Balkinization  

Thursday, December 04, 2008

Power and authority in time of crisis (continued)

Sandy Levinson

In a Huffingtonpost posting, Jim Kuhnhenn suggests that some Democrats are becoming frustrated by Barack Obama's purported refusal to take the reins of leadership with regard to the economic crisis. In particular Kuhnhenn cites a recent speech by Barney Frank:

"He's going to have to be more assertive than he's been," House Financial Services Committee Chairman Barney Frank, D-Mass., told consumer advocates Thursday. . .

"At a time of great crisis with mortgage foreclosures and autos, he says we only have one president at a time," Frank said. "I'm afraid that overstates the number of presidents we have. He's got to remedy that situation."

Given our defective Constitution, I am genuinely curious what the "remedy" would be. Obama could, presumably, indicate more strongly his views on the current subjects of controversy, including the (un)wisdom of bailing out the Big Three auto manufacturers. But, when push comes to shove, Barack Obama has no more legal authority to affect the present crisis than do any of the readers of this posting; he no longer even has whatever legal authority might be attributed to a senator, given that he has resigned that position. At this point, he is simply Citizen Obama, having only the power of persuasion.

An additional vital question is the audience he must persuade. After the new Congress convenes on January 6, 2009, President-elect Obama would be speaking to a significantly more Democratic Congress than is now the case. Until then, again thanks to our defective Constitution, the Congress would be far more closely divided, and Republicans in the Senate could easily rebuff any advice given by Obama, especially, obviously, if the legal president who has no apparent interest in leaving office prior to Jan. 20 is offering contrary advice.

Much of the debate concerns the decisions being made by the Secretary of the Treasury to spend the $700 billion more-or-less blank check voted him by Congress in October. Even if one views Sec. Paulson as being independent from President Bush, perhaps on "realist" grounds that no one in the world takes Bush seriously on the economy, that doesn't mean, of course, that his decisions will necessarily be the same as those that would be made by Sec. Geithner. Is there any way to give Geithner the relevant authority to countermand Paulson prior to Jan. 20? I'd be extremely surprised, but I welcome the intervention of those who are convinced that any of the defects in our Constitution can be remedied by "workarounds" that will provide happy endings to our constitutional dilemmas.



Comments:

"But, when push comes to shove, Barack Obama has no more legal authority to affect the present crisis than do any of the readers of this posting; he no longer even has whatever legal authority might be attributed to a senator, given that he has resigned that position."

Chairman Frank might respond as follows: "How central, really, is presidential legal authority with respect to effectively addressing the economic crisis? Isn't presidential persuasion much more central?"

It is true that the president, and certain cabinet officials, have the legal authority to make decisions about TARP expenditures. But, even there, isn't it true that the Administration is actively soliciting the views of Geithner and other officials now associated with Obama?
 

Frank's whining makes it appear that the Dem congressional leadership cannot line up Dem votes for their proposed bailout of the UAW and want some help from the ostensible leader of the party.

I see no constitutional impediment preventing Mr. Obama from speaking out in favor of the UAW bailout and rallying the Dems to this cause. Of course, there is that pesky 60% public opposition to this tax money giveaway to consider. Mr. Obama appears to be dodging the issue as he did the bank bailout during the campaign.
 

From all accounts, General Motors is likely to go under before 1-21-09 if Congress takes no action. That may be a good thing or a bad thing. It certainly is a big thing that will have an impact on the economy over next four years, adn Obama has a responsibility to weigh in on it. That Obama is not yet President does not mean that he cannot be a leader.
 

Little Lisa'a bro might consider political counterinsurgency:

"What John McCain and Sarah Palin would have done."

And John and Sarah have no legal impediment from speaking out on whatever.

But "bailout of the UAW"? Why without UAW workers, little Lisa's bro may see his DUI legal specialty dwindle. That might be a sobering plus.
 

JMHO, but I think it would be a huge mistake for Obama to be more assertive now. The current Congress is likely to be obstructionist (so's the next one, but less so). That means any plan he pushes will get tied up and lose the impetus it needs to pass. And that's assuming Bush would sign bills he disagreed with (highly doubtful). Obama is better off waiting. Like Lincoln.
 

Mark is one hundred percent correcrt.

Anything he does now telegraphs his moves and allows the talking heads to savage his plan while it is stalled in front of an obstructionist lame duck congress.

this is all about leading effectively. without the power, obama should not be signalling anything other than that he is ready to take over.

where is mccain by the way?
 

McCain is opposing the bailout of the UAW like the rest of the GOP and not a few Dems.

It appears that this union of the GOP and Blue Dog Dems defending the tax payers is compelling the Big Three and the UAW to consider bankruptcy restructuring in order to get the votes for a government bridge loan.

