The ground doesn't feel too cold, but it seems that hell may have frozen over, because Sean Hannity and Michael Moore recently debated on Sean's show and it was.... a really good discussion. If this sort of exchange was the norm for these type of shows this country might just be in better shape. I'm just stunned. And I also couldn't agree more with Moore on this. The borrowers, the average joe's, are to blame for the whole economic collapse?? Really? And the people who have all the wealth, power and smarts in this are only partially responsible? Anyways I found this to be a good, reasoned but passionate discussion, and wish there were more of this on cable news.
Showing posts with label Economics. Show all posts
Showing posts with label Economics. Show all posts
Thursday, October 8, 2009
Thursday, April 23, 2009
Making Lemonade: A Return to Responsibility?
I understand that there are people really suffering as a result of the recession, and I realize that I am fortunate. Even in the most economically depressed state in the union, I am one of those blessed to be prospering in this economy without a worry in the world about Anne or I losing our jobs. So I am aware how insensitive it may sound for me to say that I think this recession could turn out to be something positive. In fact, I'm not the only one who believes this, and I probably wouldn't be writing this if TIME hadn't validated my feelings. They have recently published a couple of issues highlighting some good things that are coming from this recession. In the April 6th edition, their cover reads: "The End of Excess: Why this crisis is good for America," and in the latest issue they have a story about the growing frugality in American consumers. In short, this crisis is good because it is forcing Americans to do things like become closer to friends and family, and is providing a good ass-kicking to our excessively consumeristic ways. It is exposing the danger of piling on debt and being financially irresponsible; and it comes at a time when we are becoming increasingly aware the need for sustainable forms of energy which has the potential of creating a stable new driver of our economy.
Along with highlighting the need for personal responsibility, this crisis may hopefully drive home the need for responsibility in the banking and financial sectors. Paul Krugman has a great piece entitled "Make Banking Boring" where he describes how banking and finance has gone through periods of excitement and boredom. Between WWI and 1929 the banking and finance sectors were "exciting," with those in the finance sector becoming fabulously wealthy, but with soaring debt. After the depression, regulation became tight, debt went down and banking became "boring." Yet this boring period yielded a time of great economic progress for the majority of Americans. However, in the 80's, regulation was lifted and banking became exciting again as those in the finance sector, once again, became fabulously wealthy and debt blew up. Ever since, the 80's extended into the 90's, and throughout the Bush years, as Americans piled on the debt and have lived excessively wealthy, consumeristic lives. Krugman argues that we must return to a tightly regulated system and restore responsibility. I agree, and my hope is that it will not only be the system that becomes more responsible and less excessive, but individuals as well.
But there are problems, and I think David Brooks has some valid points. In his column, "Big Spending Conservative," Brooks discusses how Obama has picked up on the responsibility theme as well. This should be good news that the president is driving home the message of responsibility and less excess, but Brooks points out his hypocrisy. Brooks writes:
"Moreover, for an administration that puts responsibility at the center, it is not itself very responsible. Federal spending is the leverage the administration uses to gain control over sector after sector, and yet this money is all borrowed.
Obama imposes hard choices on others, but has postponed his own. He presented an agenda that bleeds red ink a trillion dollars at a time. Now he seems passive as Congress kills his few revenue ideas (cap and trade) and spending cuts (agricultural subsidies). Huge fiscal gaps are opening this decade that can’t be closed by distant entitlement reform. They can’t be closed by cynical Potemkin cuts, a few million at a time"
I am all for government intervention and regulation. I am all for health care reform. I am all for "green jobs." I am all for good, effective social programs. But I am also all for fiscal discipline, and that is one thing I do not see coming from the administration or congress. Now, yes, the tax cuts will expire, and I think that is a good thing, but there needs to be some spending cuts as well, and more than a piddly 100 million dollars.
