Random Thoughts

November 20, 2011

The right has been pushing a lie that despite the fact that the lie has been debunked on numerous occasions. The lie is that the Community Reinvestment Act (“CRA”) in conjunction with Fannie Mae and Freddie Mac triggered the collapse of the residential real estate market. The Financial Crisis Inquiry Commission has concluded that this is baloney. Specifically, the Commission found that:

[Fannie and Freddie the “GSEs”] contributed to the crisis, but were not a primary cause. Importantly, GSE mortgage securities essentially maintained their value throughout the crisis and did not contribute to the significant financial firm losses that were central to the financial crisis.

The GSEs participated in the expansion of subprime and other risky mortgages, but they followed rather than led Wall Street and other lenders in the rush for fool’s gold. They purchased the highest rated non-GSE mortgage-backed securities and their participation in this market added helium to the housing balloon, but their purchases never represented a majority of the market. Those purchases represented 10.5% of non-GSE subprime mortgage-backed securities in 2001, with the share rising to 40% in 2004, and falling back to 28% by 2008. They relaxed their underwriting standards to purchase or guarantee riskier loans and related securities in order to meet stock market analysts’ and investors’ expectations for growth, to regain market share, and to ensure generous compensation for their executives and employees—justifying their activities on the broad and sustained public policy support for homeownership.

The Commission also probed the performance of the loans purchased or guaranteed by Fannie and Freddie. While they generated substantial losses, delinquency rates for GSE loans were substantially lower than loans securitized by other financial firms. For example, data compiled by the Commission for a subset of borrowers with similar credit scores—scores below 660—show that by the end of 2008, GSE mortgages were far less likely to be seriously delinquent than were non-GSE securitized mortgages: 6.2% versus 28.3%.

We also studied at length how the Department of Housing and Urban Development’s (HUD’s) affordable housing goals for the GSEs affected their investment in risky mortgages. Based on the evidence and interviews with dozens of individuals involved in this subject area, we determined these goals only contributed marginally to Fannie’s and Freddie’s participation in those mortgages.

[Snip.]

The Commission concludes the CRA was not a significant factor in subprime lending or the crisis. Many subprime lenders were not subject to the CRA. Research indicates only 6% of high-cost loans—a proxy for subprime loans—had any connection to the law. Loans made by CRA-regulated lenders in the neighborhoods in which they were required to lend were half as likely to default as similar loans made in the same neighborhoods by independent mortgage originators not subject to the law.

Mike Konczal has a great point by point refutation of the right wing “analysis” here.

Of course, you will always have Republicans, such as Mitt Romney, continuing to press the lie:

When you have government play its heavy hand, markets blow up and people get hurt. And the reason we have the housing crises we have is that the federal government played too heavy a role in our markets. The federal government came in with Fannie Mae and Freddie Mac, and Barney Frank and Chris Dodd told banks they had to give loans to people who couldn’t afford to pay them back.

Update: Barry Ritholtz has a good summary in a WaPo commentary. Hale Stewart has this take on Ritholtz’s analysis:

For those of you who still adhere to the CRA/GSE line of argument please do us a favor: don’t reproduce.

Update Two: So now we find that Sen. Corker of Tennessee is either a fool or a liar. See Dean Baker’s analysis. Baker quotes Moody’s analysis from 2006:

“Freddie Mac has long played a central role (shared with Fannie Mae) in the secondary mortgage market. In recent years, both housing GSEs [Government Sponsored Enterprises] have been losing share within the overall market due to the shifting nature of consumer preferences towards adjustable-rate loans and other hybrid products. For the first half of 2006, Fannie Mae and Freddie Mac captured about 44 percent of total origination volume – up from a 41 percent share in 2005, but down from a 59 percent share in 2003. Moody’s would be concerned if Freddie Mac’s market share (i.e., mortgage portfolio plus securities as a percentage of conforming and non-conforming origination), which ranged between 18 and 23 percent between 1999 and the first half of 2006, declined below 15 percent. To buttress its market share, Freddie Mac has increased its purchases of private label securities. Moody’s notes that these purchases contribute to profitability, affordable housing goals, and market share in the short-term, but offer minimal benefit from a franchise building perspective.” (Moody’s, “Federal Home Loan Mortgage Corporation, Analysis,” December 2006, p.8)

Dean then comments:

So here we have Moody’s expressing concern about the ongoing viability of Freddie Mac because they are losing out in the subprime and Alt-A market to the investment bank. This is its assessment at the time, before it was apparent (to them) that this market was a disaster in the works.