Obama has taken a powder to avoid political responsibility rather than because of any imaginary constitutional impediment. It will be interesting to see if he continues this pattern of avoidance once the Constitution compels him to take the office of President.
 

Look on the bright side. The lack of initiative by any past or future President is forcing Congress to show some initiative of its own. I, for one, am glad to see it.
 

My, this is getting tedious... Barney Franks' comment about the number of Presidents in office made me smile though. As far as I'm concerned, the office has been vacant for nearly eight years now -- seven more weeks isn't going to kill us.
 

"(un)wisdom of bailing out the Big Three auto manufacturers."

I completely fail to understand why there is any discussion about the wisdom of the auto bailout under the present circumstances. Can someone direct me to the unified theory on why this bailout would be bad? As I understand it, NOT bailing out the industry -- I stress, under the prevailing circumstances -- would be bad, and could be catastrophic:

- We are talking millions of jobs lost if the Big 3 and associated industries fold. This is how a recession slides into a depression.

- Even if just one of the Big 3 folds, there MAY (risk) be a cascading effect where parts-makers and other associated industries (who serve all of the 3) cannot survive on the reduced volume, ultimately resulting in their closure and the consequent closure of the remaining Big 2.

- In the midst of the present credit crisis, Chapter 11 reorganization is less likely to be possible. Such complex reorganizations depend on extensive lines of credit which may not be forthcoming. Ch 11 is not an easy answer this time: there may be no emergence from bankruptcy. If the economy was strong, things would be different. If there were no credit crisis. But sadly this is not the case. It is not the optimal time to wave the flag of "die and rise again remade." Auto industry death now could be the straw that breaks the camel's back. How hard is that to see?

- After throwing at least $700B at the financial industry (likely double or triple that, in fact) so far... Congress is pontificating about $34B for the auto industry? Are you kidding me!? Even double or triple that is a tiny fraction of what's been heaped on the financial sector. And regarding the auto industry, millions of blue collar workers would be benefited by the bailout. Aren't these Democratic constituents? Shouldn't Democrats be lining up behind these folks (especially because it serves the greater good)?

- Shouldn't Democrats be doing a better job of explaining the greater good at stake here, and the fractional money we're talking about compared to the financial industry bailout? This 60% opposition to bailing the auto industry is just the poison in the water from the financial bailout. In fact, the two situations are very different. The public needs to be educated on this, or everyone is going to suffer.

- There is the (long term) matter of industrial production capacity related to national defense. If we lose heavy manufacturing capability in the US, we would have no lines to convert over to manufacture of military vehicles in the event of a large war (long term, admittedly, but it is something to consider.)

We need to keep the jobs we have -- and create more -- to buttress middle class purchasing power and confidence to climb out of this recession. Are we really willing to risk the consequences of allowing the auto industry to wither and die? Isn't the whole concept of bailout about mitigating the fallout of this (self-inflicted) economic downturn in prudent fear of the consequences of the failure to mitigate?

B
 

Mr. Bush and the GOP were more than happy to give away our money if it could be diverted from retooling programs intended for addressing the long-term nature of the problem.

That's a bit like taking your retirement money out in order to pay for a cruise. You have fun, but you're still broke a month later.

What Obama should do seems simple enough to me. Starting in late January we should begin something akin to the space race, where we start to develop cars and infrastructure that rely on hydrogen-based technologies. Give the "Big 3" what they need to become dominant in a worldwide market, and reorient our manufacturing base accordingly. It'd be a shot in the arm for multiple industries and create jobs all over the country, not just in Detroit.

Until then, it isn't his responsibility to lead the country, regardless of what Barney Frank says. John McCain learned that the hard way when he went in guns a-blazin' to "fix" the credit crisis. He's far better off waiting and presenting an actionable solution in January than advocating throwing money down a hole.

As for the power of persuasion, I think Obama's done a great job of spacing out his economic team's announcements in order to maximize the positive effect they have on the markets. As Bush fades, how quickly should Obama rise? Fireside chats by Christmas?
 

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In the midst of the present credit crisis, Chapter 11 reorganization is less likely to be possible. Such complex reorganizations depend on extensive lines of credit which may not be forthcoming. Ch 11 is not an easy answer this time: there may be no emergence from bankruptcy.

One way to solve this problem is to have the government provide the debtor in possession financing. I've seen that broached as a possibility, but I'm not sure where it stands.
 

Nov 14, 2008 - The Maverick

Today, the New York Times reports that Republicans are balking at a rescue package for the struggling auto industry. The bill would use some of the funds originally appropriated to shore up the banking system. Democrats need 60 votes to move the measure forward, but Sen. Chris Dodd (D-CT) said, “Right now, I don’t think there are the votes.” Some Republicans who have spoken out against the measure: Reps. John Boehner (R-OH) and Jeb Hensarling (R-TX) and Sens. Saxby Chambliss (R-GA), Richard Shelby (R-AL), and Mitch McConnell (R-KY).

