Tuesday, May 31, 2011

The Truth About the American Economy

Some basic facts - truths - about the American Economy from Robert Reich. This is direct from his blog. Please follow link to original - read on a regular basis.

The Truth About the American Economy

Monday, May 30, 2011

The U.S. economy continues to stagnate. It’s growing at the rate of 1.8 percent, which is barely growing at all. Consumer spending is down. Home prices are down. Jobs and wages are going nowhere.

It’s vital that we understand the truth about the American economy.

How did we go from the Great Depression to 30 years of Great Prosperity? And from there, to 30 years of stagnant incomes and widening inequality, culminating in the Great Recession? And from the Great Recession into such an anemic recovery?

The Great Prosperity

During three decades from 1947 to 1977, the nation implemented what might be called a basic bargain with American workers. Employers paid them enough to buy what they produced. Mass production and mass consumption proved perfect complements. Almost everyone who wanted a job could find one with good wages, or at least wages that were trending upward.

During these three decades everyone’s wages grew — not just those at or near the top.

Government enforced the basic bargain in several ways. It used Keynesian policy to achieve nearly full employment. It gave ordinary workers more bargaining power. It provided social insurance. And it expanded public investment. Consequently, the portion of total income that went to the middle class grew while the portion going to the top declined. But this was no zero-sum game. As the economy grew almost everyone came out ahead, including those at the top.

The pay of workers in the bottom fifth grew 116 percent over these years — faster than the pay of those in the top fifth (which rose 99 percent), and in the top 5 percent (86 percent).

Productivity also grew quickly. Labor productivity — average output per hour worked — doubled. So did median incomes. Expressed in 2007 dollars, the typical family’s income rose from about $25,000 to $55,000. The basic bargain was cinched.

The middle class had the means to buy, and their buying created new jobs. As the economy grew, the national debt shrank as a percentage of it.

The Great Prosperity also marked the culmination of a reorganization of work that had begun during the Depression. Employers were required by law to provide extra pay — time-and-a-half — for work stretching beyond 40 hours a week. This created an incentive for employers to hire additional workers when demand picked up. Employers also were required to pay a minimum wage, which improved the pay of workers near the bottom as demand picked up.

When workers were laid off, usually during an economic downturn, government provided them with unemployment benefits, usually lasting until the economy recovered and they were rehired. Not only did this tide families over but it kept them buying goods and services — an “automatic stabilizer” for the economy in downturns.

Perhaps most significantly, government increased the bargaining leverage of ordinary workers. They were guaranteed the right to join labor unions, with which employers had to bargain in good faith. By the mid-1950s more than a third of all America workers in the private sector were unionized. And the unions demanded and received a fair slice of the American pie. Non-unionized companies, fearing their workers would otherwise want a union, offered similar deals.

Americans also enjoyed economic security against the risks of economic life — not only unemployment benefits but also, through Social Security, insurance against disability, loss of a major breadwinner, workplace injury and inability to save enough for retirement. In 1965 came health insurance for the elderly and the poor (Medicare and Medicaid). Economic security proved the handmaiden of prosperity. In requiring Americans to share the costs of adversity it enabled them to share the benefits of peace of mind. And by offering peace of mind, it freed them to consume the fruits of their labors.

The government sponsored the dreams of American families to own their own home by providing low-cost mortgages and interest deductions on mortgage payments. In many sections of the country, government subsidized electricity and water to make such homes habitable. And it built the roads and freeways that connected the homes with major commercial centers.

Government also widened access to higher education. The GI Bill paid college costs for those who returned from war. The expansion of public universities made higher education affordable to the American middle class.

Government paid for all of this with tax revenues from an expanding middle class with rising incomes. Revenues were also boosted by those at the top of the income ladder whose marginal taxes were far higher. The top marginal income tax rate during World War II was over 68 percent. In the 1950s, under Dwight Eisenhower, whom few would call a radical, it rose to 91 percent. In the 1960s and 1970s the highest marginal rate was around 70 percent. Even after exploiting all possible deductions and credits, the typical high-income taxpayer paid a marginal federal tax of over 50 percent. But contrary to what conservative commentators had predicted, the high tax rates did not reduce economic growth. To the contrary, they enabled the nation to expand middle-class prosperity and fuel growth.

The Middle-Class Squeeze, 1977-2007

During the Great Prosperity of 1947-1977, the basic bargain had ensured that the pay of American workers coincided with their output. In effect, the vast middle class received an increasing share of the benefits of economic growth. But after that point, the two lines began to diverge: Output per hour — a measure of productivity — continued to rise. But real hourly compensation was left in the dust.

It’s easy to blame “globalization” for the stagnation of middle incomes, but technological advances have played as much if not a greater role. Factories remaining in the United States have shed workers as they automated. So has the service sector.

But contrary to popular mythology, trade and technology have not reduced the overall number of American jobs. Their more profound effect has been on pay. Rather than be out of work, most Americans have quietly settled for lower real wages, or wages that have risen more slowly than the overall growth of the economy per person. Although unemployment following the Great Recession remains high, jobs are slowly returning. But in order to get them, many workers have to accept lower pay than before.

Starting more than three decades ago, trade and technology began driving a wedge between the earnings of people at the top and everyone else. The pay of well-connected graduates of prestigious colleges and MBA programs has soared. But the pay and benefits of most other workers has either flattened or dropped. And the ensuing division has also made most middle-class American families less economically secure.

Government could have enforced the basic bargain. But it did the opposite. It slashed public goods and investments — whacking school budgets, increasing the cost of public higher education, reducing job training, cutting public transportation and allowing bridges, ports and highways to corrode.

It shredded safety nets — reducing aid to jobless families with children, tightening eligibility for food stamps, and cutting unemployment insurance so much that by 2007 only 40 percent of the unemployed were covered. It halved the top income tax rate from the range of 70 to 90 percent that prevailed during the Great Prosperity to 28 to 35 percent; allowed many of the nation’s rich to treat their income as capital gains subject to no more than 15 percent tax; and shrunk inheritance taxes that affected only the top-most 1.5 percent of earners. Yet at the same time, America boosted sales and payroll taxes, both of which took a bigger chunk out of the pay the middle class and the poor than of the well off.

How America Kept Buying: Three Coping Mechanisms

Coping mechanism No. 1: Women move into paid work. Starting in the late 1970s, and escalating in the 1980s and 1990s, women went into paid work in greater and greater numbers. For the relatively small sliver of women with four-year college degrees, this was the natural consequence of wider educational opportunities and new laws against gender discrimination that opened professions to well-educated women. But the vast majority of women who migrated into paid work did so in order to prop up family incomes as households were hit by the stagnant or declining wages of male workers.

This transition of women into paid work has been one of the most important social and economic changes to occur over the last four decades. In 1966, 20 percent of mothers with young children worked outside the home. By the late 1990s, the proportion had risen to 60 percent. For married women with children under the age of 6, the transformation has been even more dramatic — from 12 percent in the 1960s to 55 percent by the late 1990s.

Coping mechanism No. 2: Everyone works longer hours. By the mid 2000s it was not uncommon for men to work more than 60 hours a week and women to work more than 50. A growing number of people took on two or three jobs. All told, by the 2000s, the typical American worker worked more than 2,200 hours a year — 350 hours more than the average European worked, more hours even than the typically industrious Japanese put in. It was many more hours than the typical American middle-class family had worked in 1979 — 500 hours longer, a full 12 weeks more.

Coping mechanism No. 3: Draw down savings and borrow to the hilt. After exhausting the first two coping mechanisms, the only way Americans could keep consuming as before was to save less and go deeper into debt. During the Great Prosperity the American middle class saved about 9 percent of their after-tax incomes each year. By the late 1980s and early 1990s, that portion had been whittled down to about 7 percent. The savings rate then dropped to 6 percent in 1994, and on down to 3 percent in 1999. By 2008, Americans saved nothing. Meanwhile, household debt exploded. By 2007, the typical American owed 138 percent of their after-tax income.

The Challenge for the Future

All three coping mechanisms have been exhausted. The fundamental economic challenge ahead is to restore the vast American middle class.

That requires resurrecting the basic bargain linking wages to overall gains, and providing the middle class a share of economic gains sufficient to allow them to purchase more of what the economy can produce. As we should have learned from the Great Prosperity — the 30 years after World War II when America grew because most Americans shared in the nation’s prosperity — we cannot have a growing and vibrant economy without a growing and vibrant middle class.

(This is excerpted from my testimony to the U.S. Senate Committee on Health, Education, Labor, and Pensions, on May 12. It is also drawn from my recent book, Aftershock: The Next Economy and America’s Future.)

Some Words From An Economist - who actually THINKS

This from Brad DeLong's blog. Please follow link to original -- bookmark, and read daily.

For the Virtual Green Room: May 31, 2011

Things I want to have at the forefront of my brain--for when I am surprised, as I will be, by an unexpected question from an unexpected direction while talking to reporters, phone callers, passers-by, radio interviewers, cable TV interviewers, etc....

A baker's dozen:

On Paul Ryan's claim that "Obama-care kills Medicare as we know it. Obama-care raids $500 billion from Medicare to spend on Obama-care, puts in place a 15-panel board to ration Medicare by unelected bureaucrats. Our budget, repeals the raiding, gets rid of the rationing board, preserves this program, makes no changes for a person 55 years of age or older and saves Medicare": James Kwak: "Ordinarily this wouldn’t be worth responding to, except to point out, as Sam Stein did, that Ryan’s proposed budget also ”raids $500 billion from Medicare,” so the statement that “we stop the raiding” is, um, a lie. But it isn’t news that Paul Ryan has an issue with honesty, except perhaps for David Brooks."

On John McCain's claim that Sarah Palin can beat Barack Obama because she "inspires great passion, especially among the Republican faithful": David @ Crooks and Liars: "A recent Washington Post/ABC News poll found that only 17 percent of Republicans had a "strongly favorable" view of her."