8:20pm | URL: http://tmblr.co/ZfuEbyCCEtni

November 5, 2011

Words of Greatness

I’m not moved by “Words of Great Men.” You know, aspirational quotes from the usual suspects: Jefferson, Lincoln, Roosevelt (both Teddy and Franklin), et al. Hero worship is simply not a good substitute for independent, critical thought.

The Occupy Movement has a whole series of them. Again, the Usual Suspects. One, however, was simply too good to pass up.

10:51pm | URL: http://tmblr.co/ZfuEbyBZ77bc

October 29, 2011

A Short Analysis of the Perry Tax Plan

Dan Shaviro gets it right about the Perry tax plan:

Perry’s tax plan is in many ways the usual nonsense, not really worth addressing seriously. For example, it’s clearly a huge revenue-loser, is a huge tax break for the wealthy, etcetera.

[Snip]

[T]he Perry plan in many ways makes less sense than Cain’s 9-9-9 plan.

The details can be found at the link above, but, in summary, Shaviro makes it manifest that the Perry plan (i) does not deliver on its promise of simplicity, (ii) is not flat, (iii) the exemption of dividends and capital gains will reduce taxes at the upper end of the income scale, and (iv) the corporate changes that Perry suggests “would reduce corporate taxable income at the same time that [the plan lowers] the corporate rate” defeating Perry’s stated goal of flattening the corporate tax.

9:36pm | URL: http://tmblr.co/ZfuEbyBH6IpO

October 29, 2011

Why Economic Inequality Is Bad For Us (Part I)

All too often, debates over economic inequality focus on intellectually squishy concepts of what constitutes a “fair” outcome. That is, one side contends that the current high level of economic inequality is unfair to the “losers,” a contention that is met by claims that changing economic outcomes via governmental action is somehow theft (thus the claim of “class warfare”). Lost in this debate is the fact that more egalitarian economies work better not only for those on the bottom, but for everyone.

Via Paul Caron’s TaxProf blog, we have a report of an academic paper by two Israeli economists, Eran Manes (Ben Gurion University) and Matan-Paul Shetrit (State of Israel Ministry of Finance), who, in a recent paper, A Theory of Inflation, Tax Evasion and the Demand for Redistribution, report that:

We provide a theory which predicts that economies with greater inequality will tend to have greater tendency for tax evasion and more reliance on inflationary finance. Consistent with empirical evidence, the model features economies of scale in the credit transaction technology, and pervasive tax evasion in the extreme tails of the income distribution due to increasing returns in the tax evasion technology, and the existence of positive audit costs which makes auditing the poor unappealing. A rise in inequality in the sense of second order stochastic dominance spreads more mass to the tails, and raises the marginal cost of taxation thus making inflation more attractive from the public finance point of view. An important contribution of the paper is that when the level of redistribution is decided by majority voting, the median voter may prefer less redistribution, the greater the level of inequality, contrary to standard politico- economic theories, and consistent with some empirical evidence. We provide further empirical evidence in support of this view, according to which controlling for inflation and the size of the shadow economy dramatically changes the effect of inequality on redistribution.

And, as Charles Blow of the NYT, reminds us, the U.S. is near the bottom in terms of income and wealth inequality.

6:17pm | URL: http://tmblr.co/ZfuEbyBGfevp

September 13, 2011

Correspondence

I usually refrain from posting ordinary correspondence here because I view such correspondence as being somewhat confidential. However, I will make an exception this once.

