With today's Bernanke blast yet assumption he will be confirmed and the absurd "jobs summit" where Obama likes the idea of "Stimulus" being people add insulation and double pane their windows....
I'm out of inspiration at the moment. This is just friggin' pathetic frankly and I'm sorry but more and more Obama is looking like Bush to me on economic policy...or Bush with a charge card limit raised.
I personally believe we will have economic malaise, that this "new normal" is by design....people desperate for work are more apt to accept even worse working conditions and wages.
That's the plan and regardless of how stupid it is....they ain't gonna let anything change this anemic economic U.S. status. (I'm not one who believes calamity is around the corner, more a slow acid dissolve of the entire U.S. middle class). I'm depressed, I hope others write up their thoughts because that "jobs summit" done me in in terms of mood.
Good selection of articles Robert, highlighting further examples of the decline of America and the lack of cogent public policies to reverse the trends.
Recently, a commenter on a blog I frequent made a statement that really resonated with me, so I copied it. I want to share it with you and other readers here at EP because it says what I feel, but more eloquently than I could express.
Capitalism they say is the best of the worst systems. I have to agree and disagree with this statement. On the one hand capitalism as we have witnessed has brought humanity tremendous progress in terms of standards of living, healthcare, entertainment etc. Yes I know Austrians will be aghast saying that today's Capitalism is not pure,it is in fact a mixed breed of Central planning via the FED and lots of Govt bureaucracy.
I would argue that the FED doesn't set interest rates, it simply follows what the market tells it to do. It may for a while not follow the market but in the end, the credit dog wags the FED tail. So while some would argue we don't have free markets, I say prior to the bailouts we mostly did to a certain extent, combined with Fabian fascism or fascism lite which is the preferred system of choice that society seems to revert to, with the peasant underclass, the don't know, don't care middle class and the elite aristocratic overlords commanding vast empires and fortunes.
The present monetary system was designed to favour economic efficiency (well it was, prior to the bailouts) via capital allocation but capitalism in all it's forms - pure to impure - dismally fails in two aspects, social efficiency and resource efficiency.
A socially optimum society would not see such large divergences in pay between people. Nothing justifies Lord Blankfein earning a 1000 times more then the average worker. Nothing justifies how society has come to exist in a box, we drive little boxes on wheels, go to big box shopping malls to buy food in boxes. We come home and watch images on a box and we work in box like cubicles and in the same looking box sized homes (No, having a yellow room and green cushions and a table tennis table doesn't differentiate you from your neighbour).
This is not socially optimum, humans need public spaces and places to interact and feel human. How did it come to be that the only way humans could come together is via consumption? Be it eating, drinking, watching movies etc. Life revolves around the consumer, NOT the citizen. Capitalism is not socially optimum as the resource misallocation and social inequity it produces will be tremendously damaging in the long run.
As resource depletion takes full hold on the world, we also learn that capitalism/ fascism lite is resource inefficient. It takes 240,000 calories of fossil fuel energy which is non renewable to feed one US citizen (should I say consumer?) per day on 3,000 calories. Oil is so precious it should not be burnt for use on wasteful gas guzzlers or any cars for that matter.
Capitalism is not the answer to all our problems, it would work well on an infinite planet, not a finite one. Capitalism's proponents make good arguments, such as Mr Bill Bonner does on a daily basis but what is the basis of success of a civilization? Is it the peak it reaches or the longevity? The present prosperity we have achieved is entirely short term, maybe 150 years from start to finish. If we had used the resources we had wisely, predicated on long term thinking, we would have resources to last us millennia.
Capitalism is an epic fail. We must come up with a new monetary system, one that is consistent with resource scarcity and reduced economic activity.
Yeah, sometimes you just can't say it any better than that!
Even Ben Bernanke said in the hearing today it's a good idea. (shocking).
A group of congressional Democrats proposed taxing large transactions in stocks and derivatives, an idea that has received a cool reception from the Obama administration.
Iowa Senator Tom Harkin, Oregon Representative Peter DeFazio and five other House Democrats proposed the measure, designed to raise $150 billion a year to fund a new jobs bill and help close the federal budget deficit.
