Madness in March

** Nevada’s own Sin City Siren has an outstanding Bracket, created especially for those who are interested in seeing how state and localities across this country are competing to see which can have the most regressive, reactionary, and repugnant statutes limiting the rights of women to make their own decisions (as in Small Government?).   Do click over and copy the brackets, and then share them with family and friends!

** The Nevada Progressive updates information about the continuing Soap Operas which are the lives of former Mega-Lobbyist Harvey Whittemore and the ever charming but perhaps a shade duplicitous Heidi Gansert.  Steve Sebelius added another page to the continuing drama that is Assemblyman Steven Brooks (D-NLV).  For the video version, see Ralston Reports.

*** The Nevada Rural Democratic Caucus reprints a good piece from Jim Hightower on how the GOP wants to transform Medicare into “We Don’t Care.”  For a refresher course in how Republicans have the wrong end of the stick on the Medicare issue, consult this March 10th post in Perrspectives:  In Five Charts. Congresswoman Michele Bachmann (R-LoonyTunes) should get more exercise dodging questions from reporters about how she substantiates her claims on the floor of the House that the Affordable Care Act “kills people.” [ThinkProg]  For those in the fact based universe:

While the main coverage expansion provisions will go into effect in 2014, the ACA has so far saved seniors over $6 billion on prescription drugs, reduced administrative overhead, deterred private insurers from requesting double digit premium increases, kept millions of young people on their parents’ health care plans, and provided 34.1 million people with Medicare preventive services without additional cost-sharing. [ThinkProg]

*** And, if we thought the continuing Management by Crisis thing was over in House Republican quarters — here comes Speaker John Boehner with the Demand, (Demand I say), that every dollar increase in the debt ceiling (The Debt Ceiling I say) will “require a dollar in spending cuts.”  Another day, another manufactured crisis.   Before one gets too hysterical about The Great Big Debt Crisis — read “Paul Ryan and Eric Cantor Are Trying To Con You Into Paying Their Debts. “

*** Things we could be talking about if it weren’t for the manufactured debt “crisis” compliments of the GOP majority in the House of Representatives:

(1) The report that nearly two out of three hate crimes committed in this country goes unreported. [The Grio]

(2) The filibuster of Richard Cordray’s nomination to head the Consumer Financial Protection Bureau. [TPM]  Of District Court nominee Elissa Cadish, who withdrew her nomination after Senator Dean Heller (R-NRA and Shooting Sports Foundation) questioned her bona fides on the unrestricted and unlimited right to pack shoulder firing missile launchers as prescribed in the 2nd Amendment. [Bloomberg] Or, the filibuster of Appeals Court nominee Caitlin Halligan, who had the temerity to do her job and participate in a lawsuit of behalf of the City of New York in a lawsuit again gun manufacturers. [Bloomberg]  Or the hold placed on the nomination of Scott C. Doney, to head the NOAA — Mr. Doney relinquished his nomination. [NOLA] Or, Senator Roy Blunt (R-MO, and Tobacco Industry) placing a hold on the nomination of Gina McCarthy to head the EPA, because he has a problem with levee plans, which is interesting because McCarthy’s area of expertise is “fuel efficiency” and clean air administration. [LAT]  Here’s the list of nominations pending in Senate Committees.   Two days ago Bloomberg News oped asked “Are Republicans  Abusing the Filibuster?”  the answer still looks like YES.

***  Perhaps we could even be paying more attention to the latest report card release from the American Society of Civil Engineers on our nation’s infrastructure — hey! we’re up to a D+ now.  But, why worry — Nevada only needs about $2.7 billion to maintain and upgrade our drinking water delivery systems, another $2.9 billion to deal with our sewage; while we have 149 high hazard dams, and 40 structurally deficient bridges.  [ASCE]  Maybe we’re waiting for our kids and grandkids to pick up the bills?

Dear Grandkids, We’re Leaving You Some Bills

Dear Grandchildren,

It’s March 16, 2013 and we’re all in a dither about the debt we’re passing along to you.  Yes, it’s a big one.  The lines on the charts look devastating indeed:

We chose to ignore the actual debt and real deficit reduction efforts in order to focus on cutting the “size of government” in your life so you could have more “freedom.”

But, all this said, we are leaving you some bills we sincerely hope you can pay!  In our fervor to erase the national budget deficits and reduce the level of national debt we left a few things for you to do to pick up after us, we hope you don’t mind.

The Water Bill:    We knew that as of 2009, and more information is coming on March 19, 2013, that we were running up an $11 billion per year backlog of funding to replace aging water system components.  In reality, the 2009 report wasn’t our first clue:

“The Congressional Budget Office (CBO) concluded in 2003 that “current funding from all levels of government and current revenues generated from ratepayers will not be sufficient to meet the nation’s future demand for water infrastructure.” The CBO estimated the nation’s needs for drinking water investments at between $10 billion and $20 billion over the next 20 years.” (emphasis added)

We knew that there had been a 159% increase in the demand for clean drinking water between 1950 and 2000, but we did precious little about the issue.  We moaned about the ARRA’s expenditures for water treatment, about how it would run up the Debt, so our Congress appropriated a “drop in the bucket.”

“The new federal stimulus law provides $6 billion for water projects, with $2 billion of that directed to drinking water systems. But that money is only, well, a drop in the bucket: a report released last month by the E.P.A. estimated that the nation’s drinking water systems require an investment of $334.8 billion over the next two decades, with most of the money needed to improve transmission and distribution systems.” [NYT, 2009]

We knew that the design life of concrete treatment plants would expire in 60-70 years, so the plants built in 1950 are now on their last legs.  We knew that the trunk mains were built to last from 65 to 95 years. Some of those are now aging into oblivion. [ASCE]  So we’re leaving you with the bill for $334.8 billion over the next twenty years to pay for the maintenance of a water distribution system we bragged about but didn’t really want to pay for.