I received an email with a link to this WSJ op-ed piece. The email had the message “You and Dr. Krugman should be ashamed.” The op-ed piece and the message obviously referred to Krugman’s comments here. My response (with some minor editing made before this posting) was as follows:

Neither I nor Paul Krugman have anything to be ashamed of. The people who should be ashamed are:

1. Donald Rumsfeld and his minions who on September 11, 2001, began to scheme how to use the attack to justify an invasion of Iraq.

2. Dick Cheney and his minions who cooked up false “intelligence” to justify invading Iraq, capitalizing on the fears and anger of Americans after 9/11.

3. Stupid dupes like you and toadies who write editorials for Rupert Murdoch, who somehow, even now after the sickening facts are known, criticise those who tell the truth rather than the truly evil individuals who caused more Americans to die than died in the 9/11 attacks, many, many more Americans to be maimed than the number who were injured in the 9/11 attacks, spent literally hundreds of billions of dollars in a war that was instituted fraudulently, and finally, caused the death of literally tens of thousands of innocent civilians.

Yet, you, you stupid asshole, you bizarrely find that Rumsfeld, one of the chief architects of this malfeasance, is somehow justified in his protest in cancelling his subscription to the NYT because Paul Krugman exposed him for the truly evil and dishonest person that he is.

Two things I truly don’t understand.

First, why don’t Rumsfeld and Cheney and their ilk have the good sense and common decency to slink away and remain silent for the rest of time. Have they no shame?

Second, why do people like you find that these American versions of Albert Speer have anything interesting or valuable to add to the public discourse?

Put another way, if the Rumsfelds and Cheneys of this world do not have the common decency to feel remorse for their crimes, why do people like you continue to pander to them and treat them as honorable members of society rather than the pariahs that they are?

What Krugman (and, more forcefully, Dan Rodricks) was saying is not that we should not grieve for the victims of 9/11, not that we should not remember that 9/11 was a tragedy for our country, but that we should also be aware that those who took advantage of 9/11 to advance their own narcissistic agendas still walk among us, with the full rights of citizens of a nation that they ill-served, still exhibiting the same hubristic pride and arrogance that has always been their mark.

And I am certainly not ashamed to state the truth of the matter.

10:48pm | URL: http://tmblr.co/ZfuEby9VNd4l

September 10, 2011

No Ponzi

There are three types of people who believe that Social Security is a Ponzi scheme: People who are ignorant (i.e., those who do not know what a Ponzi scheme is or how the Social Security system works); People who are liars (i.e., those who know what a Ponzi scheme is and how the Social Security system works, but nevertheless, usually for political advantage simply lie about Social Security); or People who are stupid (i.e., those who simply repeat what someone who is ignorant or a liar has said, without any thought as to whether the statement is or is not true).

In 2009, Larry DeWitt of the Historian’s Office of the Social Security Administration outlined in great detail (i) how a Ponzi scheme works and (ii) how Social Security is structured. By so doing, DeWitt proved, beyond any question that Social Security is not a Ponzi scheme. As set forth in the paper:

The essence of the Ponzi scheme was that Ponzi used the money he received from later investors to pay extravagant rates of return to early investors, thereby inducing more investors to place their money with him in the false hope of realizing this same extravagant rate of return themselves. This works only so long as there is an ever-increasing number of new investors coming into the scheme.
[snip]
In contrast to a Ponzi scheme, dependent upon an unsustainable progression, a common financial arrangement is the so-called “pay-as-you-go” system. Some private pension systems, as well as Social Security, have used this design. A pay-as-you-go system can be visualized as a pipeline, with money from current contributors coming in the front end and money to current beneficiaries paid out the back end.

There is a superficial analogy between pyramid or Ponzi schemes and pay-as-you-go programs in that in both money from later participants goes to pay the benefits of earlier participants. But that is where the similarity ends. A pay-as-you-go system can be visualized as a simple pipeline, with money from current contributors coming in the front end and money to current beneficiaries paid out the back end.