So far, Sen. John McCain (R-AZ) hasn’t spoken up. (ThinkProgress contacted his spokesperson, but has yet to receive a reply.) But back in October, when McCain was still running for president, the senator indicated support for this rescue package:

Q: We’re finding out that there may be a possibility of some sort of bail-out or government assistance for the auto industry. Would that be something that you would support?

MCCAIN: Well, we’ve already done that to $25 billion, and we’ve delayed getting them the money. I would do whatever I think needs to be done to help our automotive industry. We’ve got to make this transition to flex fuel, battery powered, hydrogen automobiles. And, obviously — and, also, I would provide tax credits for people who buy these new automobiles. We’ve got to keep this industry alive. There’s no doubt about that.
 

The next administration is still in the petri dish. The current lameduck administration likely is continually surprised at the rawness of the visible sequelae of its profiteering, which in a typical transition to the next elected batch of leadership becomes evident only after the new folks take office, so the ex-officeholders still would have their soapbox pulpit from which to castigate the newbies for early malfeasance. Given the dimension of the executive, it is little wonder it takes 90 days for the transition to a new administration; or, perhaps, the executive has grown to fit the timespan to form, proving nature, even political nature, abhors a vacuum.
 

castigate the newbies for early malfeasance!!!

I think I have a new battle-cry... :)
 

Bart's snarky label "UAW bailout" helps show that at least some opposition to the bailout is based on the idea that NOT doing it would be an effective way to bust unions.

I wonder if he realizes that many of the "Reagan Dems" he and other Republicans were hoping to reach in Michigan, Ohio, and nearby states (Indiana, PA) not only work in the unionized auto industries, but work in other jobs in local economies that will be decimated if the "Big 3" go under.
 

whatsyourevidence said...

I completely fail to understand why there is any discussion about the wisdom of the auto bailout under the present circumstances. Can someone direct me to the unified theory on why this bailout would be bad?

Here are the economics:

1) The product put out by Detroit is actually rather good. Its quality is very close to its overseas competitors. The claims that consumers are clamoring to buy expensive hybrids and electric cars that the Big Three will not provide is nonsense.

2) There is an enormous foreign owned US automobile industry which is economically viable and expanding.

3) The difference between the Big Three and their competitors in the foreign owned US automobile industry - the Big Three are saddled with the UAW and their competitors are union free with half the labor costs.

This is not rocket science. The model for bailout free recovery for the Big Three is that same as that used by the US airline industry - enter bankruptcy to compel the restructuring of the union contracts to market wages, the transfer of legacy retirement assets to the union management and distribution, and the closing of most of the state government protected auto dealerships.

If banks are reluctant to make bridge loans to the Big Three during this process, the government can guarantee private loans with no tax payer outlay.
 

jslater said...

I wonder if [Bart] realizes that many of the "Reagan Dems" he and other Republicans were hoping to reach in Michigan, Ohio, and nearby states (Indiana, PA) not only work in the unionized auto industries, but work in other jobs in local economies that will be decimated if the "Big 3" go under.

Apart from tax reform, Reagan's greatest contribution to ending stagflation and a far worse recession that we currently experience was breaking the unions. Starting with his firing of the striking air traffic controllers, Reagan made it clear that the government would no longer back union shakedowns. As a result, union membership in private industry plunged during the 80s and 90s while the economy boomed, Reagan Dems started working in non-union jobs and they still voted GOP for the next generation.

If you really give a damn about the Big Three and the jobs they provide, the UAW needs to either face economic reality or be broken. There is no ethical reason that $20 per our auto workers in Alabama should be paying to support $45 per hour UAW workers in Michigan because their cars are too expensive.
 

One way to solve this problem is to have the government provide the debtor in possession financing.

While this is at least possible in theory, a more insurmountable problem is that a bankruptcy filing would cause consumer demand to tail way off, much moreso than in other lines of business. If an airline is in Chapter 11, people are happy to keep flying with them, as long as the planes are taking off. But for a car, you want to make sure that manufacturer is going to be there years down to the road to service the warranty. And since it really doesn't take much to walk across the street and check out a different car dealership, unless the bankrupt company is making a product that is far superior to everyone else's, why take the chance?

Separately, I'd note that you're seeing from Bart an example of the new Republican math, which is that government loans require huge outlays of taxpayer money (even though the loan will get paid back unless the recipient fails) while government guarantees are free (even though they might have to make good on the guarantee if the recipient fails). You saw this with the financial bailout, where the Republican alternative was "let's not buy these distressed securities, let's just guarantee all of them so we don't have to spend anything!" You start to feel sorry for them after a while.
 

Bart, the only political responsibility right now belongs to G. W. Bush, and he's AWOL. Again.