The Sewer Bill:  Our 15,000 public wastewater treatment facilities serve about 225 million people in this country, but we’re still subject to about 900 billion gallons of good old raw sewage discharged every year from aging and dilapidated facilities. [NYT 2011]  We knew back in November 2002, when you were just little tykes, that the Congressional Budget Office estimated the expenditures needed for new and improved wastewater treatment would be in the range of $3.2 to $11 billion. [CBO pdf]  There was a Gap Analysis conducted by the CBO back in 2002 which had some more disheartening information:

“According to the Gap Analysis, if there is no increase in investment, there will be a roughly $6-billion gap between current annual capital expenditures for wastewater treatment ($13 billion annually) and projected spending needs. The study also estimated that if wastewater spending increases by only 3% per year, the gap would shrink by nearly 90% (to about $1 billion annually).

The CBO released its own gap analysis in 2002, in which it determined that the gap for wastewater ranges from $23 billion to $37 billion annually, depending on various financial and accounting variables.”  [ASCE]

So, when all is said and done, we dawdled around until the EPA estimated that it would cost about $390 billion over the next 20 years to repair or replace inadequate water treatment plants and other components of the systems.  We hope you don’t mind we’re leaving you this bill for $390 billion?

The Education Bill:  It’s hard to account for all the needs of our 98,917 public schools in this country. [NCES]   If we’re being honest, we haven’t really looked at the number of aging buildings, or carefully studied their functional age since the “turn of the last century,” in 1999.  We do know that children who are in poverty are also in the oldest buildings. [NCES]   Additionally, we’ve known this not-so-fun fact since the 1999 study: “While 40 percent of small schools (enrollments of less than 300) were built before 1950, 23 percent of large schools (enrollments of 1,000 or more) were built before 1950.”  Since large schools tend to be secondary, we can assume we’ve been following the time honored practice of building nice big new high schools and moving the junior high kids into the old buildings?  Then there’s the “portable building” problem — we’ve known since the Fall of 2005 that portable buildings have more problems which interfere with instruction than standard buildings. [NCES] While the issues might not be too far from the similar interferences in standard buildings — we know they exist — it was just cheaper to ignore them.  Our spending on school construction, as analyzed by the ASCE might give you some pause:

“While detailed conditions and needs numbers do not exist, we do have up-to-date numbers on spending levels. According to the American School and University’s 34th Annual Official Education Construction Report, school construction completed in 2007 (which included both new construction and renovations) totaled more than $20.2 billion. That is down from a peak of $29 billion in 2004. The downward trend is expected to continue: with $52.7 billion in funding is projected between 2008 and 2010. This represents a significant decrease from the $68.4 billion spent between 2005 and 2007.^1″

If you are thinking that you might be able to kick this discussion down the road, as we did, because privatization is the solution to every public problem, please think again. First, the charter schools are public buildings in which instruction is immediately governed by groups outside the system.  Secondly, they may not be located conveniently near you, or serve the age groups of your offspring:

“In 2009–10, over half (54 percent) of charter schools were elementary schools. Secondary and combined schools accounted for 27 and 19 percent of charter schools, respectively. In that year, about 55 percent of charter schools were located in cities, 21 percent were in suburban areas, 8 percent were in towns, and 16 percent were in rural areas. [NCES]

There are studies indicating some charter schools are doing better than some public schools, but we have to be careful with our numbers.  For example, one summarization of the different levels of educational achievement (read: test scores) failed to note that charter schools youngsters tend to be from more financially secure families.  [WaPo]  However, if we’re honest, we’d tell you that we’ve not been looking too closely behind the numbers of either the cost of building or maintaining schools, or at the cost of employing qualified teachers… But, Hey, we walked to school and back uphill both ways in driving blizzards.   And, about those standardized tests — “States are likely to spend $1.9 billion to $5.3 billion between 2002 and 2008 to implement NCLB-mandated tests, according to the non-partisan Government Accounting Office (GAO),” as of 2005. [RSO]  We’re leaving you the bill for that too. Whatever it might be.

The War Bill:  We were going to have another “Splendid Little War,” the one in Iraq.  The Bush Administration and a compliant Congress authorized the expenditures as “supplemental appropriations,” meaning that we didn’t have to look at the tab we were running in real time.

Total federal spending associated with the war has reached $1.7 trillion. Future promised health and disability payments for veterans through 2053 add up to $490 billion. So, as it stands now, the Iraq War has cost $2.2 trillion, which is a far cry from the initial 2002 estimates of $50 to $60 billion. When you factor in the interest, war expenses could swell to more than $6 trillion over the next four decades. [NYDN]

So, we missed by a few dollars… but we’re leaving you with the very possible  $6 trillion bill anyway.

We might have paid for some of these items ourselves. We might even have given more consideration to the state of our bridges, dams, and public buildings.  We could have thought of the state of the air traffic system, or the highway syste, or the rail transportation system, we were leaving to you.  However, fretful as we were about these expenses and future costs, we decided that it was not in our best interests to close tax loopholes for giant multi-national energy corporations, or for yachts, or for private jets.  We decided that we “over taxed” our corporations, and rewarded them when they “repatriated” money earned overseas to the U.S.   We decided it was more important to appropriate money for airplanes that didn’t fly than to pay for G.I. benefits earned by service.  We decided it was more important to protect the interests of Wall Street than Main Street.  We decided that money earned in speculation was just as hard won as income from investments or good old fashioned hard labor.   We didn’t want to “burden” you with restrictions on financiers, or humongous banks, or on the incomes to be earned by the top 1% of the population — we wanted you to be “free,” to have “liberty,” and to say nice things about America!

We love you dearly, and want you to know that we think of you always.   Good Luck.   (PS: Hope you don’t mind we’re moving in with you.  After cuts in Social Security and the voucherization of Medicare we’re having a little financial difficulty at the moment.  Even Meals on Wheels isn’t coming anymore.  We could babysit for you now that the Headstart Program serves only a few kids in your neighborhood?)

The Gramps

Windsock Mitt

Be careful with questions, they often have answers

Fresh from a convention which dramatically promoted Bold New Ideas from the Nineteenth Century, the ever-innovative GOP has a NEW question for the 2012 campaign — Are you better off than you were four years ago?  Somehow, I think perhaps I’ve heard that before somewhere… oh, I remember, 1980?

And the answer is a resounding YES.  If we are speaking in general economic terms, we are much better off, and trending in the right direction.  Taking one of the most general measures, the Gross Domestic Product, things are looking much better than they were in late 2008 – early 2009.