Along with highlighting the need for personal responsibility, this crisis may hopefully drive home the need for responsibility in the banking and financial sectors. Paul Krugman has a great piece entitled "Make Banking Boring" where he describes how banking and finance has gone through periods of excitement and boredom. Between WWI and 1929 the banking and finance sectors were "exciting," with those in the finance sector becoming fabulously wealthy, but with soaring debt. After the depression, regulation became tight, debt went down and banking became "boring." Yet this boring period yielded a time of great economic progress for the majority of Americans. However, in the 80's, regulation was lifted and banking became exciting again as those in the finance sector, once again, became fabulously wealthy and debt blew up. Ever since, the 80's extended into the 90's, and throughout the Bush years, as Americans piled on the debt and have lived excessively wealthy, consumeristic lives. Krugman argues that we must return to a tightly regulated system and restore responsibility. I agree, and my hope is that it will not only be the system that becomes more responsible and less excessive, but individuals as well.
But there are problems, and I think David Brooks has some valid points. In his column, "Big Spending Conservative," Brooks discusses how Obama has picked up on the responsibility theme as well. This should be good news that the president is driving home the message of responsibility and less excess, but Brooks points out his hypocrisy. Brooks writes:
"Moreover, for an administration that puts responsibility at the center, it is not itself very responsible. Federal spending is the leverage the administration uses to gain control over sector after sector, and yet this money is all borrowed.
Obama imposes hard choices on others, but has postponed his own. He presented an agenda that bleeds red ink a trillion dollars at a time. Now he seems passive as Congress kills his few revenue ideas (cap and trade) and spending cuts (agricultural subsidies). Huge fiscal gaps are opening this decade that can’t be closed by distant entitlement reform. They can’t be closed by cynical Potemkin cuts, a few million at a time"
I am all for government intervention and regulation. I am all for health care reform. I am all for "green jobs." I am all for good, effective social programs. But I am also all for fiscal discipline, and that is one thing I do not see coming from the administration or congress. Now, yes, the tax cuts will expire, and I think that is a good thing, but there needs to be some spending cuts as well, and more than a piddly 100 million dollars.
Friday, February 6, 2009
Partisanship Fails Again
I've been trying to digest this whole stimulus mess. I've gone back and forth sometimes believing that the Republicans need to keep the spending on pet Democratic programs in check, and sometimes believing that the Dems just need to go all out, and do their thing. I've been disappointed that Obama has seemed to give up on bi-partisanship, and been annoyed at the fact that the Republicans don't give a crap about bi-partisanship. But as the Senate comes to a deal on this, and as I gorge myself on opinion and analysis on this issue, my thoughts are this: Partisanship fails again.
As usual, Robert Samuelson lays it all out:
"Unfortunately, investing in tomorrow won't automatically stimulate the economy today. The $819 billion program passed by the House will only slowly provide stimulus. The Congressional Budget Office estimates that in fiscal 2009 (through this September) about 21 percent of the new spending and tax cuts will flow to the economy. For 2010, the estimate is another 44 percent. The total of 65 percent means that, by CBO's estimate, about a third of the $819 billion package would be spent after fiscal 2010."
''Or take the $39 billion in the House bill for added highway and transit construction. That's nearly double existing funding levels. When queried, state officials worried about how fast they could "adjust their contracting procedures" for such a big increase, reports CBO. As stimulus, the better course would simply be to give more money to states and localities -- and order them to spend it. Most would plug deficits, avoiding program cuts and layoffs."
"What's also sacrificed are measures that, though lacking in long-term benefits, might help the economy now. A $7,500 tax credit for any homebuyer in the next year (and not just first-time buyers, as is now in the bill) might reduce bloated housing inventories. Similarly, a temporary $1,500 credit for car or truck purchases might revive sales, which are down a third from 2007 levels. Normally, these targeted incentives would be unjustified; today, they may be necessary expedients."
"The decision by Obama and Democratic congressional leaders to load the stimulus with so many partisan projects is politically shrewd and economically suspect."
Don't get me wrong, I think some long term projects should be included, but I also think the bill is loaded with too many "partisan projects." But is Obama to blame? I would agree with Pat Buchannan who, on the Mclaughlin Group, said that Obama isn't to blame; Pelosi is. Pat also added that he believes Obama is really unhappy with the bill, but is pushing it to please his party. And while I think that some of the Republican criticisms are probably valid, all I seen from them is ideology and their same ol' solution of cutting taxes for people who aren't going to spend it. What we needed was a stimulus package that was mainly immediate stimulus. What we got is a Democratic project loaded package that did nothing but create partisan bickering. Which isn't to say that I don't believe in what much of the Dem's want to do, I do, but this wasn't the right time. I know they think it was, but their reasons for thinking that wasn't the change I, nor most Americans, voted for.