Obama's right. We have only one President at a time. Bush is treating the job like it was the Texas Air National Guard, and he doesn't want to do it. So he isn't. It's not like his history didn't warn everyone.
 

"and he's AWOL. Again."

I'm having trouble keeping these complaints straight: Is Bush improperly exercising the prerogatives of the Presidency, such as attending summits, or is he missing, and nobody can find him?
 

Here are the economics:

1) The Big Three's sales are down by 30-45% since last year as a result of liquidity problems in auto financing. Good products, perhaps, but the US trade deficit in the automotive industry has grown to more than $100 billion / year.

2) The "enormous foreign-owned US automobile industry" is posting similar declines in sales, and stocks have tumbled since January.

3) The "enormous foreign-owned US automobile industry" provides similar benefits to its workers as unionized manufacturers. The difference is not the presence of the UAW, but the age of their employees and the amount of time they have been offering pensions. As a result, the Big Three spends ten times the amount of foreign-based competitors on health care. The surge in retirees is currently peaking, and Detroit's requirements will decrease over time. Foreign-based operations will see an increase in those costs as their labor force ages.


EFA.
 

Have we touched yet on the speculation that Big Auto could be more competitive if we had universal health care as is the case with many of our overseas competitors?
 

While this is at least possible in theory, a more insurmountable problem is that a bankruptcy filing would cause consumer demand to tail way off, much moreso than in other lines of business. If an airline is in Chapter 11, people are happy to keep flying with them, as long as the planes are taking off. But for a car, you want to make sure that manufacturer is going to be there years down to the road to service the warranty.

Agreed.

Is Bush improperly exercising the prerogatives of the Presidency ... or is he missing, and nobody can find him?

Yes.
 

Why has Obama resigned from the Senate? He isn't required to do so until he takes office as President, is he?
 

No, but it gives him an extra couple of months during which he doesn't have to make any hard choices, and can hope most of the stuff that's really going to piss people off is done with by the time he takes office.

Though to be fair, assembling his team is job enough, where he'd find the time to vote "Present!" is beyond me.
 

PMS:

Thanks for the report on the auto industry.

1) The claim that the non-union auto plants offer "similar" benefits is unsupported and indeed pretty much rebutted by the rest of the report. The non-union plants are similar in that they offer their employees health care and retirement benefits, but the similarity pretty much ends there.

2) The report pretty much summarizes the three major problems with the UAW contracts - Much higher wages for all but the newest employees, paying laid off employees most of their salaries under a job board program and enormous fixed defined benefit retirement pension and health care payments.

3) It is correct that the Big Three's labor cost problems are aggravated by their aging workforce. The workforce is aging because it has been cost ineffective for years to add new employees at these compensation rates. The last contract remedied this to some extent by lowering wages for new employees. However, the overhead for the old employees has made the vehicles too costly, the Big Three are losing market share and not adding employees.

4) As the report noted, labor costs were about to deep six GM back in the fat boom years of the middle of the Bush Administration. It is impossible to continue this level of labor costs under this far more challenging environment. Non-union factories do not have these fixed costs, will simply lay off employees when demand shrinks and rehire them as we pull out of the recession. The Big Three cannot shed much of their labor costs by layoffs under the UAW contracts.

You cannot repeal the basic laws of economics. Either the Big Tree go under, they enter bankruptcy and shed the UAW contracts, or we turn them into the largest example of corporate welfare outside of the EU. The first is unthinkable and the latter is opposed by about 2/3 of us tax payers.
 

"and enormous fixed defined benefit retirement pension and health care payments."

IIRC, (Probably do, mom's on one of those pensions.) at one time the retirement benefits were being funded as they were incurred. Naturally, this resulted in a simply enormous trust fund accumulating, and at some point it got too tempting, and they successfully lobbied the government to be permitted to loot it, and switch to pay as you go.

Burned through the money, and now those retirees are an insuperable burden. But they didn't HAVE to be, wouldn't have been if the company had just played it straight.

I suppose you could argue that the present crisis would have come sooner if they hadn't had all that money to burn through, but that's about the extent the retirees contribute to the crisis.
 

"You cannot repeal the basic laws of economics. Either the Big Tree [sic] go under, they enter bankruptcy and shed the UAW contracts, or we turn them into the largest example of corporate welfare outside of the EU. The first is unthinkable and the latter is opposed by about 2/3 of us tax payers."

Little Lisa's bro engaging in "economic originalism" with "the basic laws of economics"? Are these "basic laws of ecomonics" in a sense like "constitutional" or "common"? Little Lisa's bro may be dealing in "uncreative and pre-emptive economic destructionism." Are these "basic laws of economics" set in stone over the grave of Milton Friedman?
 

Shag:

Economic destructionism?

The correct term is creative destruction where the creative and efficient replace the sclerotic and inefficient, providing consumers with the most cost effective array of goods and services.