Now, let’s add some highlights to the same graph:

We get a bonus in this category, not only do the figures indicate we are better off in terms of the improvement in our Gross Domestic Product, but the ARRA appears to have mitigated the worst impact of public sector layoffs, strain on the automatic stabilizers, and problems in the construction sector.

What about employment?  We’re better off in that economic category as well:

Taking a purely Cartesian view of the graph above shows the “numbers” moving from the 3rd Quadrant wherein all things are negative to the 1st Quadrant in which all things are positive.  However, it’s not necessary to have been thrilled to sit in Algebra II in order to observe that in terms of employment the situation is much better than it was in late 2008.

So, why doesn’t it FEEL better?  The CBPP offers this explanation –

“Although employers began to add jobs in 2010, the economy has recovered only about 4 million of the 8.7 million jobs lost between the start of the recession in December 2007 and early 2010. As a result nonfarm payroll employment was 3.4 percent (4.7 million jobs) lower in July 2012 than it was at the start of the recession.” (emphasis added)

A rough analogy might be that we’re economic “sophomores,” one of the traditionally  more difficult years in high school — and the year in which the oldsters now were then parked in that Algebra II class — we knew we weren’t lowly freshman anymore, but the “end” looked to be off in some distant horizon unreachable in human terms.  We obviously have some work to do to get back to pre-recession employment levels.

Another reason the economic situation may not “feel” as good as the days before the Wall Street Wizards drove the American economy into a very deep ditch is that the jobs lost tended to be middle income level,  while the jobs gained tend toward the lower end of the pay scale.  There’s a chart for that, too, from the National Employment Law Project:

Readers preferring the numbers will note the NELP study showed: “Lower-wage occupations constituted 21 percent of recession losses, but 58 percent of recovery growth. Mid-wage occupations constituted 60 percent of recession losses, but only 22 percent of recovery growth.  Higher-wage occupations constituted 19 percent of recession job losses, and 20 percent of recovery growth.”  (emphasis added) See also: NYT.

What American workers are facing is called “job polarization,” as Catherine Rampell explains in her NYT article:

“Job growth has been concentrated in positions that tend to fall into two categories: manual work that must be done in person, like styling hair or serving food, which usually pays relatively little; and more creative, design-oriented work like engineering or surgery, which often pays quite well.

Since 2001, employment has grown 8.7 percent in lower-wage occupations and 6.6 percent in high-wage ones. Over that period, midwage occupation employment has fallen by 7.3 percent.”

Those mid-wage jobs lost tended to be in manufacturing in which automation and off-shoring account for considerable, and permanent, job declines and public sector employment for teachers, law enforcement personnel, firefighters, and other middle class wage level public employees.  [NYT ] Down-sizing government means hiring freezes, or layoffs, and the loss of those wages recycling back into the economy.  To borrow a GOP analogy — it’s not hard to reduce the size of government until it could be drowned in a bath tub — BUT we’re draining those wages out of the economy along with the reductions.

Yet another reason for the bind in middle income jobs is that the construction industry still hasn’t recovered from the Housing Bubble puncture.  Construction sector employment peaked in January 2006 when banks were still happily handing out mortgages of questionable terms and provenance in order to sate their appetite for more fodder to create highly profitable asset based securities and their derivatives.   In numerical terms, the Bubble Collapse and subsequent recession eliminated approximately 2.21 million construction sector jobs. [CalcRisk]

The Prescription:  If we accept three fact-based propositions in regard to the employment bind the policies necessary to address the real issues becomes more clear.  (1) The reality is that the economic pit into which we tumbled was deeper than advertized.  (2)  Most of the jobs lost tended to be middle income employment. (3)  Those middle income jobs tended to be in the public sector and in the construction industry.

In order to address these three realities any “jobs” plan presented by any politician should (1) seek to halt the decline in public sector employment of teachers, police officers, firefighters, and public service personnel who live and work in communities which need their economic contributions to sustain their economies.  Contrary to the half-baked but often served conservative image of The Greedy Public Employee munching vigorously at the trough — these are people who pay taxes, make mortgage payments, purchase automobiles, shop at the local grocery, buy furniture, and otherwise contribute to local economies.

A real “jobs” plan should (2) immediately and directly address the situation in the construction sector.  There is a real opportunity here to reprise our Greatest Generation and repair, replace, or maintain the physical legacy of their efforts especially in terms of our infrastructure.  We have construction companies seeking to bid for infrastructure related contracts, workers ready and willing to work to complete those contracts, and an almost unconscionably long list of roads, bridges, dams, water treatment facilities, airport facilities, and sewer treatment plants that demand renovation.

A real “jobs” plan should (3) acknowledge that some of the manufacturing jobs of old are not coming back, and that in order to promote industrial growth we need to look to new technologies and offer greater support for innovation.  We dismiss new alternative energy technologies at our peril, because while some Republicans are dismissing solar and wind tech as “passing fads” the Germans and the Chinese are investing in them such that they will be permanent and profitable segments of their economies.

The answer to the question is YES, we are better off than we were four years ago, and YES we could be doing better.  The answer is definitely NOT to “elect a Republican, give the top 0.1% another big tax cut, and hope the Chinese and the Germans see the ‘error’ of their ways.”  Such a response is the economic policy equivalent of telling the patient to take two aspirin, and to ignore what’s really causing the pain.

 

You Shoot A Bear? The American Way

According to several talking heads on my television set today, the Romney Campaign must be feeling the heat about the tax return release issue because it’s time to haul out John “Frequent Flyer” Sununu for a reminder that the current President of the United States is The Other.

“What I thought I said but I guess I didn’t say is that the president has to learn the American formula for creating business,” Sununu said. “The American formula for creating business is not to have the government create business.”  Sununu [HuffPo]

Former Massachusetts Governor Romney entered the lists running after a line from a speech by the President in Roanoke, VA.

