The
World Series ended before November! Congrats to the Sox. The Wrongologist and
Ms. Oh So Right are in Boston, but sadly, no champagne remains inside the city
limits.

No
Halloween fun for St. Louis:

Another difficult week for the Obama administration: the NSA proves that it is more than a 4th branch of government; it is its own country with its own foreign policy. And yet more faux outrage about Healthcare.gov along with some real outrage about Mr. Obama’s promise that “you can keep your doctor, you can keep your health insurance”.

Can government get this country back on track? We have had enough of the endless DC theater that pretends to govern. Congress thinks that if it talks long enough and loud enough, no one will notice that they are not accomplishing anything. Use the quote below from Will Rogers to write your homily about government dysfunction:

Faux Outrage:

Shouldn’t Republicans stop pretending to be upset that the website isn’t working properly when they would rather it didn’t work at all? Where is the Republican plan?

Bed mates:

Obama Halloween:

NSA makes no friends for USA:

What’s
Wrong Today:

As the
chart below from the Federal Reserve Bank of St. Louis (FRED) shows, after-tax
Corporate Profits (blue line) are at all time highs. The Wrongologist graphed
wages (red line) as a share of GDP on the same graph, the left axis is
corporate profits, the right axis, wages as a share of GDP:

It doesn’t
require a degree in economics to see that corporations have done very well and
individuals not so well. So, when we spoke yesterday about how some economists
are recycling old theories to support
current fiscal policy in a fact-free context, here is a little context
for the rest of us.

As you
look on the above chart before the big recession, even the pre-crisis corporate
profit picture was very rosy. The chart isn’t overlaid with the effective
corporate tax rate, but, below is a chart of corporate taxes as a percentage of
GDP since the 1950s:

Most of
corporate America’s productivity gains over the last 10 years have been the
result of stagnant wages, and corporate tax breaks. The net-net is that the increase
in corporate profits is largely due to lower wages, lower taxes and corporate
welfare.

So, now let’s
close those tax loopholes and get corporations to pay their fair share.

Looking at
the first chart, we see a 9-fold increase in corporate profits since 1980
compared to flat wages since 1989, so, it might be time to ask where is the
trickle down? The answer is: It went
to workers in China, Mexico, India, executive salaries & offshore corporate
cash hoards.

Recently,
the GOP has stopped using the term “job creators”, which had replaced the
previous “trickle down”. Now the question is whether the GOP believes they can
simply create a new term to convince enough voters that low taxes on
corporations and the wealthy are acceptable to the rest of us.

Every major economist
has espoused the “labor
theory of value”. That includes the conservative Adam Smith, who wrote of
the “Invisible
Hand”, which is a metaphor
to describe the self-regulating behavior of the marketplace. It has come to reflect
Smith’s claim that individuals’ efforts to maximize their own gains in a free
market will also benefit society, even if that individual has no benevolent
intention.  

The labor theory was
also at the core of the writings of the left-leaning Karl Marx.

One corollary of the labor
theory is that if “real” wages that should be going to labor decline in a period of growth, the difference will
flow upward to the corporations and their executives.

We have ample
evidence that wealth does not “trickle down” to the working class. Our first
chart demonstrates that.

“Supply Side Economics”
says that lowering taxes and regulations would drive economic growth. It was a
con promulgated by the economist Arthur Laffer. Mr. Laffer
is remembered for his “Laffer
Curve“, which purportedly
demonstrates that taxable income will vary inversely with changes in the
rate of taxation. That means that lower taxes produce higher tax revenues, and
vice versa. Laffer said it
illustrates the theory that reducing taxes for the very wealthy would result in
increased production and thereby, tax receipts. Laffer’s theory of trickle down
was immediately embraced by the GOP, who claimed that by cutting taxes for opposite
has occurred.

Since Ronald Reagan occupied
the White House, the GOP has peddled the idea that tax cuts that benefit only
the elite classes would achieve big economic gains. It hasn’t worked. By now,
even the GOP knows that ‘trickle down” or “supply side
theory” is bunkum. They will, however, will always resurrect it if they can milk it for another tax cut.