Complaining will not change reality - neither consumers of automobiles nor tax payers want to pay a tax to support UAW workers who are paid far more than the average consumer and tax payer. Either take a market wage to make a product at a price the consumer will pay or go to the end of the unemployment line.
 

Shag: when LSR Bart asserts: "You cannot repeal the basic laws of economics.", he forgets that economics is one of the social sciences and that the findings and knowledge produced by a social science generally cannot be as exact or predictable as those of a physical science, such as physics or chemistry. One cannot speak of "the basic laws of economics" in the same sense as for a physical science ("at sea level and atmospheric pressure water boils at 100 degrees Centigrade"). One has "theories" rather than "laws".

Thus John Maynard Keynes produced in 1936 his "General Theory of Employment, Interest, and Money" which was perhaps the most influential work relied upon by governments until Milton Friedman became an economic adviser to Ronald Reagan.

Friedman's monetarist theories became influential under Reagan in the USA under Thatcher in the UK and - above all in Iceland where the Independence Party from 1991 set out on a programme of monetaristic policies: privatization, tax rate reduction (e.g., lowering the corporate income tax rate from 45% to 18%), definition of exclusive use rights in fisheries, abolition of various government funds for aiding unprofitable enterprises and liberalization of currency transfers and capital markets. By 2008, the Heritage Foundation's Index of Economic Freedom ranked Iceland's economy as the 14th freest in the world.

Today Iceland is bankrupt. Its currency has no value, its banks are closed and, absent an IMF bailout and entry into the EU its future is bleak.

So much for slavish reliance on particular economic theories.

On 8th June 2004, at the time of the Reagan funeral Paul Krugman wrote a piece in the NY Times: The Great Taxer

"Over the course of this week we'll be hearing a lot about Ronald Reagan, much of it false. A number of news sources have already proclaimed Mr. Reagan the most popular president of modern times. In fact, though Mr. Reagan was very popular in 1984 and 1985, he spent the latter part of his presidency under the shadow of the
Iran-Contra scandal. Bill Clinton had a slightly higher average Gallup approval rating, and a much higher rating during his last two years in office. We're also sure to hear that Mr. Reagan presided over an unmatched economic boom. Again, not true: the economy grew slightly faster under President Clinton, and, according to Congressional Budget Office estimates, the after-tax income of a typical family, adjusted for inflation, rose more than twice as much from 1992 to 2000 as it did from 1980 to 1988.....

The first Reagan tax increase came in 1982. By then it was clear that the budget projections used to justify the 1981 tax cut were wildly optimistic. In response, Mr. Reagan agreed to a sharp rollback of corporate tax cuts, and a smaller rollback of individual income tax cuts. Over all, the 1982 tax increase undid about a third of the 1981 cut; as a share of G.D.P., the increase was substantially larger than Mr. Clinton's 1993 tax increase.

The contrast with President Bush is obvious. President Reagan, confronted with evidence that his tax cuts were fiscally irresponsible, changed course. President Bush, confronted with similar evidence, has pushed for even more tax cuts. Mr. Reagan's second tax increase was also motivated by a sense of responsibility — or at least that's the way it seemed at the time. I'm referring to the Social Security Reform Act of 1983, which followed the recommendations of a commission led by Alan Greenspan. Its key provision was an increase in the payroll tax that pays for Social Security and Medicare hospital insurance.

For many middle- and low-income families, this tax increase more than undid any gains from Mr. Reagan's income tax cuts. In 1980, according to Congressional Budget
Office estimates, middle-income families with children paid 8.2 percent of their income in income taxes, and 9.5 percent in payroll taxes. By 1988 the income tax share was down to 6.6 percent — but the payroll tax share was up to 11.8 percent, and the combined burden was up, not down. Nonetheless, there was broad bipartisan support for the payroll tax increase because it was part of a deal. The public was told that the extra revenue would be used to build up a trust fund dedicated to the preservation of Social Security benefits, securing the system's future. Thanks to the 1983 act, current projections show that under current rules, Social Security is good for at least 38 more years.

But George W. Bush has made it clear that he intends to renege on the deal. His officials insist that the trust fund is meaningless — which means that they don't feel bound to honor the implied contract that dedicated the revenue generated by President Reagan's payroll tax increase to paying for future Social Security benefits. Indeed, it's clear from the arithmetic that the only way to sustain President Bush's tax cuts in the long run will be with sharp cuts in both Social Security and Medicare benefits.

I did not and do not approve of President Reagan's economic policies, which saddled the nation with trillions of dollars in debt. And as others will surely point out, some of the foreign policy shenanigans that took place on his watch, notably the Iran-contra scandal, foreshadowed the current debacle in Iraq (which, not coincidentally, involves some of the same actors). Still, on both foreign and domestic policy Mr. Reagan showed both some pragmatism and some sense of responsibility. These are attributes sorely lacking in the man who claims to be his political successor."