“If you were successful, somebody along the line gave you some help,” Obama said. “There was a great teacher somewhere in your life. Somebody helped to create this unbelievable American system that we have that allowed you to thrive. Somebody invested in roads and bridges. If you’ve got a business, you didn’t build that. Somebody else made that happen.”  [HuffPo]

Governor Romney was outraged, I say, outraged:

“The idea that Steve Jobs didn’t build Apple, that Henry Ford didn’t build Ford Motors, that Papa John didn’t build Papa Johns, that Ray Kraut didn’t build McDonalds, that Bill Gates didn’t build Microsoft,” Romney said. “It’s not just foolishness, its insulting to every entrepreneur, every innovator in America and it’s wrong.”  [HuffPo]

Let’s ignore the relatively obvious antecedent of “that” as  the physical infrastructure, and move quickly to what used to happen at the dinner table when one of the offspring made altogether too much of some personal exploit.

You could tell when the  line between pride and chutzpah was crossed: Someone would grin and ask, “You Shoot A Bear?”

Steve Jobs built Apple, for which he was justly proud.  Bill Gates built Microsoft, an accomplishment in which he should take pleasure.  However, where would Apple or Microsoft be if the Atanasoff-Berry Computer hadn’t been designed and built at Iowa State University in 1942?  IBM/Harvard’s 1944 Mark I? The Colossus machines delivered to Bletchley Park in 1944?  Where might we have been but for the University of Pennsylvania’s School of Electrical Engineering constructing stored program computers in 1946? [CTL]

Henry Ford built his motor car company. Where the cars were going to travel was another matter.  Around the turn of that century:

“The country had approximately 2,199,600 miles of rural roads and only 190,476 miles (8.66 percent of the total) had improved surfaces of gravel, stone, sand-clay, brick, shells, oiled earth, bituminous or, as a U.S. Bureau of Public Roads (BPR) bulletin put it, “etc.” Many people thought of interstate roads as “peacock alleys” intended for the enjoyment of wealthy travelers who had time to spend weeks riding around the country in their automobiles.”  [FHAd]

Where might the U.S. auto industry be now if only 8.7% of our roads had improved surfaces?

What of franchising, as in the case of McDonalds and Papa Johns.  Sorry, the founders of those two popular American franchises are standing on the shoulders of Albert Singer who used franchising to sell his Singer Sewing Machines in 1851.

Infrastructure takes a variety of forms.  There’s the physical component,  for example, local and state efforts were necessary to create a road system on which cars and trucks could travel efficiently.  There’s the knowledge component.   Jobs and Gates availed themselves of a knowledge base created by a variety of government, educational, and private efforts to create stored program computers.  There’s an economic component.

The American system of finance should function to channel investment from areas of surplus to areas of scarcity — from those who have money to invest to the entrepreneurs like Ford, Jobs, and Gates, who need capital.  There’s also a legal component — for private enterprise to flourish there must be an independent legal system in place with the power to interpret and enforce laws governing contracts and other businesses matters.

What’s WRONG is to assume that Ford, Gates, Jobs, and Kraut didn’t create their businesses in an environment in which the physical, knowledge, legal, and economic infrastructure elements were used to entrepreneurial advantage.   Ford didn’t pave roads. Gates and Jobs didn’t invent computers.  Kraut didn’t invent mass production and franchising.  And, all of them were successful in a legal context in which an independent judiciary could call for the enforcement of contracts and business agreements.

To say that a single individual was personally responsible for the success of his or her enterprise without any acknowledgment of the physical, knowledge, legal, and economic infrastructural  environment falls easily into the You Shoot A Bear? category.

To say that it is only the financial sector which assures the success of any commercial enterprise is almost as naive.   Without the knowledge base there are no software start-ups in which to invest.  Without the physical base there is no way to deliver power generated by alternative energy sources.  Without the legal component there is no way to insure patents and contracts.

Governor Romney’s rather arrogant thesis also rests upon the notion that business owners need not feel “grateful” for the public infrastructure on which they rely because “we paid for it.”  Yes, business owners pay taxes.  However, the former Governor’s argument works if — and only if — the business owner in question was the only one paying for the work.  The argument doesn’t work because the taxes paid by the business owner are combined with the taxes paid by the butcher, baker, candlestick maker, teacher, firefighter, police officer, garage mechanic, airline pilot, and veterinarian….

What is foolish and insulting is the notion that Americans are so ill-informed and naive as to believe that our modern innovators and entrepreneurs are so divorced from their business environment that they don’t acknowledge the elements which inform and support their endeavors.

Perhaps the failure to acknowledge the totality of our American business environment comes from being a Master of the Universe?  “Who shot a bear?”

Wall Street Fine, Main Street Not So Much, States Caught in the Middle

The situation in Nevada is beginning to demonstrate the universal application of the great literary phrase: “It was the best of times, it was the worst of times.”  Consider the following information from a Las Vegas Sun article about therapeutic services for disabled children back in March:

“In 76 percent of the cases reviewed, the state did not provide all of the services called for in plans agreed to by state caseworkers and families. This was “due to a lack of available personnel resources” and reduced hours the state had to contract with therapists.”

In 52 percent of cases, the state did not initiate services within 30 days, as required by the federal government. This was “attributable to the lack of personnel resources as a result of the reduction in the amount of funds available for contract services.”

There are 2,477 children receiving these services, such as they are, and another 250 ranging in age from newborn to 3 years of age on a waiting list.   So youngsters with autism, physical disabilities, developmental issues, and other serious medical challenges are in the cross hairs of a support system in which “fewer children could have more services, or more children could have fewer services.”  This is what an austerity budget means.   For everyone. If there are no increases in revenues, then all public services will be caught in the same bind as the kids — fewer may have more, or more can receive fewer.

However, in a political climate still clutching the remnants of the failed Voodoo economics of the Trickle Down Artists, and the ephemeral mythology that lower taxes magically transforms spreadsheet pixel dust into increased revenues,  any attempt to raise revenue is the antithesis of good politics.  ["Sandoval, not in favor of business tax initiative", LVSun]

The often and well debunked MYTH [EconoFact]  that lower rates of taxation will generate the revenues necessary to provide essential government services simply doesn’t work in the real world in which there are pot holes in asphalt, 30 kids in a kindergarten class, not enough health inspectors to cover the number of restaurants in a single year, not enough deputies to keep trucks from speeding through small towns, aging fire fighting equipment, and what might generously be called “antique” drinking water delivery systems.