We need
companies to realize both their operations and society would be better
sustained over the long run if they started to re-invest more in their
companies and their workforce. Whether it’s more pay, fewer hours and more employees,
something has to give. If 10% of current profits were diverted to workers’
wages, there would be an additional $182.14 BILLION (1.16% of GDP) in the
pockets of consumers who are more likely to spend that cash rather than hoard
it.

Windfalls/tax cuts are
never re-invested in ways that create jobs. They are squirreled away offshore
or, otherwise removed from circulation. The results are obvious: a slow down or
a recession eventually has followed every GOP tax cut.

Is this GOP record of
lowering taxes to create jobs, and getting the opposite simply a fluke?  

Not a chance. It is
the predictable outcome of economists backing bad fiscal policy with quack
theories.

What’s
Wrong Today:

Happy Halloween! And now for something truly scary:a Guardian news article by Aditya Chakrabortty entitled “Mainstream economics is in denial: The world has changed”. From Chakrabortty:

The
thesis in the original article is that despite the crash, many bold face
economists do not really use a feedback loop of facts to study the big picture. They just
recycle old theories and continue to prop up bad fiscal policy. The money
quote:

This
1980’s cartoon crystallizes the problem with economists. It is by Mark Stamaty,
who drew Washingtoon for the WaPo for many years. It is
nice to show it on the day after the World Series has ended. Thanks to Rod
Bingaman for sharing:

Here are a few more bad judgments by really famous economists:

Traditional
economics presents an “assumed” model of reality, namely an efficient
market where everyone is perfectly rational and has the same tastes and
preferences. Many then ignore any question of how well this corresponds to the world
we live in, the one that includes 30 years of financialization of various risk
assets. Models and markets can be and are often manipulated.

This is
another way of saying that our economy is a very complex system. It is dynamic
not static, and very difficult to predict or control. It is permeated by interactions
between inputs and outputs. “Common sense” about how small changes
should impact the big picture rarely hold in the real world where global
economic disruption is the order of the day.

Economics
isn’t quackery, but there are certainly quack economists. Also, you didn’t need
a PhD to understand the banking collapse. It was an out-of-control derivatives market,
which fueled an out-of-control mortgage market that brought down our economy.
Too many banks risked too much of their capital in a stretch for profits. All the while, many economists, mainly those who worshiped at the
feet of Alan Greenspan and Wall Street, told us that financial industry
deregulation was OK.

And our
government lacked the political courage to try to prevent the accident that was
about to happen. After all, Greenspan and Bernanke both said all was well.

We have
lived with the outcome of the current orthodoxy in political economy, and it took the
global economy to the brink of catastrophe. Now, both political parties are trying
to balance the books on the backs of working people and poor, adding a raft
of discretionary budget cuts and a creeping dismantling of our social safety
net, our infrastructure and our public services.

All while
using the tax code to build more wealth for the top one-tenth of one percent in
America.

There is
no area of our politics which cries out more for an evidence-based approach
than in the politics of fiscal policy. How it is possible that discredited evidence-free
economic ideologies (like trickle down, austerity and tax cuts for the wealthy)
can get passed as policy decisions that affect the lives of millions? Often in
a nearly fact-free debate?

Here are a
few facts that should be driving our discussion about fiscal policy: The continued
worsening of income disparity in the US, which is caused principally by lowering
of upper-income taxation. That started during the Johnson administration and
ended with Reagan. During that period, top-tier tax levels were lowered from
above 75% to 35% today. The shift in income from the public’s treasury to private
pockets is obvious: The share of total income of the Top 10% of American
households has increased from 31.5% to 48.2% over the past six decades:

1960 –
33.8%
1970 – 31.5%
1980 – 32.9%
1990 – 38.8%
2000 – 43.1%
2012 – 48.2%

According to State of
Working America, the Forbes 400, a thin slice of the wealthiest people in
the United States have (no surprise) been doing very well. From 1982 to 2011,
their average wealth increased
from $1.1 billion to $3.8 billion, and their collective net worth was $1.5
trillion. By comparison, in 2010, the
collective net worth of the entire bottom 60% of the wealth distribution,
over 70 million households, was only $900 billion. 

In short, changes in
taxes exacerbated the steep rise in income inequality over this period. Good economics and good fiscal
policy must test itself against outcomes. Is this the outcome our policies
should produce? This is the result of all the sophistry that afflicts our
present-day economic debate, especially from the Right about income
distribution.

