Washington Post Sees Good Economic News, Declares It Bad

The lead from an editorial in today's once great Washington Post Bezos Bugle, home of unrepentant deficit scolds:

WHEN IS an improving fiscal situation not really an improving fiscal situation? When it’s the United States’ current one.

That’s the lesson of the White House’s annual budget update, known as the Mid-Session Review, which was published Tuesday by the Office of Management and Budget (OMB). Data in the report show the federal government is on course to record a $455 billion budget deficit this year, which is $128 billion less than the Obama administration had projected six months ago. Expressed as a percentage of gross domestic product, this is even more impressive: it amounts to six-tenths of a percent of GDP that we were planning to borrow this year, but won’t have to borrow after all. Well over half of this unexpected deficit reduction is due to above-forecast tax revenue, generated by the economy’s continued growth. Given the report’s forecasts for next year, it is likely that, as a share of the economy, the budget deficit at the end of the Obama presidency will be three-quarters smaller than it was at the beginning. Not too shabby. 

But, of course, this impressive accomplishment can't be allowed to stand unchallenged.  Allusion to the Simpson-Bowles "catfood commission" in 3...2...1:

These stubbornly high levels of public debt, and the prospect of truly uncontrolled debt in the years beyond 2025, reflect the lack of fundamental reform to U.S. entitlement programs such as Medicare and Social Security. President Obama may be able to boast about lower deficits on his watch, but not his avoidance of this issue. 

"Yes, =cough= much lower deficits =cough= but let's keep our eye on the small picture:  keeping the oldsters from robbing us!  Let them eat catfood!"

For a look at the world the rest of us live in, let's turn instead to Robert Kuttner, who we'll quote at length on what the real debt problem is:

This is the real debt problem—the merciless and economically stupid failure to write off old debt. It is the opposite of the claim that is relentlessly promoted by conservative groups, who tell a story of debts that must always be paid and of public debt burdening future generations. The reality is the opposite. It is growth that tames debt and makes it less burdensome; sometimes it takes debt relief to restore growth.

Here in the United States, the Peter G. Peterson Foundation and a variety of front groups that it has created have spent more than $1 billion to propagate the story of public debt destroying America’s economic future. In this view, only austerity—budget cuts intended to pay down debt—can spare America from this fate.

This view violates the most basic logic of economics. If an economy is in a deep recession, balancing the budget is the worst policy that can be pursued, because fiscal contraction during a downturn reduces the rate of growth. The government’s books may eventually balance, but at a needlessly depressed level of economic output. This is what has occurred in Greece, where forced austerity has caused the economy to shrink by more than 25 percent and the budget is still not in balance.  [snip]

Peterson and the deficit hawks have continued to warn that deficits and debts are courting sky-high inflation, on the theory that government borrowing crowds out business borrowing and pushes up rates. But in a subpar economy, demand for credit is depressed and the inflation never arrives. That the austerity mongers have been proven wrong again and again has not diminished their puritanical crusade.

President Obama needlessly succumbed to the allure of the deficit hawks in 2010. He defined America’s prime economic problem not as prolonged stagnation but as excessive public debt. He appointed a bipartisan ["catfood"] commission inspired by the Peterson Foundation, chaired by Erskine Bowles and Alan Simpson, to come up with a belt-tightening program. Mercifully, the commission could not agree on a plan that met its required supermajority.  [snip]

Only when the Federal Reserve embraced heroic monetary policies of bond purchases on a scale unknown since World War II—more debt!—did the economy begin a real recovery. The debt-to-GDP ratio began coming down faster than projected—not mainly because of the budget cuts but because growth was resuming. Obama finally abandoned austerity economics in his 2015 State of the Union Address. By then, the political damage was done. Republicans controlled both Houses of Congress and his proposals for increased public investment were dead on arrival.

Not that we expect the editorial board at the once great Washington Post Bezos Bugle to acknowledge the abject failure of their prescriptions for economic health.  As the times pass them by, count on their finding more gray linings inside silver clouds.

Germany: Putin, Ja! Greece, Nein!

The uber-austerians in Berlin are tough.  They won't let up until Greece - the birthplace of democracy - is buried:

Germany quickly rejected a conciliatory bailout proposal by Greece on Thursday, dampening hopes that emergency talks might break a deadlock threatening the country with default and an exit from the euro.

But Putin, well that's another bowl of borscht:

France and Germany, which oversaw marathon peace talks between the Ukrainian and Russian leaders last week in Minsk, Belarus, both signaled Thursday that they’re determined to salvage the cease-fire deal and keep the two sides talking. 

