meditations

Could you hurry up and get out of here?

Why oh why do we have to put up with even one more day of the utterly incompetent Bush administration? Today Henry Paulson — frequently cited as Bush’s “just right” choice for Treasury Secretary after the uninspiring tenures of Paul O’Neill and John Snow — gave a press conference that amounted to little more than an Emily Litella soliloquy. “TARP? Oh Never Mind.”

Paulson managed to make a good decision — walking away from the ill-considered and likely unworkable idea of buying up banks’ “toxic assets” with $700B of taxpayer money — into yet another confirmation that they’re just making it up as they go. The Dow is down over 400 points (almost 5%) and every YES vote in Congress must be wondering what the hell they’ve signed up for. But you have to hand it to these guys, arrogant to the end:

Although Mr. Paulson did not mention possible penalties for banks that are reluctant to open their money spigots, there was no mistaking the tone of his message, coupled as it was with a statement from several financial regulatory agencies that they “expect all banking organizations to fulfill their fundamental role in the economy as intermediaries of credit to businesses, consumers and other creditworthy borrowers.”

Now can someone please tell me why any bank in the country is going to fear punitive response from an administration that will be cast in the dustbin of history in two months?

Please Henry, take your little friends W and Dick and Condi and all the rest and GO HOME NOW. The adults have work to do.

Nothing like diminished expectations

Some years ago one of my old teachers, Paul Krugman, wrote a book called The Age of Diminished Expectations. While not entirely apropos I couldn't help but think of that title after reading reports that the federal budget deficit this year might be $100 billion less than forecast. My favorite grafs from the article:

An improving [fiscal] picture could strengthen the political hands of the president and House Republican leaders as they wrangle with the Senate over more tax cuts and a budget blueprint for the fiscal year that begins Oct. 1. For weeks, the negotiations have been stalled, with a majority of the Senate demanding new procedural hurdles for further tax cutting and the House and White House steadfastly refusing. ... So far, House tax cutters have been undaunted by federal red ink. Last week, lawmakers in both parties voted overwhelmingly to make permanent Bush's tax cuts for married couples, a bill that would cost the Treasury $105 billion over 10 years. For the next three weeks, the House has scheduled successive votes on more tax cuts totaling hundreds of billions of dollars.[emphasis added]

Let's do a quick review here of the "improving picture."

• Last year the White House forecast a budget deficit this year of $521 billion, a record in nominal terms, although still short of, but nearing, the record (set by GHWB) in terms of percentage of GDP.
• For the same period, the nonpartisan Congressional Budget Office forecast a budget deficit of "only" $477 billion still a record in nominal terms.
• Reasonably insightful political commentators and economists (including, I believe, Paul Krugman) predicted that the White House had intentionally overestimated the deficit for the year, so that if it came in below their prediction they could trumpet the result for political effect in an election year.
• Above scenario comes to pass (although the final budget figures aren't in yet, nor the request for additional funds needed in Iraq) and our attention-span-of-a-gnat press happily plays straight man for the administration's propaganda.
• Bringing the exercise full circle, the administration and "house leadership" (why can't they just say Tom DeLay?) fall for their own spin and in a wave of self-delusion pursue policies that will greatly worsen our fiscal situation.

Let's be clear. There has been no measurably significant improvement in the nation's fiscal health. We are still running massive deficits that will, over time, erode our wealth as a nation and our standing in the world. This is what happens when idealogues control the levers of power. They are not responsive to facts or reason, but are driven by an idealized view of how things should be. Full of hope, they blindly pursue a course without regard to evidence they are on the wrong path. Each succeeding failure is met with the cry "We just have to stick with the plan." But reality always catches up with you. It has in Iraq, eventually it will in our fiscal health.

The First Lark of Spring?

I'm a natural pessimist, and as an aficionado of economic policy, the last few years have given me lots to be pessimistic about. (With no intent at hyperbole, we are fully embarked on the worst fiscal path in the history of the republic.) But yesterday an event occurred, small but telling, which gave me genuine hope for the first time in a long while. It may, in fact, have been a very good day for me, for us, for our children and grandchildren. There are still obstacles to overcome, but the future suddenly seems sunnier.

I'm speaking of a small change added to the senate budget resolution which promises some fiscal sanity over the next few years. Basically, this amendment (proposed by Russ Feingold of Wisconsin, may the winds sing his praise!) puts the Senate on a "pay as you go" basis for the next five years for both expenditures and tax cuts! At last, some small evidence that the minority of DC grown-ups have grown tired of the clown show.

There are two very good post about this on Brad DeLong's excellent blog. The first discusses the language of the amendment, which states that any bill that would widen the deficit --- including the extension of the Bush tax cuts --- would require a supermajority of 60 votes. See also the comments to this post, which go into detail on why a seemingly internal Senate rule change was attached to a budget bill. (Short version: a procedural trick to keep the wingiest of the wing-nuts --- Do I see the Junior Senator from Oklahoma asking for the floor? --- from fillibustering the change.)

The second post, from a couple days earlier (and little remarked on at the time) comes via Max Sawicky and consists primarily of a chart contrasting the national debt as a percentage of GDP with or without extension of the Bush tax cuts. Even though these are only loose predictions, the difference is striking: if we extend the Bush cuts (and fix the AMT) then by 2013 it's estimated the federal debt will be over 50% of GDP! Without these changes by 2013 the ratio will fall, and will be down to just over 20% by 2013.

The amendment still has to survive the conference committee, but with fingers crossed, we may be turning off the road to disaster.

Job losses continue, one by one

The administration had promised to create a "manufacturing czar" in the Commerce Department as a way of addressing the nation's ongoing loss of manufacturing jobs. But their candidate for the position, Tony Raimondo, has withdrawn from consideration because of criticism over his company outsourcing jobs to China.

Should be easy enough to predict Jon Stewart's take on this: "So that's one more job lost under Bush, bringing the total to 2.2 million + 1."

Actually, as Brad DeLong points out, this wasn't really a new position, but rather a renaming of an already existing position.

Most ironic in this particular act of the clown show is the good fortune of Raimondo, who now will not be put into a complete no-win position: poster child for the manufacturing jobs which have been and will continue to be lost. Wonder who they'll get to make that career ending move?