Larry Littlefield's blog
Within days after Tea Party Republicans nearly drove the federal government into default to gain political advantage, they have been topped by presidential candidate Rick Perry. “Texas Governor Rick Perry, the latest entrant in the fight for the Republican presidential nomination for 2012, said it would be ‘almost treacherous -- or treasonous’ for Federal Reserve Chairman Ben S. Bernanke to increase stimulus spending before the 2012 election.” Because by helping to prevent recession, doing so might be part of a plot to help Barack Obama win re-election.
Now for reasons of lack of expertise, etc., I generally don’t write about Federal Reserve monetary policy. But since Perry has broken what has been considered a taboo by responsible politicians and politicized that policy, let’s take a look at how the federal funds rate has been changed since 1987 – under Republican Fed chairmen – in the run-up to Presidential elections.
This article in the Financial Times is well worth a read. It is behind a pay wall, so let me hit the highlights (you can register and read the whole thing for free if you want to). Someone told the author that the people of the United Kingdom were mature enough to distinguish between problems caused by long term global trends and the decisions of their leaders. “I question whether such rationality is the norm among the British, American and European peoples. Our societies cherish a gross sense of entitlement…if today’s leaders told their peoples the truth, and articulated the most plausible and bleak scenarios for their economic future, I will bet my socks most would be electorally trounced by rivals claiming to offer panaceas.”
The reality, this author asserts and I agree, is that the “fundamental task is to reconcile electorates to accepting less of everything than they have had in the past.” “We get the political leaders we deserve. Recent evidence suggests that in America, especially, charlatans prosper on the hustings, while good people flinch from exposing themselves to the humiliations and deceits essential to secure public office. Unless or until electorates become more rational, I doubt we shall see leaders much better – though, please God and the Tea Party, no worse – than today.”
Has the Obama Administration lost its mind? “Uncle Sam is landlord for at least 90 thousand homes that owners lost to foreclosure, and tens of thousands more in the pipeline as families are evicted and properties are appraised…Today the Federal Housing Finance Agency (FHFA) is asking for information from industry and the public on what might be done with the inventory currently held by mortgage giants Fannie Mae, Freddie Mac, and the Federal Housing Administration…One option: turning foreclosures held by the government into rental homes. That way, cheap foreclosures would not compete with other houses on the sales market. Local companies would probably be asked to manage any government rentals.”
Here’s the Republican commercial: “At one time this was a solid neighborhood of decent, law abiding families who took pride in the homes they owned. But then the federal government took over a bunch of houses and started renting them out to poor transient people from out of town. Now crime is up, there is trash in the street, property values are collapsing and people have started to flee. It’s this neighborhood today; it could be your neighborhood tomorrow if Socialist social engineer Barack Obama remains President.”
There are many who are getting a sense of deja vu about the Obama Presidency. Like President Jimmy Carter, President Obama is dealing with quagmires that have built up over many years that will make the American people worse off for some time to come. The weight of those challenges, and the unwillingness of Congress to impose the measures needed to turn things around, is making him seem hapless and impotent. Moreover President Obama underestimated just how rotten our economy has become at its core, and what a hard slog it will be to find a bottom. The measures he managed to get passed were conventional measures for a conventional recession, not an economic structure in collapse at the end of a 30-year debt binge. That 30 year era followed another era that collapsed under President Carter.
But Jimmy Carter had a Democratic congress, whereas Barack Obama is facing a Republican congress. That makes his situation more like that of President Harry Truman, whose term I didn't live through personally but read about in the award winning book. Truman was unpopular due to the problems in the country, including a far more brutal war than the one we are in, and yet could run against a "do nothing Congress." At the time, as well, part of the Republican Party had fallen into McCarthyism. You can't say politics today are more divisive than that. To put on a respectable face the Republicans nominated a respected and reasonable figure, Thomas E. Dewey, the Mitt Romney of his day, but Truman won anyway.
According to the Attorney General, as quoted in the Daily News, stock prices are volatile because people distrust Wall Street. "The trust bank is empty and we have to restore public confidence in the instruments of government and the instruments of the private sector," Scheiderman said. Scheiderman said people need to believe that Wall Street "is not a rigged casino."
Actually, stock prices are volatile because they are too high, because the suckers have too much trust. The dividend yield is 2.0%, down from a historical average of 4.3%. Those running the rigged casino are looking for the signal to get out before the suckers. Scheiderman is repeating the Spitzer line, and perhaps enough trust was restored after 2000 that the suckers were fleeced again. What people need to believe is that Wall Street is, in fact, a rigged casino, and that government will not be trustable until all those incumbents are tossed out. The real debate is whether our public and private institutions can be reclaimed, or the best we can hope for is to rebuild after an institutional collapse that we only hurt ourselves more by forestalling. The problem, Mr. Scheiderman, is the values of Generation Greed.