For small businesses in Nevada this isn’t the best of times either.  Nevada’s experiencing job growth of about 1.1% YOY, a tick behind the national YOY job growth of 1.4%.  [DETR] Of special note is that the capital region — Carson City — has lost 4.2% of its job growth.  In fact, the capital city MSA is the only one in the state which is having declining job growth.

When the “business” of a MSA is primarily government then the private sector is affected when government declines.  We can craft a little home-made chart showing what happened to Carson City in terms of the percentage change YOY in its taxable sales as reported to the Department Of Taxation, as the state shed jobs and shaved the budget.  (pdf reports)

It’s no wonder small businesses and local retailers feel the bind when there’s been only one YOY increase since 2007 — and they started digging and backfilling out of the prior four year hole.  This is what an “austerity” budget looks like to local businesses trying to function in an area in which government payrolls help support the local economy.

So, why all the demand for “austerity,” if it doesn’t help provide public services and it doesn’t help local businesses? 

Federal and state deficits are a problem when interest rates are high.  Here’s one of the simplest explanations I’ve found so far:

“When long-term interest rates are high, a federal deficit competes against and “crowds out” private borrowing and investment. When long-term interest rates are low, the federal deficit is not taking away from borrowing by the private sector. On the contrary, the federal deficit is acting as a needed boost to aggregate demand in the economy, an action also known as “fiscal policy.” When the economy is slack, every dollar of reduction in federal spending takes three or four dollars off of our gross national product.”  [Grayson](emphasis added)

Got that?   The “crowding out private borrowing and investment” happens when interest rates are HIGH.”   So, what are the long term interest rates now?  The Treasury 20 year CMT is 2.13%. [Treasury] What does this look like in a historical context?  This:

The overall trend line doesn’t seem to indicate “high interest rates” does it?  Notice that the top of the line for the interest rates shown on the chart doesn’t go above 5.5%  Now, let’s compare that to the 30 yr. CMT for a previous era, say 1980 to 1990:

Since the old 30yr column has gone the way of the DoDo, and really long term Treasuries are spoken of as 25+’s, perhaps a better comparison would be the current 20 year rates:

The rate for 20 year notes hasn’t crept up over 3.08% during 2012 thus far.  We could sit and look at pretty charts all day, and the message would remain the same — this is NOT a period of HIGH interest rates, therefore the old “government borrowing drives out private capital” maxim doesn’t apply.  What the heck! Let’s look at one more — the U.S. Treasury’s Yield Curve showing the yields (rates) for all the notes available:

And, there it is — a graphic illustration of Low Interest Rates.  So, let’s get this straight.  We have to have an “austerity budget,” meaning that the federal government has to cut back on aid to the states, because when the government has to borrow money it crowds out private investment — EXCEPT when interest rates are low.   No, this doesn’t make sense, and Laura D’Andrea Tyson explains why:

“The “crowding out” argument explains why large and sustained government deficits take a toll on growth; they reduce capital formation. But this argument rests on how government deficits affect interest rates, and the relationship between government deficits and interest rates varies.

When there is considerable excess capacity, an increase in government borrowing to finance an increase in the deficit does not lead to higher interest rates and does not crowd out private investment. Instead, the higher demand resulting from the increase in the deficit bolsters employment and output directly, and the resulting increase in income and economic activity in turn encourages or “crowds in” additional private spending.”  [NYT] (emphasis added)

How do we know when we have excess capacity?  High unemployment is one really good tell.   What have we learned?

(1) Austerity budgets, the result of program funding cuts without any new revenue don’t serve to provide basic services for Nevada citizens, and others throughout the nation.

(2) We know that in regions in which government spending constitutes one of the major supports of the local economy local retailers and other small businesses see their sales decline.

(3)  Deficit reduction is necessary when government borrowing during periods in which we are operating at or close to our economic capacity when interest rates will be affected by the “crowding” to get capital.

(4) Our interest rates, for even very long term treasury notes, are exceedingly  low.

(5) Our economy is not functioning close to its capacity — witness the unemployment rates.

Therefore, the argument that we have to privatize Social Security, turn Medicare into a voucher coupon program, cut women and children off WIC nutrition support, take SNAP benefits from working families, cut spending for infrastructure maintenance and improvement, slash preventative medicine and wellness programs, and leave the national parks to rot…. because We Have To Reduce The Deficit — is ultimately ideology and currently bogus economics.

Unsolicited Questions for the Press Corps

There was a post like this a while back, but after listening to the President’s remarks this morning and then sitting through some rather inane inquiries from the White House Press Gaggle — how about this:  We put a moratorium on questions that begin, “Mr. President… The _____ are saying that ____ and how would you respond?“

First, this makes the person asking the question sound lazy.  The easiest question in the world is something someone else writes for you.  A right wing bloviator of some infamy writes — “The president had control of both houses of Congress during his first two years, and the economy didn’t bounce back.” And, then the intrepid reporter asks, “How do you respond?”

Step two, now the reporter sounds uninformed.  The President’s party had control of the House, and titular control of the Senate.  A majority is sufficient to establish Committee appointments in the Senate, BUT it is insufficient to overcome 137 Republican filibusters.  [Senate]   The question also indicates that somehow we were supposed to rebound enthusiastically from the worse Crash since 1929, all while some $50 trillion of global wealth was erased by the Wall Street casino.  Not to mention the $7 trillion lost in U.S. equity wealth, and another $6 trillion lost in the housing debacle. [CBS]

Thus, in the interest of assisting a more energetic, more informed, Fourth Estate, here’s a humble offering of possible questions:

#1.  Background: In 2006 JPMorganChase hired a trading manager who rescinded the company’s guidance that traders exit any position in which there were $20 million in losses, and in February 2012 the firm adopted an index comprised of 125 credit default swaps on investment grade entities.   By April 5, 2012 the London Whale was involved in position so large that he was moving prices in the $10 trillion credit market.  As of May 18, 2012 JPMorgan’s losses were calculated at $3 billion and rising.

Question:  What actions have the SEC, CFTC and other regulators taken which might control the gambling in credit markets exemplified by JPMorgan? And, are U.S. capital requirements sufficient to protect American investors from fall out?

