Archive for June, 2010

Some of my regular readers have been asking me privately why I haven’t been posting recently.  There is just so much craziness going on that I’m not sure where to begin.

But I think John Boehner’s interview with the Pittsburgh Tribune Review may just have taken the cake, especially following on the GOP’s rationale for blocking extending benefits to the long-term unemployed.  And Marco Rubio’s call to make the Bush tax cuts permanent.  It’s time for a simple lesson in reality.

First, about blocking the unemployment benefit extension.  The stated reason is that people are just lazy.  That they should simply take a lower paying job than the one they lost.  During almost all of the Bush (43) administration, the US economy failed to create enough jobs to meet the demands of an increasing population.  Using the most basic macro-economic principle of supply and demand, that put downward pressure on wages.  So wages, with the exception of executive pay, were at best stagnant even before the crash of 2008.  Remember this graph?

Notice how the economy began to shed jobs at a rapid clip — a total of 8.5 million of them.  And that doesn’t count the 100,000 jobs or so that need to be created each month, just to keep pace with population growth.  So, I have a question for the Republicans who think the job seekers are simply lazy.  Just where are the unemployed supposed to find those jobs?

The other kink in the string is that benefits flow directly into the economy.  That money doesn’t find its way into savings accounts or even paying off consumer debt.  It goes to necessities — groceries, rent, clothes to replace the ones the kids have outgrown, school supplies, etc.  Unemployment benefits directly stimulate the economy.  And that stimulation leads to more job creation.

So do wages that allow consumers to purchase products.  Henry Ford was no friend of labor unions, but he understood a basic fact — paying his workers enough that they could afford to buy a car was good business.  And without a strong recovery in jobs, the revenues flowing into the Treasury Department in the form of income taxes are diminished.

In the same interview, House Minority Leader Boehner worried about the long term viability of Social Security, and with good reason.  But he advocated raising the retirement age to 70 — not to help fund Social Security, but to pay for our two wars.  This approach fails the smell test on a couple of fronts, especially as it relates to the broader economic recovery.  First, the biggest reason the Social Security Trust Fund is going to run out of money is that Congress has used it as a piggy bank, raiding it for the general fund.  And so, now that those IOUs are coming due, the GOP wants to raid it some more.  The quickest and best way to return Social Security to solvency is to remove the income cap, currently at $90K per year.  The cap amounts to a 6% tax break for people earning significantly more than average.  Second, raising the retirement age keeps older workers in the economy at a time when we ought to be encouraging them to leave the work force.  Yes, older workers tend to be higher earners than young ones, and as such they pay more in income taxes than their younger counterparts.  But at a time when we don’t have enough jobs to go around, is it sound economic policy to insist that these older workers stay on?  And by the way, my family would be directly impacted both by removing the cap and raising the retirement age.

History teaches us that shifting our attention from stimulus to deficit reduction too soon in a major recession causes another dip in the recovery.  We’re teetering on the edge of such a double dip, and this one following an essentially jobless recovery during the recession of 2000-2002.  We ought to be looking at how to create jobs — millions of good-paying jobs.  Job growth means more revenue to the Treasury.  And that, if well used, would go to reducing the deficit.  For all the trumpeting of the Bush tax cuts as good for the economy, the end result was not the promised job creation.  Early indications are that the employment data due out this week will show a net loss in job creation — largely the result of the census being completed.  America needs a massive effort to create jobs.  But Congress’ current deficit fears makes that unlikely.  We need another stimulus.  Let’s not kid ourselves — we need to invest in infrastructure and in green manufacturing.  And those will require investments by the government.  Our roads and bridges and rail systems are in disrepair.  We continue to ignore them at our peril.

History teaches us another important lesson about how the economy fares under each of the two parties — one that is perhaps surprising.  Comparisons of real economic growth adjusted for inflation (as measured by GDP), the consumer price index (a measurement of inflation), unemployment levels, the Dow Jones average, and even the value of the dollar all indicate that the US economy has fared better under Democratic administrations than under Republican ones.  When one looks at election year numbers only, the balance tips towards the Republicans.  Hmmmm.  Could it be that when the GOP is in power that they pump up the economy, knowing that most of the electorate has relatively short memories?  Or is it just by chance?  We do see that over the past 30 years, conservatives have made taxes in general a favorite target at all levels.  Similarly, they have called for less regulation and have a documented preference for the top 5% of wage earners over the rest of us.

And finally, Boehner needs to get out into his district a bit more often.  He allowed as how the financial collapse that occurred in September 2008 was a mere “ant” and that the reform package wending its way through Congress is akin to using a nuclear weapon to kill that same ant.  I’m not sure that the 3,000,000 American families who have lost their homes to forclosure or the 8,500,000 Americans whose jobs disappeared with the current recession would consider the collapse a mere ant.


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Walruses in the Gulf of Mexico???  A Japanese home shopping network as the source of oil drilling parts???  Yup, those are elements of BP’s disaster plan for Gulf drilling.  Beyond the fact that this isn’t a disaster plan by any sane definition of that term, it’s also demonstrably true that regulators don’t have a leg to stand on when they claim they reviewed it.

And, as if that weren’t bad enough, we’ve learned that MMS “inspectors” at times simply traced over the company-issued inspection reports with pen, demonstrating that agency (or at the very least some of its employees) were guilty of what most reasonable people would describe as criminal neglect of their duties.

BP, which claims that it is big and important, has the audacity — one might even say the stones — to buck the EPA’s demand to use a less toxic dispersant.  In effect, they told EPA where to go.  It doesn’t seem to be coincidental that BP has a financial interest, both in the company that makes the dispersant they’re using but also in minimizing both the estimates of the amount of oil gushing from the run-away well and the amount of oil that eventually reaches landfall.

The Top Kill and Junk Shot efforts to contain or stop the gusher have failed, and now we’re told that the next best hope — cutting off the damaged pipe and adding another blowout protector — could actually make things worse as BP continues to drill its relief well.  Then there’s the relief well itself, which has been described as trying to hit a dinner plate at a distance of several miles through solid rock.  And as if all that weren’t discouraging enough, hurricane season is beginning and the latest estimates call for a very active season.  (The first Pacific hurricane has already caused devastation in parts of Central America.)

Through all that BP CEO Tony Hayworth just wants his life back!  Well, I’m sure the impacted people and wildlife of the Gulf would like theirs back too.

There is an interesting parallel between the continuing tragedy in the Gulf and the financial crisis.  In both cases, industries got involved in things they didn’t know how to control.  In one case it was derivatives and liar loans.  In the other it was drilling at depths without knowing how to fix things when they went awry.  And in both cases it was an industry that enjoyed and promoted deregulation of its activities.

As if all that didn’t add up to enough, we’ve learned that BP held the controlling interest in Alyeska, the consortium that was initially responsible for the Exxon Valdez clean-up operations — that is until they demonstrated a total lack of preparedness or capability in the early days of the effort.

This confluence of events and attitudes led directly to the deaths of 11 people.  Yet we hear few if any calls for charges of criminal negligence against the executives and managers of BP, TransOcean or Halliburton.

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