Those who do not suffer from LSR Bart's selective memory lapses will recall that by 2000 Clinton had reduced the US National Debt by US$2.4 trillions over his
period in office. According to the US Treasury, the US National Debt has risen from US$5.706 trillions on the day Bush took office to US$10.653 trillions today.

Reagan's 1980s and Bush's early 21st century have been essentially the same: benefits for the "the haves" and the "have mores" with "greed is good" low tax corporate heaven as against "soak the poor" indirect taxes coupled with practically non-existent social services.

For a long time, the USA has lived beyond its means, buying more than it sells. The USA is a net debtor nation with a trade deficit with the rest of the world of about US$700 billion annually. The trade deficit has been financed mostly by foreign investors buying T-bonds - at present about US$3 trillion worth of government debts and liabilities.

But what if the T-Bond holders want their money back? Remember the 2002 Bernanke "Helicopter Theory" speech? He said that when the time came for the USA to pay its debts back, the USA could simply fire up the printing press because the the world would be forced to accept US paper in lieu of those debts. If need be, the Fed “could drop dollars from helicopters” in order to get the money into circulation.

Since Bernake's speech, the dollar has declined over 40% against a basket of world currencies and the USA is now being forced to add drastically to the money supply and that has known consequences for inflation. There are also signs that the creditor nations are slowly diversifying out of the US economy and buying up interests in natural resources to feed their own economies. They are also spreading their currency risks.

I suggest that we are in uncharted waters. Will the recession turn into depression? We simply do not know. Will a Kenysian-style intervention work? We must hope so, but we cannot be certain.

But what we do now know is that in today's economies, fiscal irresponsibility a la mode de Reagan, Thatcher et Bush has terrible consequences and therefore a period of silence from LSR Bart and the others of that school might be most welcome.
 

Mourad:

1) I am almost afraid to ask, but pray tell what does monetarism have to do with bad investments by Icelandic banks, which were identical to those made in countries who do and do not practice monetarism?

2) Krugman's blaming Reagan for the years 1980-81 of the Carter recession before he enacted his tax reform is as silly as his crediting Clinton for the Bush 41 recovery in 1992-93 before Clinton's tax increases went into effect.

3) The Reagan deficit financed the military buildup which won the Cold War, while Clinton inherited a peace dividend which he initially squandered. Reagan left a $152 billion deficit which was heading down along with a booming economy. You may recall Clinton and the Dem Congress projected $200 billion dollar deficits out as far as the eye could see despite a peace dividend. The Gingrich Congress were the folks who balanced the budget by slowing down spending and cutting taxes. It is unfortunate that power corrupted the GOP after Gingrich left.

4) I am glad that you agree with me that Mr. Bush spent like a drunken Dem and will join me in opposing Mr. Obama's incipient proposal of a $700 billion to $1 trillion dollar spending spree to be financed beyond our means.
 

LSR Bart posts more drivel culminating in the following:

"I am glad that you agree with me that Mr. Bush spent like a drunken Dem and will join me in opposing Mr. Obama's incipient proposal of a $700 billion to $1 trillion dollar spending spree to be financed beyond our means."

I think it is the soon-to-be-ex President Bush who has an alcohol problem - so his deficits (and so nuch else) lead one to wonder whether he remained "on the waggon" during his presidency.

Or perhaps the present mess is simply the consequence of his well-known Attention Deficit Disorder.

Or perhaps his "inner voice" from what he believes to be the Almighty (the same one which told him to invade Iraq) also told him not to worry about the public finances because manna from heaven would surely float down.

That last possibility is at least consistent with the Bernanke "Helicopter Theory" speech.

The mere fact that LSR Bart is in opposition to the stimulus proposal is a powerful incentive for regarding it favourably.

But I am sure that whatever recovery package is passed, there will have to be provision to finance it. I can only hope that whatever taxation has to be imposed will be carefully framed to impose the maximum burden on Loathsome Spotted Reptiles by means such as:
- tax surcharges on unearned income, stock options etc;
- the removal of tax exemptions from the AEI, the Heritage Foundation, the Federalist Society etc;
- removal of tax exemptions on the income of the churches save insofar as spent on corporal charitable works such as schools, hospitals, creches, hostels for the down & out etc, but to exclude spending on evangelism;
- a tax surcharge on the earnings of executives in certain kinds of professions: registered lobbyists, investment banking etc;

and perhaps DUI lawyer fee income could be the subject of very special attention.
 

In my search for the Holy Grail of the "basic laws of economics" that little Lisa's bro relies upon, a Google search led me to "The Natural Laws of Economics" by Fred E. Foldvary, Senior Editor of the Progress Report at:

http://www.progress.org/2004/fold379.htm

listing 26 such natural laws.