For how
much longer do we have to put up with the Ayn-Randian nonsense that claims that
entrepreneurial activity is stifled by the oppression of “government
regulation” or “uncertainty”? What is oppressing is this: 15% of the
American population is below the Poverty Threshold with little chance of
movement into the middle class. That’s about 50 million American men, women and
children.

How long are we
going to put up with certain economists on the Right helping perpetuate such economic
injustice?

How long will we
tolerate politicians who willingly remain economic policy Neanderthals because it helps
their wallets?

What’s
Wrong Today:

What’s wrong in Saudi Arabia? In August, Saudi Arabia offended
Russia’s president over Syria, then it turned
down a seat on the UN Security Council and last week, announced
its disapproval of US foreign policy. For a nation with substantial
vulnerabilities, the Saudis act as though they can survive their internal and
external enemies without any help. 

Saudi Arabia is an economy based entirely on huge oil revenues controlled by an extended family
network. About 85% of the population is Sunni Muslims. Its richest oil
fields face hostile neighbors (Iran, Iraq, and Syria). All this is defended
by an unproven military. Given that reality, you would think that the Saudis would
want to court the US, the only world power that’s shown a willingness to defend
them. But, apparently not.

Last week, members
of Saudi Arabia’s ruling family signaled a rift with the US that could take the
alliance between Washington and the Kingdom to its lowest point in years. The
United States and Saudi Arabia have been
allies since the Kingdom was declared in 1932. That relationship has given the
House of Saud a powerful military protector and Washington, secure oil supplies.

Reuters reported
that Prince Bandar bin Sultan (known in the US as “Bandar Bush” for his
relationship with both Presidents Bush) told European diplomats that the United
States has failed to act effectively against Syrian President Bashar al-Assad
or in the Israeli-Palestinian conflict, was growing closer to Tehran, and had
failed to back Saudi support for Bahrain when it crushed an anti-government
revolt in 2011.

Reuters
added that Prince Turki al-Faisal a member of the Saudi royal family and former
director of Saudi intelligence, said:

If that
wasn’t clear enough, the breach between the United States and Saudi Arabia was also on display in Washington,
where another Saudi prince criticized Mr. Obama’s Middle East policies,
accusing him of “dithering” on Syria and Israeli-Palestinian peace.

It may be that this is a real “pivot” by Saudi Arabia,
but maybe we should consider the possibility that Bibi is behind this. According
to Debka.com, Israel may just
be playing a card: (emphasis by the Wrongologist)

Perhaps the
Saudi’s change in strategy grew out of these recent meetings as an effort to pressure Congress to go to war with Syria, or with Iran.

Saudi
Arabia has a close relationship with Israel. In fact, the Israelis have a
military base in Tabuk, in northwestern Saudi Arabia. The Israelis and the
Saudis have an agreement to arm and fund the rebels in Syria. The Israelis strengthened
that relationship last week with Saudi Arabia just as the news broke that the Saudi’s
were moving away from the US.

But wait! Al
Jazeera reported yesterday that after weeks of agitation for increased
attacks on the Syrian government and its president, Bashar al-Assad, the Saudis signaled a 180 degree change
in policy. Saudi Arabia’s highest religious authority, the grand Mufti
Abdulaziz Al al-Sheikh, told young Saudis they should not go to Syria to
fight in the civil war:

The grand
Mufti, who is appointed by the Saudi king, also warned preachers against
encouraging young men to fight in Syria during their sermons, after delivering a lecture on “Deviation among the youth” at a
mosque:

Based on the Mufti’s
statement, fighting with the Syrian rebels is no longer a sacred cause, it is
something to be avoided, according to the Kingdom’s most important Muslim
cleric.

But, Prince Bandar Bush has been recruiting
Saudis and Sunnis from around the Middle East to fight with the rebels in Syria. It
is unclear whether the statement by the Mufti will stop the flow of jihadists to
Syria from Saudi Arabia. It is also unclear if this signals a major
conflict with the policies of Prince Bandar or, perhaps, a major blow to
Bandar’s authority and standing. What is clear is that they throwing Bandar under the bus.

This looks
like a squabble inside the Saud family that is based in the reality that we won’t
be pressed into a war with Syria, and that they have no power to stop us from opening talks with
Iran on their nuclear program.

