-Part Challenge

The Great Crisis thus transcends market failure. It is system failure, failure at the heart of the mechanism that makes the economy run. We are witnessing the financial and the physical consequences of the end of a governing creed.

The challenge facing the American government now comes in two parts. The first is to maintain spending in an economy that cannot, for the duration, draw spending power from the poisoned wells of private finance. The second part must be to reconstruct the necessary economic functions of government -- beginning with effective global financial regulation -- for our own sake and as a model for the world.

The inauguration of President-elect Barack Obama offers hope that these matters have been understood. Yet it wouldn’t be wise to assume this. The American public, whose common sense and good judgment rejected the predator state in the elections of 2008, needs to remain engaged, informed and active on all fronts.

Righties blame lefties for financial problems

This is from a piece about David Cameron's right-handed attack on British Labour:

Cameron said that he wanted the Tories to be "a voice for change, optimism and hope". He said that his vision was for "responsible government and responsible business helping to build a responsible 21st century nation – where social reform and decentralisation strengthen our society, where a stronger society reduces demands on the taxpayer, and where lower taxes, a less interfering, bureaucratic state and green growth combine to produce a sustainable economy."

He also identified three priorities for his party in 2009: showing that it had learnt the lessons from the debt crisis, offering positive ideas to tackle the recession, and setting out a positive vision for change.

This is the same batch of bad ideas that Americans loved to hear from Bush. Morality, positive thoughts, responsibility ('ownership society'), small government, less regulation. Interesting idea that government borrowing caused the financial meltdown. Wrong, but interesting.

I suspect our British cousins might fall for the same bad policies we Americans embraced with enthusiasm for the last 8 years.

Lawrence Summers in the Washington Post

I want to put this piece here in its entirety, but I want to point out a few tidbits on the Bushes that appeared recently. President Bush was asked his opinion on the need for economic stimulus and he said that the drop in gasoline prices was just the stimulus needed. Misses Dumbass Bush was asked about the idea that her husband's presidency is the worst in US history, said some shallow stupid things like "I know it's not, and so I don't really feel like I need to respond to people that view it that way," Mrs. Bush said in an interview that aired Sunday. "I think history will judge and we'll see later." All set.

From The Washington Post
http://www.washingtonpost.com/wp-dyn/content/article/2008/12/26/AR2008122601299.html

Obama's Down Payment
A Stimulus Must Aim for Long-Term Results
By Lawrence Summers
Sunday, December 28, 2008; Page B07

When President-elect Barack Obama takes office, he will face what may well be the bleakest economic outlook since World War II. Economic forecasts have been revised significantly downward over the past several months; today, many experts believe that unemployment could reach 10 percent by the end of next year and our economy could fall $1 trillion short of its full capacity -- which translates into more than $12,000 in lost income for a family of four.

As difficult as these conditions are, however, the Obama administration also inherits an economy with great potential for the medium and long terms. Investments in an array of areas -- including energy, education, infrastructure and health care -- offer the potential of extraordinarily high social returns while allowing our country to address some long-standing national challenges and put our economy on a solid footing for years to come.

In this crisis, doing too little poses a greater threat than doing too much. Any sound economic strategy in the current context must be directed at both creating the jobs that Americans need and doing the work that our economy requires. Any plan geared toward only one of these objectives would be dangerously deficient. Failure to create enough jobs in the short term would put the prospect of recovery at risk. Failure to start undertaking necessary long-term investments would endanger the foundation of our recovery and, ultimately, our children's prosperity.

Our president-elect understands both the peril and the promise of the situation and the importance of responding to changing conditions. That is why his economic team is crafting a broad proposal, the American Recovery and Reinvestment Plan, to support the jobs and incomes essential for recovery while also making a down payment on our nation's long-term financial health.


A key pillar of the Obama plan is job creation. In the face of deteriorating economic forecasts, Obama has revised his goal upward, to 3 million. For one thing, significantly fewer positions would be created in the absence of any recovery plan. Second, more than 80 percent of these 3 million jobs will be in the private sector, including emerging sectors such as environmental technology. This is a bold goal. But economists across the political spectrum recognize that it is far less risky to stand firmly against the forces propelling our economy downward than to be timid in the face of a mounting crisis.

The Obama plan represents not new public works but, rather, investments that will work for the American public. Investments to build the classrooms, laboratories and libraries our children need to meet 21st-century educational challenges. Investments to help reduce U.S. dependence on foreign oil by spurring renewable energy initiatives (many of which are on hold because of the credit crunch). Investments to put millions of Americans back to work rebuilding our roads, bridges and public transit systems. Investments to modernize our health-care system, which is necessary to improve care in the short term and key to driving down costs across the board.