Little Lisa's bro riffs on the UAW workers as the culprits in the Big Tree (sic) brouhaha, ignoring the executives who made the decisions for the Big Tree (sic) that attributed to their problems, ignoring the non-UAW workers, ignoring their stockholders, ignoring their suppliers, ignoring their consumers, etc. Why single out the UAW workers? Did they design the cars?

Perhaps little Lisa's bro might examine in similar fashion the prior bailouts of the past couple of months in an effort to scapegoat workers who happen to be unionized. Were unionized workers the culprits in the banking system, on Wall Street?

Many of us know of the late Joseph Schumpeter's "creative destruction [or destructionism] of capitalism," a phrase often misused and misdefined. But little Lisa's bro lacks creativity in his destruction, pre-emptively, of UAW workers. Little Lisa's bro may now decide to riff on "free markets" and "free trade," neither of which is free nor could be in an interdependent globalized world, in support of his version of the creative destruction of the Big Tree (sic): just chop it down.

Perhaps if Michigan had voted for McCain, little Lisa's bro would not be blowing through the wrong end of her saxophone.
 

Mourad:

But I am sure that whatever recovery package is passed, there will have to be provision to finance it. I can only hope that whatever taxation has to be imposed will be carefully framed to impose the maximum burden on Loathsome Spotted Reptiles by means...

Sorry, Mr. Obama has ruled out tax increases this year and intends to run up $700 billion to $1 trillion in debt on top of the already record $700 billion dollar debt.

The One is proposing pure Peronism, but you will support it anyway as will the rest of the hypocrites on the left.
 

Shag: I would take Dr Foldvary with a fairly generous pinch of salt. Foldvary is an extreme libertarian, a supporter of the geo-rent movement as well as of the Free Earth Party and he disapproves of taxing the rich, so he is unconventional enough to be right up LSR Bart's street.

As, for LSR Bart's continuing drivel, just when the tax increases to pay for the stimulus might kick in is a matter yet to be
clarified, but Democrats still have a better record on the national debt than the loon about to leave office.

Poor Bart has obviously stopped taking his medication again.
 

Poor Bart has obviously stopped taking his medication again.

I don't think there is a medication for what Bart has.
 

Overheard: "...Mr. Bush spent like a drunken Dem..."

Yet, oddly, what the exiting administration spent like was a committed neo-con. Anyone checked the price tag lately on his illegal, immoral invasion and occupation of the sovereign nation of Iraq? The meter's still running on that, and the insinuation that Democrats run up greater deficits than Republicans is an easily demonstrated falsehood.

Here I should recall the advice of Schopenhaur: "...scarcely one man in a hundred is worth your disputing with him. You may let the remainder say what they please, for every one is at liberty to be a fool..."
 

LSR Bart seeks to put the blame on the workers in the Detroit automobile industry. He fails to mention that the average wage at the international car maker US plants is estimated at $24–$25 an hour, less than a $3 differential an hour for UAW first tier workers, according to Jonathan Cohn in The New Republic.

But on the other hand there is a history of management bleeding the big three with unjustified compensation arrangements:

When Chrysler merged into Daimler-Benz, the world-class German car company, Daimler-Benz, at the time, outpaced Chrysler on every standard corporate performance measure from revenue to profit. But in 1997, Daimler’s top gun, Juergen Schrempp, earned an estimated $2.5 million. Chrysler’s Robert Eaton that same year took home $16 million, over six times more.

Chrysler’s top five execs, together, collected $50 million in 1997 compensation. Daimler’s top ten execs pulled in only $11 million.

In the fiscal year that ended in March 2007, Toyota’s top 32 executives — a group that included CEO Katsuaki Watanabe — together pulled in $7.8 million in bonuses on top of salaries of $12.1 million. For the comparable period, one single GM exec, CEO Rick Wagoner, raked in $10.2 million.

Alan Mulally at Ford earned $2 million last year, plus additional compensation totaling about $21.7 million, according to the SEC. Ford lost $2.72 billion last year.

At GM, Rick Wagoner earned $15.7 million last year, according to the Wall Street Journal, while his company lost $38.7 billion.

Chrysler's Robert Nardelli earned $1 in salary last year, but has significant compensation package that is not publicly disclosed. Chrysler lost about $2.9 billion last year.

If there is to be a bail-out with public money, then it ought to be on terms that executive remuneration does not exceed the levels paid to top management at successful car-makers such as Toyota and on terms that compensation other than base salary is only payable if there are profits.

Any other basis would be screwing the workforce, the shareholders and the taxpayers.
 

You may let the remainder say what they please, for every one is at liberty to be a fool.."

I think you found this in the classified edition of Fox News' business plan.

LSR Bart seeks to put the blame on the workers in the Detroit automobile industry.