Since Saudi
Arabia and Iran are competitors, the Saudis want to make sure that they get
something for our tilt towards Syria and Iran. First, they probably are looking
for assurances that the Saudis won’t lose too much political influence in the
region if US-Iranian relations are regularized. Second, an American détente with
Iran means there will be much more Iranian oil on world markets, so Saudi
Arabia wants to make sure that it doesn’t lose profits. Third, they may want to
hear that we are not taking sides in the Sunni-Shia divide.

Could all
of this be a smart move on our part? The cold war ended long ago. We need Saudi
Arabia less diplomatically than we used to, and we need less of their oil as
well. As Oil Price notes:

Go ahead, sell
your oil to China, and get paid in Yuan.

Maybe we
could also tell the Saudis that we will no longer tolerate their religious
suppression. And BTW, why not let your women drive? And if you are so concerned about Syria, just
send your troops. Americans are sick to death (literally) of fighting wars on
behalf of various Middle Eastern power players.

That
includes you too, Israel.

What’s
Wrong Today:

Before
we get into the latest from America’s corrupt banking system, Lou Reed died
yesterday. He (or someone close to him) posted the photo below, called “The
Door” on his Facebook
page on the day he died:

The picture tells us that Lou Reed remained
who he was to the end, you don’t know if he went through that door or not. Lou
didn’t sell out in the 80’s, he didn’t go disco, he didn’t try to modernize
his sound. 

The
Wrongologist came late to the Velvet Underground.
He didn’t even listen to their first LP. Then came “Walk on the Wild Side”, “Sweet
Jane”, and others. Lou proved that you didn’t need a great voice in rock ‘n roll,
just something to say. His death is a big deal. Happy trails to the Rock ‘n Roll Animal, he made the
1970’s interesting.

Now,
on to last week’s news that JP Morgan settled with the Department of Justice (DoJ)
for $13 billion for their misdeeds during the mortgage bubble.  

This was a fine folks, not a penalty, so JP Morgan can deduct
these costs from their taxable income. Therefore, taxpayers will pay 30+% of the
fine. Since JP Morgan is a bank, it could raise all of the money necessary to
pay the fine from whom? Your Federal Reserve. It could do this by accessing
what is called the Fed’s discount
window. It could use the government’s money to pay the government’s fine.

Fines do not punish the banks. The only true form of punishment is
to prosecute and jail those who run afoul of the Exchange Act of 1934. The big takeaway
from this is that nobody who benefited
from the bad behavior got hurt in the settlement. The big bonuses remain
paid to the perpetrators of the fraud. There is a concept in financial firm employment
contracts called claw back policies that allow companies to recover
erroneously awarded compensation from executive officers. They have
increased in popularity over the past few years. C-Suite
Insight reports that the prevalence of claw back provisions among Fortune
100 companies increased from 3% prior to 2005 to 82% in 2010.The Sarbanes-Oxley Act requires the Securities and
Exchange commission (SEC) to pursue the repayment of incentive compensation
from senior executives that are involved in a fraud.

In
practice, the SEC has enforced its claw back powers in only a few cases.

The Dodd-Frank
Act mandated that the SEC require US public companies to include a claw back
provision in their executive compensation contracts that is triggered by any financial
reporting restatement, regardless of fault by the executive. (Sarbanes only
required claw back in the case of intentional fraud).

But this
portion of the Dodd-Frank Act has not been implemented, since the SEC has not
yet issued guidance on the specifics of the claw back provision that firms must
employ. Isn’t that convenient? No claw backs of any portion of the immense
bonus compensation paid to Wall Streeters, despite the fact that just 5 banks
involved in the meltdown that began in 2008 have
amassed nearly $100 Billion dollars in fines in 81 separate settlements.
Look at the chart below from the Economist:

What
the hell is the point of imposing fines on these big banks when no banker pays
a personal price in jail time or in bonus claw backs?

Are these
fines greater than the banking industry’s ill-gotten profits? Not close. So,
the “fines” were not a penalty for wrongdoing at all, they were merely a cost
of doing business for the banks and a profit-sharing deal for the government that
collects the fines.

The
banking industry sold $2 Trillion in mortgages to the US government through Fannie
Mae and Freddie Mac in the years leading to the financial crash. A little known
condition of those sales allows Fannie and Freddie to return those mortgages to the banks where proper procedures of
mortgage origination were not followed.