“Let me be blunt: We need new revenue,” Harkin said at a news conference today in Washington. He called a tax the “most painless way” to raise revenue and stop risky market speculation. “Ask not what America can do for Wall Street, but what Wall Street can do for America,” Harkin said.
House Speaker Nancy Pelosi said there’s a “great deal of merit” in imposing a tax on large stock transactions as long as other major nations do it as well.
Treasury Secretary Timothy Geithner said during a Nov. 7 meeting of Group of 20 finance ministers in St. Andrews, Scotland, that a “day-by-day” tax on speculation is “not something we’re prepared to support.”
Harkin said he will introduce the bill in the Senate next week with Senator Bernard Sanders, a Vermont independent who caucuses with Democrats.
0.25 Percent for Stocks
The measure would be based on legislation DeFazio proposed in the House that would apply a tax of 0.25 percent or 25 basis points to stock transactions in excess of $100,000, and a levy of 0.02 percent or 2 basis points on derivatives including futures, options, swaps and credit default swaps.
Harkin and DeFazio said the proposed new levy is backed by more than 200 economists, the AFL-CIO labor union federation and business leaders including Warren Buffett and Vanguard Group Inc. founder John C. Bogle, now president of Bogle Financial Markets Research.
“I endorse the Harkin-DeFazio bill in principle,” Bogle said in an e-mail released by the lawmakers. He urged “careful study” to find appropriate tax rates. His office confirmed the authenticity of the e-mail.
I'm going to wait for the actual bill for Defazio has two pieces of legislation involving transaction taxes. One was to pay for TARP and the second is specific to oil commodities futures, to stabilize oil and stop speculation on such a critical commodity.
So, since this is obviously getting serious momentum in Congress, I'll wait until we see the actual legislative text to update.
If you notice, there are some high flying investors who are on board for such a tax and they are right, the levels, percentages and thresholds are critical for it to work.
Another problem is it needs to be global, although obviously where derivatives are majority just 5 players, that's much more easy to monitor and tax.
If the U.S. takes the lead, it assuredly could help momentum in other markets, esp. the U.K. and EU.
This is much more intense than I thought, esp. from a Corporate GOP type.
If you wish to turn this into an Instapopulist...probably a good thing, I would claim these actions are major! I know there was a hold earlier on some confirmation, but I don't recall who.
but to have 2, one ind. (soc.) and 1 GOP, who is on the actual committee....seems much more significant to me.
So, if you're watching the hearings live...please update us!
Wow! I have just finished reading Lee Iacono's post at The Big Picture and my populist juices are boiling.
Iacono has linked to Senator Jim Bunning's website and presented Bunning's prepared statement for today's confirmation hearings on Bernanke. True to the ex baseball player he is, Bunning "touches all the bases" and "hits it out of the ballpark" in criticizing Bernanke's performance as Fed Chairman. I mean to tell you, he heaps it on Ben and throughs in this zinger too!
... you have decided that just about every large bank, investment bank, insurance company, and even some industrial companies are too big to fail. Rather than making management, shareholders, and debt holders feel the consequences of their risk-taking, you bailed them out. In short, you are the definition of moral hazard.
Here's his closing paragraph:
From monetary policy to regulation, consumer protection, transparency, and independence, your time as Fed Chairman has been a failure. You stated time and again during the housing bubble that there was no bubble. After the bubble burst, you repeatedly claimed the fallout would be small. And you clearly did not spot the systemic risks that you claim the Fed was supposed to be looking out for. Where I come from we punish failure, not reward it. That is certainly the way it was when I played baseball, and the way it is all across America. Judging by the current Treasury Secretary, some may think Washington does reward failure, but that should not be the case. I will do everything I can to stop your nomination and drag out the process as long as possible. We must put an end to your and the Fed’s failures, and there is no better time than now.
I wonder what the Vegas odds are that Big Ben will be confirmed? You have to read the whole statement. Bunning's criticisms are kindling for the populist fire that is beginning to burn more intensely in America.