The German government said the four leaders had agreed “to stick to the Minsk agreements despite the serious breach of the cease-fire in Debaltseve.” It said “immediate concrete steps” were necessary to ensure that the cease-fire is fully implemented and heavy weapons are withdrawn.  (our emphasis)

Unlike Russia, Greece doesn't have a natural gas pipeline going up Frau Merkel's heinie.

Scheisse kopfe!

R.I.P. "Grand Bargain"

We won't be shedding any tears:

 President Obama will not include cuts to Social Security and other earned-benefit programs in his upcoming budget, the White House confirmed on Thursday. 

The cuts had been included in past proposals to lure Republicans into a so-called "grand bargain" that would raise taxes and cut spending with the goal of deficit reduction. The president faced fierce resistance to the cuts, and while Republicans liked the idea, they never agreed to pair the policy with higher taxes. 

The withdrawal of the offer from the budget is a recognition of the reality that a grand bargain is simply too unpopular on both sides of the aisle. The death of the grand bargain, first reported by the Associated Press on Thursday, comes as annual budget deficits have fallen from more than $1 trillion to less than $500 billion next year.

Finally, we're moving the goalposts back our way.

A Blow To The Austerity Racket

For years, Rethuglican politicians and economists, joined by their courtiers in the Beltway media, have pushed austerity policies that only served to retard growth and spending aimed at stimulating the economy (infrastructure for example).  Despite evidence to the contrary (see European recession), and the voices of experts like Nobel Prize winner Paul Krugman, Rethuglicans and too many spineless Dems have put deficit reduction / spending cuts as a priority, when stimulus was called for (the modest 2009 stimulus stopped the recession in its tracks, and began to turn the economy around -- albeit slowly).

The Center for American Progress has developed a case for walking away from the austerity-pushers and a "grand bargain" on the budget that would further slow the economy by cutting spending just as the economy is starting to recover.  Will Dems finally focus on the case and push back on the austerity-pushers?  As the CAP is representative of establishment Dems, we're hopeful-- but not optimistic.

More Austerity Fail - Reinhart and Rogoff Edition

Two new studies further debunking the work of austerity economists Reinhart and Rogoff, who falsely linked high debt to slow growth, are now out:

In a post at Quartz, University of Michigan economics professor Miles Kimball and University of Michigan undergraduate student Yichuan Wang write that they have crunched Reinhart and Rogoff's data and found "not even a shred of evidence" that high debt levels lead to slower economic growth.

And a new paper by University of Massachusetts professor Arindrajit Dube finds evidence that Reinhart and Rogoff had the relationship between growth and debt backwards: Slow growth appears to cause higher debt, if anything.

As it's said, a lie gets halfway around the world before the truth has a chance to get its pants on.  In this case, it's taken three years for those pants to get on.

Today's Read - Austerity Bites Edition

Neil Irwin sums up today's Congressional testimony by Fed Chair Ben Bernanke:

Ben Bernanke testifies before Congress today for the first time in three months, and the Federal Reserve chairman has a message for lawmakers: You’re the reason the economy isn’t taking off more.

Of course, Bernanke is too polite to phrase things quite so bluntly. But to anyone versed in Fedspeak, that’s the gist of his message. Even as state and local governments are becoming less of a drag on growth, Bernanke says in his prepared testimony before the Joint Economic Committee, “fiscal policy at the federal level has become significantly more restrictive.”

Whether Bernanke acknowledges it or not, Rethuglicans are fully aware that the austerity policies they've been foisting (often with the foolish acquiescence or outright promotion by the White House and rudderless Dems) are holding the economy back.  Why would this crop of bone-stupid, nihilist Rethuglicans want a healthy economy when their only goal is to discredit this Administration in particular and Democratic stewardship in general?  How does a healthy economy achieve that end? 

Shocking News! Austerity Division

Whooda thunk it?  A report by Brookings Institution researchers concludes:

"There are more than 2 million unemployed Americans who might have jobs today if not for austerity."

File under, "Tax cuts for me, austerity for thee."

Colbert Demolishes Reinhart/Rogoff Austerity Report

One of the foundational reports used by austerians from Rep. Paul "Lyin'" Ryan to the editorial board of the once great Washington Post Kaplan Daily was produced in the Year of the Teabaggers  (2010) by right-wing Harvard economists Carmen Reinhart and Kenneth Rogoff.  One slight problem:  it was b.s.  Stephen Colbert has the goods, with a bonus appearance in part II by the UMass graduate student who exposed the flaws:

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Austerity Fail (Yet Again)

What happens when the main "academic" underpinning of your argument that austerity brings prosperity is exposed as, um.... BS?  Oops.