But,
that hasn’t happened.

Do
Fannie and Freddie have the political backing to “sell” much of the bad mortgages back to the banks? Could the banks
be stuck with hundreds of billions of underwater mortgages that probably did not
meet the original conditions of sale?

Why
isn’t this the correct “fine” for the Banksters?

Since
the banks see these fines as a cost of doing business, they will simply
continue to look for ways of increasing the volume of their derivatives and trading
activities. The long term net effect will be to undermine demand in our economy
for goods and services and to help build us towards the next bubble.

The Glass-Steagall
Act regulated banking from 1933 until 1999. It was about 40 pages long and
everyone knew what it was for, and its implementation was immediate. During
that period we corrected what was wrong as it happened. Since its repeal, we
have bailed out the Too Big To Fail (TBTF) banks and let their executive managements
skate. And 5+ years after the meltdown, we still haven’t implemented final rules for Dodd-Frank.

Following
the financial crisis of 2007-08, legislators unsuccessfully tried to reinstate elements
of Glass–Steagall as part of the Dodd–Frank,
without success. In Sunday’s NYT, Gretchen
Morgenstern quoted Luigi Zingales
a professor of
entrepreneurship and finance at the University of Chicago Booth School of
Business. Dr. Zingales doesn’t argue that a new Glass-Steagall act would have prevented
the financial meltdown, but he said that an
unintended consequence of its repeal is that the merger of banking and
underwriting has allowed the TBTF banks to become a huge lobbying force that
was impossible before 1999 when they all competed:

There is not even a theoretical possibility of reform today. In
the past, banking has reformed itself mostly by being led kicking and screaming
by vigorous government involvement. Now, it is nearly invulnerable to reform. What does Dr. Zingales suggest we do
to reduce the implied guarantees bestowed on the banks? He recommends a
two-pronged approach:

Here is a little history: By 1911, JP
Morgan controlled about 40% percent of the capital raised in America. Judge Louis
Brandeis wrote that the main objection
to a financial oligarchy was not primarily economic, it was moral. It
was a threat to political liberty and democracy:

We need an army of modern day Louis Brandeis’. House to House fighting
is the only way we will break the hegemony of the TBTF banks.

The Wrongologist has managed a few outsourced Federal government projects in his career.
They all involved some level of software integration. It is a bitch getting Federal government departments to talk to each other when
they have to support a technical task, even when they want to be helpful. That
doesn’t absolve anyone involved in the Obamacare roll-out.

Write your homily
using the quote by the Marquess of Halifax on church sign below. It speaks to
the need of any project manager to understand their project end-to-end. Woe
betide the prince or princess (that means you Ms. Sebelius), who fails to understand
that difficult task:

The outsourcer-in-chief gets rolled:

The
Obamacare roll-out is a fiasco. The call for heads to roll has commenced. The I-told-you-so’s
are on parade. The GOP is trying to avoid being seen as rooting for failure
but, they are rooting for failure.
Didn’t they just shut down the government trying to force the ACA’s failure?

However, Republicans
are in a tactical bind. They are thrilled that the website trouble is slowing
the program down, but they have to act concerned that the website isn’t
working. That gives them the opportunity to reinforce their ongoing message
that government is inept, that it can’t do what the private sector does
successfully on the web every day. Yet, they know very little about the real issues.
Andy Borowitz said it all in his Borowitz Report about the hearings
this week:

Congressional
Republicans shaking their jowls at testimony about “end-to-end testing”, and
“enterprise identity management”, act like the website roll-out confirmed their fears,
but their fear is not about whether the website has glitches. Their fear is
that it could work and that people who had no healthcare will get healthcare
and like it. Then the country would be stuck with another popular program that they
and their Tea Party confederates insist the government should not be operating.
Will the GOP now help work out the website problems? No, their job is to amplify them while creating new problems as the
opportunity presents.

GOP
talking points:

House vs. Mouse

Darth Cheney’s health care is better than yours:

If government wants software that works, call the NSA:

What’s
Wrong Today:

(Sorry for the radio
silence. Family and personal issues made blogging tough.)