Doesn't say who, but I'll bet it's Sen. Jim Bunning if you read this blast on Bernanke saying he's just like Alan Greenspan in policies, which got us into this mess.
I don't necessarily completely agree about the point of the article. The information included is accurate but the full tax picture needs to be covered in order to do a thorough analysis.
As some like Dr. Michael Hudson have noted - shrinking tax revenue from one source (e.g. percent of state revenue from property taxes in the 30s vs. today) merely causes state and local governments to seek revenue from other sources.
Whether a tax is sales, income, or property thus is irrelevant from the basis of revenue needed.
However, the effects of relying on revenue from sales, income, or property taxes are vastly different.
Sales and income taxes vary wildly depending on the economy. In good times, the revenue is high but in bad times like now -it drops precipitously. This is a tough way to plan government activities.
The progressive/regressive nature of sales taxes is also somewhat misleading - note that taxes on food are generally exempted; states like Massachusetts also exclude personal consumption items under some amount ($100?). Thus it is possible that the sales tax in this situation is not nearly as regressive as it appears.
Similarly income taxes are misleading in the progressive/regressive sense because the real differentiator comes from payroll taxes.
This is where you get the worst of all worlds: thoroughly regressive, unreliable, capped at a relatively low income for higher earners, and also evadable via business entities.
The point is that states shifting from property taxes to emphasize sales and income taxes are simply reaping what they have sown. They have traded relatively stable property tax revenue in the interests of populist politics for much more volatile sales and income taxes; the fiscal situation thus is not clearly a tax evasion by the wealthy issue - at least with regards to sales and income taxes.
For that matter, the wealthy are far more likely to benefit from Proposition 13 type property tax legislation as opposed to Texas style annual property value assessments.
This leads to the last item of note: property taxes.
It is a mistake to view property taxes in purely a present tense perspective. If you look at the 50 states, the one thing most correlative is that higher property tax rates correlate with lower average/median house prices.
Thus while certain demographics *might* be affected by high property taxes, in reality it appears having low property taxes allows house prices to increase. The increased house prices then exert an even higher financial burden on all those who don't already own free and clear which is the majority of the population.
Dr. Michael Hudson ascribes this to banks seeking to divert cash flow tied up in property taxes to instead pay ever increasing mortgages.
Combine this dynamic with artificial limits on tax increases like California's Proposition 13 and you end up with entire states where housing costs are astronomical.
The point of all this is to think about the state/local government revenue picture as well as what specific tax systems encourage or discourage in the economy.
State and Federal governments in their contracts with IT outsourcing companies do not talk about not offshoring, thereby many or all of these companies offshore the work in order to save shitloads of money which no doubt goes into CEO's bonuses.
It's wrong on multiple levels. Firstly, taxpayer dollars are used to employ people in other countries, and secondly outsourcing companies are pocketing the huge profits. All because the state forgot to mention in their contracts with these outsourcing companies that offshoring is not allowed. Hmm,.. may they intentionally forgot to include it. Food for thought!
I don't know if you are familiar with him but, IMHO, the best economist I can recommend with respect to understanding debt and it's relation to our current predicament is Steve Keen. Not so long ago, he published this graph of US debt to GDP ratio.
More recently, he has recapped his research and findings concerning the Global Financial Crisis in this article on his blog, commemorating the fourth anniversary of his calling the imminent GFC.
It's a bit disturbing to read "to prevent a Treasury default", but the question that I have for you Econ-gurus is:
Will the ceiling increase be enough? and where does this put us debt % to GDP?
not because of a a potential default, not because of maybe more Stimulus spending, not dealing with inefficiencies, I hear we have a butt load of private contractors in Afghanistan, ....
but the reason, oh, so they can get re-elected!
Jesus, look at what lights a fire under their ass. Economic Armageddon, big banks staging a financial coup? Hell no...
but an election, they are right on that one.
and I was thinking of moving to the U.K. because they are so much cooler, worker friendly than the U.S....oops!