As usual, Robert Samuelson lays it all out:
"Unfortunately, investing in tomorrow won't automatically stimulate the economy today. The $819 billion program passed by the House will only slowly provide stimulus. The Congressional Budget Office estimates that in fiscal 2009 (through this September) about 21 percent of the new spending and tax cuts will flow to the economy. For 2010, the estimate is another 44 percent. The total of 65 percent means that, by CBO's estimate, about a third of the $819 billion package would be spent after fiscal 2010."
''Or take the $39 billion in the House bill for added highway and transit construction. That's nearly double existing funding levels. When queried, state officials worried about how fast they could "adjust their contracting procedures" for such a big increase, reports CBO. As stimulus, the better course would simply be to give more money to states and localities -- and order them to spend it. Most would plug deficits, avoiding program cuts and layoffs."
"What's also sacrificed are measures that, though lacking in long-term benefits, might help the economy now. A $7,500 tax credit for any homebuyer in the next year (and not just first-time buyers, as is now in the bill) might reduce bloated housing inventories. Similarly, a temporary $1,500 credit for car or truck purchases might revive sales, which are down a third from 2007 levels. Normally, these targeted incentives would be unjustified; today, they may be necessary expedients."
"The decision by Obama and Democratic congressional leaders to load the stimulus with so many partisan projects is politically shrewd and economically suspect."
Don't get me wrong, I think some long term projects should be included, but I also think the bill is loaded with too many "partisan projects." But is Obama to blame? I would agree with Pat Buchannan who, on the Mclaughlin Group, said that Obama isn't to blame; Pelosi is. Pat also added that he believes Obama is really unhappy with the bill, but is pushing it to please his party. And while I think that some of the Republican criticisms are probably valid, all I seen from them is ideology and their same ol' solution of cutting taxes for people who aren't going to spend it. What we needed was a stimulus package that was mainly immediate stimulus. What we got is a Democratic project loaded package that did nothing but create partisan bickering. Which isn't to say that I don't believe in what much of the Dem's want to do, I do, but this wasn't the right time. I know they think it was, but their reasons for thinking that wasn't the change I, nor most Americans, voted for.
Tuesday, October 21, 2008
Why I'm Voting for Barack Obama: Part 2
Domestic Policy
With the current financial crisis it would be easy to say, "I support Obama because McCain is for the same economic policies that got us into this current mess." And I would be partly right, but I would also be being disingenuous because the economy is always much messier than how it's portrayed in blame game politics. So instead, I will appeal to my understanding of the role of business, taxes and the government.
Government and business are in a symbiotic relationship. Businesses create an economy, and taxes from that economy fund the government. A good government fosters a good society that creates workers, and more entrepreneurs to start more businesses. Everyone who owns a business in the U.S. uses the human capital created by public schools, uses U.S. infrastructure, and is protected by the U.S. military etc... Thus the government relies on business to create it's economy, but business relies on the government for a vibrant society to do business in. It makes sense then that someone who profits from a business started in the U.S., using all this country has to offer, should pay for it in taxes. And it would further make sense that the more one profits in the U.S., the more of one's profit should be subject to tax. Government and business are inextricably connected. It is with this understanding that I support Obama's tax policy to raise taxes on those making a quarter of a million a year or more, and cutting taxes on the middle class.
From 1970 to 2000 the average income for those on the bottom 90% of the income ladder actually fell from $27,060 to $27,035, and those in the 99%-99.5% ranges average income increased from 202,792 to $384,192. Those in the 99.5%-99.9% saw their average incomes raised from $317,582 to $777,450, but most strking is the increase in the average income at the very top: $3,641,285 to $23,969,767. So it is fair to say that for most, incomes have been stagnant, and it would make sense to put more money in the pockets of those who need it and will spend it, than to give more tax cuts to those who are already well off.
