Tissue-like and so thinas to be useless journalism; worse than double-ply
The New York Times and Dave Leonhardt's Upshot section made a big splash a few days ago by reporting on a study showing that the Canadian middle class had caught the US middle class in median income and likely surpassed it since. The study is based on an effort to measure median income per capita after taxes, and its results are presented as something truly significant.
However, I think the study is biased in that in median income per capita after taxes, it selected the wrong measure. What is needed is a measure of income or affluence that takes account of the value of cross-national variations in Government benefits delivered to the middle classes. Since the United States has lower taxes than most comparable nations, but delivers much less in safety net and entitlement benefits, it's pretty clear that the measure used in the study reported on by The Times overestimates the real median income of the US middle class in comparison with the middle classes of other comparable nations and provides a misleading impression of the relative affluence of the American middle class. Read more about Did Canada's Middle Class Just Get More Affluent Than the US's, or Did that Happen Long Ago?
In my last post, I took issue with a recent column by Catherine Rampell, who tries to make the case that seniors haven't paid for their Social Security and Medicare because they “generally receive” more in benefits out of these programs than they pay into them. Rampell relies on an Urban Institute study to make her case. Since that post, she's offered another that replies to some of the questions raised by commenters on her earlier effort. I'll reply to that new post shortly, but first I want to present key points emerging from my analysis of Federal monetary operations in my reply to her earlier post. See that post for the full argument.
First, once Congress mandates spending, there is no way that the Treasury can be forced into insolvency or an inability to pay its obligations as long as it is willing to make use of all the ways it can cause the Fed to create reserve credits in Treasury spending accounts which can then be used for its reserve keystroking into private sector account activities that today represent most of the reality of Federal spending. Read more about More Misdirection from Rampell in the Service of Generational War
MSNBC's right wing representative on The Cycle, Abby Huntsman, got a lot of pushback from Social Security defenders after her rant last week. They made points similar to the following in countering Huntsman:
The media and politicians in both parties are still largely echoing the Administration's framing of the fiscal situation and absolving the President of his share of the blame for the debt limit crisis. They're reinforcing his message They're also preparing the way for a compromise, that will, almost certainly, result in hurtful cuts to Government spending including renewed consideration of "the Great Betrayal," also known as “the Grand Bargain,” including passage of the chained CPI cuts to Social Security over the objections of a large majority of the American people.
The mainstream news outlets still haven't seriously questioned the President's claims that There Is No Alternative (TINA) to just facing down the Republican's shutdown and debt ceiling related threats without giving in or resorting to any options to de-fang the debt ceiling threat. They have begun to mention other options, but in a way that is largely supportive of the President's reluctance to use them. In reinforcing TINA, the mainstream is allowing the President to escape from responsibility and obligation, while, ironically, allowing him to characterize himself as “the adult in the room.”
When it comes to our repeated and unwelcome debt ceiling crises, President Obama is like the person who says he has a problem, but when confronted with a variety of options for alleviating or even solving the problem, comes up with some rationalization about why each will not work. After awhile, it becomes obvious that the person with the problem doesn't want any help help solving it, but actually loves having it, and is fixated on a single objective having little to do with solving the problem (“the Great Betrayal”), that is very difficult to get, and wants to claim that there is no alternative, because, as the problem produces more and more negative effects he/she will be able to push through that objective. Read more about Rationalization and Obligation, Part I: No Magic Bullets?
It now looks like the big media and leaders in both parties are no longer focusing on the Government Shutdown crisis, but are now moving on to the notion that the shutdown is melding with the upcoming probable breaching of the debt limit to create a combined mother of all fiscal crises. Along with this, the media and many politicians, encouraged by the President's standing “strong, strong, strong,” are now directing attention away from whether ObamaCare will be delayed or compromised, to other types of ransom the Administration might pay in return for both re-opening the Government and also providing an increase of an undetermined amount in the debt limit. Meanwhile there are reports that under increasing Wall Street pressure John Boehner is preparing to negotiate with House Democrats and allow a vote to pass a CR and a clean debt limit increase bill, in return for concessions he can take back to his caucus.
TINA does not apply in this case, and the President's choices are not limited to just refusing to negotiate or giving in to ransom demands whether focused on Obamacare, the Keystone Pipeline, entitlement cuts,“tax reform frameworks” or any other measures that give “tea party” Republicans “the respect” they think is due them. By continuing to frame things in this way, the media and politicians in both parties are echoing the Administration's framing of the situation and absolving the President of his share of the blame for the debt limit crisis. They are also preparing the way for a compromise, that will, almost certainly, result in hurtful cuts to Government spending including renewed consideration of "the Great Betrayal," also known as the Grand Bargain, and probably passage of the chained CPI cuts to Social Security over the objections of a large majority of the American people. Read more about Stop “the Great Betrayal:” Kabuki Update
MSNBC continues on with its campaign to cast the Tea Party Republicans in the role of principal villains in the imminent Government budget/ government shutdown crisis and the likely coming debt ceiling crisis. The teabots, you see, are using the Republican majority in the House to demand more austerity in government and defunding of the Affordable Care Act (ACA). Read more about Stop the Kabuki: It's About “the Great Betrayal”
The US is broke. Government deficits are de facto evidence of a government gone wild. We’re careening toward Greece. Entitlements are the root cause of our fiscal woes, and the Chinese are coming for our grandchildren. How many Americans believe this garbage? My guess? Most of them.