Did you notice that debt
paranoia is back? Both amongst the people who are checking out National Debt Relief options in their area, and on the federal level? Once the government shutdown ended, America’s politicians and
the debt scolds returned to hand wringing about the debt. There’re back talking about the disastrous consequences
to the Republic if we fail to reduce our federal debt. Media
Matters reported that the coverage
of budget priorities were far more likely to mention the need for debt reduction
than they were to mention economic growth and job creation.

This, despite continuing
warnings from economists that growth is the more pressing concern. Here are the
statistics based on frequency of mention by each paper:

Across these three
print outlets, of the 46 articles mentioning the need for debt and deficit
reduction as a priority, 24 mentioned that addressing costs of entitlements,
such as Social Security and Medicare, was necessary. We’re back to talking
about deficits, despite the fact that demand for our debt via US Treasuries is extremely
 strong (our debt is oversubscribed by 2x
whenever it is offered). This is simply mind boggling, debt is not the #1 problem facing America.

Jared Bernstein in the
NYT Economix
Blog: (emphasis by the Wrongologist)

For those
who still like facts, here is a perspective on our “deficit problem”:

• Federal
  Budget deficit 2009 – $1.4 trillion

• Federal
  Budget deficit today – $759 billion

That means it was
halved in the past 4 years. While today’s deficit becomes tomorrow’s debt, here
is Paul
Krugman in the NYT:

 

Let’s remind ourselves
who these “scaremongers” are. They include the Fix The Debt coalition of big businesses and
CEOs. This group is headed by Erskine Bowles and Alan Simpson, who, right after
the end of the shutdown, felt the need to warn America
that:

But today we have record
income inequality, record corporate profits and no growth in real median income in
America since the 1970’s. This results in lost consumer demand and in persistently
high unemployment that creates a chronically weak economy. That’s what we need to
concentrate on fixing, not the debt.

Remember: the rich do
not create jobs, despite Republican hype. The
goal of a corporation is to create as few new jobs as possible. More
jobs means more overhead; more overhead means less profit. The only reason for
a business to create jobs is if employing more people will generate more
business and create more profit. But that only happens with new paying customers.
A thesis to consider: We mostly have a revenue problem, not a debt problem.

• In
  1950, the corporate tax contribution was 32% of Federal revenues. It’s now less
  than 17%, despite corporate profits being at their highest since 1943 (adjusted
  dollars)

• In
  1950, individual contributions to Federal revenue were 45% of Federal revenue.
  Individuals now contribute 63%

• In
  years in which the corporate tax rate was less than 50%, growth has averaged
  2.7%. In years they were 50% or more, growth has averaged 3.7%

We’ve
been here before. The Great Depression finally ended when our unemployed went
to work. They went to work as the Home Front of WWII, but they went to work. At
the end of the 1930s, 17% of the American work force remained unemployed, which
is close to today’s 13.6% U-6 Unemployed
number (unemployed plus those working part-time who want a full-time job).

 

So, we have been here before. We fixed it before too, and not just
by cutting expenditures. If we took the concerns of debt scaremongers at face
value, the fix is to employ people, not to simply push them to the side. Republican
debt fears are best addressed by fixing our economy.

But, corporate America
is doubling down on fear. They believe that attacking the social safety net
will pre-empt any move to increase corporate taxes and taxes on the 1%. So, what
we really have is a lack of care and concern problem by Plutocrats and Republicans.
More from Krugman:

We are swimming in corporate
wealth and middle class income stagnation. That has a much greater impact on our
country’s and our children’s future than our debt level.

Building innovation while
destroying inequality are the keys for America’s future, not cutting our debt!

Sunday Cartoon
Blogging arrives on Saturday! The Wrongologist is on the road.

Another week in: Tales of America, The Cliff Dweller. There won’t be a default for about 3
months. But, the GOP’s Default Caucus — 18 Republican Senators and 144 House Republicans, (including the
chief Republican House negotiator for the next budget deal, Rep. Paul Ryan), clearly
preferred a default to allowing
millions of Americans access to affordable health insurance, or to re-opening the
government at the spending
levels Republicans had originally proposed.

Supporting an
economic shutdown by refusing to pay the nation’s bills is a stunningly extreme
position. Unfortunately, it’s a position that about 60% of Congressional
Republicans supported last week.