So we could image that at any given time there might be, say, 40 million people receiving benefits at the back end of the pipeline; and as long as we had 40 million people paying taxes in the front end of the pipe, the program could be sustained forever. It does not require a doubling of participants every time a payment is made to a current beneficiary, or a geometric increase in the number of participants. (There does not have to be precisely the same number of workers and beneficiaries at a given time—there just needs to be a fairly stable relationship between the two.) As long as the amount of money coming in the front end of the pipe maintains a rough balance with the money paid out, the system can continue forever. There is no unsustainable progression driving the mechanism of a pay-as-you-go pension system and so it is not a pyramid or Ponzi scheme.

In this context, it would be most accurate to describe Social Security as a transfer payment—transferring income from the generation of workers to the generation of retirees—with the promise that when current workers retiree, there will be another generation of workers behind them who will be the source of their Social Security retirement payments. So you could say that Social Security is a transfer payment, but it is not a pyramid scheme. There is a huge difference between the two, and only a superficial similarity.

If the demographics of the population were stable, then a pay-as-you-go system would not have demographically-driven financing ups and downs and no thoughtful person would be tempted to compare it to a Ponzi arrangement. However, since population demographics tend to rise and fall, the balance in pay-as-you-go systems tends to rise and fall as well. During periods when more new participants are entering the system than are receiving benefits there tends to be a surplus in funding (as in the early years of Social Security). During periods when beneficiaries are growing faster than new entrants (as will happen when the baby boomers retire), there tends to be a deficit. This vulnerability to demographic ups and downs is one of the problems with pay-as-you-go financing. But this problem has nothing to do with Ponzi schemes, or any other fraudulent form of financing, it is simply the nature of pay-as-you-go systems.

And see Brad DeLong’s take on those who argue that Social Security is a Ponzi scheme.

There then arises a question that we really don’t have to find an answer to: Is Rick Perry a fool (i.e., ignorant or stupid) or a liar? We don’t have to answer the question. It doesn’t matter. In either case, he is disqualified from serving in any political office that carries even an ounce of responsibility.

10:45pm | URL: http://tmblr.co/ZfuEby9NudUa

(Notes: 8)

September 10, 2011

Missing the Point

A NYT story authored by one reporter, Motoko Rich, with contributions from seven other reporters is a prime example of economics reporters who presumably know what they’re talking about, but who nevertheless say stupid things.

The stated premise of the story is that business people do not believe that President Obama’s jobs plan will generate new jobs. The underlying, but unstated, premise is that the jobs plan is intended to create jobs by subsidizing jobs. According to the article, the reason that business people think that the job plan will fail is that no subsidy will work since there is insufficient demand for their products.

It is plain that the NYT’s description of the plan is simply false. Starting with a false premise, the article then reaches an incorrect conclusion.

It is true that part of the jobs plan is directed to subsidizing the hiring of new workers by, for instance, cutting the employer share of FICA taxes and providing tax credits for hiring formerly unemployed individuals. These elements constitute what might be termed the “Republican” part of the plan. That is, providing tax benefits to businesses as incentives to hire more workers. Liberal economic commentators have long contended that these subsidies will not bring very much bang for the buck.

However, there is a very large “Democratic” component to the jobs plan—cuts in the employee share of FICA, extending unemployment insurance benefits, direct and indirect spending for hiring teachers, building infrastructure, and the like, that are designed to create demand. That is, the principal problem that the business people in the article point to. In dollar terms, the “Democratic” elements of the plan are larger than the “Republican” aspects of the plan. Yet, the article mentions the “Democratic” aspects of the plan in only one paragraph.

It should be obvious to anyone who has watched the Obama Administration’s formulation of economic policy from January, 2009, on, that they have always added significant amounts of “Republican” nostrums to their proposals in order to obtain some Republican support. However, the core of both the 2009 stimulus and the current proposal is an attempt to increase aggregate demand, that is, approaching the problem in a “Democratic” (read: “Keynesian”) manner.

It would have been nice if Ms. Rich et al., had accurately described the plan when interviewing business people. For instance, telling them, correctly, that the plan will give consumers more money and that most economists believe that these consumers will actually spend that money. Which is to say that the plan will increase aggregate demand, addressing the biggest problem identified by these business people.