Question: What progress has been made by the CFTC and other regulators to assure the investing public that credit default swaps (and the indices based thereon) are transparent enough so that risk can be properly assessed and debacles like the one at JPMorgan avoided?

#2. Background:  From the Bureau of Economic Analysis, “the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 1.9 percent in the first quarter of 2012 (that is, from the fourth quarter to the first quarter), according to the “second” estimate released by the Bureau of Economic Analysis. In the fourth quarter of 2011, real GDP increased 3.0 percent. ” (May 31, 2012)

Question: If public sector hiring has decreased of late, and the Department of Labor is predicting, “Slower population growth and a decreasing overall labor force participation rate are expected to lead to slower civilian labor force growth from 2010 to 2020: 0.7 percent annually, compared with 0.8 percent for 2000-10, and 1.3 percent for 1990-2000. The projected 0.7 percent growth rate will lead to a civilian labor force increase of 10.5 million by 2020. (See table 1.)” Then, what role does public sector hiring play in the full recovery of our consumer based economy?

Question: If private sector worker compensation costs (wages and benefits) increased by 2.1% YOY, and public sector worker compensation costs increased 1.5% YOY,  [DoL] and if this trend continues will this constitute a drag on consumer spending?

#3. Background:  As of January 2007, the GAO reported that our national transportation infrastructure were at risk in terms of financing and capacity, and that funding sources were eroding  just as investment was needed to expand capacity.

Question:  What inroads into this imbalance might have been made by ARRA projects?  What employment advances might be made if funding was available for contracts to improve air traffic and transportation facilities? For highway improvements?

Question: In terms of our national parks, the GAO reported in 2006:  “Each of the 12 park units reported their daily operations allocations were not sufficient to address increases in operating costs, such as salaries and new Park Service requirements. In response, officials reported that they either eliminated or reduced services, or relied on other authorized sources to pay operating expenses that have historically been paid with allocations for daily operations.”   What should Congress and the Administration do to prevent this trend from continuing, and what might the economic benefits be in the private sector if sufficient funding were available for the operation of our national parks?

#4. Background: “During the 2011 legislative sessions, states across the country passed measures to make it harder for Americans – particularly African-Americans, the elderly, students and people with disabilities – to exercise their fundamental right to cast a ballot. Over thirty states considered laws that would require voters to present government-issued photo ID in order to vote. Studies suggest that up to 11 percent of American citizens lack such ID, and would be required to navigate the administrative burdens to obtain it or forego the right to vote entirely.” [ACLU]

Question:  What actions are currently being taken by the Department of Justice to confirm every eligible American citizen’s right to vote?

Thank you.  You’re welcome.

Jobs, Jobs, Jobs and Numbers, Numbers, Numbers

As promised, here’s a closer look at the jobs report released today by the Department of Labor.  If we take the 69,000 total apart and look at the separate categories of private sector employment there’s an interesting picture:

We can see more clearly now which jobs ARE being created, and which are not.  Healthcare added 33,000 jobs, transportation and warehousing added another 36,000.  Manufacturing was up 12,000. Temporary professional services gained 9,200.  Full time professional services dropped about 1,000.  The financial sector added 3,000 jobs, retail added 2,300, and wholesale jobs increased by 15,900.

The drag? We lost 13,000 government jobs, 9,000 leisure and hospitality jobs, and 28,000 construction jobs. [BLS Table B]

Here’s where the ideological wheels meet the real world road.

If the ultra-conservative ideology is correct, then the reduction of government jobs should boost the overall economy?  That’s the theory, and one espoused by Republican candidate Mitt Romney:

“Romney, by contrast, would make immediate, drastic moves toward austerity. His deficit plan would slash federal spending to 20 percent of GDP by 2016, and as low as 18 percent of GDP in later years—well below historic averages. In addition, Romney’s plan bets that lower tax rates will spur economic growth, boost the economy, and return the country to an era of budget surpluses and prosperity.” [NatlJournal]

That’s the plan, cut government programs (reducing the federal payroll), privatize Medicare (vouchers), and send everything that can be packaged into block grants back to the states.   So, we’d have to ask: If we have shed about 1,000,000 public sector jobs in the last few years — then why haven’t we seen more robust gains in private sector employment? [FTimes]  If during the Obama Administration some 600,000 public sector jobs have been eliminated,  where is the vaunted economic growth that was supposed to happen?

Reuters offered an analysis of the drag on the economy created by the loss of public sector employment last April:

The result? The last three years of job losses at the state and local government level has been the most dramatic since Labor Department records began in 1955, according to a Reuters analysis.

Public-sector employees tended to have more job security, which in some ways helps during weak economic climates, as their steady demand for goods and services spread through the economy. The recent trend, conversely, can make things worse.

“If public-sector employment had grown since June 2009 by the average amount it grew in the three previous recoveries (2.8 percent) instead of shrinking by 2.5 percent, there would be 1.2 million more public-sector jobs in the U.S. economy today,” said the Economic Policy Institute in a recent report, which included federal employees in the calculation.

Yes, we’ve come right back to the demand side of the classic market equation.  The lost demand for goods and services created when public sector jobs were eliminated is a drag on the economy especially during a recessionary period.  There is an argument to be made that the job security and spending capacity of public sector employees, health inspectors, teachers, firefighters, police officers, public health nurses, highway department employees, etc. acts as one of those automatic stabilizers cushioning the shocks to a retracting economy.

The illogical extrapolation of this notion is that “Gee, then all we need are public employees…” No.  What we need are infrastructure construction and maintenance, and public services, which not only meet the needs of the community but also serve to sustain demand for goods and services in local economies during tougher times.   The magic word is Balance.

The question we now need to ponder is what will get the economy moving forward at a more rapid pace?  Tax Cuts for wealthy Americans?  Infrastructure spending and small business incentives to boost employment in the construction  and other sectors?