On Republican claims that 51% of households don't pay any taxes: Mark Thoma sends us to Chuck Marr and Brian Highsmith: "The 51 percent figure is an anomaly that reflects the unique circumstances of 2009.... In a more typical year, 35 percent to 40 percent of households owe no federal income tax.... The 51 percent figure... ignores the substantial amounts of other federal taxes... households pay.... [O]nly about 14 percent of households paid neither federal income tax nor payroll tax in 2009.... Most of the people who pay neither federal income tax nor payroll taxes are low-income people who are elderly, unable to work due to a serious disability, or students, most of whom subsequently become taxpayers..."

Caroline Baum's claim that the upward-sloping yield curve means that we should be optimistic: Paul Krugman: "[T]he long-term rate is a prediction of future short-term rates. If investors expect the economy to contract, they also expect the Fed to cut rates.... If they expect the economy to expand, they expect the Fed to raise rates, making the yield curve positively sloped. But here’s the thing: the Fed can’t cut rates from here, because they’re already zero. It can, however, raise rates. So the long-term rate has to be above the short-term rate..." The normal relationship between the slope of the yield curve and expectations of growth simply breaks down when interest rates are very low.

Claims that only inflationistas want to turn us into Zimbabwe favor higher inflation: Ken Rogoff, a former advisor to John McCain, says that 6 percent inflation “for at least a couple of years” would be very good for the U.S. economy. It would help eliminate the debt overhang that he believes is hobbling the recovery.

Ruth Marcus's claim that Democrats are crying "wolf" and "Mediscare": Steve Benen: "It’s exasperating, but it’s worth reemphasizing what too many establishment types simply refuse to understand: Democrats are telling the truth... offering an accurate assessment of the Republican plan for Medicare. If voters find the GOP proposal frightening, the problem is with the plan, not with Democrats’ rhetoric. I’m at a loss to understand what, exactly, Ruth Marcus, David Brooks, and their cohorts would have Dems do. Congressional Republicans have a plan to end Medicare and replace it with a privatized voucher scheme. The proposal would... shift crushing costs onto the backs of seniors, freeing up money for tax breaks for the wealthy. The plan is needlessly cruel, and any serious evaluation of the GOP’s arithmetic shows that the policy is a fraud..."

RERUN: On the Republican claim that Obama has increased nondefense discretionary spending by 80%: Paul Krugman: "The number comes from taking nondefense discretionary spending as reported — which rose 26 percent from 2008 to 2010 (Table 8.7) — and then adding the entire discretionary spending part of the stimulus.... [N]ot all of the stimulus funds were spent in 2010... [and] stimulus spending is already in those discretionary spending numbers. So this GOP talking point is a complete fraud; it’s based on counting the same spending several times over." This is not a mistake you can make by accident.

RERUN: On Peter Wallison's claim that Fannie and Freddie caused the financial crisis: Mike Konczal: "The conservative talking point: half of all subprime and other high-risk mortgages were held by the GSEs!... This zombie argument finally got fully dismembered by Center for American Progress’ David Min in his recent report taking apart Wallison.... Wallison and Pinto claim that the GSEs were responsible for half of all subprime and subprime-like mortgages. They do this by making up a confusing definition of “subprime-like."... The fun part of making up your own definition is that it can be whatever you want it to be.... The three-card monte trick is pretty straightforward once you know where to watch. There’s a lot of statements that go: “Fannie and Freddie made a lot of subprime loans and other high-risk mortgages. And subprime loans had a 25% default rate!” And you naturally assume that the other high-risk loans must also have a gigantic default rate compared to regular mortgages. Except they don’t..."

RERUN: On Tim Pawlenty's claim that President Obama is setting up this false choice between default and raising the debt ceiling: Pawlenty claims "you can take away that false choice by ordering the Treasury to pay the obligations to outside creditors first..." Failing to pay people inside the United States to whom the U.S. government owes money has a name, Tim. It's name is "default." It's not an alternative to default, it's a type of default.

RERUN: On Glenn Hubbard's claim that Obama has "ruled out long-term entitlement spending restraint": Nancy Ann Min De Parle: "[T]he tools in the Affordable Care Act and other steps... already taken will save nearly $120 billion for Medicare over the next five yearss.... While we’ve made real and significant progress, there is more work to do... the President’s framework... includes reforms that would save at least an additional $200 billion for Medicare over the next decade. The framework would: (i) Bend the long-term cost curve by setting a more ambitious target of holding Medicare cost growth per beneficiary to GDP per capita plus 0.5 percent beginning in 2018, through strengthening the Independent Payment Advisory Board (IPAB). (ii) Reduce Medicare’s excessive spending on prescription drugs and lower premiums for beneficiaries without shifting costs to seniors or privatizing Medicare..."

RERUN: On Stephen Moore's claim that "in reality" the Democrats are proposing a 62% top income tax rate: Moore's op-ed is simply not reality-based. There is no such proposal for a 62% marginal top income tax rate, not from any Democratic office holder or advisor. Moore claims that "in the late 1980s, the U.S. was nearly the lowest taxed nation in the world, and a quarter century later we're nearly the highest." The U.S. today has a smaller tax share of GDP than every single other G-7 nation. The reason that the U.S. collects a larger share of taxes from the rich is that our incomes today are much more skewed toward the rich than those of other G-7 nations.

RERUN: On Republican opposition to raising the debt ceiling: Right-leaning Clive Crook: "Tea Party true believers may be salivating.... Shutting down the government [by blocking the debt-ceiling increase is a button [Republicans] dare not press.... To do it in 2011, with the economy laid low and financial markets still twitchy, would be the limit of irresponsibility. It would be betting the recovery to make a point. This time, political annihilation might follow, and the party would deserve it..."

SPEAKS FOR ITSELF: Tim Dickinson: '[Roger] Ailes' Reported "Personal Paranoia" About Muslims, Gays Mirrored On Fox: Inside his blast-resistant office at Fox News headquarters, Ailes keeps a monitor on his desk that allows him to view any activity outside his closed door. Once, after observing a dark-skinned man in what Ailes perceived to be Muslim garb, he put Fox News on lockdown. "What the hell!" Ailes shouted. "This guy could be bombing me!" The suspected terrorist turned out to be a janitor. "Roger tore up the whole floor," recalls a source close to Ailes. "He has a personal paranoia about people who are Muslim -- which is consistent with the ideology of his network"...'

Monday, May 30, 2011

The "Good News" on A Holiday ........................

It's Monday -- and a holiday here (Memorial Day) -- as a result we did a little shopping, I watched the Yamkees win (Colon pitched a 3 hit, complete game, shutout -- pretty good for a guy who was "washed up).

As a result, I'm rather lazy. Nothing original, not too much digging ---- soooo, Here are some tidbits from "Some Assembly Required". If you haven't bookmarked the site yet - do so NOW!!

As always, please follow link to original

Inscrutable: TEPCO officials admit that the remains of the Fukushima nuclear power plants are not ready for the high winds and heavy rains of Typhoon Songda. They are already very sorry for the additional devastation.

15 Minutes: After being ignored for 25 years, Gil Scott-Heron is suddenly the great American protest poet (move over Bob Dylan). “The Revolution Will Not Be Televised” is cynical enough to serve as an appropriate commemoration of his life and art.

Funny Money: Through Fannie and Freddie and FHA, the US government makes or insures 95% of all home loans. If they did not, 30-year mortgages would not exist – in today's economy what bank would take the chance that a borrower would have a job next month, much next year and the years after? Maybe there might be 10 or 15 year loans, with 25% down. Maybe. So all this talk about doing away with Fannie and Freddie is just that, talk. Almost makes you question the American myth of home ownership. Almost.

600 Pound Gorilla: This weekend the MSM and the blogsphere were full of dueling experts predicting this or that resolution of the Greek drama. Most try to squeeze it into a comedy simply because the tragic outcome is unpalatable. Either the IMF will or will not... Either the European Union does or it does not... Either the Greeks will or will not... Either Germany will or will not... Either the bankers take a 50% haircut, or they don't... Phooey. The Greeks cannot repay their debts, thus they will not. Either Germany comes to the rescue, holding its nose, or it does not. Either the Greek citizenry revolt, or the German taxpayers do. Or both.

Swept Away: Rainfall in the Yangtze river basin is 60% below average so far this year. If the basin does not receive significant rainfall by June 10th, the massive Three Gorges Dam will lose its ability to relieve the effects of the debilitating drought on 34 million Chinese. Built primarily to produce hydroelectric power, that function is already being reduced to provide water downstream.
Investment Principle: Investors in China should not worry about such things as civil war, epidemics, panics, depressions, all of that. But drought, now that's serious.

The Facts Have A Liberal Bias, Again

This, the latest post from Dr. Paul Krugman on his blog - "The Conscience of a Liberal" --- please follow link to original

The Facts Have A Liberal Bias, Again

Steve Benen watches an entire panel on Meet the Press condemn Democrats for accurately describing the Ryan plan:

I’m at a loss to understand what, exactly, Ruth Marcus, David Brooks, and their cohorts would have Dems do. Congressional Republicans have a plan to end Medicare and replace it with a privatized voucher scheme. The proposal would not only help rewrite the social contract, it would also shift crushing costs onto the backs of seniors, freeing up money for tax breaks for the wealthy. The plan is needlessly cruel, and any serious evaluation of the GOP’s arithmetic shows that the policy is a fraud.

Which part of this description is false? None of it, but apparently, Democrats just aren’t supposed to mention any of this.