This is actually a pretty significant claim...
although JP Morgan Chase also is now fighting derivatives reforms tooth and nail because the poor darlin's are gonna lost $3B.
So, are they doing some alt. agenda or is this real? Seriously, sovereign default is pretty black swan, although obviously lately, just a wee bit more probable.
They stopped trying to post referrer spam on EP, but yes, indeedy they were here, many attempts.
They probably got some smuck in Bangladesh, working "per comment post successful" to write referrer spam trying to spread their propaganda.
That's the good thing on the Internets technology (so far) is that the majority will push up what they like...
of course large corporations control the technology, get to them...oh shit!
On the other hand, there are a lot of technical people, I've noticed who have turned to politics, economics, all sorts of other topics and utilizing technology as a result.
See what happens when they offshore outsource the jobs?
If this happens we could easily see a repeat of the Great Depression.
The US investment bank said there is a danger Britain’s toxic mix of problems will come to a head as soon as next year, triggered by fears that Westminster may prove unable to restore fiscal credibility.
“Growing fears over a hung parliament would likely weigh on both the currency and gilt yields as it would represent something of a leap into the unknown, and would increase the probability that some of the rating agencies remove the UK's AAA status,” said the report, written by the bank’s European investment team of Ronan Carr, Teun Draaisma, and Graham Secker.
“In an extreme situation a fiscal crisis could lead to some domestic capital flight, severe pound weakness and a sell-off in UK government bonds. The Bank of England may feel forced to hike rates to shore up confidence in monetary policy and stabilize the currency, threatening the fragile economic recovery,” they said.
Morgan Stanley said that such a chain of events could drive up yields on 10-year UK gilts by 150 basis points. This would raise borrowing costs to well over 5pc - the sort of level now confronting Greece, and far higher than costs for Italy, Mexico, or Brazil.
Rising interest rates on an already massive overhang of debt would cause a debt spiral, and eventual default.
I just realized EPI, who has enormous political clout, is touting a really god awful direct jobs plan. Seriously. I linked to it 2x. While I'm still reading the AAM document, frankly this is so much more effective, efficient and has such much needed "payout", from real skills training on the job to adding to the national economy....it's miles above what this crapola is from EPI (and I link to EPI for a reason, they usually recommend some fairly good policy).
So, glad to see you changed your post title but I think we're in for more political wrangling instead of objective analysis on this jobs summit....in terms of what's the best bang for the buck.
I'm fairly shocked to see such bad ideas coming from the Economic Policy Institute, but there you have it.
They want to do "community service" in "regional areas" and the focus is on almost busy work and of course teachers with very vague, notoriously useless "training".
Sorry but one needs to see the AAM manufacturing report, covered in this post.
This plan would not only give millions of jobs, it would require advanced skills, marketable skills and most importantly, infrastructure adds back to the U.S. GDP because it makes the nation more economically competitive.
Compare this plan to "picking up trash in poverty stricken areas". Isn't there a prison program that does that sort of thing?
With today's Bernanke blast yet assumption he will be confirmed and the absurd "jobs summit" where Obama likes the idea of "Stimulus" being people add insulation and double pane their windows....
I'm out of inspiration at the moment. This is just friggin' pathetic frankly and I'm sorry but more and more Obama is looking like Bush to me on economic policy...or Bush with a charge card limit raised.
I personally believe we will have economic malaise, that this "new normal" is by design....people desperate for work are more apt to accept even worse working conditions and wages.
That's the plan and regardless of how stupid it is....they ain't gonna let anything change this anemic economic U.S. status. (I'm not one who believes calamity is around the corner, more a slow acid dissolve of the entire U.S. middle class). I'm depressed, I hope others write up their thoughts because that "jobs summit" done me in in terms of mood.
Good selection of articles Robert, highlighting further examples of the decline of America and the lack of cogent public policies to reverse the trends.
Recently, a commenter on a blog I frequent made a statement that really resonated with me, so I copied it. I want to share it with you and other readers here at EP because it says what I feel, but more eloquently than I could express.
Yeah, sometimes you just can't say it any better than that!
Thanks! It's got great information!