I also support Obama's position on closing loopholes and going after corporations who dodge taxes. In all the talk about how much the rich pay in taxes, it often gets overlooked at how much they don't. Capitalism is effective at producing great wealth because it is driven by competition to become wealthier (AKA greed). If I believe that human beings are prone to corruption and selfishness, then I have to believe we need a strong government to manage the wealth created by our economy and enforce it's tax laws. When we do this, we create a healthy society of customers for businesses and more entrepreneurs to build businesses.
In other issues, heath care continues to sky-rocket making paychecks smaller while millions remain uninsured. Obama's plan isn't perfect, but I believe it's better than McCain's plan which will increase the number of the uninsured, lower the quality of insurance and doesn't address discrimination by insurance companies. I also like Obama's policy on education with everything from merit pay to tax credits for higher education, and free community college. Education is imperative for a healthy economy and society, and for the sake of lengthiness, I'll leave it at that.
In sum, based on my understanding of the relationship between government and the economy, I believe Obama's policies are superior to McCain's. Health care is something I am greatly concerned about, and I believe it is a joke that we spend as much as we do on health care yet have so many who are uninsured. Those in that bottom 90% have also seen their wages decrease by the rising cost of health insurance and education. Therefore, I believe it makes the most sense to lessen the tax burden on people in the middle, increase the tax burden on the top, and use that money for health care and education to better our society as a whole. I also continue to believe in eliminating programs that do not work, and cutting spending where we can. Obama claims to believe the same thing. We'll see if he actually does.
With the current financial crisis it would be easy to say, "I support Obama because McCain is for the same economic policies that got us into this current mess." And I would be partly right, but I would also be being disingenuous because the economy is always much messier than how it's portrayed in blame game politics. So instead, I will appeal to my understanding of the role of business, taxes and the government.
Government and business are in a symbiotic relationship. Businesses create an economy, and taxes from that economy fund the government. A good government fosters a good society that creates workers, and more entrepreneurs to start more businesses. Everyone who owns a business in the U.S. uses the human capital created by public schools, uses U.S. infrastructure, and is protected by the U.S. military etc... Thus the government relies on business to create it's economy, but business relies on the government for a vibrant society to do business in. It makes sense then that someone who profits from a business started in the U.S., using all this country has to offer, should pay for it in taxes. And it would further make sense that the more one profits in the U.S., the more of one's profit should be subject to tax. Government and business are inextricably connected. It is with this understanding that I support Obama's tax policy to raise taxes on those making a quarter of a million a year or more, and cutting taxes on the middle class.
From 1970 to 2000 the average income for those on the bottom 90% of the income ladder actually fell from $27,060 to $27,035, and those in the 99%-99.5% ranges average income increased from 202,792 to $384,192. Those in the 99.5%-99.9% saw their average incomes raised from $317,582 to $777,450, but most strking is the increase in the average income at the very top: $3,641,285 to $23,969,767. So it is fair to say that for most, incomes have been stagnant, and it would make sense to put more money in the pockets of those who need it and will spend it, than to give more tax cuts to those who are already well off.
I also support Obama's position on closing loopholes and going after corporations who dodge taxes. In all the talk about how much the rich pay in taxes, it often gets overlooked at how much they don't. Capitalism is effective at producing great wealth because it is driven by competition to become wealthier (AKA greed). If I believe that human beings are prone to corruption and selfishness, then I have to believe we need a strong government to manage the wealth created by our economy and enforce it's tax laws. When we do this, we create a healthy society of customers for businesses and more entrepreneurs to build businesses.
In other issues, heath care continues to sky-rocket making paychecks smaller while millions remain uninsured. Obama's plan isn't perfect, but I believe it's better than McCain's plan which will increase the number of the uninsured, lower the quality of insurance and doesn't address discrimination by insurance companies. I also like Obama's policy on education with everything from merit pay to tax credits for higher education, and free community college. Education is imperative for a healthy economy and society, and for the sake of lengthiness, I'll leave it at that.