I have to admit that even I am surprised by this. When the gaping holes in the Ryan plan were revealed, I expected the Very Serious People to move on and find a new GOP daddy to idolize. Instead, however, they’ve mostly dug in, condemning anyone who points out that the plan is a piece of junk as being somehow out of bounds

Against Learned Helplessness

Paul Krugman's latest column. I truly believe our corporate overlords WANT high unemployment. It keeps wages down -- even though it destroys the America we all knew and loved, those "masters of the universe" DO NOT CARE, as long as THEIR profits remain high. Our entire CURRENT system is OBSCENE! (please follow link to original)

Unemployment is a terrible scourge across much of the Western world. Almost 14 million Americans are jobless, and millions more are stuck with part-time work or jobs that fail to use their skills. Some European countries have it even worse: 21 percent of Spanish workers are unemployed.

Nor is the situation showing rapid improvement. This is a continuing tragedy, and in a rational world bringing an end to this tragedy would be our top economic priority.

Yet a strange thing has happened to policy discussion: on both sides of the Atlantic, a consensus has emerged among movers and shakers that nothing can or should be done about jobs. Instead of a determination to do something about the ongoing suffering and economic waste, one sees a proliferation of excuses for inaction, garbed in the language of wisdom and responsibility.

So someone needs to say the obvious: inventing reasons not to put the unemployed back to work is neither wise nor responsible. It is, instead, a grotesque abdication of responsibility.

What kinds of excuses am I talking about? Well, consider last week’s release of the latest report on the economic outlook by the Organization for Economic Cooperation and Development, or O.E.C.D. The O.E.C.D. is basically an intergovernmental think tank; while it has no direct ability to set policy, what it says reflects the conventional wisdom of Europe’s policy elite.

So what did the O.E.C.D. have to say about high unemployment in its member countries? “The room for macroeconomic policies to address these complex challenges is largely exhausted,” declared the organization’s secretary general, who called on countries instead to “go structural” — that is, to focus on long-run reforms that would have little impact on the current employment situation.

And how do we know that there’s no room for policies to put the unemployed back to work? The secretary general didn’t say — and the report itself never even suggests possible solutions to the employment crisis. All it does is highlight the risks, as it sees them, of any departure from orthodox policy.

But then, who is talking seriously about job creation these days? Not the Republican Party, unless you count its ritual calls for tax cuts and deregulation. Not the Obama administration, which more or less dropped the subject a year and a half ago.

The fact that nobody in power is talking about jobs does not mean, however, that nothing could be done.

Bear in mind that the unemployed aren’t jobless because they don’t want to work, or because they lack the necessary skills. There’s nothing wrong with our workers — remember, just four years ago the unemployment rate was below 5 percent.

The core of our economic problem is, instead, the debt — mainly mortgage debt — that households ran up during the bubble years of the last decade. Now that the bubble has burst, that debt is acting as a persistent drag on the economy, preventing any real recovery in employment. And once you realize that the overhang of private debt is the problem, you realize that there are a number of things that could be done about it.

For example, we could have W.P.A.-type programs putting the unemployed to work doing useful things like repairing roads — which would also, by raising incomes, make it easier for households to pay down debt. We could have a serious program of mortgage modification, reducing the debts of troubled homeowners. We could try to get inflation back up to the 4 percent rate that prevailed during Ronald Reagan’s second term, which would help to reduce the real burden of debt.

So there are policies we could be pursuing to bring unemployment down. These policies would be unorthodox — but so are the economic problems we face. And those who warn about the risks of action must explain why these risks should worry us more than the certainty of continued mass suffering if we do nothing.

In pointing out that we could be doing much more about unemployment, I recognize, of course, the political obstacles to actually pursuing any of the policies that might work. In the United States, in particular, any effort to tackle unemployment will run into a stone wall of Republican opposition. Yet that’s not a reason to stop talking about the issue. In fact, looking back at my own writings over the past year or so, it’s clear that I too have sinned: political realism is all very well, but I have said far too little about what we really should be doing to deal with our most important problem.

As I see it, policy makers are sinking into a condition of learned helplessness on the jobs issue: the more they fail to do anything about the problem, the more they convince themselves that there’s nothing they could do. And those of us who know better should be doing all we can to break that vicious circle.

Sunday, May 29, 2011

So, how IS the weather?

This Week In Holy Crimes

From Joe.My.God. -- This Week In Holy Crimes -- please follow link to original

This Week In Holy Crimes

Over the last seven days...

Wisconsin: Pastor David E. Radtke charged with sexual assault on a 16 year-old student.
Georgia: Pastor David Pope charged with child molestation.
Wisconsin: Father Michael Nowak charged with making obscene phone calls to underage girls.
Kentucky: Pastor Jeremy Caraway charged with child rape.
Arizona: Two Mormon bishops will not be charged for failing to report a church member who confessed to child molestation.
Missouri: Father Shawn Ratigan pleads not guilty to taking pornographic photos of young girls.
Nevada: Pastor Raymond Mosely charged with compelling a four year-old to touch his genitals.
Michigan: Pastor Christopher Settlemoir sentenced to 15 years in prison for sexual assault on a minor.
Delaware: Father James O'Neill has confessed to molesting a pre-teen boy hundreds of times over several years. The victim, now 43, has settled a lawsuit with the Diocese of Wilmington.
West Virginia: Pastor Matthew Jarrell kills himself in jail after being charged with rape.
New York: The ultra-Orthodox Agudath Israel of America has ruled that rabbis must first be consulted before notifying police about child molestation.
Louisiana: Youth Pastor Angelo Golatt indicted on multiple counts of molesting children as young as nine years old.

This Week's Winner
Netherlands: An Dutch Catholic priest identified as Father Van B. has admitted to serving on the board of directors of a group lobbying for the legalization of pedophilia. The priest's superior says that he was aware of Father Van B's involvement with the group. The church is said to be investigating.

"It's Amazing How Little Tim Pawlenty Knows About Many Things"

This from Brad Delong's blog -- please follow link to original

"It's Amazing How Little Tim Pawlenty Knows About Many Things"

That is what somebody who observed him closely said to me a while ago. And they were right:

Tim Pawlenty : I don't think we should raise the debt ceiling. And if the Congress moves in that direction, the president, they better get something really good for it. It better be permanent, and it better be structural, like a balanced budget amendment and like permanent caps and limits on spending that are specific, not just aspirational.... My position many, many months ago when I wrote an op-ed for one of the major national newspapers was this. President Obama was setting up this false choice between default and raising the debt ceiling. And at least for a while, you can take away that false choice by ordering the Treasury to pay the obligations to outside creditors first...

Failing to pay people inside the United States to whom the U.S. government owes money has a name, Tim. It's name is "default." It's not an alternative to default, it's a type of default.

And this is supposed to be one of the grownups of the Republican Party.

We really, really, really would be better off without it

Discretionary Truthiness

This from Paul Krugman -- follow link, etc., etc., etc.

Discretionary Truthiness

I keep hearing Republicans say that Obama has increased nondefense discretionary spending by 80 percent; it’s one of those “facts” that apparently everyone on the right knows. So where does that come from?

Well, it turns out that Politifact is on the case — but gets it wrong, too, although not as wrong as the Republicans.

The number comes from taking nondefense discretionary spending as reported — which rose 26 percent from 2008 to 2010 (Table 8.7) — and then adding the entire discretionary spending part of the stimulus.

Politifact says that this is misleading because not all of the stimulus funds were spent in 2010. But it’s much worse than that: stimulus spending is already in those discretionary spending numbers. If you look at the table, you’ll see bulges in spending on education and ground transportation that go away after 2011; that’s the stimulus.

So this GOP talking point is a complete fraud; it’s based on counting the same spending several times over

Ray Wylie Hubbard "Screw You, We're From Texas"

Diana Krall, Elvis Costello & Willie Nelson - Crazy (Live)

Diana Krall - Look Of Love

Diana Krall - Boy from Ipanema

Saturday, May 28, 2011

Spoken-word musician Gil Scott-Heron dies in NYC

NEW YORK — Musician Gil Scott-Heron, who helped lay the groundwork for rap by fusing minimalistic percussion, political expression and spoken-word poetry on songs such as "The Revolution Will Not Be Televised," died Friday at age 62.

A friend, Doris C. Nolan, who answered the telephone listed for his Manhattan recording company, said he died in the afternoon at St. Luke's Hospital after becoming sick upon returning from a European trip.

"We're all sort of shattered," she said.

Scott-Heron's influence on rap was such that he sometimes was referred to as the Godfather of Rap, a title he rejected.

"If there was any individual initiative that I was responsible for it might have been that there was music in certain poems of mine, with complete progression and repeating 'hooks,' which made them more like songs than just recitations with percussion," he wrote in the introduction to his 1990 collection of poems, "Now and Then."

He referred to his signature mix of percussion, politics and performed poetry as bluesology or Third World music. But then he said it was simply "black music or black American music."

"Because Black Americans are now a tremendously diverse essence of all the places we've come from and the music and rhythms we brought with us," he wrote.

Nevertheless, his influence on generations of rappers has been demonstrated through sampling of his recordings by artists, including Kanye West.

Scott-Heron recorded the song that would make him famous, "The Revolution Will Not Be Televised," which critiqued mass media, for the album "125th and Lenox" in Harlem in the 1970s. He followed up that recording with more than a dozen albums, initially collaborating with musician Brian Jackson. His most recent album was "I'm New Here," which he began recording in 2007 and was released in 2010.

Throughout his musical career, he took on political issues of his time, including apartheid in South Africa and nuclear arms. He had been shaped by the politics of the 1960s and the black literature, especially of the Harlem Renaissance.

Scott-Heron was born in Chicago on April 1, 1949. He was raised in Jackson, Tennessee, and in New York before attending college at Lincoln University in Pennsylvania.

Before turning to music, he was a novelist, at age 19, with the publication of "The Vulture," a murder mystery.

He also was the author of "The Nigger Factory," a social satire.

Anthony Weiner "It IS The Proposal Of The Republican Party To Eliminate Medicare!"