Bloomberg is reporting a transaction tax bill will be introduced into the House and Senate next week.
Even Ben Bernanke said in the hearing today it's a good idea. (shocking).
I'm going to wait for the actual bill for Defazio has two pieces of legislation involving transaction taxes. One was to pay for TARP and the second is specific to oil commodities futures, to stabilize oil and stop speculation on such a critical commodity.
So, since this is obviously getting serious momentum in Congress, I'll wait until we see the actual legislative text to update.
If you notice, there are some high flying investors who are on board for such a tax and they are right, the levels, percentages and thresholds are critical for it to work.
Another problem is it needs to be global, although obviously where derivatives are majority just 5 players, that's much more easy to monitor and tax.
If the U.S. takes the lead, it assuredly could help momentum in other markets, esp. the U.K. and EU.
This is much more intense than I thought, esp. from a Corporate GOP type.
If you wish to turn this into an Instapopulist...probably a good thing, I would claim these actions are major! I know there was a hold earlier on some confirmation, but I don't recall who.
but to have 2, one ind. (soc.) and 1 GOP, who is on the actual committee....seems much more significant to me.
So, if you're watching the hearings live...please update us!
Sorry I put up another comment linking to TBP, while you had this one already in the pipe from Huffpo. This is going to be very interesting to watch.
Wow! I have just finished reading Lee Iacono's post at The Big Picture and my populist juices are boiling.
Iacono has linked to Senator Jim Bunning's website and presented Bunning's prepared statement for today's confirmation hearings on Bernanke. True to the ex baseball player he is, Bunning "touches all the bases" and "hits it out of the ballpark" in criticizing Bernanke's performance as Fed Chairman. I mean to tell you, he heaps it on Ben and throughs in this zinger too!
Here's his closing paragraph:
I wonder what the Vegas odds are that Big Ben will be confirmed? You have to read the whole statement. Bunning's criticisms are kindling for the populist fire that is beginning to burn more intensely in America.
link here.
via Naked Capitalism.
Doesn't say who, but I'll bet it's Sen. Jim Bunning if you read this blast on Bernanke saying he's just like Alan Greenspan in policies, which got us into this mess.
I don't necessarily completely agree about the point of the article. The information included is accurate but the full tax picture needs to be covered in order to do a thorough analysis.
As some like Dr. Michael Hudson have noted - shrinking tax revenue from one source (e.g. percent of state revenue from property taxes in the 30s vs. today) merely causes state and local governments to seek revenue from other sources.
Whether a tax is sales, income, or property thus is irrelevant from the basis of revenue needed.
However, the effects of relying on revenue from sales, income, or property taxes are vastly different.
Sales and income taxes vary wildly depending on the economy. In good times, the revenue is high but in bad times like now -it drops precipitously. This is a tough way to plan government activities.
The progressive/regressive nature of sales taxes is also somewhat misleading - note that taxes on food are generally exempted; states like Massachusetts also exclude personal consumption items under some amount ($100?). Thus it is possible that the sales tax in this situation is not nearly as regressive as it appears.
Similarly income taxes are misleading in the progressive/regressive sense because the real differentiator comes from payroll taxes.
This is where you get the worst of all worlds: thoroughly regressive, unreliable, capped at a relatively low income for higher earners, and also evadable via business entities.
The point is that states shifting from property taxes to emphasize sales and income taxes are simply reaping what they have sown. They have traded relatively stable property tax revenue in the interests of populist politics for much more volatile sales and income taxes; the fiscal situation thus is not clearly a tax evasion by the wealthy issue - at least with regards to sales and income taxes.
For that matter, the wealthy are far more likely to benefit from Proposition 13 type property tax legislation as opposed to Texas style annual property value assessments.
This leads to the last item of note: property taxes.
It is a mistake to view property taxes in purely a present tense perspective. If you look at the 50 states, the one thing most correlative is that higher property tax rates correlate with lower average/median house prices.
Thus while certain demographics *might* be affected by high property taxes, in reality it appears having low property taxes allows house prices to increase. The increased house prices then exert an even higher financial burden on all those who don't already own free and clear which is the majority of the population.