According to a recent article, with Nassau Coliseum in bad shape and no money for a new arena in Nassau County, there is some talk about the New York Islanders hockey team moving to the Barclay's Center in Brooklyn. I doubt such a move would be permanent, because the arena would evidently only seat less than 15,000 for hockey, but it could provide the Islanders with a place to play until either a larger venue becomes available or the team moves away.
There is another obstacle to such a move, however. According to the Daily News, “Islanders' owner Charles Wang said he wants to keep the team on Long Island.” Now I know what he meant, but the maps says Brooklyn is part of Long Island, even residents of neither Brooklyn nor Nassau and Suffolk Counties wish to admit this. No one built a moat on the Queens border, although many years ago one wag who used to comment on a transit message board once suggested that Nassau and Suffolk might want to build one, leaving the separate landmass of Brooklyn and Queens to be called “Royal Island” and disassociated from them entirely.
For the past 30 years, the Republican Party has sought popularity by selling out our collective future and pandering to short-term greed. And the Democratic Party has gone along with this, and done some of it as well, to avoid unpopularity. At first I was increasingly outraged at the direction the country was taking, and the irresponsibility of our so-called leaders. I should have stopped to think about why such pandering always worked. Now I understand that they were merely reflecting the irresponsibility of our people.
This video and this video show the last two national politicians who were willing to say that all of us needed to make sacrifices in the short term, to ensure our well-being and prosperity in the long term. Their points were grounded in the values of their generation, now called the Greatest Generation. They lost their elections, and lost badly, and no Democrat has been willing to defend the future or younger generations ever since. Another member of Greatest Generation in fact took difficult and unpopular steps to secure the future. He is primarily responsible for the pause in the 30-year upward march of debt in the 1990s, as he described in this audio clip, while President. But he didn’t dare to tell Generation Greed that’s what he was going to do beforehand. Instead he lied to get elected. And then was tossed out after four years. And subsequent Republicans have done nothing but double down on pandering to Generation Greed and selling out the future. Click on those links, and really listen to what is being said. How are these men perceived today? As losers. And we are living in the country the winners made.
China bluntly criticized the US on Saturday one day after the superpower's credit rating was downgraded, saying the "good old days" of borrowing were over. Standard & Poor's cut the U.S. long-term credit rating from top-tier AAA by a notch to AA-plus on Friday over concerns about the nation's budget deficits and climbing debt burden. "The U.S. government has to come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone," China's official Xinhua news agency said in a commentary.
Those messes aren't the U.S. Government's messes. The mess in the U.S. government is just part of Generation Greed's messes. And they didn’t happen this week. They happened over 30 years.
It's getting tough to just keep repeating myself, and what you'll read below is nothing that I haven't said here for years. But I just posted a comment on another blog that I think is worth thinking about for those who haven't been reading my posts in the past. According to The Economist magazine, writing about the terrifying state of the U.S. and world economy, "Barack Obama or one of his Republican challengers may yet discover the courage to tell the truth about the American economy in next year’s presidential election."
My response: So what is the truth? I suspect that if Barack Obama were to tell it, he would be labelled a Socialist. And there is no chance of a Republican candidate telling the truth. The truth is this...
Prodded by a New York Times article, it appears that Governor Cuomo is prepared to ask why heads of non-profit organizations -- charities in theory -- should be paid more than the President of the United States. This represents quite a reversal for, among others, the Times, which had been the mouthpiece of the non-profiteers, uncritically reporting on their "studies," for decades. As I have noted, adjusting for inflation since the last time the President's salary was increased (it tends to be frozen by politics for a long period), that level of pay is $500,000 plus a house. Which is plenty.
Next question: why should public pension funds invest in private companies with employees that are paid imore in guaranteted compensation than the President of the United States, if those companies are unable or unwilling to pay dividends in excess of the 10-year U.S. Treasury bond yield? If the investors have to wait, the executives should have to wait, with some kind of conditional compensation that only pays off years down the road if there is also a payoff for investors.
I was surprised to read in the newspaper that the June 2011 employment-population ratio, the ratio of people age 16-plus who were working to the total population that age, had fallen to the lowest level since June 1983, when I graduated from college into unemployment. Part of this is cyclical – this is the worst recession since the early 1980s debacle, and has arrived just into time for the children of the benighted 1970s generation – the first to be worse off than those who came before – to repeat that young adulthood experience. But I believe there is also something structural going on.