A report on protests at the Tampa convention appearing in the Hill (h/t Lambertstrether) partly focused on views about our economy and financial system of an Occupy protestor named Andrew Speirs. The report says:
“Protesters with the Occupy movement were also in full force with calls to dismantle the United States’ economic and political system.
As the saying goes ""It's not the people who vote that count. It's the people who count the votes.". And considering all the hoopla over Olympic apparel being made in China, it's incredible to me that there is simply no media coverage or outrage about the fact that the means by which elections are held in the U.S. is on systems made in countries other than the U.S. And that doesn't even take into account all the issues associated with electronic voting.
So to that end, publishing with permission: Read more about It's not who votes but who counts the votes and Ecuador
Bill Van Auken in wsws in May wrote:
Washington’s closest allies in the Arab world, the dictatorial feudal monarchies of Saudi Arabia and Qatar, set up a $100 million fund to place FSA members directly on their payroll, while the US announced it was sending “non-lethal” aid to these same forces, including sophisticated communications equipment, night vision goggles and US intelligence.
None of this has had the desired effect. The FSA has barely put up token resistance to the Syrian military in most areas, and there is no sign of mass popular support for the Syrian National Council.
Bill Van Auken of wsws has a NON-shallow take on Bill Keller’s recent disappointingly shallow column on the New York Time’s role in the launch of the Iraq War:
On the ninth anniversary of the US invasion of Iraq, New York Times columnist and former editor Bill Keller has penned a self-serving piece that obscures his own role in justifying that war, while setting ground rules for launching the next one.
Keller’s headline—“Falling in and out of war”—is an accurate reflection of the smug and cynical character of the well-heeled layer of establishment liberals of which he is a part, and which today constitutes a principal constituency for imperialism.
This is the third and last installment of a critical review of Dean Baker's second reaction to the debate kicked off by the WaPo's piece on Modern Monetary Theory, written by Dylan Matthews. Read more about The WaPo MMT Post Explosion: Dean Baker's Second Try On MMT (3)
This is the second installment of a critical review of Dean Baker's second reaction to the debate kicked off by the WaPo's piece on Modern Monetary Theory, written by Dylan Matthews. The first installment discussed Dean's views on using the monetary channel to boost aggregate demand, and began criticism on his views on devaluing the currency and increasing exports. This post continues that critique, and later takes up his views on work sharing.
Expanding US Exports at the Expense of Decreasing Real Wealth? (continued)
Dean goes on:
”To see this point, imagine a more extreme case. Suppose that we had a trade deficit equal to 50 percent of GDP. If the countries who were buying up dollar assets then decided that they had enough, so we could no longer rely on imports to meet half of our domestic demand, does anyone believe that the U.S. economy could quickly and painlessly replace our imports with domestic production?”
No, of course not! But, why do economists like Dean and Paul Krugman insist on relying on far-fetched scenarios to try to argue against simple truths that may apply today? The current account balance will probably be around 4-5% of GDP this year. As the economy recovers it will probably rise to 6% of GDP again, which represents a very real benefit to the United States. But there's no reason to expect that this growth would continue indefinitely or ever reach 50% of GDP. Why should it? What are the dynamics that would drive things this way, and make other nations value the dollar so much, that they will keep their own populations barefoot?
China, India, and Japan are all under pressure domestically to change their policies and make more of their production available to their own people. Europe may also abandon austerity soon, as they experience its ravages.
The long-term trend in the current account balance won't be up, It will be down, gradually down, for reasons I mentioned above. It just doesn't make sense for foreign nations to continue giving more than they're getting from the US. So, the 50% GDP scenario is just ridiculous. Why even bother suggesting it? What does the thought experiment prove, except that Dean Baker isn't thinking through a realistic model of the forces accounting for the international trade patterns we see?
In fact, Dean isn't even really serious about suggesting that this scenario somehow corresponds to a result of MMT economics. He says:
”I would not attribute this view to the MMTers, but then the question becomes one of a degree. Perhaps a trade deficit of 6 percent of GDP is okay, but presumably somewhere between 6 percent and 50 percent we get into a problem. It seems the question then has to be how quickly the U.S. economy could adjust to a much lower trade deficit and what is the risk that foreign countries will slow or stop their purchases of U.S. assets? We may differ on the answer to these questions, but they are the questions that must be asked.”
I think these are important questions. We should ask them. But, has Dean answered them? And do his answers indicate any serious problems for the United States economy? And if so, how does that relate to MMT? If these changes could possibly produce cost-push inflation in the United States, then MMT has some answers for that kind of problem. On the other hand, if other nations stop exporting so much to the US, then that may create less demand leakage for our economy. In which case, MMT predicts that we will get closer to full employment and also that we will have to moderate deficit spending as full employment is approached.
Dean continues with more scenarios about what would happen if foreign nations began to charge us more from imports. I won't reproduce each of these here or critique them. But, invariably, there is a general pattern to them. Read more about The WaPo MMT Post Explosion: Dean Baker's Second Try On MMT (2)