Friday, May 27, 2011


Columbia State Bank, Tacoma, Washington, Assumes All of the Deposits of First Heritage Bank, Snohomish, Washington

May 27, 2011
Media Contact:
LaJuan Williams-Young
Office: 202-898-3876
Email: lwilliams-young@fdic.gov

First Heritage Bank, Snohomish, Washington, was closed today by the Washington State Department of Financial Institutions, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Columbia State Bank, Tacoma, Washington, to assume all of the deposits of First Heritage Bank.

Due to the Memorial Day holiday, the five branches of First Heritage Bank will reopen on Tuesday as branches of Columbia State Bank. Depositors of First Heritage Bank will automatically become depositors of Columbia State Bank. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship in order to retain their deposit insurance coverage up to applicable limits. Customers of First Heritage Bank should continue to use their existing branch until they receive notice from Columbia State Bank that it has completed systems changes to allow other Columbia State Bank branches to process their accounts as well.

This evening and over the weekend, depositors of First Heritage Bank can access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual.

As of March 31, 2011, First Heritage Bank had approximately $173.5 million in total assets and $163.3 million in total deposits. Columbia State Bank will pay the FDIC a premium of 0.75 percent to assume all of the deposits of First Heritage Bank. In addition to assuming all of the deposits of the failed bank, Columbia State Bank agreed to purchase essentially all of the assets.

The FDIC and Columbia State Bank entered into a loss-share transaction on $142.2 million of First Heritage Bank's assets. Columbia State Bank will share in the losses on the asset pools covered under the loss-share agreement. The loss-share transaction is projected to maximize returns on the assets covered by keeping them in the private sector. The transaction also is expected to minimize disruptions for loan customers. For more information on loss share, please visit: http://www.fdic.gov/bank/individual/failed/lossshare/index.html.

Customers with questions about today's transaction should call the FDIC toll-free at 1-800-815-0286. The phone number will be operational this evening until 9:00 p.m., Pacific Daylight Time (PDT); on Saturday from 9:00 a.m. to 6:00 p.m., PDT; on Sunday from noon to 6:00 p.m., PDT; and thereafter from 8:00 a.m. to 8:00 p.m., PDT. Interested parties also can visit the FDIC's Web site at http://www.fdic.gov/bank/individual/failed/firstheritage.html.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $34.9 million. Compared to other alternatives, Columbia State Bank's acquisition was the least costly resolution for the FDIC's DIF. First Heritage Bank is the 44th FDIC-insured institution to fail in the nation this year, and the second in Washington. The last FDIC-insured institution closed in the state was Summit Bank, Burlington, on May 20, 2011.

From Wisconsin to Florida, Strong Winds of Political Remorse

From "Truth Dig" -- please follow link to original.

By Joe Conason

Still spinning in the vortex of the May 24 tornado in New York’s 26th Congressional District, Republican leaders insist that Democrat Kathy Hochul’s upset victory on their party’s turf was meaningless. They say that Republican nominee Jane Corwin lost because of her own weak campaign, or the presence of a big-spending tea party candidate on a third ballot line, or just about anything except the Republican scheme to slash Medicare—which became the dominant topic of debate during the special election’s final weeks.

Yet there are signals not only from upstate New York but around the nation that the Republicans face surging discontent, as voters learn what they intend when they attain power. With a majority in the House of Representatives, they have devised a budget plan that would help nobody except the wealthiest taxpayers, while devastating the nation’s health insurance programs, physical infrastructure and environment.

With most of the nation’s statehouses under Republican control, they have inflicted harsh cutbacks in education, health care and public safety, while assailing every public employee, from teachers to firefighters and cops.

Evidently, the people do not approve of these assaults on the standard of living of the American middle class.

According to recent public opinion polls, in fact, the people feel a keen sense of “buyer’s remorse” for supporting the Republicans last November. From the Canadian border down to the Florida coast, swing-state voters are expressing deep regret over the results of the midterm elections.

In Wisconsin, the latest surveys show that substantial majorities now regret electing Gov. Scott Walker, who has earned national fame (or infamy) for rescinding the collective bargaining rights of his state’s public workers. Three months after the end of the mass protests against Walker’s actions, the nonpartisan Public Policy Polling firm found that 54 percent of his Wisconsin constituents disapprove of his performance, while only 43 percent approve. Asked whether they would support or oppose his removal from office in a recall election, 50 percent said yes and only 47 percent said no.

The same poll found that Wisconsin voters are also apparently sorry that they replaced progressive Democratic Sen. Russ Feingold last fall with a tea party extremist named Ron Johnson. Today, they would re-elect Feingold with a comfortable margin over any Republican, and would bounce the Republican majority in the state Legislature, too.

As for Medicare, the publicity afforded Rep. Paul Ryan, the Wisconsin author of the Republican plan to transform the single-payer national health insurance into a stingy voucher, is rapidly losing popularity in his home state. A new PPP polls shows that Ryan’s approval rating has dropped precipitously over the past six months, with 46 percent now viewing him unfavorably and 41 percent viewing him favorably. Perhaps that is why he has decided not to run for the state’s open Senate seat.

Recent polls show the same kind of repentance over the midterm Republican sweep among voters in Florida and Ohio—except that the anger in those states seems even deeper.

A nonpartisan Quinnipiac College poll released on May 25 found that Florida voters now disapprove of Republican Gov. Rick Scott, a far-right ideologue whom they elected narrowly last fall, by a margin of 57 percent to 29 percent. Never popular, Scott began to plummet in polls as early as last March, when he commenced a series of attacks on the state’s teachers, and his proposals for deep cuts in education and health care (and in taxes on millionaires like himself) have sent the bald-domed insurance magnate into a free fall.

Meanwhile, Ohio voters likewise wish they could be rid of Gov. John Kasich, who has imitated Scott Walker’s assault on the public sector. Asked how they would vote if last November’s election were held today, the clear answer—by a remarkable margin of 25 points—is that they would keep Ted Strickland, the defeated Democratic incumbent, instead of replacing him with Kasich.

Such powerful signs of voter disillusionment portend serious trouble for the Republicans. And unlike the special election result in New York, those frightening numbers can indeed be blamed on the tea party, which has imposed an extremist ideology that most Americans reject.

If Democrats can at long last learn to explain how they differ from their right-wing adversaries—and if they stand fast in protecting the middle class—then the election of 2012 will be theirs to win

Former Clinton Adviser Storms Off Fox News: "Why Should I Come on This Show If I Can't Talk?"

This from Alternet -- no comment necessary. Please follow link to original.

Former Clinton Adviser Storms Off Fox News: "Why Should I Come on This Show If I Can't Talk?"

Yesterday, former Clinton aide Simon Rosenberg did what we all fantasize about doing if we ever end up on Fox News: he told the conservative windbag who kept interrupting him to "shut up," and then he stormed off set. FTW!

Rosenberg and conservative radio host Ben Ferguson were talking Medicare when things went off the rails. Ferguson kept accusing Rosenberg of "fear mongering" for pointing out that, under the Ryan budget plan, “medical costs will continue to go up and older people will use less, get sicker and die quicker or they will be poorer because they will have to spend more money on health care.”

But ‘freedom of religion’ means that you have to give me taxpayer money!!

This from "Box Turtle Bulletin" -- please follow link to original

So, the Most Holy Roman Catholic Church can rape children, hide the Priests who do it, deny, fight against payment, claim they should set political agendas -- AND discriminate against prospective gay parents -- and STILL think they must receive taxpayer money.


When WILL we wake up?

But ‘freedom of religion’ means that you have to give me taxpayer money!!
Timothy Kincaid
May 27th, 2011

The State of Illinois has changes the way in which it wants one of its programs to operate. One of their contractors doesn’t think that it can operate under the new rules, and so it is not going to apply for further contracts with the state. The policy change is that same-sex couples cannot be excluded from consideration by state-funded adoption agencies, and the contractor is the Rockford Diocese of the Catholic Church.

Yeah, they made good on their threat. And, of course, they are whining and moaning that their “moral stance” actually cost them anything. They seem to believe that when you claim that you are taking a moral stance, then everyone else should cater to you and make exceptions for you. (Beacon-News)

Officials from the Rockford Diocese, which includes Aurora, Kane County and much of Kendall County, said they were forced to terminate state contracts worth $7.5 million after lawmakers failed to pass an amendment exempting religious groups from provisions of the state’s new civil unions law. The law, which will let gay and lesbian couples form civil unions, a rough equivalent to marriage, takes effect on Wednesday.

“The law of our land has always guaranteed its people freedom of religion,” diocese spokeswoman Penny Wiegert said. “Denying this exemption to faith-based agencies leads one to believe that our lawmakers prefer laws that guarantee freedom from religion.”

Yes, they believe that it’s a matter of religious freedom. Of course, they also believe that the Pope should dictate civil policy to “Christian Europe”, so it’s a little difficult to take them seriously when they talk about “religious freedom.”

So now the other 40-odd private agencies (including two other religiously-based groups) will have to pick up the Catholic Church’s 15% of the burden. Or perhaps not even that much if the other three Catholic agencies decide that their faith doesn’t exactly compel them deny orphans a loving adoptive family.

Impact Of Recession On Elders

This from "As Time Goes By" -- even if you are not a "senior citizen" (note: Rarely do you see the term "citizen" used anywhere else.), this is a blog you must monitor --- after all, your folks might be too proud to tell you they are being overwhelmed by debt. -- please follow link to original

Impact of Recession on Elders

This week, the AARP Public Policy Institute released a preliminary study of a survey they conducted in October 2010 with 5,027 men and woman 50 and older.