Republican members of the House of Representatives are fond of asserting they’ve passed some 30 “jobs” bills.  However, in their enthusiasm to repeal the Affordable Care Act, to repeal Dodd-Frank, to reform Medicare out of existence, to preserve taxpayer subsidies for fossil fuel corporations, to cut taxes for the top 0.5% of American income earners, and to slash funding for infrastructure programs (all of which they have characterized as “Job Creating” measures) –  their proposals would cost a potential 700,000 jobs in H.R. 1; approximately 300,000 jobs lost in regard to H.R. 2; and, perhaps a total of 1.7 million jobs lost by 2014 per H.Con.Res. 34. [Gavel]

There is an alternative available, S. 1549.   It is stalled in the United States Senate, tagged with the all too familiar Republican filibuster.  There are some component which could have a positive impact on the economy much sooner than waiting for the tax breaks for billionaires to trickle down to the local county road department. *(See American Jobs Act)

One component is the Buy American provision, requiring that items procured for the maintenance or construction of public works be made in America.  There could be some “wiggle room” for negotiation to allow for the acquisition of items which are no longer manufactured here, but this topic should be a started for further discussions.

Another component would give business owners some tax breaks: “amends the Internal Revenue Code to: (1) reduce employment and self-employment tax rates in 2012 to 3.1%; (2) allow employers a tax credit for payroll increases in the last quarter of 2011 and in 2012; (3) extend the 100% bonus depreciation allowance through 2012; (4) delay until 2014 the 3% withholding requirement on payments due to vendors who provide services to federal, state, and local governmental entities; and (5) increase the work opportunity tax credit for hiring unemployed veterans. ”   If tax breaks are the bread of conservative life, why would this be controversial?

There’s an infrastructure component which has drawn more fire: “Makes specified funds available to the Secretary of Transportation (DOT) for: (1) grants-in-aid for airport planning and development and noise compatibility planning projects under the airport improvement program (AIP); (2) Federal Aviation Administration (FAA) Next Generation air traffic control system advancements; (3) highway and bridge restoration, repair, and construction projects and for passenger and freight rail transportation and port infrastructure projects; (4) grants for high-speed rail projects, capital investment grants for intercity passenger rail service, and grants to reduce congestion on intercity rail passenger transportation; (5) capital grants to the National Railroad Passenger Corporation (Amtrak); (6) transit capital assistance grants; (7) capital projects for existing fixed guideway system modernization, replacement and repair of buses and bus-related equipment, and construction of bus-related facilities; and (8) discretionary capital investment grants for surface transportation infrastructure.“

This is where the cat-calls about “nostrums of statism” begin from the right.  However, we are indeed a nation with antiquated air transportation systems, and love Amtrack, or not, it is invaluable in the NE corridor transportation grid.  We’ll probably not find too many members of the Republican caucus taking the bus — but thousands of their constituents take the bus daily to get to their jobs.

The cri de coeur from the right hand side of the political aisle really increases in volume when it’s suggested that the federal government could step in to help school districts, cities, and counties retain or rehire teachers, police officers, and firefighters laid off because of local and state budget cuts.  Speaking of “nostrums,” there’s little more vague or exaggerated than claims that if tax rates for the upper upper upper income earners are further reduced, then POOF! the economy will improve and state and local revenues will rise with the Yachting Tide.   The Speaker of the House of Representatives announced that the first stimulus bill was a failure before the money even got out the door, however the Republicans piously intone their mantra that we should at least wait another four years for the “benefits” of the Bush Tax Cuts to kick in.

The magic formula “Tax Cuts + Deregulation” was in effect for eight years of the George W. Bush Administration….. and we’re still waiting. In fact we’ve had nearly thirty years of tax cuts and deregulation. 

We can narrow it down and look at the last decade, and the economic picture of the efficacy of the Magic Formula simply isn’t there.

What is readily apparent is that some sectors of the economy are doing better than others.  Federal spending for infrastructure would more immediately benefit business owners in the construction sector and the employees who would be hired.  Arguing that these aren’t “permanent” jobs is silly.  There are precious few “permanent” jobs in a sector dependent on winning bids and hiring sub-contractors.

It’s also clearly visible that we cannot continue to decimate our public sector.  “Stack’em deep and teach’em cheap” is not a productive educational maxim.   Nor can we encourage business growth in our retail sector by seeking to minimize or privatize our public safety sector.   Commercial and industrial activity is curtailed if workers can’t find affordable and reliable transportation to and from the workplace.

Once again: Austerity never begat Prosperity.

Quick Picks: Bishops To Square One on Contraception

Bishops to Square One:  The US Conference of Catholic Bishops is pleased to announce their “Fortnight to Freedom,” June 21 to July 4, described by the Catholic News Agency, as follows:

“The initiative was created in response to several moves by the Obama administration that are threatening the Church’s religious freedom. The most well-known action is the Health and Human Services mandate that requires employers to cover birth control and other services that Catholics and other believers find morally objectionable.”

Now, what was that old line the Bishops used to find so objectionable, could it have been “They want to hang their religions around other people’s necks?”

Tax dollars are going out the back door to private schools.  This may not be what the Alliance for School Choice had in mind:

“While the scholarship programs have helped many children whose parents would have to scrimp or work several jobs to send them to private schools, the money has also been used to attract star football players, expand the payrolls of the nonprofit scholarship groups and spread the theology of creationism, interviews and documents show. Even some private school parents and administrators have questioned whether the programs are a charade.”  [NYT]

How many didn’t believe the programs were a charade in the first place?

Solyndra and Lobbyists in Romney’s Bundle?  If an article included  “Solyndra, lobbyists, fundraising, and Romney” would you click over and read it? Would it surprise anyone that Romney has not released the names of any of his bundlers?  We could guess we’d find the list in the stack with his tax returns?

The Not Debt Crisis?  Next time some one tells you that the national debt is Crushing the Nation!!!  Ask why then have Treasuries remained low after a $35 Billion 2 yr. sale. “The securities drew a yield of 0.300 percent…”  [Bloomberg]

Meanwhile back with the “Job Craters” — JPMorganChase is being sued by employees whose retirement funds were hit by the bank’s Big At Least $3B Blunder. “The defendants were accused of violating their duties to 401(k) and other retirement plan participants by including company stock as an investment option, hiding the stock’s risk, and failing to move participants to safer choices.” [Reuters]   And about their former risk manager… there were red flags. [Reuters]

Infrastructure Anyone: The Chinese say yes.  Reuters reports:

The pace of investment in the likes of roads, bridges and real estate is running at its weakest in nearly a decade, April data showed, suggesting the world’s second-biggest economy is heading for a sixth straight quarter of slowing growth.