Not claiming expertise here, but I think Bart has at least some merit to his argument that the UAW is hurting the Big Three. Needless to say, in his zeal to take the side of the powerful against the weak--as a matter of pure reflex--Bart overstates it.

Come to think of it, if & when social democracy is ascendant in our beloved nation, Bart will probably have a wet-dream of "ratified victimization" when the political leverage of the super-rich has been mitigated just a tad...
 

Mourad:

As to management, they certainly contributed to the problem by agreeing to this unworkable labor compensation arrangement which includes their compensation.

If (or hopefully when) the Bug Three enter bankruptcy restructuring, management pay is also on the chopping block.

The attempts by ignorant blowhard legislators, who haven't the foggiest idea how to build a car that would sell, to manage the Big Three's compensation and product line as the price of a bailout is yet another terrific reason to deep six any bailout.
 

Management set the policy for the business decisions made by the Big Three for their products, not UAW workers, that caused the Big Three's problems. Management looked to its primary stakeholders, stockholders and customers (although mostly to themselves) in deciding what products to manufacture. Consider "management" as George W's Administration deciding to invade Iraq, and the UAW workers as the grunts in the military following orders but not making policy, and the stockholders and customers as the neocons not wishing to serve in the military (and putting their asses on the line), the military-industrial complex as well as voters in 2004 who reelected George W with continued congressional control in the GOP.

Does little Lisa'a bro put andy of the blame upon the grunts in the military for the policy disasters of George W in Iraq over which the grunts had no control? Would little Lisa's bro dare point to the bonuses some of the grunts took to re-up in comparing them to "greedy UAW workers"?
 

Shag:

The quality of Big Three products is fine and there is a wide spectrum of products from which to choose. However, they are overpriced by roughly $2000 to $3000 to pay for the UAW contracts.

BTW, I am blaming the UAW who were not looking out for their members' long term interests and the management who were not looking out for their shareholders' interests, not the workers. I feel sorry for the workers who will now reap the economic whirlwind which the UAW and management sowed.
 

For those with an interest as to the actual facts, here is
a detailed breakdown of the UAW contract labor costs.
 

I continue my search for the Holy Grail of the “basic laws of economics” that little Lisa’s bro relies upon, with the caveat of Mourad concerning Dr. Foldary’s “The Natural Laws of Economics.” I am well aware of the give and take of “natural” versus “positive” law in the legal profession. We positively have a Constitution, its Amendments, and legislation pursuant thereto. Perhaps with the support of the Declaration of Independence, some “natural” law has been embedded in the Constitution, particularly in certain of its Amendments.

But with the “science” of economics, I have been unable as yet to locate “basic laws of economics” comparable to “positive” law in the legal profession. “Natural” law in the legal profession has been difficult to pin down and may have a “living” aspect based upon experience and wisdom as there remain controversies among legal scholars. As to “The Natural Laws of Economics,” I took that only with a grain of salt as Folderay’s folderol, far from scientific.

My continued search has led me to Henry Hazlett’s “Economics in One Lesson” available at:

http://jim.com/econ/chap01p1.html

Links are available to the full publication, including the table of Contents that lists “Part Two: The Lesson Applied” with many interesting topics, including “3. The Blessings of Destruction” and “14. Saving the X Industry.” I have read only “Part One: The Lesson” as of now but the publication is near the top of my current reading list.

(Mourad: you pointed out that Foldary is a libertarian. So is Hazlett. But all libertarians are not alike.)

Here we are in the Blogosphere that was not available during the Great Depression, permitting us to consider many economic viewpoints with the speed of light. The Boston Sunday Globe, Dec. 7, 2008, at page 1 of the “Ideas” section features Stephen Mihm’s “Inside The Influential New World of Econobloggers that includes, at page 2, “A Field Guide To Economics And Finance Blogs” that “only begins to scratch the surface of the econoblogosphere; ….”

Just as we joust with legal scholars (and ourselves) at Balkinization, we can joust with the Econobloggers, even those of us who lack little Lisa’s bro’s minor in economics, in the search for the “basic laws of economics” he relies upon. Perhaps in time we might get so frustrated that we might share President Truman’s search for a “one-handed economist” for answers.
 

Shag:

Hazlett's book is superb and is among those on my bookshelf for reference. I cannot recommend it highly enough.

BTW, the laws to which I refer are simple supply and demand, nothing exotic. I am fairly sure that there is not much of a dispute among economists about the validity of these laws.
 

"BTW, the laws to which I refer are simple supply and demand, nothing exotic. I am fairly sure that there is not much of a dispute among economists about the validity of these laws."

Are these laws subject to originalism-type standards or changing circumstances? Can they be applied universally? In applying these laws, do we get virtual agreement among trained economist? Or do these simple laws, like certain provisions in the Constitution, require sometimes difficult interpretations as they are applied?
 

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