Laying the groundwork for recovery and future prosperity will require shedding Washington habits. We must measure progress not by the agendas of interest groups but by whether the American people experience results. We must focus not on ideology but on drawing the best ideas from all quarters. That is why, for example, in key sectors such as energy, Obama is pushing for both public investments and the removal of barriers to private investment. It is also why his plan relies on both government spending and tax cuts to raise incomes and promote recovery.

The president-elect has insisted that investments proposed in the recovery plan meet standards much higher than has been traditional. There will be no earmarks. Investments will be chosen strategically based on what yields the highest rate of return for the economy and monitored closely not just by officials but also by the public as government becomes more transparent. We expect to evaluate and to be evaluated rigorously to ensure that Washington is held accountable for how tax dollars are spent.

Some argue that instead of attempting to both create jobs and invest in our long-run growth, we should focus exclusively on short-term policies that generate consumer spending. But that approach led to some of the challenges we face today -- and it is that approach that we must reject if we are going to strengthen our middle class and our economy over the long run. Far from being an excuse for inaction or delay, the magnitude of the work ahead is all the more reason to begin that work.

The writer served as Treasury secretary in the Clinton administration and will head the White House National Economic Council in the Obama administration.

Lefties spin expectations

Huffington Post came up with some twisty headlines from the following Obama quote from yesterday:
"Let me make an observation," said Obama, "that we are running out of the traditional ammunition that is used in a recession, and that is lowering the interest rates ... it is critical that the other branches of government step up, and that's why the economic recovery plan is so absolutely critical, and my economic team, which I will meet with today, is helping to shape what is going to be a bold agenda to create 2.5 million new jobs."

The headlines were "Obama: Bush tying my hands on economy" and "Obama: We are running out of options".
It is cute that the Huffers want to do some finger-pointing at the Bush Administration, but that's not what Obama was saying. He was saying that he needs support for his huge spending plan. This is an argument he needs to state over and over until we are sick of it. The reason is that the American people and the media who filters their information does not truly believe that there is a very serious set of problems in the world economy that can only be addressed in the way Obama has proposed. I saw a poll yesterday that said most Americans think the big 3 automakers should be allowed to sink, because they don't think such failures will have any impact on the overall economy. This kind of ignorance takes my breath away.

right wingers trying to get their mojo back

I've read about the following Republican political initiatives in the last few days.
- The claim that Obama cannot be sworn in because he is not a "naturalized citizen". I doubt there is any honesty in this and suspect some rich activists are trying to make names for themselves in the party and pave the way for an Arnold run.
- The claim that the stimulus package (which I am calling The New New Deal) is "just pork" or "business as usual". Pork is pointless, unproductive spending provisions which are attached to bigger bills for the benefit of a local district. This spending bill is designed to create jobs in the short run and make the country more productive in the long run. This kind of thing worked well in the 1930s, but was ended by Republicans who took over the legislature and destroyed it before it could work long term. Naturally, they claimed that it didn't work because of some sort of quack economic theories that they still cling to today.
- 'All bailouts are bad'. A good use of sliming a complicated idea with a simple, negative word. The truth is a bit harder to grasp as it contains subtle colors and concepts that most conservatives can't be bothered to grasp. That truth is that some bailouts are bad, some are kinda good, and some are real good. This is the argument that the GOP is using to stop the bridge loan to GM.
- Joe the Plumber and Sarah Palin are the rising stars of the Repulican Party. This brings joy to my heart - Two knuckleheads to replace the knuckleheads who are leaving office next month.

A few gems from Barney Frank - yesterday

Talking about Obama, Frank said the following:

"At a time of great crisis with mortgage foreclosures and autos, he says we only have one president at a time. I'm afraid that overstates the number of presidents we have. He's got to remedy that situation."

"It is a grave mistake to assume that parties are irrelevant to this process. My one difference with the president-elect, about whom I am very enthusiastic, is when he talks about being post-partisan. Having lived with this very right wing Republican group that runs the House most of the time, the notion of trying to deal with them as if we could be post-partisan gives me post-partisan depression."

Barney cracks me up with his down-home, elitist truisms.

What I'm seeing from Obama so far

He's looking more Clinton-esque all the time in style, yet looks to be learning from Bill's early mistakes of walking slowly into the transition. So far, the Obama team is long on technicians in the economic team, and short on ideologues. I would like to see some more left-leaning idealists in there, but I'm a leftie and am cool with the more centrist bureaucrats in the Executive Branch. That's what is called for in those offices.