To provide some support the government had asked for project proposals by the end of June, even for those initially earmarked for the end of the year, said the China Securities Journal, one of the country’s top financial papers.

Citing government sources, the article said Beijing did not rule out bringing forward next year’s projects, if it thought more investments would be needed to stimulate the economy.

Meanwhile, the American Energy and Infrastructure Act  stalled in the U.S. House of Representatives. [ASCE] There is a House-Senate Committee moving on the topic in fits and starts. [VTD]

Flowing Foreclosure money?  Want to see what your state has done with settlement funds from the Big Five Banks?  Pro Publica has the information in a convenient chart.

Yucca Mountain is Still Dead.  [Las Vegas Sun]

Nevada unemployment rate drops below 12% for the first time in 3 years.  [NNBureau]

Coffee and the Papers: From the Ridiculous to the Whatever

** Nevada politics is nothing if not highly entertaining.  Consider this pithy summation of the Nevada GOP’s leadership issue:

“The Republicans, pounded by Democrats in critical races the last two cycles, have a reasonable chance to win the state for Mitt Romney, hold onto John Ensign’s Senate seat and take over the Legislature’s upper house. And the glue holding that all together — the man charged with raising money, attacking Democrats and articulating GOP principles — is a Laughlin constable and former strip club lobbyist found guilty of ethics transgressions by two tribunals and whose odiferous city land deal has revolted everyone (except the folks at Roundheels Central on Stewart Avenue), including a conservative think tank on Tuesday.  Come on, folks. This must be a joke.”  [full story Las Vegas Sun]

Well, let’s see now, there seems to be a bit of history.

February 12, 2012:  “Early last fall, when Florida Republicans defied the national party and moved their presidential primary to January, Nevada Republican Chairwoman Amy Tarkanian issued a defiant statement.  “No matter what, we will not allow this disruption to interfere with our goal of creating a presidential caucus that will be the pride of the Western states,” Tarkanian said. “This situation gives Nevadans the opportunity to showcase our ability to adapt and establish our state as a major player in national politics.”  [Las Vegas Sun]

February 5, 2012: “Unable to control how its county parties count and report results, state Republicans were scrambling Sunday to explain why, almost 24 hours after most caucuses ended, the votes still have not been counted. [Politico]

January 5, 2012: “The head of the Nevada Republican Party, Amy Tarkanian has announced her resignation.  Thursday, Tarkanian sent a statement announcing her resignation since her husband is considering a run for Congressional District 4.” [News2]

April 24, 2010:  Sue Lowden proposes “chickens for checkups” health reform plan. [C&L]

November 16, 2009: “Dr. Chris Comfort replaces Sue Lowden, who resigned Sept. 30 to launch her campaign for the GOP U.S. Senate nomination and try to unseat Senate Majority Leader Harry Reid in next year’s election.”  [NNV]

And so it goes.

**  The Political Animal notes the activities of ALEC, right wing legislators, and national Republican leaders to enact vote suppressing laws, but “…a less well-known phenomenon might be called “bankrupting the vote,” as states and localities (particular cities with heavily Democratic electorates) struggling with fiscal crises simply can’t afford to adequately staff and administer elections. “  Read the full report here from Reuters.

** Heaven Forefend we’d actually pass a transportation bill wherein states and construction contractors would have a realistic expectation of long term infrastructure improvement projects.  “Also look for the House and Senate to start reconciling their differences over federal highway funding. Last week, the House passed an extension of highway programs through the end of the fiscal year, HR 4348. In March, the Senate approved a two-year extension, S 1813.“  [NRDC]

** There’s a report from the VA’s Inspector General that isn’t getting half as much publicity as it deserves.   “The Department of Veterans Affairs’ mental-health care system suffers from a culture where managers give more importance to meeting meaningless performance goals than helping veterans, according to testimony before a Senate committee Wednesday.”  [WaPo]

“Contrary to VA claims that 95 percent of first-time patients seeking mental-health care in 2011 received an evaluation within the department’s goal of 14 days, just under half were seen in that time frame, the report found. A majority waited about 50 days on average for a full evaluation.”  [WaPo]

From the report summary:

“VHA does not have a reliable and accurate method of determining whether they are providing patients timely access to mental health care services. VHA did not provide first-time patients with timely mental health evaluations and existing patients often waited more than 14 days past their desired date of care for their treatment appointment. As a result, performance measures used to report patient’s access to mental health care do not depict the true picture of a patient’s waiting time to see a mental health provider.”

The full report is available in PDF format here.

** It’s really very hard to get beyond House Speaker John Boehner’s (R-OH) comment that a “good” way to finance the reduction in student loan interest rates would be to take the money from the Affordable Care Act’s provisions for cancer screenings for men and women, wellness education programs, and immunizations for children, which he said was a “Slush Fund.”   HHS Secretary Sebelius has more to say here.

**  Did we know that when Nevada Representatives Amodei  (R-NV2) and Heck (R-NV3) voted for the Ryan Budget that they voted in favor of locking in the doubled interest rate for student loans?  We do now.

** Thus much for “Listening to the Generals.”  The GOP controlled House of Representatives rejected the Pentagon proposal for the next round of BRAC (base realignment and closure) Commission recommendations. [The Hill]

**  One of the more interesting characterizations of the upcoming presidential race from the President’s interview with Rolling Stone:

“I think the general election will be as sharp a contrast between the two parties as we’ve seen in a generation. You have a Republican Party, and a presumptive Republican nominee, that believes in drastically rolling back environmental regulations, that believes in drastically rolling back collective-bargaining rights, that believes in an approach to deficit reduction in which taxes are cut further for the wealthiest Americans, and spending cuts are entirely borne by things like education or basic research or care for the vulnerable. All this will be presumably written into their platform and reflected in their convention. I don’t think that their nominee is going to be able to suddenly say, “Everything I’ve said for the last six months, I didn’t mean.” I’m assuming that he meant it. When you’re running for president, people are paying attention to what you’re saying.”