Jon Chait at New York Magazine has a great piece on the Reinhart/ Rogoff report, which formed the basis of all the Paul Ryan/ Simpson-Bowles/ Washington Beltway media received -- and self-perpetuating -- wisdom that incurring debt while stimulating the economy is berry berry bad, austerity is berry berry good.  Here's a taste:

If you ever follow American politics — if you glance at a newspaper, or have a Sunday morning talk show on in the background — you have probably heard the following fact: Economists believe that the national debt causes the economy to slow once it reaches 90 percent of the size of GDP. Even if you don’t remember this fact, it is embedded so deeply in the reporting and commentary on Washington that its influence is unmistakable.

The provenance of this fact is a paper by the economists Carmen Reinhart and Kenneth Rogoff. It turns out the paper was wrong. Some other economists tried to replicate its findings and discovered some basic errors. They left several crucial historical examples out of their study and miscoded some other cases on their spreadsheet. When fixed, the errors change the finding.

"Changed the finding,"  or to paraphrase Chait, "Sorry about all that unnecessary unemployment and suffering, folks!" We await tomorrow's mea culpa editorial in the once great Washington Post Kaplan Daily.

Krugman on "Dwindling Deficit Disorder"

It's a disorder rampant on the editorial pages of the once great Washington Post Kaplan Daily and on Sunday talk shows:

"For three years and more, policy debate in Washington has been dominated by warnings about the dangers of budget deficits. A few lonely economists have tried from the beginning to point out that this fixation is all wrong, that deficit spending is actually appropriate in a depressed economy. But even though the deficit scolds have been wrong about everything so far — where are the soaring interest rates we were promised? — protests that we are having the wrong conversation have consistently fallen on deaf ears.

"What’s really remarkable at this point, however, is the persistence of the deficit fixation in the face of rapidly changing facts. People still talk as if the deficit were exploding, as if the United States budget were on an unsustainable path; in fact, the deficit is falling more rapidly than it has for generations, it is already down to sustainable levels, and it is too small given the state of the economy."  (our emphasis)

The whole article is, of course, worth reading -- and remembering the next time you hear a charlatan (=cough=Pete Peterson=cough=) earnestly entreating us to "fix the debt."

Saturday Morning Reading - Austerity Fail (Again)

Here's Paul Krugman on the enormous success abject failure of British Conservative PM David Cameron's austerity policies in the past 4 years.  Is it possible the always- behind- the- curve "mainstream media" is picking up on such indicators?  We're noticing a slight wiggle in the Beltway Conventional Wisdom (though not especially on the editorial page of the once great Washington Post Kaplan Daily), indicating that maybe,  just maybe austerity (in the form of sequestration and deficit hawking/Grand Bargaining) might not be the tonic for the economy that the Rethug-wired CW has heretofore been pushing.  But it still remains a delivered fact for much of the Georgetown salon crowd that we have to get that gummint spending under control!  Keynes who?

Bill Clinton: Austerity Would Drag Country Back Into Recession

Snippet from former President Bill Clinton's remarks to the Democratic congressional retreat in Leesburg, Virginia, this week:



Maybe now that the Big Dog has endorsed the reality that Paul Krugman has been espousing for years, more Democrats will have the courage/ sense to stand up against destructive austerity measures that would "solve" a problem that doesn't exist.

Austerity: "Wrong On All Fronts"

Paul Krugman on the failure of austerity:

"So what do we learn from the rather pathetic search for austerity success stories? We learn that the doctrine that has dominated elite economic discourse for the past three years is wrong on all fronts. Not only have we been ruled by fear of nonexistent threats, we’ve been promised rewards that haven’t arrived and never will. It’s time to put the deficit obsession aside and get back to dealing with the real problem — namely, unacceptably high unemployment."

Yet, as you will most likely see if you turn on this Sunday's talk shows, the media austerity scolds =cough=Dancin' David Gregory=cough= will still be "searching for Mr. Goodpain." Krugman lays out the case (again) for why the austerity/ deficit scolds have been wrong on just about everything.

Debt, Deficits and Austerity: The Credulous and The Credible

Once great Washington Post Kaplan Daily editorial page editor and prominent austerity fan Fred "Pain For Thee, Tax Breaks For Me" Hiatt, quoting President Obama from 4 years ago:

"...Obama has said the national interest requires both revenue increases and reform of entitlement programs."

“'The real problem with our long-term deficit actually has to do with our entitlement obligations and the fact that historically if our revenues range between 18 and 20 percent of GDP, they are now at 16,” the president told the Post editorial board in January 2009. “We’re going to have to shape a bargain. This, by the way, is where there are going to be some very difficult choices, and issues of sacrifice and responsibility and duty are going to come in, because what we have done is kicked this can down the road. We’re now at the end of the road. And we are not in a position to kick it any further.'”