In the past 15 years (the business cycle adjusted for), I am aware, New York City’s employment-population ratio and its labor force participation ratio – the share of its residents age 16-plus who are either working or looking for work – have been moving up. This is significant because one of New York City’s chief economic liabilities for the past half-century has been its need to carry a large economically inactive population. Through 1960, New York City residents had been more likely than the U.S. average to be working or looking for work, mostly because its women were more likely to work outside the home. But during the mass population migrations of the 1960s and 1970s this changed, giving New York the status of the city that didn’t work. Is it changing back? I downloaded the data in the linked at the end of the post spreadsheet to find out (had trouble attaching).
Some essay writers for the Wall Street Journal have noted an ace in the hole for the Republican party: the “flower power” generation of the 1960s is increasingly right wing. The article is behind a pay wall, but let me summarize. This generation was left wing in the 1960s and early 1970s, because they objected to the Vietnam War and Watergate. But once they became older and started families, they became increasingly Republican and Conservative. The trend has continued into old age, an asset for the GOP since older voters vote in large numbers, younger Americans don’t bother, so both parties have to compete to meet the preferences of the old.
I agree with the trends, but not with the reasons for the trends. The party loyalists who wrote the WSJ article see changes in ideology, but I just see the continued pursuit of unenlightened self interest. At every point, but particularly back in the 1960 and early 1970s, it is a mistake to judge the intentions of this generation by what certain high profile members said, rather than what the vast majority did. Peace, love and understanding? Anti-materialism? There were some who pursued those ideals, and continue to do so. But getting laid and getting high, and avoiding personal responsibilities, were the real goals of the “Silent Majority” in the 1960s. They later moved on to avoiding social responsibilities, and thus became more likely to vote Republican.
Imagine this. In mid-2013, President Mitt Romney asks to increase the debt ceiling so he can borrow money to provide benefits for today's seniors while continuing to collect taxes as the lowest level relative to GDP in 60 years. "We owe it to our children to make a deal," he illogically claims. And a large rump of newly elected Democrats in the house threaten to depose Speaker Nancy Pelosi, now back in charge, unless the federal income tax rate is increased to 90 percent on those earning more than $500,000 per year, with no spending cuts. The impass leads a possible financial and economic meltdown. Until Romney knuckles under and agrees to tax increases (with no spending cuts), but only on the politically powerless and younger generations. (Just as Obama is being pressured to agree to just spending cuts, but only for the politically powerless and younger generations).
Enough of this nonsense. As a result of Generation Greed, our taxes are going up, our public services and benefits are going down, and our standard of living is going down, unless our cronies on the corporate board vote for our salaries or we have a public employee pension. But Generation Greed politicians would rather engage in theatrics and finger pointing than face the reality of what they have collectively done. Let the meltdown happen now. Otherwise the rot just continues. They staved off collapse in 2008, and merely preserved the wealth of the wealthy. Bail out the wealthy, or you get another Great Depression. And here we are three years later, blackmailed again. And here we will be in two years. In a collapse everyone gets hit. Perhaps it isn't the worst case scenario after all. Perhaps only a disaster will stop the "I want for me now!" chant we've been hearing for 30 years.
Wanted, politically savvy transit manager willing to preside over the gradual re-collapse of New York City's transit system due to deferred maintenance while denying it is occuring, be publicly blamed for the consequences by those actually responsible (all of whom drive everywhere to parking spaces reserved for them by placard), and hated by the suckers who believe them. In exchange for decent pay, little work, and a fat pension.
The successful applicant is expected to live outside New York City in an undisclosed location, and not appear in public except during the first half hour of public hearings, during which elected officials castigate them for the very situation they created while the MTA head sits in silence. Among the key selection criteria are the willingness to not object to an assertion that a 20/50 pension enhancement wil cost nothing, the willingness to go on borrowing money the MTA cannot possibly repay, and the ability to make sure those affluent municipal bond holders and Florida residents get paid, no matter what. Any interest in actual transportation is optional, as most public services are optional as well. However, the ability to come up with cutsey distractions like shifting the transit map around to generate favorable New York Times press is always helpful. Apply to
Those who read my posts consistently know I'm not pleased with Comptroller Liu. His union backers decided to destroy public services despite the highest tax burden in the country by getting their retirements, already richer than just about anyone gets, enriched further. But they don't want to admit that's that they have done, so Liu has used misdirection in a series of reports to pretend that isn't what has happened, hoping they'll back him for Mayor.
Today I note that the fact that the New York City pension funds are in a far deeper hole than the New York State pension funds has hit the blogosphere (if not the MSM). And New York City's Deputy Mayor is trying to pin the difference on one year's worth of returns and Comptroller Liu, who oversees the city pension funds. Well, sorry but inadequate returns are NOT the reason for the city's greater pension hole, and taking more risk in a situation in which assets are overvalued is NOT the solution. This problem has been building up for decades, and Liu just got there.