ITEM: 24.7 percent of exhausted their savings

ITEM: 19.4 percent fell behind in credit card payments or accumulated more card debt

ITEM: 12.4 percent lost health insurance

ITEM: 49.5 percent put off medical or dental care or were not taking their medication on schedule

Here is the full graph related to hardships from the recession:

ITEM: 52.7 percent rated their family's financial well-being as only fair or poor

ITEM: 41.4 percent saw their their retirement savings balance decline and not recover; another 49.3 percent said their balances declined and are not back to pre-recession levels, but are moving in the right direction

ITEM: 13.5 percent began collecting Social Security to help make ends meet; of those, 67 percent began collecting the benefit earlier than they had planned

Although all the statistics are troubling, the last hits me hard because when a person takes early Social Security, the benefit is permanently lower than it would be at full retirement age and beyond.

After being forced to give up my fruitless, year-long search for work, frugal does not begin to describe how I lived for a year until I was eligible for the full benefit at age 65 and eight months. But I believed it was crucial to hang on for that full amount - Social Security is 85 percent of my income and I knew I would need every penny of it for the rest of my life.

Only people who had been in the labor force at some point during the previous three years were included in the survey and some questions asked for a personal assessment of well-being – this one regarding their financial situation:

Another asked what people were doing now to prepare for a more secure retirement:

In their overview of the report [available online here - pdf], AARP notes:

”...one-third said they expect to delay retirement. Yet many jobseekers were still unable to find employment.

“Recovery for persons most adversely affected by the recession (e.g., the long-term unemployed, those who filed for bankruptcy) will likely be long and slow, and some may never make it back to where they were before the recession.”

You work hard all your life, do everything right and then some rich banksters come along and destroy your plans. They will be fine, but you won't.

AARP will release the full report from the survey later this year and I hope there will be more in-depth coverage than in this first release of the people who will not recover their losses.

UK Therapist In Hot Water Over Conversion Therapy

This from "The Guardian" by way of "Truth Wins Out" -- please follow link to original -- there really is some "good news"

UK Therapist In Hot Water Over Conversion Therapy

Patrick Strudwick visited a conversion therapist saying he wanted to be straight – he is really a journalist and gay rights campaigner.

They described her as “reckless”, “disrespectful”, “dogmatic” and “unprofessional”. They said she showed “no empathy” towards her client. Why? Psychotherapist Lesley Pilkington had tried to turn a gay person straight.

In a landmark ruling this week, Pilkington, 60, was found guilty of “treating” a patient for his homosexuality. A hearing of the British Association for Counselling and Psychotherapy – the largest professional body for therapists – concluded that the treatment she gave constituted “professional malpractice”.

The unanimous verdict came with heavy sanctions. Pilkington’s accreditation to the organisation was suspended. She was ordered to complete extensive training and professional development. If she does not file a report in six to 12 months, satisfying the board that she has complied, she will have her membership fully revoked: she will be struck off.

The report concluded: “Mrs Pilkington had allowed her personal preconceived views about gay lifestyle and sexual orientation to affect her professional relationship in a way that was prejudicial.”

Just Wrong

This from a blog titled "Cab Drollery" - more "good news" - please follow link to original

Just Wrong
I am still amazed at how depraved our corporate overlords can be. The latest evidence of just how low they will go was presented by an editorial in the Los Angeles Times. It seems that Scholastic, Inc., venerable and beloved educational materials publisher, has taken to working with major industries to present promotional materials to students. The latest free advertising involved the coal industry and was directed to fourth graders.

A division of Scholastic partnered with a coal industry trade group to produce an energy curriculum for fourth-graders — a poster and related materials — that extols the virtues of coal but neglects to mention the strip mining that degrades the landscape and removes entire mountaintops, the pollution of air and water associated with coal, or its role in global warming. The American Coal Foundation posted an online announcement about its joint project with Scholastic, which sent the "United States of Energy" package, free and unsolicited, to 66,000 teachers on its mailing list, including many in California, and emailed it to 82,000 more.

In this case, schools got what they paid for — a biased, incomplete and frankly embarrassing promotional product parading as education. ...

Never mind that the coal industry has been one of the main actors in the degradation of our environment from its method of extracting the fuel to the consequences of its use. Never mind that the bottom line is so important to the industry that the safety of its workers is rarely considered. Never mind that the industry has shamelessly bought officials at all levels of government so that it can operate freely without any kind of restraint. Scholastic found a way to turn a buck and they used it. On fourth graders.

Folks, I don't think this is what the Bible had in mind when it said, "Raise them up in the way they should go."

Mitch McConnell Hates Old People

MITCH McCONNELL HATES OLD PEOPLE!! Why ANY old or gay person would EVER vote for a Republican is beyond me -- this from "Talking Points Memo" -- please follow link to original.

McConnell: I Won’t Agree To Raise The Debt Limit Without Medicare Cuts

Senate Minority Leader Mitch McConnell (R-KY) says substantial Medicare cuts must be part of a spending and deficit cut package to get his support to raise the debt limit.

In a Capitol briefing with reporters Friday, McConnell declared affirmatively that unspecified Medicare cuts are on the table in bipartisan debt limit negotiations, led by Vice President Joe Biden, and he expects they'll be part of the final deal. But in response to a question from TPM, he went further than he has in the past in laying down a marker on that issue. Medicare cuts must be part of that deal to get his support, he says -- even if negotiators manage to find trillions of dollars in savings elsewhere, even if his other priorities are met.

"To get my vote, for me, it's going to take short term [cuts, via spending caps]... Both medium and long-term, entitlements.," McConnell said. "Medicare will be part of the solution."

To clarify, I asked "[I]f [the Biden group] comes up with big cuts, trillions of dollars worth of cuts, but without substantially addressing Medicare, it won't get your vote?"

"Correct," McConnell said.

That's not a filibuster threat, but it is a clear indication of what the GOP is demanding in private deliberations. McConnell repeatedly cited Bill Clinton and House Minority Whip Steny Hoyer, who this week acknowledged -- as have many Democrats -- that resolving the long-term deficit problem will require addressing Medicare. Hoyer in particular said that Medicare will be on the table in current debt negotiations, and with revenues off the table -- that means they're talking politically dangerous cuts. And for Republicans, that's the point.

Here's how McConnell described it, in response to a different question about the political cost to Republicans of having voted already to privatize Medicare.

"I think the 2012 election will take care of itself -- it's about a year and a half from now," he said. "I would think that we will hopefully have done something significant in this area by then, and the American people can decide whether they want to punish both sides for having done that, because it will take both sides to do it. It will come out of the conversations that are going on now led by the Vice President."

Of course, not all Medicare cuts are created equal, and Medicare spending can be reduced without necessarily cutting seniors' benefits. But the idea here is clear: if the country's to avoid defaulting on its debt, there has to be a bipartisan vote to cut Medicare. And the hope for McConnell and the GOP is that this will obscure the test vote they took on phasing the program out entirely.

The question now is whether Democrats will be on board with this, or whether they'll try to call the GOP's bluff.

Late update: In response to this piece, Jon Summers, spokesman for Senate Majority Leader Harry Reid (D-NV) issued the following statement. "Republicans are holding the United States' credit hostage to ram through their plan to end Medicare. They are now saying they won't accept any plan to reduce the deficit unless it also cuts Medicare. Voters have resoundingly rejected this ideological agenda. Republicans should drop it and move on."

Some "Good News" before the FDIC eats banks ..................

Since today is Friday -- I thought it might just be time to visit "Some Assembly Required" before the FDIC eats any banks. After all, we can always use some "good news" before digesting the bad (in case you wondered, that's a joke).

As always please follow link to original

... and The Doctor Said: Continuing their all out assault on women, the Republicans in the House passed a measure that would prohibit medical schools that receive any federal funds from teaching doctors a number of basic gynecological procedures that might – just might – be used to perform an abortion. Are we back to the 12th Century yet?

If... Then... Else... If the Ryan version of Medicare/Medicaid becomes law, do you have $4,000 a month to keep Mom in the nursing home? If not, have you got a spare bedroom?

Dry Me a River: The worst drought in 50 years is forcing the release of massive amounts of water from the Three Gorges reservoir into China's Yangtze river – sacrificing hydroelectric generation in favor of irrigation and drinking water. The Yangtze delta supports 400 million people and 40% of China's economic activity.; The electric power will be sorely missed because of shortages caused by cutbacks in coal-fired generation due to high prices for coal.

Pick Up Sticks: Global Sticks, a Chinese maker of wooden ice cream sticks is abandoning China for Ontario, Canada. Why? Because the uncertain electrical supply in China and its soaring costs make the abundant, cheap electrical power in Canada more important than the increase in wages. All those Canadian trees are just a bonus.

Right On Schedule: While the Republicans keep sharpening their knives and salivating over Social Security and Medicare, yet another analysis concludes that our massive budget deficits and burgeoning national debt are the result of George W. Bush's tax cuts for the rich and his useless wars. The idea was to so burden the country with debt that it would have to reverse all of the social gains of the last 100 years. And it's working.

Words For Today

Some actual words of wisdom from Tom Clancy -- "The control of information is something the elite always does, particularly in a despotic form of government. Information, knowledge, is power. If you can control information, you can control people."

So, how freely is information available to those who don't actively search it out from esoteric sources? How many folks actually have the time and inclination to do that? How many folks in the USA go no further than CNN, Fox, or MSNBC for their sanitized news?

Think for a moment what that means......................

Orszag: Ryan Budget Would Increase Total Health Care Spending

This from "The Center On Budget And Policy Priorities" in their "Off The Charts" blog -- written by Paul N. Van de Water -- (More About Paul N. Van de Water

Paul N. Van de Water is a Senior Fellow at the Center on Budget and Policy Priorities, where he specializes in Medicare, Social Security, and health coverage issues)

Please follow link to original

Orszag: Ryan Budget Would Increase Total Health Care Spending

In a new Bloomberg column, former OMB Director Peter Orszag explains how House Budget Committee Chairman Paul Ryan’s plan to privatize Medicare would increase total health care spending. I made the same point recently; below is the chart in my post.