"In a phone interview with me later that year, the president added: “It may start with Social Security because that’s, frankly, the easier one.'”

Let us introduce Fred to E.J. Dionne, same page, same day:

"The moment’s highest priority should be speeding economic growth and ending the waste, human and economic, left by the Great Recession. But you would never know this because the conversation in our nation’s capital is being held hostage by a ludicrous cycle of phony fiscal deadlines driven by a misplaced belief that the only thing we have to fear is the budget deficit."

"Let’s call a halt to this madness. If we don’t move the economy to a better place, none of the fiscal projections will matter. The economic downturn ballooned the deficit. Growth will move the numbers in the right direction."

Hiatt's views are an example of the credulous Beltway-think that has gone on for at least the past 4 years: the Simpson-Bowles worshipers, the "serious thinkers" who are almost always late to the realization that their long-held serious thought has, at the very least, been overtaken by events. Note how he quotes Obama's 4-year-old prescription of sacrifice approvingly (not that we're not for "sacrifice" -- we just prefer it be evenly distributed and only when it's going to solve a real problem rather than undermining faith in government as a protector of the vulnerable).

Meanwhile, Dionne points out that there's an emerging counterweight to the austerity chorus that's been dominating economic policy discussions here and abroad. Austerity has been a disaster in Europe and would effectively halt the recovery that's been slowly building here over the past 18 months. That, of course, is what the Rethuglican agenda really boils down to: it's not the deficit, stupid -- it's dismantling the progressive social safety net and diminishing the Obama legacy. Too bad Hiatt and his fellow Beltway chin-strokers have a deficit of insight (or honesty) and can't see that.

More Media Malpractice - Austerity Scolds Edition

H/t to Mr. Pierce for directing us to this analysis by Kevin C. Brown discussing the media co-conspirators in the austerity con game being run by "Plutocrat Pete" Peterson. Peterson, you might recall, has made his name in recent years by being at the forefront of Wall Street vultures "visionaries" looking to turn Social Security into what amounts to a Vegas table game. Unfortunately, he's hardly been alone in his efforts, as Brown points out:

"An essential and successful element of the Peterson strategy is to create an environment where it is widely if not universally believed that there is no alternative to his vision. In this view, it’s 'not realistic' to believe the country can afford the same programs it once did. Those who are prepared to be 'adults' will look at these 'hard truths' without flinching and recognize that it is time to take citizens-have-to-do-with-less medicine.

"The conceit is that those with 'courage' will see past narrow, partisan concerns and embrace an ideal: a bipartisan consensus that has the strength to demand 'shared sacrifice' from a childish and selfish populace.

"A review of the proceedings of the Fiscal Summits of the last three years makes agonizingly clear that most of the journalists who conducted interviews or moderated panel discussions both reflected and amplified the Peterson worldview — entirely unselfconsciously, it would seem."

Brown, of course, names those Peterson acolytes in the media =cough=Sunday talk shows=cough= often thought of as the "serious people" who are more than willing to prescribe needless pain for the poor and the middle class ("Tax breaks for me, austerity for thee."). It's an interesting piece, and you may find some surprising names on the list (or not).

Meanwhile, let's not forget what a smashing success austerity has been in Europe.

IMF Report: Austerity Doesn't Work

A recent staff report from the International Monetary Fund paints a grim picture of the effects of austerity policies undertaken by conservative European governments in the past four years. As George Logothesis at Daily Kos summarizes,

Austerity born on the backs of the 99 percent doesn't work. It not only doesn't fix the problem, it makes it worse by exacerbating a country's economic problems. The fact that austerity in Europe resulted in 1.50 euros of lost growth for every euro cut should serve as a major wake-up call to American politicians here at home. Giving in to the debt fetishists and cutting simply for the sake of cutting—and cutting from society's safety nets—while neglecting at the same time to push forward any robust pro-growth strategy ensures a nightmare situation. The middle class can't be sacrificed in an attempt to bring a country's books into the black. (our emphasis)

Yet, the drumbeat continues here for "deficit reduction" (i.e., "slashing entitlements and social programs"), from the likes of plutocrat Pete Peterson (who wants to get his hands on the Social Security trust fund and start playing with it on Wall Street), the CEOs of the "Fix the Debt" crowd, the once great Washington Post Kaplan Daily editorial board and much of the "mainstream media," and the conservative pols who are using as cover the Beltway mania for "deficit reduction" to undercut or end popular and effective programs such as Medicare, Medicaid and, yes, Social Security. In this report, the lessons of Europe are plain to see. The onerous consequences can be avoided if political will can be mustered to defeat the "debt fetishists" here in America.