12:21am | URL: http://tmblr.co/ZfuEby9LUXfx

August 21, 2011

Perry Gets a B+ on Climate Change

I know that since the release of his college grades, there’s been a great deal of concern about Gov. Perry’s, um, intellect. However, WaPo’s Fact Checker column has given him a B+ with respect to his comments on global climate change. That is, he got four Pinnochios, just short of a “Whopper” (the “Geppetto checkmark”).

The article concluded:

Perry’s statement suggests that, on the climate change issue, the governor is willfully ignoring the facts and making false accusations based on little evidence. He has every right to be a skeptic — all scientific theories should be carefully scrutinized — but that does not give him carte blanche to simply make things up.

These guys are just no fun.

5:29pm | URL: http://tmblr.co/ZfuEby8bjhYq

Filed under: Perry Climate Change

August 21, 2011

Better Than 4 Out of 5 Doctors

There is a rather bizarre belief that anthropogenic climate change is a matter of fierce debate among scientists. It’s not. This 2009 study in the Proceedings of the National Academy of Sciences found that:

(i) 97–98% of the climate researchers most actively publishing in the field support the tenets of [Anthropogenic Climate Change (“ACC”)] outlined by the Intergovernmental Panel on Climate Change, and (ii) the relative climate expertise and scientific prominence of the researchers unconvinced of ACC are substantially below that of the convinced researchers.

5:15pm | URL: http://tmblr.co/ZfuEby8bhOvb

(Notes: 10)

Filed under: Scientists Climate Change Climate Change Poll

August 21, 2011

Recession Caused the Deficit

This is truly whudathunkit: According to the Associated Press: Recession Is Culprit in High US Debt.

While spending’s share of the GDP might be at a post-World War II high, tax revenues have fallen to 14.4 percent of the index, the lowest since 1950.

This disparity between what comes in and what goes out plays into the Republican argument about runaway spending.

But it also reflects the mathematical reality that during recessions, tax revenues go down sharply because people and companies make less money and so pay less in taxes. Federal spending goes up, even before stimulus programs, with an increasing demand for government help from food stamps and unemployment compensation and other safety-net programs.

At the same time, the negative economic growth associated with recessions lowers the GDP number on the bottom of the equation, further boosting the ratio of spending to GDP.

Since 1970, federal spending has averaged just over 21 percent of GDP while tax revenues have averaged over 19 percent.

The last time since World War II that federal spending exceeded 23 percent of GDP was in 1982 and 1983, when it rose to 23.1 percent and 23.5 percent, respectively, during what was then called the worst recession since the Great Depression. A Republican, Ronald Reagan, was president, and he was hardly anyone’s idea of a tax-and-spend liberal.

Federal spending is even higher now as a percentage of GDP, but not by much — just between 1 and 2 percentage points. That reflects the fact that the most recent recession was far deeper than the 1981-82 downturn, which lasted 16 months.

As is often the case, the best analysis comes from Republican apostate Bruce Bartlett:

Economist Bruce Bartlett, who worked in the administrations of both Reagan and President George H.W. Bush, said some of the statements by Republicans make him cringe. “And what sometimes makes me cringe more is the silence from their competitors.”

Bartlett includes the solid opposition to any tax increases from the entire GOP field, citing the recent debate when not a single Republican participant would agree to accept even a mix of $1 in new taxes for every $10 in spending cuts.

“It’s the cowardice of people who know they’re wrong when they say these things that disturbs me more than the fact that some people say crazy things,” Bartlett said. He said the Republicans were clearly playing to the party’s conservative base for the primary elections “but when you repeat these things, they tend to get solidified.”

Here”s why we have a federal deficit:

2:52pm | URL: http://tmblr.co/ZfuEby8bLOfz

(Notes: 11)

Filed under: Recession Deficit Government Spending

August 13, 2011

A Man of the People

A good deal of attention has been focused this week on Mitt Romney’s assertion that “corporations are people.” As Roberton Williams notes:

[Romney’s] right, of course, in both the legal sense—the law treats corporations as if they are people—and in the economic sense—what happens to corporations affects people. Corporations are merely a legal convenience that people use to organize their businesses. That specifically applies to the taxes corporations pay: The corporation is the conduit but the burden of the tax falls on individuals. The question is “On whom?”