Use the quote by
Mark Twain on the Church Sign below to write a homily on the wisdom and smarts
displayed by the Tea Party and their fellow travelers in Congress over the past 16 days:

240 years have
changed the Tea Party:

America needs a reboot:

New polls are
grim:

We are now a
joke to much of the world:

What’s
Wrong Today:

In the
past 100 years, there have been eight Democratic and nine Republican
Presidents. 6 of the 8 Democrats (except FDR and Wilson), delivered to their successors
smaller deficits than they
inherited. 7 of the 9 Republican Presidents (except Eisenhower and Harding), delivered
to their successors larger deficits
than they inherited.

You read
that correctly, every Republican
President since Eisenhower has left office with a larger deficit than he
inherited, so says a study by Stephen Bloch,
a PhD mathematician at Adelphi University.

Despite
the last minute reprieve by Congress’s voting to extend the date(s) of our
budgetary and debt ceiling crisis, we will most certainly see the Republicans in general and the Tea Party in specific, charge up
Austerity Hill again in a few weeks.

The Center
for American Progress (CAP) says
we are paying a steep price for Tea Party demands for fiscal austerity. Their analysis (see
chart below) shows it has cost us 2.5 million jobs:

The CAP report
says the gap in economic growth between our present and their imagined
anti-austerity worlds could have made a big impact on the US jobs situation:

Moreover, the widely-cited Macroeconomic
Advisors (MA) report estimates
that our crisis-driven fiscal policy has cost us 1 percentage point off of the
growth rate of GDP for the past three years, or roughly 3% in total. More than
half of this estimated cost comes from the “fiscal drag” of falling
discretionary spending, with the rest
coming from MA’s estimate of the negative impact on GDP of fiscal uncertainty.

“Uncertainty”
used to be the Republican mantra when discussing the Obama fiscal policy. Now, it
is hung around the necks of the Republicans like Flavor Flav’s Clock.  

So, it is clear that we have paid a steep price for Tea Party and right
wing Republican intransigence on the debt. What explains the Teapols’ ability
to remain fact-free? How can they look past the facts to whichever totem stands
for their beliefs about economics?

Cognitive
neuroscience says we are not
fundamentally rational beings. Whenever decision-making involves
judgment or personal values, our default mode of thinking is driven by
subconscious forces. We reach decisions almost instantly, and just as quickly,
we create rationalizations to justify those conclusions, consciously thinking
we worked through the decision logically.

The
psychologist, Daniel Kahneman has studied this for decades. He won the Nobel Prize
in economics, without any formal economics training, (! What’s up with the
Nobel Committee?) for demonstrating that economic decisions are not made
rationally. His book, “Thinking
Fast and Slow” made most Top-10 non-fiction lists. An example:

The
Dunning-Krueger Effect shows that the
least-qualified are most likely to be certain of their (incorrect) conclusions.
Tea Party, meet economics; media, meet Paul Ryan. Of course there is also
the example of Mr. Romney’s polling gurus – who were certain of his victory
deep into election night.

Deliberately
setting out as the Tea Party did, to create doubt about the full faith and
credit of the US, and grand-standing with the Confederate flag in front of the
White House by the very same Teahadists who worked to shut the government
down, all the while bemoaning that it is shut down, is not just delusional
in the face of logic, it is shameful behavior to most Americans.

We shouldn’t
dignify their totemic beliefs as a “negotiating position”. The position “give
us concessions or we will destroy the Government of the United States, an
institution we all took an oath to uphold,” is not a logical, or a fact-based
position.

Maybe Ted
Cruz, et. al really wish to destroy the government of the United States.
There is a different word for that. That word would
be “treason” and there seems to be a faction of the Republican Party
that embraces and endorses that strategy. These people normally would be prosecuted;
here, they build their email lists, raise money and get re-elected.

In
December, Republicans will again raise the flag of Austerity. They will strap
on their Tea Party armor and work to weaken Medicare and Medicaid, just like
they did in 2011, just as they did to the Food Stamp (SNAP) program in the
House last month. Paul Ryan will be back on the Sunday media catwalk, hawking
the same old tax cuts and cuts to social programs, wrapped up in “tax reform”
and deficit reduction.

Paul
Ryan, who this week, along with 143 other Republican members of House, voted
for a US debt default, will be the chief Republican negotiator.  