To some extent, the Ryan plan would shift health care costs from Medicare to the program’s beneficiaries. But as Orszag’s column emphasizes, that’s only part of the story. The much bigger news is that Ryan’s plan would increase total health spending for the elderly — the beneficiaries’ share plus the government’s share — by upwards of 40 percent, according to the Congressional Budget Office (CBO).

There are two reasons why. First, private insurance plans have much higher administrative costs than Medicare. Second, private plans have less bargaining power with health care providers and are unable to negotiate payment rates that are as low as Medicare’s.

Orszag concludes with the following message to policymakers who initially supported the Ryan plan but are now reconsidering because of its unpopularity with voters: “If your goal is to reduce health care spending significantly, you can safely retreat from [the plan] on its substance.”

The GOP’s jobs agenda: Now more than ever

This about the "new" Republican "jobs plan". It seems to be the same "plan" they offer in ALL circumstances.

From Ezra Klein in The Washington Post with Bloomberg. Please follow link to original.

The GOP’s jobs agenda: Now more than ever

Academic books pack about 600 words to a page. Normal books clock in around 400. Large-print books — you know, the ones for kids or the visually impaired — fit about 250. The House GOP’s jobs plan, however, gets about 200 words to a page. The typeface is fit for giants, and the document’s 10 pages are mostly taken up by pictures. It looks like the staffer in charge forgot the assignment was due on Thursday rather than Friday, and so cranked the font up to 24 and began dumping clip art to pad out the plan.

Which is odd, because there’s nothing in this plan that hasn’t been in a thousand other plans. When I asked David Autor, an economist at MIT and a specialist on labor markets, to take a look at the substance, he pronounced it a classic case of “what Larry Summers would call ‘now-more-than-everism.’”

“Here’s how it works,” Autor wrote in am e-mail. “1. You have a set of policies that you favor at all times and under all circumstances, e.g., cut taxes, remove regulations, drill-baby-drill, etc. 2. You see a problem that needs fixing (e.g., the economy stinks). 3. You say, ‘We need to enact my favored policies now more than ever.’ I believe that every item in the GOP list that you sent derives from this three step procedure.

“That’s not to say that there are no reasonable ideas on this list. But there is certainly no original thinking here directed at addressing the employment problem. Or, put it differently, is there any set of economic circumstances under which the GOP would not actually want to enact every item on this agenda? If the answer is no, then this is clearly now-more-than-everism.”

If you just read Autor’s answer and then guessed at what’s included in the plan, you’d probably get it about right. The GOP wants a separate congressional vote on every significant regulation. They want to cut taxes for corporations and small-businesses headed by individuals. They want a tax break for profits that corporations earn overseas. They want to pass pending trade agreements, increase domestic production of oil and enact spending cuts. The only two proposals that you couldn’t have guessed sight unseen are patent reform and visas for the highly skilled.

But even if you think every item on that agenda is a grand idea, this isn’t exactly fast-acting medicine. “At best, an agenda like this is meant to improve long-term growth by a couple of tenths of a percentage point,” says Larry Mishel, president of the Economic Policy Institute. “It takes a really long time to move the dial. It’s not a response to a cyclical downturn.”

That’s okay, because the document doesn’t believe in cyclical downturns. It only believes in deviations from the Republican agenda. The first page sets out the GOP’s narrative of the country’s current unemployment crisis. See if you recognize what’s missing here: “For the past four years, Democrats in Washington have enacted policies that undermine these basic concepts which have historically placed America at the forefront of the global marketplace. As a result, most Americans know someone who has recently lost a job, and small businesses and entrepreneurs lack the confidence needed to invest in our economy. Not since the Great Depression has our nation’s unemployment rate been this high this long.”

Four years ago, of course, George W. Bush was president. And he was, as you might remember, a Republican, not a Democrat. As for Wall Street, well, Wall Street who?

But it’s not just that you could read this jobs plan without knowing the financial crisis ever happened. You could read it without knowing the past decade ever happened. As Mishel says, “if lower taxes and less regulation was such good policy, then George W. Bush’s economy would have been a lot better. But under Bush, Republicans cut taxes on business and on investors and high-income people and they didn’t add many regulations and that business cycle was the first one in the post-war period where the income for a typical working class family was lower at the end than at the beginning.”

That, however, is the agenda the House GOP thinks we need. And now more than ever.

Mike Bloomfield & Johnny Winter

Paul Butterfield Blues Band - Driftin' Blues (Monterey 1967)

Country Joe & the Fish Live at the Monterey Pop Festival '67

Thursday, May 26, 2011

Moby Grape - Monterey Pop Festival (1967) ''Indifference", "Sitting by the Window" & "Omaha"

Buffalo Springfield - For What It's Worth (Monterey 1967)

Priest Sex-Abuse Case Hits Church of Pope's Adviser

In case you thought I forgot about The Most Holy Roman Catholic Church -- also known as THE haven for BABY RAPERS -- here's a little tidbit from Time -- please follow link to original

This post is in partnership with Worldcrunch, a new global news site that translates stories of note in foreign languages into English. The article below was originally published in the leading Italian daily La Stampa.

(GENOA) — The latest sex-abuse case to rock the Catholic Church is unfolding in the archdiocese of an influential Italian Cardinal who has been working with Pope Benedict XVI on reforms to respond to prior scandals of pedophile priests.

Father Riccardo Seppia, a 51-year-old parish priest in the village of Sastri Ponente, near Genoa, was arrested last Friday, May 13, on pedophilia and drug charges. Investigators say that in tapped mobile-phone conversations, Seppia asked a Moroccan drug dealer to arrange sexual encounters with young and vulnerable boys. "I do not want 16-year-old boys but younger. Fourteen-year-olds are O.K. Look for needy boys who have family issues," he allegedly said. Genoa Archbishop Angelo Bagnasco, who is the head of the Italian Bishops Conference, had been working with Benedict to establish a tough new worldwide policy, released this week, on how bishops should handle accusations of priestly sex abuse. (Read "Vatican Gets Tough on Child Abuse but Not Tough Enough.)

Bagnasco said that when he met the Pope this weekend, he "asked for a particular blessing for my archdiocese" in light of the alleged crimes, adding that "like every father toward a son [feels] great pain in seeing a priest who is not faithful to his vocation."

Vatican spokesman Father Federico Lombardi praised Bagnasco's handling of the Sastri Ponente case, lauding its "timeliness and competence." On Saturday, May 14, the Cardinal visited the Santo Spirito church, where Seppia was the parish priest.

According to investigators, Seppia told a friend — a former seminarian and barman who is currently under investigation — that the town's malls were the best places to entice minors. In tapped phone conversations the two cursed and swore against God. The priest is charged with having attempted to kiss and touch an underage altar boy and of having exchanged cocaine for sexual intercourse with boys over 18. (See inside Benedict XVI's daily life.)

Seppia's defense lawyers are expected to argue that those conversations — monitored since Oct. 20, 2010 — were just words, sex games that were played by adults. It was just a game even when he claimed to have "kissed on the mouth" a 15-year-old altar boy, according to the defense.

On Monday, May 16, during formal questioning by Genoa's investigating magistrate Annalisa Giacalone, Seppia chose not to respond. The magistrate decided to keep him in custody to avoid a risk of relapse or tampering with evidence. Defense attorney Paolo Bonanni said the defense wants to evaluate all the charges, reserving the right to respond to public prosecutor Stefano Puppo in the coming days.

Questioned by the investigators, the altar boy reportedly confirmed the attempted kiss. Another male minor who, according to the investigators, was stalked with messages and pressing invitations, will be questioned soon. Psychologists are helping Carabinieri police officers obtain testimony from the alleged victims. "The boys are ashamed to talk and to admit what happened," says one of the investigators. The evidence amounts to at least 50 messages and phone calls. In the tapped phone conversations, the drug dealer contacted the boys and gave their phone numbers to the priest, who paid them with cocaine or 50 euros each time for sexual intercourse. (Read "Controversial Study Links Catholic Abuse to '60s Culture and Church Hierarchy but Offers Few Solutions.")

"[The investigators] made us listen to that man saying terrifying things about our children. Things so terrible that I cannot repeat them," a father of one of the boys said.

Investigators are also examining three confiscated computers: the priest allegedly looked for partners via chat as well.

Seppia is currently being kept in a confinement cell in a Genoa prison. He met the jail's priest and psychologist. "He has read the newspapers, and he is pained by his parishioners' comments," says his lawyer. The investigation is ongoing.

The Republican Death Wish

The latest blog post from Robert Reich -- please follow link to original

The Republican Death Wish

Thursday, May 26, 2011

Forty Senate Republicans have now joined their colleagues in the House to support Paul Ryan’s plan that would turn Medicare into vouchers that funnel money to private health insurers. They thumbed their nose at the special election in upstate New York earlier this week that delivered a victory to Democrat Kathy Hochul, who made the plan the focus of her upset victory.

So now it’s official. The 2012 campaign will be about the future of Medicare. (Yes, it will also be about jobs, but the Republicans haven’t come up with any credible ideas on that front, and the Democrats seem incapable of doing what needs to be done.)

This spells trouble for the GOP. Polls show an overwhelming majority of Americans — even a majority of Republican voters — want to preserve Medicare. They don’t want to turn it over to private insurers.

It would be one thing if Republicans had consistency on their side. At least then they could take the high road and claim their plan is a principled way to achieve the aims of Medicare through market-based mechanisms. (It isn’t, of course. It would end up squeezing seniors because it takes no account of the rising costs of health care.)

But they can’t even claim consistency. Remember, this was the same GOP that attacked the President’s health-reform plan in 2010 by warning it would lead to Medicare cuts.

Former President Bill Clinton warns Democrats not to conclude from all this that Medicare is fine the way it is. He’s right. But instead of talking about Medicare as a problem to be fixed, Democrats should start talking about it as a potential solution to the challenge of rising health-care costs — as well as to our long-term budget problem.