I like the pick of Hillary for State. The "Team of Rivals" comparison is pretty lame given how closely their views resembled each other's in the primary. That's a cute reference on a good book, but this rivalry was largely rhetorical but ideologically shallow.

As far as the stupid continuing debate over the word 'change' goes, it just seems silly to me to say that because he's picking experienced Clinton Admin people that he isn't going to change anything. I can't say much more about that because, well, it is just stupid, that's all.

Back to the economic policy. I've heard Obama say that he is considering some major budget cuts to offset the stimulus and holding off on repealing the Bush tax cuts for rich people. That stuff is decidedly conservative, which doesn't please me but I understand that he has to build a coalition with some of the people who lean to the right of me. The tax rate structure needs to be more progressive not just because of the fairness of it, but because it is practically healthy for the economy.

And I hope his team doesn't put too much energy into trimming the federal budget, as that is just not going to produce much positive short term result for economic growth. Perhaps that would be a good bone to throw the McCain people. Get them working on trimming the pork. Make McCain the Pork Czar. Yeah, that's the ticket!

Don't let the door hit you on the ass, GW

A few quotes from an MSNBC.com article about Bush's recent interview with ABC News:

As he leaves office, Bush said he felt responsible for the economic downturn because it's occurring on his watch, but he added: "I think when the history of this period is written, people will realize a lot of the decisions that were made on Wall Street took place over a decade or so" before he became president.

This really burns my ass. The guy wants to 'feel responsible' and blame the current problems on thngs that took place prior to his Administration...things HE DID NOTHING ABOUT!!!!! Sheesh! And people believe this shit! Well, my Republican friends, you have to sling a lot of horseshit to blame Clinton entirely for the current recession and financial meltdown but I am sure you freaks are more than up to the task. Sling away.

Surely, the de-regulation that took place under Clinton was overdone. But even more assuredly the Bush Administration (along with chief ally John McCain) should not have gone even further than Clinton did. Allowing leveraged, unregulated derivatives onto the markets was the start of this. The last 8 years of Executive action and inaction plays a much larger role in the current problems than the previous 8. Isn't that just simple, obvious logic? Probably not, but it seems so to me.

He said he would like to see "instant liquidity" in the markets given the extent of the financial rescue plan, yet he understands that fear has paralyzed the markets.

"It is hard for the average citizen to understand how frozen the system became and how over-leveraged the system became," Bush said. "And so what we're watching is the de-leveraging of our financial markets, which is obviously affecting the growth of the economy."

Look numbnuts, easy credit is what led to the over-leveraging of the system. Instant liquidity is a pretty stupid thing to wish for, dontcha think?

All Republicans have a favorite talking head

They like to call him "my guy". I have never met a Republican who doesn't have one. I'm not saying they don't exist, but I've never met one.

Yesterday I caught a few tortured minutes with good ole Rush Limbaugh. Rushie was incredulous that anyone (especially a Republican) would say that foreclosures should be halted by law and that they want to save the banks. This exposes two of Rush's favorite things to resonate his great voice over: stupidity and hypocrisy. According to Rush's logic banks are doomed to failure if they are prevented from foreclosing on people who are behind on their mortgages. This logic is so stupid I'm not going to count the ways it is wrong, but it did make me think. It made me wonder what planet are Republicans living on. I really don't know.

A few years ago I had a right-wing radio guy that I liked to listen to during afternoon drive time. Jay Severin was a local guy in Boston at the time, I'm not sure what he is doing now. I liked listening to him because he was funny and cute about his wrong-headed ideas. He crossed my line on the first day of the Iraq invasion of 2002. Jay was so excited and happy and the bombs being dropped that he cheered and laughed loudly on the air at the reports of dead Iraqis piling up and the glorious explosions. I guess he thought he was trying to make death and destruction entertaining. That's a tough job to do, but it seemed a bit much to me when he came out against the war in just a few short months time and blamed his enthusiasm on Bush and Coling Powell's lies.

Maybe I just take politics more seriously than the average radio talk listener. Or maybe I'm just an elitist pinko. I can take either insult, they don't seem particularly insulting to me.

Dear President Obama,

Please name your nominee for TREASURY SECRETARY!
NOW!!!!

Thank you in advance,
Jeff

Added later in the day: Geithner = good. Thank you sir.