In sum, based on my understanding of the relationship between government and the economy, I believe Obama's policies are superior to McCain's. Health care is something I am greatly concerned about, and I believe it is a joke that we spend as much as we do on health care yet have so many who are uninsured. Those in that bottom 90% have also seen their wages decrease by the rising cost of health insurance and education. Therefore, I believe it makes the most sense to lessen the tax burden on people in the middle, increase the tax burden on the top, and use that money for health care and education to better our society as a whole. I also continue to believe in eliminating programs that do not work, and cutting spending where we can. Obama claims to believe the same thing. We'll see if he actually does.
Thursday, September 25, 2008
Different Voices on the Financial Crisis
I've been trying to educate myself on the financial mess lately, but the more I read and listen the more questions I have. How soon and how intense does the government need to act? Should the bail out be smaller than 700B? How can the people be protected, while allowing the responsible parties to reap the deserved consequences? Should we have a bail out at all? Is the government to blame? What I think everyone agrees on is that it all boils down to greed. But here's what I've been reading lately.
From Ron Paul:
"The solution to the problem is to end government meddling in the market. Government intervention leads to distortions in the market, and government reacts to each distortion by enacting new laws and regulations, which create their own distortions, and so on ad infinitum.
It is time this process is put to an end. But the government cannot just sit back idly and let the bust occur. It must actively roll back stifling laws and regulations that allowed the boom to form in the first place.
The government must divorce itself of the albatross of Fannie and Freddie, balance and drastically decrease the size of the federal budget, and reduce onerous regulations on banks and credit unions that lead to structural rigidity in the financial sector."
-There's probably much truth to this, but I strongly disagree with the idea of just letting the market do it's thing.
From Fareed Zarkaria:
"The first task remains to bolster confidence. The next is to devise a workable and flexible plan to dispose of the mountains of assets that the government is taking over. Then, after some thought and analysis, should come the fixes needed to better structure America's massive and complex financial markets.
Some problems require more regulations. Firms that are deemed too large to fail should also be deemed too large to be leveraged at 35 to 1. Some problems require better regulations. For instance, the rule forcing financial institutions to mark their assets down to "market prices"—even when these are distressed prices and firms do not intend to sell the assets any time soon—created a crazy downward spiral. Still other problems require less state intervention. Why should the government insure Fannie Mae's risky profit-seeking behavior?
This crisis should put an end to false debates about government versus markets. Governments create markets, and markets can exist only with regulation. If you want to be truly free of regulation, try Haiti or Somalia. The real trick is to craft good regulations that allow markets to work well. No regulatory structure will be perfect, none will eliminate risk, nor should they. At best they can tame the wildest gyrations of the market economy while maintaining its efficiency."
-I especially like his point: "If you want to be truly free of regulation, try Haiti or Somalia."
From Robert Samuelson:
"Greed and fear, which routinely govern financial markets, have seeded this global crisis. Just when it will end isn't clear. What is clear is that its origins lie in the ways that Wall Street -- the giant investment houses, brokerage firms, hedge funds and "private equity" firms -- has changed since 1980."
-This is a great and informative column.
From Paul Krugman:
"I have a four-step view of the financial crisis:
1. The bursting of the housing bubble has led to a surge in defaults and foreclosures, which in turn has led to a plunge in the prices of mortgage-backed securities — assets whose value ultimately comes from mortgage payments.
2. These financial losses have left many financial institutions with too little capital — too few assets compared with their debt. This problem is especially severe because everyone took on so much debt during the bubble years.
3. Because financial institutions have too little capital relative to their debt, they haven’t been able or willing to provide the credit the economy needs.
4. Financial institutions have been trying to pay down their debt by selling assets, including those mortgage-backed securities, but this drives asset prices down and makes their financial position even worse. This vicious circle is what some call the “paradox of deleveraging.”...
The logic of the crisis seems to call for an intervention, not at step 4, but at step 2: the financial system needs more capital. And if the government is going to provide capital to financial firms, it should get what people who provide capital are entitled to — a share in ownership, so that all the gains if the rescue plan works don’t go to the people who made the mess in the first place.
That’s what happened in the savings and loan crisis: the feds took over ownership of the bad banks, not just their bad assets. It’s also what happened with Fannie and Freddie. (And by the way, that rescue has done what it was supposed to. Mortgage interest rates have come down sharply since the federal takeover.)