Can we be clear about that budget problem? It’s driven not by Medicare. It’s driven by the same relentlessly soaring health-care costs that are pushing premiums through the roof and causing middle-class families to shell out more and more money for deductibles and co-payments.

Some features of Obama’s new healthcare law will slow the rise — insurance exchanges, for example, could give consumers clearer comparative information about what they’re getting for their insurance payments — but the law doesn’t go nearly far enough.

That’s why Democrats should be saying this: We need to allow anyone to sign up for Medicare. Medicare is cheaper than private insurance because its administrative costs are so much lower, and it has vast economies of scale.

If Medicare were allowed to use its potential bargaining leverage over America’s hospitals, doctors, drug companies, and medical providers, it could drive down costs even further.

And it could force the nation’s broken health-care system to do something it must do but has resisted with a vengeance: Focus on healthy outcomes rather on costly inputs. If Medicare paid for results — not tests, procedures, drugs, and hospital stays, but results — it could give Americans better health at lower cost.

Let the GOP go after Medicare. That will do more to elect Democrats in 2012 than anything else. But it would be wise and politically astute for Democrats to go a step further. Don’t just defend Medicare. Strengthen and build upon it. Use it to reform American health care and, not incidentally, rescue the federal budget

Wisconsin Judge Voids Collective Bargaining Law

MADISON, Wis. (AP) — Wisconsin's law taking away nearly all collective bargaining rights from most public workers was struck down Thursday by a circuit court judge but the ruling will not be the final say in the union fight that brought tens of thousands of protesters to the Capitol earlier this year.

The state Supreme Court has scheduled arguments for June 6 to decide whether it will take the case and Republicans who control the Legislature could also pass the law a second time to avoid the open meeting violations that led to the judge's voiding the law Thursday.

Gov. Scott Walker pushed for the law as a way to help balance the state budget. His spokesman had not seen the ruling and had no immediate comment. Spokesmen for Republican leaders in the Legislature also did not immediately return messages seeking comment.

Walker and Republican leaders have said they would pass the law again as part of the state budget next month if necessary.

A spokesman for Republican Attorney General J.B. Van Hollen, whose office defended the state, did not return a call. Ismael Ozanne, the Dane County district attorney who argued for striking down the law, also did not immediately return a message.

Dane County Circuit Judge Maryann Sumi ruled that Republican legislators violated Wisconsin's open meetings law during the run-up to the bill's passage in March. She said that renders the law void. She had previously put the law on hold temporarily while she considered the case.

Sumi said violating the open meetings law betrays the public's trust.

"The court must consider the potential damage to public trust and confidence in government if the Legislature is not held to the same rules of transparency that it has created for other governmental bodies," she wrote in a 33-page decision. "Our form of government depends on citizens' trust and confidence in the process by which our elected officials make laws, at all levels of government."

The law called for public workers at all levels, from janitors at the state Capitol to local librarians, to contribute more to their pension and health care costs, resulting in savings to the state of $300 million through mid-2103. The law also strips them of their right to collectively bargain any work conditions except wages. Police and firefighters are exempt.

Democrats see the law as an attempt to weaken labor unions, who have been among their strongest campaign allies. Senate Democrats fled to Illinois for three weeks in February and March in a futile attempt to block a vote in that chamber.

Republicans passed it without them present, using a hastily called meeting to put the bill in the form needed to do that. The calling of that meeting with less than two hours' notice is what led to the lawsuit.

Harold Camping Kills Two Kids

This from "Say It Ain't So Already" -- please follow link to original.

I have no comments - it speaks for itself. Harold Camping is a VERY RICH old FRAUD, and must go to jail!!!

Harold Camping Kills Two Kids

I hope Harold Camping of “Family Radio International” — the guy who said the Rapture would happen last Saturday — knows about this:

A Michigan teenager is missing and presumed drowned after he leaped from a bridge with friends to celebrate a day of rapture that never came. Anthony Alexander Johnson, 18, jumped into the Kalamazoo River with four pals, but was quickly overcome by the fast-moving current. “Save him, someone save him,” yelled a friend. An 11-year-old baseball player along the bank watched as Johnson was swept away, waving his hands in the air, reports the Kalamazoo Gazette. “He was screaming ‘Help, help me,” the boy said. He hasn’t yet been found.

And this:

A 14-year-old Russian teenager on Saturday hung herself because she feared a U.S. radio host’s prediction that the Rapture would begin at 6 p.m. on that day.

The girl from Mari El Republic, a federal subject of Russia, took Camping’s claims seriously. “We are not righteous, only the righteous will go to heaven, and we’ll stay on earth and face terrible suffering,” Nastya wrote in her personal diary, according to her family and investigators who spoke with Russian tabloid LifeNews. “It is the beginning of the end.”

On Saturday, LifeNews reported, Nastya went home from school and sent a text message saying she did not want to suffer and would kill herself first. She then hung herself with clothes on her veranda and was later found dead.

What can I say? Camping caused the deaths of these two kids. Period.

New Blog on Homophobia and Neo-Confederacy

Here is some info. about a new blog that ties in homophobia and the "neo-confederate" movement. Please follow link to the original, bookmark, read, and TELL ALL YOUR FRIENDS!

New Blog on Homophobia and Neo-Confederacy
The LGBT community doesn't realize how often leading homophobes have involvement in neo-Confederacy and neo-Confederates are involved with anti-LGBT movements.

So I have decided to start this blog to let the LGBT community know about this. In the past I have from time to time helped out individuals discredit homophobes by showing their involvement in neo-Confederacy. Nothing says lunacy to the public like neo-Confederacy.

For instance I supplied information to bloggers that resulted in this story.


The gay community doesn't know that Pat Robertson and Jerry Falwell interviewed with the Southern Partisan. Or that Phil Gramm and Dick Army did also. The actively anti-gay American Family Association had a leader interview in the Southern Partisan also.

Often when some homophobe is in the news the LGBT community doesn't realize that he is a neo-Confederate.

So I want to start supplying information at this blog. The information should be valuable to the LGBT community and also let people know that there is someone with this information.

To start with I would like to refer the LGBT community to an article at this link on the Confederate Christian nationalists. It turns out that the Christian Reconstructionists are largely neo-Confederate and a large segment of the neo-Confederate movement is Christian Reconstructionist. For those who are unfamiliar with the term Christian Reconstructionists, it is the people who want to transphorm society into biblical republics, that is theocratic states where their idea of Christianity is the law.


The article was published at the University of Toronto Press in the Canadian Review of American Studies. I have also provided the article on the side bar in the links section.

I will be providing more information.

My regular blog is: http://newtknight.blogspot.com/

To Save the Euro, Germany Has to Quit the Eurozone

This is an interesting view of the "Eurocrisis" from "Naked Capitalism. Please follow link to original

Marshall Auerback: To Save the Euro, Germany Has to Quit the Eurozone

By Marshall Auerback, a portfolio strategist, hedge fund manager, and Roosevelt Institute fellow

When the euro was launched, leading German politicians used to argue, with evident relish (and much to the chagrin of the British in particular), that monetary union would eventually require political union. The Greek crisis was precisely the sort of event that was expected to force the pace. But, faced with a defining crisis, Ms Merkel’s government is avoiding airy talk of political union – preferring instead to force harsh economic medicine down the throats of the reluctant Greeks, Irish, Portuguese and Spanish electorates. This is becoming both economically and politically unsustainable. If the objective is to save the currency union, perhaps policy makers are looking at this the wrong way around. In the end, paradoxically, to save the European Monetary Union, the least disruptive way forward would be for the Germans, not the periphery countries, to leave.

One major reason why political, and social, unification is so important is that it provides conditions under which the adjustment mechanism, to being uncompetitive, is facilitated. Labour mobility is much greater within, than between, countries. Cross-regional fiscal transfers help to smooth the adjustment process. Social and national unity makes break-away policies almost unthinkable and hence provides the cement to keep the discipline of adjustment in place.

None of the above are, as yet, strongly anchored in the euro-zone. Nor are they likely to be in the current context in which any moves toward a broader supranational fiscal structure continue to be resisted by the Germans, who perceive this as a backdoor mechanism for yet more bailouts of their “profligate” Mediterranean European “partners”.

And yet some sort of broader fiscal expansion is becoming increasingly necessary if the euro project is to be sustained. From a standard Keynesian perspective, shrinking a fiscal deficit is virtually synonymous with shrinking economic growth. Keynesians emphasize the prevalence of multiplier effects. Cuts in government spending and hikes in taxes are expected to reduce incomes and spending in the private economy. If the fiscal consolidation is ambitious enough, it can deliver an outright recession.

At the time the euro was launched, there was much hopeful talk that a surge in trade and investment between the euro zone nations would create a truly unified European economy, in which national levels of productivity and consumption would converge on each other. It was also assumed – or perhaps just hoped – that the euro would create political convergence. Once Europeans were using the same notes and coins, they would feel how much they had in common, develop shared loyalties and deepen their political union.

The designers of the single currency were hoping for a third form of convergence, between elite and popular opinion. They knew that in certain crucial countries, in particular Germany, the public did not share the political elite’s enthusiasm for the creation of the euro. But they hoped that, in time, ordinary people would embrace the new single European currency. This has clearly not been reflected by the reality. Crudely speaking, the markets today are calculating that governments lack the shared political commitment to underwrite the stability of the single currency.

The main disadvantage of adopting a currency union in the absence of a fully fledged political union is that it limits the ability of the constituent regions (countries) to adjust to an (asymmetric) shock by using domestic fiscal policy to mitigate the deflationary impact of this shock, as well as eliminating the ability to deploy exchange rate adjustments to do so. The European Monetary Union doesn’t work and without a federal fiscal redistribution mechanism it will never be able to deliver prosperity. Every time an asymmetric demand shock hits the Eurozone, the weaker nations will fail. Trying to impose fiscal rules and austerity onto the EMU monetary system just makes matters worse.