Austerity and a Nation of Casual Cruelty

At the risk of turning this blog into "What Charles P. Pierce Said," we look again to the sage of Boston for his thoughts on the "austerity agenda" being mercilessly flogged by the likes of Pete Peterson, "Fix the Debt," and the once great Washington Post Kaplan Daily:

Not all that long ago, we had a national election in which the idea that we are all equal partners in the ongoing creative act self-government out of which comes a political commonwealth suited to the needs of the majority of the country was extensively litigated and, at the end of it, the question was decisively settled in the affirmative. Willard Romney's gaffe about the "47 percent" blew out two of the tires on the bandwagon, and then his selection of zombie-eyed granny-starver Paul Ryan blew out the other two, and that extravaganza of I-Got-Mine-Jack conservatism that went galumphing through Tampa finally cracked both axles. Then, of course, the whole show moved back to Washington, and became subject to the gentle ministration of the political elites and the courtier press that serves them, and the definitive decision of the election quickly was forgotten in favor of the notion that some deal, any deal, was better than what lay beyond a completely artificial deadline that had been produced a year ago in response to a completely created crisis. There is no question that some people will get hurt if we roll all the way down the GFI, but, if the president and the Senate do their jobs, the pain will be temporary. The imposition of an austerity agenda as part of some bipartisan "deal" would be infinitely worse.

The crazy-ass Rethuglicans have no real interest in "deficit reduction" other than as a stalking horse for shrinking the non-military part of the Federal Government down to a bathtub-drownable size (G. Norquist); some Democrats, it seems, are too enthralled with making a deal at almost any cost (B. Obama), and the Beltway Bubble dwellers are, well, Bubble dwelling (R. Marcus). As Pierce says, we're being fashioned into a nation of casual cruelty.

(Image: Cat food-- it's what's for dinner.)

Cartoon of the Day -- "Alien Doctrine"

Austerity: the "alien doctrine" (hee-hee)! (See also the head of the European alien enablers, Frau Merkel below.)

(click to enlarge)


(Tom Tomorrow, via Daily Kos)

BONUS: Please check out David O. Atkins at Hullabaloo for more. He has a chart that demonstrates the impact losing well over half a million government jobs has had on the unemployment rate, most layoffs occurring in Rethuglican-led states (hello, Govs. Walker, Kasich, etc.), where the right-wingers want to destroy public employee unions.

The Failure of the Austerity Doctrine

Paul Krugman today in the NY Times:

"Last week the National Institute of Economic and Social Research, a British think tank, released a startling chart comparing the current slump with past recessions and recoveries. It turns out that by one important measure — changes in real G.D.P. since the recession began — Britain is doing worse this time than it did during the Great Depression. Four years into the Depression, British G.D.P. had regained its previous peak; four years after the Great Recession began, Britain is nowhere close to regaining its lost ground.

Nor is Britain unique. Italy is also doing worse than it did in the 1930s — and with Spain clearly headed for a double-dip recession, that makes three of Europe’s big five economies members of the worse-than club. Yes, there are some caveats and complications. But this nonetheless represents a stunning failure of policy.

And it’s a failure, in particular, of the austerity doctrine that has dominated elite policy discussion both in Europe and, to a large extent, in the United States for the past two years. [snip]

...Yet influential people on both sides of the Atlantic heaped praise on the prophets of austerity, Mr. Cameron in particular, because the doctrine of expansionary austerity dovetailed with their ideological agendas.

Thus in October 2010 David Broder, who virtually embodied conventional wisdom, praised Mr. Cameron for his boldness, and in particular for 'brushing aside the warnings of economists that the sudden, severe medicine could cut short Britain’s economic recovery and throw the nation back into recession.' He then called on President Obama to 'do a Cameron' and pursue 'a radical rollback of the welfare state now.'

Strange to say, however, those warnings from economists proved all too accurate. And we’re quite fortunate that Mr. Obama did not, in fact, do a Cameron."

Now let's see what lessons Fred "Mr. Dinky" Hiatt has for us in today's Kaplan Daily:

"If America doesn’t tackle its debt problem, everything else is at risk: economic growth, the safety net for the poor, investment in research and roads. Over the past two years, Obama and congressional Republicans have squandered one chance after another to get serious about fiscal reform. A better political moment is always just over the horizon."

Alas, poor Mr. Dinky. Still cluelessly ringing the Broder/ Rethuglican austerity bell.