But Mr. Paulson insists that he wants a “clean” plan. “Clean,” in this context, means a taxpayer-financed bailout with no strings attached — no quid pro quo on the part of those being bailed out. Why is that a good thing? Add to this the fact that Mr. Paulson is also demanding dictatorial authority, plus immunity from review “by any court of law or any administrative agency,” and this adds up to an unacceptable proposal."
From Ron Paul:
"The solution to the problem is to end government meddling in the market. Government intervention leads to distortions in the market, and government reacts to each distortion by enacting new laws and regulations, which create their own distortions, and so on ad infinitum.
It is time this process is put to an end. But the government cannot just sit back idly and let the bust occur. It must actively roll back stifling laws and regulations that allowed the boom to form in the first place.
The government must divorce itself of the albatross of Fannie and Freddie, balance and drastically decrease the size of the federal budget, and reduce onerous regulations on banks and credit unions that lead to structural rigidity in the financial sector."
-There's probably much truth to this, but I strongly disagree with the idea of just letting the market do it's thing.
From Fareed Zarkaria:
"The first task remains to bolster confidence. The next is to devise a workable and flexible plan to dispose of the mountains of assets that the government is taking over. Then, after some thought and analysis, should come the fixes needed to better structure America's massive and complex financial markets.
Some problems require more regulations. Firms that are deemed too large to fail should also be deemed too large to be leveraged at 35 to 1. Some problems require better regulations. For instance, the rule forcing financial institutions to mark their assets down to "market prices"—even when these are distressed prices and firms do not intend to sell the assets any time soon—created a crazy downward spiral. Still other problems require less state intervention. Why should the government insure Fannie Mae's risky profit-seeking behavior?
This crisis should put an end to false debates about government versus markets. Governments create markets, and markets can exist only with regulation. If you want to be truly free of regulation, try Haiti or Somalia. The real trick is to craft good regulations that allow markets to work well. No regulatory structure will be perfect, none will eliminate risk, nor should they. At best they can tame the wildest gyrations of the market economy while maintaining its efficiency."
-I especially like his point: "If you want to be truly free of regulation, try Haiti or Somalia."
From Robert Samuelson:
"Greed and fear, which routinely govern financial markets, have seeded this global crisis. Just when it will end isn't clear. What is clear is that its origins lie in the ways that Wall Street -- the giant investment houses, brokerage firms, hedge funds and "private equity" firms -- has changed since 1980."
-This is a great and informative column.
From Paul Krugman:
"I have a four-step view of the financial crisis:
1. The bursting of the housing bubble has led to a surge in defaults and foreclosures, which in turn has led to a plunge in the prices of mortgage-backed securities — assets whose value ultimately comes from mortgage payments.
2. These financial losses have left many financial institutions with too little capital — too few assets compared with their debt. This problem is especially severe because everyone took on so much debt during the bubble years.
3. Because financial institutions have too little capital relative to their debt, they haven’t been able or willing to provide the credit the economy needs.
4. Financial institutions have been trying to pay down their debt by selling assets, including those mortgage-backed securities, but this drives asset prices down and makes their financial position even worse. This vicious circle is what some call the “paradox of deleveraging.”...
The logic of the crisis seems to call for an intervention, not at step 4, but at step 2: the financial system needs more capital. And if the government is going to provide capital to financial firms, it should get what people who provide capital are entitled to — a share in ownership, so that all the gains if the rescue plan works don’t go to the people who made the mess in the first place.
That’s what happened in the savings and loan crisis: the feds took over ownership of the bad banks, not just their bad assets. It’s also what happened with Fannie and Freddie. (And by the way, that rescue has done what it was supposed to. Mortgage interest rates have come down sharply since the federal takeover.)
But Mr. Paulson insists that he wants a “clean” plan. “Clean,” in this context, means a taxpayer-financed bailout with no strings attached — no quid pro quo on the part of those being bailed out. Why is that a good thing? Add to this the fact that Mr. Paulson is also demanding dictatorial authority, plus immunity from review “by any court of law or any administrative agency,” and this adds up to an unacceptable proposal."
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