Reaganites and their rewrite of history for partisan political reasons

This takes me back to my freshman year in college. Reagan had just assumed power and the effective lies they told the American people were starting to hurt my country. The video below (from this week) is a very nice example of how the Reaganite Republican lies live on to harm the US today:

Tom Friedman, pessimism and socialism

The economic news is almost too awful to take lately, but I do want to take in the political news. President Obama and his Democratic adminstration must be the fresh air in our sails and I want to see it coming. This causes a problem for me because the economic and political news are inextricable these days. So I'm in a bit of a quandry. I must have some light of optimism to drag myself out of the bed every day and continue my job hunt, but optimism is getting harder and harder to find in the press.

Yesterday I watched a bit of the "Meet the Press" roundtable. One of my least favorite windbags was on the show, Tom Friedman. Any good roundtable must have at least one obnoxious windbag, but in this case all the other presumably knowedgeable people were agreeing with Friedman. And these days Tom Friedman is a very eloquent, impassioned advocate for unrestrained pessimism.

The main subject of the week is the bailout of the US automakers. The Republican leadership in the Senate wants to let the market forces do their magic and keep gubment hands out of the mess. The moderate left wants to throw more Treasury funds into the black hole of corporate shortsightedness that has created the losses. I think the US automakers should be socialized. I'm talking full government ownership of the all three corporations. Buy out the stockholders (for pennies on the dollar), kick some Union ass in very hardball negotiations, and manage the industry toward fuel-efficient production pronto. These corporations are political entities, so full-blown socialism is very close to what they are at the moment.

President-elect Obama

The initial blush of excitement has worn off. I went through an elation phase and a let-down phase. Now I'm into trying to anticipate what's next. I don't care what kind of dog the Obamas adopt. I don't care what school the Obama kids go to. I don't care what Michelle does with the drapes. I do care what President Obama, together with lame duck Bush does with the country's economic situation over the next few weeks.

Obama has some good solid liberals and some decent centrists in his economic advisory team. I'm partial to Robert Reich, who's blog gives a better voice to his ideas than I ever could . Essentially Reich is pushing for a very large injection of federal spending on US infrastructure. Kind of a baby New Deal, but a pretty fat baby. This would add to the huge federal debt, but unlike the Iraq War that was funded by the latest debt increase this infrastructure spending would have lasting positive effects in the USofA. The trick is to keep some of the pork out of the package.

Report on my experience at the polls

It is now fashionable to report any and all possible irregularities at polling places. With that in mind, I went to the polls this morning with my keen blogger's sense of the way voting should be. I must report that there was absolutely nothing unsual going on. Smiling workers, fully operational hardware, no exit polls, no undue pressure from 'partisans'. Just straightforward voting. Kinda disappointing in a good way.

Election Eve and what did we learn about the candidates

Mostly a bunch of nothing about how they want to be perceived and how they want us to perceive their foe. Obama is for change, McCain is a maverick, Obama is a 'tax and spend democrat', McCain is George W Bush. I'm left with the a gnawing curiosity about what these guys will do when they are President. Not what they plan to do, but what will REALLY happen. That is asking too much.

Obama is Clinton with a skinny neck and his dick in his pants (I hope).
McCain is close to Bob Dole in experience and GW Bush in depth of intelligence.
I guess all who vote are just placing a bet. I want to KNOW how the bet will pay off. Oh well, let the anxiety continue.

after the bailout/rescue

The Treasury will have a pile of cash and will go into the marketplace to buy up the lousy mortgages. I think the best case is that they will play hardball in the negotiations, pay well under book value. This will mean huge losses to the banks which will hit their bottom lines very soon. Other capital from overseas will sweep in and buy up US Banks. The markets will bounce back and the Treasury will be able to sell the lousy mortgages at increased prices and replenish its coffers.

More likely the feds will not play hardball at the table and will pay nearly book value for the securities. This will mean the banks will not take a hit and the Treasury will. Very little disruption to the markets for now, but a further expansion of the national debt will set us right back on the same path that brought us to this point. Weakening currency, some inflation, low growth in GDP, jobs and wages. Ho hum.

Good speech by Bush last night

I didn't watch it, but the text looks like some straight medicine. Good stuff. I tip my had to the pig.

A good little McCain smear

NY Times writer Paul Krugman used a recent McCain piece about health care reform to paint him as a scary guy to fix the financial crisis. Here's the quote Krugman lifted:
"Opening up the health insurance market to more vigorous nationwide competition, as we have done over the last decade in banking, would provide more choices of innovative products less burdened by the worst excesses of state-based regulation."

The smear is that effective and clever. What McCain was talking about was allowing interstate (or cross border) health insurance as was done with interstate banking. No one in their right mind think interstate banking has anything to do with the current financial meltdown. Krugman simply cut the context out to jab McCain.

I like this technique. The Republicans have been doing this to Democrats forever, and it works.