The fiscal austerity that accompanied the period of transition into the EMU as governments struggled to reach the entry criteria established under the SGP manifest now as persistently high unemployment and rising underemployment; vaporising social safety nets; decaying public infrastructure and rising political extremism.

Some 10 years after the introduction of the EMU, these problems are increasing rather than decreasing, as the proponents of the system claimed. Already, Greece has disappointed and requires more EU financing than the $150 billion that seemed more than enough a year ago. Despite the very great weakness in the Irish economy, its fiscal deficit still remains at 15% of GDP. The Portuguese finance minister has conceded that the Portuguese economy will contract 2% this year and 2% next year, and these forecasts tend to be optimistic. Portugal’s real GDP was still growing at a 1% pace versus a year ago, but the sequential contraction in the final quarter of 2010 also places that growth path in question (and in fact Portugal’s policy makers have shifted to a forecast of a 2% real GDP recession in 2011 and 2012). No surprise, then, that Portugal is joining Greece and Ireland in seeking loan assistance from the EFSF. Italy’s real GDP growth was the strongest versus a year ago at 1.5%, but the pace of growth was slipping by year end, and Moody’s has recently threatened the country with a debt downgrade.

And then there is Spain: As Rob Parenteau has noted recently (“Spain under Strain”), Spain’s recovery through the end of 2010 was primarily a consumer led advance, yet the fundamentals for consumer spending were hardly favorable. The tumble in retail sales growth that began late last year appears to have accelerated to the downside through March of this year. Higher taxes, plus the onset of the global consumption tax, have put the squeeze on consumer spending. The GCT also makes it more difficult for Spain to improve its current account balance. Investors and policy makers are fixated on reducing the fiscal deficit without considering what that requires for the financial balances of other sectors. The fact of the matter is that Spain has tended to run a chronic current account deficit, not a chronic fiscal deficit. The fiscal deficit is to a great extent just an artifact of the sharp reversal in private sector deficit spending that arrived once Spain’s housing boom went bust and the GFC hit. Private sector debt/income ratios are multiples of the government’s, yet all eyes are on containing the public debt/income ratio. Some earnest efforts at restructuring are underway, and early results may be showing up favorably in capital goods production, but unless more heroic efforts are taken to improve the rate of reinvestment of corporate profits in Spain’s economy, growth shortfalls may indeed lead to a destabilizing cycle at a time when the unemployment rate already tops 21%.. This in turn could knock the euro off its perch as expansionary fiscal consolidations become elusive across the eurozone periphery. Investors do not appear to fully appreciate the challenge Spain faces in maintaining an expansionary fiscal consolidation.

With three of the five peripheral nations contracting in the final quarter of 2010, and a fourth decelerating markedly, the elusiveness of an expansionary fiscal consolidation in the eurozone periphery is becoming all too evident. That is entirely consistent with the view that the cards may be stacked against an outcome which allows the periphery countries to grow their way out of trouble.

Of course, this wasn’t an issue prior to the creation of the EMU, during which each of the member states were sovereign in their own currencies and had their own central banks. That means they were not revenue-constrained and could conduct fiscal policy and monetary policy in a co-ordinated way to best serve the socio-economic interests of their citizens.

The German political class in particular seems incapable of recognizing this basic fact, as they continue to view this as a problem defined in terms of lax government fiscal discipline. Chancellor Angela Merkel’s interpretation of the woes of the Eurozone, for example, focus on what she claims are the problems of “excessive public debt”:

We now have a clear crisis of indebtedness. But let me tell you, there is no crisis of the euro as such. This is a debt crisis. Let me say this very clearly again. The euro is our currency. And it is much more than just a currency. It is the embodiment of Europe today. Should the euro fail, Europe will fail. We are going to defend the euro …

Which is tantamount to ignoring the real issue: There is no public debt crisis without the Euro. Japan has a public debt to GDP ratio at a level some 2.5 times bigger than the euro zone, yet there is no solvency crisis in Japan. The only reason the euro has hitherto survived to this point is because the ECB has stepped in as the “missing” fiscal agent and keeping the bond markets at bay. As the ECB’s bond purchases have wound down, however, the crisis has intensified, because the ECB remains the only entity in the EMU which has currency sovereignty and can “fiscally fund” member state deficits permanently. Given the central bank’s political resistance to continuing these purchases (largely supported by the Germans) the underlying logic of the monetary system will continue to ensure these on-going crises will spread across the union.

This in turn has led to discussions that the weaker constituents of the euro zone – notably, Greece and Ireland – undertake debt restructuring. Christian Noyer of the ECB recently set out the rationale as to why the central bank opposes such restructuring:

If we restructure Greek debt, that means Greece defaults.

And what are the consequences of a default? The banks with the most Greek bonds are Greek banks. The Greek banks themselves will be badly damaged. When the banking system is stricken, what do you have to do to prevent the financing of the economy from collapsing? You have to recapitalize the banks. Who will recapitalize the Greek banking system? The Greek state.

That means the Greek state will gain nothing. It will invest in the banking sector everything that it has gained in the restructuring.

Next there are the Greek insurers and pension funds who will be hurt. That means it will weigh on the Greek population’s savings, which could cause a drop in consumer spending and Greek growth will take a hit. This counters the Greek recovery.

Then, what else is there in terms of Greek creditors? There’s the European public sector, European governments and the central banks. This is directly tapping the European taxpayer.

If we make European states pay, the mechanism of European financing will stop immediately. The states will not continue putting their taxpayers’ money on the line when their loans have just been cleaned out, when they’re taking losses on the money they’re lending. So that’s the end of support from other European states.

And for the central banks, what happens? Greek debt will become debt that is no longer worth anything. It’s no longer debt that can be considered as sufficiently safe for operations in the Euro System. That means by definition that to restructure is to become ineligible as collateral. If it’s ineligible, then it means a large part of what the Greek banks bring as collateral for refinancing can no longer be used. That means the Greek banking system can no longer be financed.

The next day what happens? Greece needs to find investors because the Greek state won’t move from deficit to surplus overnight. As long as it doesn’t have a primary surplus, the Greek state needs to borrow. International investors, that small group that remains, have just been restructured. It’s not the next day they’ll come back with financing.

The Euro System won’t refinance. The European states won’t finance. The IMF won’t go there alone. No one will finance the Greek state in coming years. That means the meltdown of the Greek economy. This is a horror story. That’s why we’re against a restructuring.

Perhaps we’re looking at this the wrong way around: Given the continued German aversion to more broadly-based pan European style fiscal programs, which its populace continues to see as nothing but bailouts for lazy Mediterranean free-loaders, there is another way to solve the euro crisis.

Let Germany leave the euro zone.

Let’s leave aside the politics for a moment as there are many who believe that a German exit from the euro zone in effect means the end of the euro because a number of other countries would leave.

So consider this exercise solely from an economic context: The likely result of a German exit would be a huge surge in the value of the newly reconstituted DM. In effect, then, everybody devalues against the economic powerhouse which is Germany and the onus for fiscal reflation is now placed on the most recalcitrant member of the European Union. Germany will likely have to bail out its banks, but this is more politically palatable than, say, bailing out the Greek banks (at least from the perspective of the German populace).

To be sure, this will not come without some cost to Germany: Germany will probably save its banking system at the expense of destroying its export base. The newly reconfigured DM will soar against the euro and become the ultimate safe haven currency. This will mitigate the write-down impact of the inevitable haircuts on euro-denominated debt, because the euro (assuming it is retained by the remaining euro zone countries) will fall dramatically. Even if the euro itself vaporizes, the Germans simply will pay back debt in the old currencies, likely fractions of their previous value. And the German populace would likely find it far more palatable to be bailing out its own banks (as it did during the reunification period), as opposed to spending German taxpayer funds to recapitalize the banking systems of a bunch of Mediterranean “profligates”.

By the same token, a fall in Germany’s external surplus means a large increase in the budget deficit (unless the private sector begins to expand rapidly, which is doubtful under the scenario described above), so Germany will find itself experiencing much larger budget deficits. In the current German situation, although the country runs a large current account surplus, it is insufficient to offset a high private sector predisposition to save (which means there is some deficit). But the current account surplus does allow for a smaller budget deficit than its so-called “profligate” Mediterranean neighbors, whilst still facilitating the private domestic sector’s desire to net save. As we have argued before, it is the “profligacy” of Germany’s Mediterranean trading partners, which has allowed it to rack up huge current account surpluses, and therefore run smaller budget deficits than the likes of the so-called PIIGS countries.

Once divorce from the euro is complete, Germany will regain its fiscal freedom. This is itself something the Germans should celebrate, providing their government takes advantage of their newfound fiscal freedom. Remember, once it returns to the Deutsche Mark (DM), Germany becomes the issuer, as opposed to the user of a currency, as is the case under the euro, and is fully sovereign in respect of its fiscal and monetary policy. Consequently, the German government can offset the external shock by running large government budget deficits, which will add new net financial assets to the system (adding to non government savings) available to the private sector. Germany might well decide not to adopt this course of action, given its historic resistance to aggressive fiscal policy, but it will no longer be bound by any of the institutional constraints inherent in the European Monetary Union.

In the meantime, the rest of the euro zone gets a huge boost to competitiveness via a (likely) substantial fall in the euro against the newly reconstituted DM. Also, the resultant potential instability means that the ECB would likely have to stand ready to backstop all of the bonds to prevent this from becoming a fully-fledged crisis, but it would encounter less political resistance to doing so, given the absence of a restraining German voice in the European Monetary Union.

It seems like an odd way to consider the problem, but the paradox of the current situation suggests that an exit from the euro zone of its strongest member, rather than its weakest links, might well be the optimal means of saving the euro, in the absence of a fully fledged return to separate national currencies