Marx said:”History repeats itself, first as tragedy, second as
farce.”

America isn’t laughing.

What’s
Wrong Today:

We
are squandering our gifts.

America
used to be the global bastion of democracy. America used to be respected globally
as the land of opportunity. America used to be the indispensable power. America
used to have a “can-do” attitude that extended to any challenge facing us as a
people, and we could solve any problem, scale any obstacle and follow through
until we achieved success.

These
gifts are going fast, they are being squandered by America’s politicians. We
are becoming a “can’t do” nation.

Now,
when things are hard, we just kick the can down the road. We decide as little
as we can, and delay debate on the big issues to another day, another election,
another time when we hope to have more information that will make the right path
clear to the political overlords.

Depending
upon which report out of DC that you see today, no real plan has yet emerged that
will pass a budget or fully and finally resolve the debate about the debt
ceiling. We will just kick the can down the road a little bit, reopen the government,
pass a Continuing Resolution to fund the government for a while, and buy a
little more time to let the suits in DC work on yet another partial solution.

Our
gifts are being squandered by a government that is above the people, a
government above the people that was built on outside money. There is no longer
any pretense about trying to serve a greater good, or serving the people, Members
of Congress only serve themselves and their monied masters.

The big takeaway
is that the Tea Party will win this round.

They are currently
in charge. The House is nominally run by the Speaker, but Roll Call reported that Sen.
Ted Cruz (R-TX) met with privately with about 20 House GOP lawmakers Monday
night at a the Capitol Hill watering hole, Tortilla Coast. The outcome of that session was to derail the Speaker from bringing the bi-partisan
temporary deal worked out in the Senate, to a vote in the House,
despite GOP leaders signaling yesterday that they planned to do just that.

Now, Taco
Joint Putsch may not have the same ring to it as Beer Hall Putsch. Still, a Cruz-tested,
Tea Party approved deal was put forth by House Republicans this morning. But
wait! They walked
back from THAT as well. From the NYT:

It
looks once again like there is no middle ground in the House. Boehner’s again back
to square one, and we hit the wall on Thursday. For the past two years, we’ve
been hearing how the Republican leadership
was going to defang Tea Party gridlock, and it hasn’t happened. We’re still
waiting for the 30 or so Republicans we continually hear about to break with
party unity in the House.

Even
with a default, the Tea Party wins. They have absolutely no incentive to
bargain towards a real solution, since default means a de facto Second Sequester. That is a clear Tea Party win.

If
something gets agreed this week, it will be some kind of kick the can ahead
agreement. No structural change is on the table that would prevent the Tea
Party from winning the next round,
once the clock runs out on whatever shitty piece of legislation both Houses
decide to pass on Thursday. A Tea Party win!

With any
limited deal, all of the focus will be on the next patch to the budget and the
debt ceiling, so there will be no action on Immigration or tax reform, no
discussion about how to put America back to work, no plan to address our
deficit. A Tea Party win!

The
public may not want gridlock, but it can do little except by voting for their
Congressmen every other year. And the power of voting is diluted by
gerrymandered districts. Tea Party-heavy districts will elect Teahadists,
and those constituents seem quite happy
with gridlock. So we have a government that is unreachable by our historical methods. It is a government that
is above the people, not a government for, or by, the people.

The Tea
Party is not some fever that started in 2010. These are the same crazy ideas
that were around for Kennedy, FDR  and even
earlier. See the Wrongologist’s columns here
and here.
The difference today is there are vast amounts of money backing their play, and
they have the bad demographic trends for older whites who feel threatened going
for them as well.

The Teahadists
surely see that they have multiple paths to a win. They will continue agitating
for any course that can go their way. The House looks paralyzed.

There
are only two ways out of this stalemate. First, it ends if the money men backing
the GOP actually launch an operation to marginalize the Teas. Are the monied
elites willing to suffer several years of inter-party bloodletting to take the
Tea Party sand out of the gears of government? Doubtful.

Second,
Obama could offer up a temporary delay in Obamacare in return for a permanent repeal
of the debt limit authorization requirement. Period. That’s what Obama needs to
jam through before midnight Thursday. A year’s delay in Obamacare might be worth
that.

Otherwise, governing will remain impossible, and we will continue to squander our gifts.