Williams goes on to offer a brief summary of the academic literature on the subject which is, to say the least, mixed. In the most recent paper on the topic, Jane Gravelle of the CBO concludes that between 60 to 90 percent of the tax burden is borne by capital. And capital, namely ownership of corporate stock, is concentrated in the wealthiest 5% of American households. (The top 5% of all households hold 79.2% of all corporate stock if pension holdings are excluded and 69.2% of all common stock. The figures for the top 1% are 48.3% and 38.3%, respectively. See here, Table 6.)

Since we know that Romney has a net worth of between $190 Million and $245 Million, we must, therefore conclude, that he is truly a man of the people.

3:11pm | URL: http://tmblr.co/ZfuEby8GyLED

(Notes: 1)

Filed under: Romney Wealth Distribution Stock Ownership Distribution

August 7, 2011

D-E-F-E-N-S-E

S&P downgraded the credit rating of the federal government. This downgrade was received with a great deal of skepticism due to S&P’s earlier grading of mortgage-backed securities as AAA when, in fact, the securities were crap.

S&P’s performance in in the meltdown of ‘08 shares one thing in common with its performance now. That is, its tendentious defense of its own ratings.

In September of 2008, Lehman Brothers declared bankruptcy. As late as June of 2008, S&P was still rating Lehman as “A.” See here. At the time, S&P said:

Overall, and despite nervous market sentiment in recent months, Lehman has maintained a very stable funding profile, with an excess liquidity position and contingent funding plan that we consider to be sound.

A little more than three months later, Lehman was history.

On September 24, 2008, S&P attempted to defend its Lehman ratings in a paper entitled “Why Was Lehman Brothers Rated ‘A.’” The paper’s conclusion “Who coulda thunk it.” Thus:

Whether it was because of the complexity of Lehman’s plan, the extended time necessary to fully implement the plan, or the continuing asset valuation risks that Lehman would bear in the meantime, some other constituents were more negative in their reaction.
[Snip]
In conclusion, we believe the downfall of Lehman reflected escalating fears that led to a loss of confidence-–ultimately becoming a real threat to Lehman’s viability in a way that fundamental credit analysis could not have anticipated.

S&P’s defense of its downgrade of U.S. obligations is similar. No retreat, full defense, even when a “slight” $2 Trillion mistake in S&P’s calculations is discovered. Thus, as the Treasury has pointed out:

In their initial, incorrect estimates, S&P projected that the debt as a share of GDP would rise rapidly through the middle of the decade, and they cited this as a primary reason for a downgrade.

In S&P’s corrected estimates – which lowered S&P’s projection of future deficits by $2 trillion over 10 years and lowered S&P’s estimate of debt as a share of GDP in 2021 by 8 percentage points - public debt is much more stable.

[Snip]

The impact of this mistake was to dramatically overstate projected deficits—by $2 trillion over 10 years. As anybody who has followed the fiscal discussions knows, a change of this magnitude is very significant. Nonetheless, S&P did not believe a mistake of this magnitude was significant enough to warrant reconsidering their judgment, or even significant enough to warrant another day to carefully re-evaluate their analysis.

As the Treasury paper points out, the error completely destroyed the principal rationale of S&P’s conclusions. So what did S&P do? It shifted to another principal rationale:

S&P … .chose to proceed with their flawed judgment by simply changing their principal rationale for their credit rating decision from an economic one to a political one.

Apparently, S&P’s analyses are consistent in only one respect: Notwithstanding the facts, they’re never wrong. Don’t believe me—Just ask S&P.

UPDATE

Brad DeLong has obtained a copy of the first S&P draft press release and red-lined it to compare it to the release that was actually issued after S&P’s $2 Trillion mistake was discovered. The red-line is here.