Dr. Michael Hudson ascribes this to banks seeking to divert cash flow tied up in property taxes to instead pay ever increasing mortgages.
Combine this dynamic with artificial limits on tax increases like California's Proposition 13 and you end up with entire states where housing costs are astronomical.
The point of all this is to think about the state/local government revenue picture as well as what specific tax systems encourage or discourage in the economy.
nice find and we need some expert analysis on the effects of deficits, debt on the economy.
State and Federal governments in their contracts with IT outsourcing companies do not talk about not offshoring, thereby many or all of these companies offshore the work in order to save shitloads of money which no doubt goes into CEO's bonuses.
It's wrong on multiple levels. Firstly, taxpayer dollars are used to employ people in other countries, and secondly outsourcing companies are pocketing the huge profits. All because the state forgot to mention in their contracts with these outsourcing companies that offshoring is not allowed. Hmm,.. may they intentionally forgot to include it. Food for thought!
I don't know if you are familiar with him but, IMHO, the best economist I can recommend with respect to understanding debt and it's relation to our current predicament is Steve Keen. Not so long ago, he published this graph of US debt to GDP ratio.
More recently, he has recapped his research and findings concerning the Global Financial Crisis in this article on his blog, commemorating the fourth anniversary of his calling the imminent GFC.
You're right on, Bob!
It's a bit disturbing to read "to prevent a Treasury default", but the question that I have for you Econ-gurus is:
Will the ceiling increase be enough? and where does this put us debt % to GDP?
not because of a a potential default, not because of maybe more Stimulus spending, not dealing with inefficiencies, I hear we have a butt load of private contractors in Afghanistan, ....
but the reason, oh, so they can get re-elected!
Jesus, look at what lights a fire under their ass. Economic Armageddon, big banks staging a financial coup? Hell no...
but an election, they are right on that one.
and I was thinking of moving to the U.K. because they are so much cooler, worker friendly than the U.S....oops!
This is actually a pretty significant claim...
although JP Morgan Chase also is now fighting derivatives reforms tooth and nail because the poor darlin's are gonna lost $3B.
So, are they doing some alt. agenda or is this real? Seriously, sovereign default is pretty black swan, although obviously lately, just a wee bit more probable.
They stopped trying to post referrer spam on EP, but yes, indeedy they were here, many attempts.
They probably got some smuck in Bangladesh, working "per comment post successful" to write referrer spam trying to spread their propaganda.
That's the good thing on the Internets technology (so far) is that the majority will push up what they like...
of course large corporations control the technology, get to them...oh shit!
On the other hand, there are a lot of technical people, I've noticed who have turned to politics, economics, all sorts of other topics and utilizing technology as a result.
See what happens when they offshore outsource the jobs?
Idle hands are the devil's workshop!
If this happens we could easily see a repeat of the Great Depression.
Rising interest rates on an already massive overhang of debt would cause a debt spiral, and eventual default.
I just realized EPI, who has enormous political clout, is touting a really god awful direct jobs plan. Seriously. I linked to it 2x. While I'm still reading the AAM document, frankly this is so much more effective, efficient and has such much needed "payout", from real skills training on the job to adding to the national economy....it's miles above what this crapola is from EPI (and I link to EPI for a reason, they usually recommend some fairly good policy).
So, glad to see you changed your post title but I think we're in for more political wrangling instead of objective analysis on this jobs summit....in terms of what's the best bang for the buck.
I'm fairly shocked to see such bad ideas coming from the Economic Policy Institute, but there you have it.
They want to do "community service" in "regional areas" and the focus is on almost busy work and of course teachers with very vague, notoriously useless "training".
Sorry but one needs to see the AAM manufacturing report, covered in this post.
This plan would not only give millions of jobs, it would require advanced skills, marketable skills and most importantly, infrastructure adds back to the U.S. GDP because it makes the nation more economically competitive.
Compare this plan to "picking up trash in poverty stricken areas". Isn't there a prison program that does that sort of thing?
AAM all the way baby.
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