As originally drafted, the release gave, as the principal reason for the downgrade, the following:

We lowered our long-term rating on the U.S. because we have concluded that the fiscal consolidation plan that Congress and the administration agreed to this week falls well short of the amount that we believe is necessary to stabilize the government debt burden by the middle of the decade.

The material that is set forth in bold italics was removed from the final draft. In the final draft, the “prolonged controversy” rational, which was previously a secondary rationale, became the principal underpinning for the downgrade. The final draft also referenced at much greater length the alleged weakness of American “governance and policymaking.”

3:33pm | URL: http://tmblr.co/ZfuEby81D9m-

(Notes: 7)

Filed under: S&P

August 7, 2011

The Season of Our Discontent

If one reads one article today, it should be Drew Westen’s “What Happened to Obama?” in today’s NYT. Westin makes it clear that President Obama’s reflexive tendency to seek consensus rather than confront enemies head-on has been a disaster. As one earlier philosopher has noted:

[M]en have less scruple in offending one who makes himself loved than one who makes himself feared … .

The S&P downgrade makes it clear that had the President followed this principle it is likely that the downgrade would not have occurred:

[T]he downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges … .

Let me be clear: I fully expect to vote to re-elect President Obama in 2012. I have contributed to his re-election campaign and expect to contribute more. As Mark Kleiman has said:

Tell me again that Obama – who has refused to defend the constitutionality of DOMA before the Supreme Court, and appointed two Justices sure to vote to strike it down – is no different from a Republican? I didn’t hear you the first time.

One could add the prospect of Justices who, with only a fig leaf of principle, support the interests of the wealthy against the rest of us.

But, this time, my support lacks any sense of joy or, perhaps more important, hope.

12:01pm | URL: http://tmblr.co/ZfuEby80m_TP

(Notes: 1)

Filed under: Obama Obama Governing Policies Westen

August 6, 2011

When Republicans Were Not Totally Insane

This from a 1954 interview of Arthur Burns, then chief economist to President Eisenhower, in Life magazine:

More tax cuts are promised as soon as the budget can stand it. On the President’s list for eventual adoption are bigger medical deductions, special deductions for working wives (e.g., what they spend for baby sitters), partial exemption of income from dividends, more liberal deductions for firms that buy new plants and tools, and permission for companies to retain more profits without tax penalties. The excise-tax crazy quilt will be reformed. The corporate tax rate will have to be kept at the present 52% until the deficit eases.

Emphasis added.

The “more liberal deductions for firms that buy new plants and tools” actually found its way into the tax code via the Kennedy tax cuts enacted in July and October, 1962. Marginal tax rates on corporations were reduced in stages from 52% to 48% via the last part of the Kennedy tax cuts enacted in 1964 during the Johnson Administration. Also, in 1964, the top marginal rates on individuals were reduced from 90% to 70%.

Compare the rate structure then to the very low rate structure that would result if the Obama Administration’s tax increases were adopted. In essence, taxes would still be far lower than the rates in effect from 1950 though the ‘60’s, a period of rapid economic growth.

12:03pm | URL: http://tmblr.co/ZfuEby7_EBqP

Filed under: Republican Historic Policies Historic Tax Policies

August 4, 2011

Drought

According to the National Drought Mitigation Center at the University of Nebraska-Lincoln:

The percent of contiguous U.S. land area experiencing exceptional drought in July reached the highest levels in the history of the U.S. Drought Monitor … .

Nearly 12 percent of the contiguous United States fell into the “exceptional” classification during the month, peaking at 11.96 percent on July 12. That level of exceptional drought had never before been seen in the monitor’s 12-year history, said Brian Fuchs, UNL assistant geoscientist and climatologist at the NDMC.

Yes, the Monitor’s history goes back only 12 years, but still. For instance, this study published in October, 2010, concluded:

[T]he large-scale pattern … appears to be a robust response to increased GHGs. This is very alarming because if the drying is anything resembling [the projections], a very large population will be severely affected in the coming decades over the whole United States, southern Europe, Southeast Asia, Brazil, Chile, Australia, and most of Africa. (Footnote omitted.)