Friday, August 26, 2011

A New Yorker's Guide to Hurricane Preparedness

Hurricane Irene appears to be heading this way so I'm taking a time out from ranting and raving about the idiots in Washington to write a Hurricane Preparedness List for all of my fellow New Yorkers who haven't experienced a hurricane.

1. Check the hurricane evacuation page to see if you're in a flood zone. If the system is too bogged down with traffic (it was earlier this morning) check the map below. If you are in a flood zone, go to step 2. If not in a flood zone, skip to step 5.

2. Find a friend who doesn't live in a flood zone whose place you can crash at. The bigger and nicer the apartment the better.

3. Pack a bag of necessities (necessary) and family heirlooms you don't want to get waterlogged (less important if you're not in a basement or 1st floor apartment).

4. Stop by liquor store on your way to your friend's house. It's nice to show gratitude. The provisions and whatnot are now your friend's responsibility. Take advantage of their good nature and foresight not to buy an apartment in a flood zone. Go to step 12.

5. Fill up the bathtub with water. Remember how nasty it was when the sewer backed up in your building's basement? Imagine that in your apartment. You need the water to flush the toilet in case of a power outage.

6. Fill up all available containers with tap water. You'll need drinking water in case of a power outage. Fortunately, our tap water is so damn good you don't need to buy bottled water like those suckers in other cities that are going to get hammered.

7. Order groceries from Fresh Direct. No sense in wasting time leaving your apartment to get provisions. Snacks and non-perishibles are probably best. Fridge will likely go down.

8. Download flashlight app for smart phone. For iphone/ipad. For android. For blackberry. If you're using another operating system, go to step 9. If not, skip to step 10.

9. Go to local service provider to upgrade to an iphone, android, or blackberry.

10. Charge your smartphone, laptop, and any other portable electronics you may want to use during the likely power outage. For example, I'm charging my Roomba.

11. Do laundry. This could be problematic later if your building's laundry room is in the basement or if you use a laundromat nearby. And it's important to have appropriate clothes for #12.

12. Plan a Hurricane Party. It's an old southern tradition to throw a hurricane party if you're not really in a danger zone. The best locale for a party is going to be a tall building with great views so you can watch nature's fury from the safety of an overpriced condo.

13. Set up a time lapse of the storm to post on Vimeo later. This will be the biggest hurricane in NYC in 80 years. You don't want to miss being the guy featured on gothamist for having that great idea.

14. You almost forgot to buy party provisions. If you read this whole list before submitting your fresh direct order you probably got them that way, otherwise you're stuck with a trip to the store. You probably should buy more liquor anyway - beer won't keep cool so wine or spirits are the best way to weather this storm.

15. Enjoy yourself - you're making memories. But be sure to stay safe too.

Tuesday, August 23, 2011

Stimulus didn't work?

The American Recovery and Reinvestment Act (ARRA), better known as the "stimulus package", was signed into law in February 2009. In the wake of this large (and it was large, though not massive) spending package, a wide variety of people came out to say "it didn't work" ...

These ranged from free market Milton Friedman swooning economists who cringed at the idea of Keynesian economic theory being implemented after their own policies failed the country abysmally to CEOs of large companies that gained financially through the stimulus, to state governors who claimed it was wasteful while accepting $28.5B in money for their own states (I'm looking at you Rick "The Idiot" Perry).

Now Perry I can understand. He's running for president against President Obama so facts don't matter to him. I mean, he closed 97% of his state government's budget deficit using stimulus money and he took a great deal of credit for jobs created while he was spending that $28.5B in stimulus funding in his state.

The CEO at least waited a year before making his pronouncement. Of course, he did what a CEO was supposed to do - review the effects of the stimulus on his own bottom line. Interesting that within weeks of this pronouncement, Intel was given a tax exempt bond issuance to build a new semi-conductor factory and upgrade adjacent facilities in Oregon. That ol' CEO has been silent since then on the success of the stimulus. Convenient for him and his shareholders.

But the economists? Well, the economists are slaves to their ideology - claiming the stimulus didn't work just a few months after it was enacted. But they're careful. These sneaky economists were very, very careful ... they pointed to the lack of increase in personal consumer spending as a sign the stimulus didn't work ... and this from data dating only through June 2009. This is convenient for them, because stimulus funding didn't begin allocation until the 3rd fiscal quarter in 2009 (April 1-June 30) so they were looking at the effect of $36B in stimulus on a single indicator to demonstrate for their fellow free market rag, The Wall Street Journal, that Keynesian economic theory is a failure. What a load of bullshit.

But more economists spoke out, right? That's right, in a survey of 68 private sector economists,  50 (73%) said the stimulus didn't increase hiring for their companies, but 39 (57%) said that demand for their services was rising - they just apparently didn't think the stimulus was causing that demand.  This was 68 economists employed by businesses. How many economists are employed by businesses? Where did they work? What was their motivation? As someone who does survey research as part of my job, 68 is a very low sample size to draw such an enormous conclusion. Of course, if I could get that much press by surveying 68 conflicted individuals, I'd be a fool not to. I'm sure the National Association of Business Economists was well compensated for their findings.

But getting away from the claims of ideological zealots, politicians, and CEOs looking for a handout, what do the data actually tell us? The stimulus package has largely run out of money. Approximately $670B of an expected $787B has been paid out. So 85% of the money has been spent. A fair amount of the remaineder may end up being unallocated, so we've basically seen the bulk of the money having been spent over the past 2 years. What did it get us?

Well, one indicator is the job growth rate, since a big part of the stimulus was to get the labor market moving again. Take a look at the chart below from The Economist:

See that big spike? That's February 2009 - the month the stimulus was signed into law. We see an immediate and steep decline in jobless claims, which once the money started being received around April 2009, declined steadily until joblessness plateaued around the middle of 2010, presumably after many of the jobs created by the stimulus had been filled. But stimulus money began to run out for many of the projects over the past few months and look at that ... jobless claims are climbing again in mid-2011. But remember, the stimulus didn't work.

Now lets look at the effect on GDP.

So by the 2nd quarter 2009 (this isn't fiscal quarters) we see a big bump, coinciding again, with the stimulus package. Yes, GDP is a very gross measure, but there wasn't a whole lot going in with the economy at this point so how else do we explain this rapid movement from -4% retraction to +4% growth in just 2 quarters? It's tough to explain otherwise. Sure, the Fed was doing its own tweaking of the economy, but it would be tough to imagine that infusing the economy with an additional ~$150B in spending each quarter wasn't helping anything. To claim that the stimulus didn't work.

So what's been happening as the stimulus has wound down? No big surprise. Growth is anemic. The original 1.9% 1st quarter GDP in 2011 (seen in the 2nd figure above) was revised down to just 0.4% "growth" ... and the 2nd quarter wasn't much better at 1.3%. The slowest growth since the stimulus package was enacted 2 years ago. Some economists (those with a mind of their own?) now think we're headed to a double dip recession as the stimulus funding runs out and austerity cuts are enacted at the wrong time.

Notice nobody's come back out and admitted they were wrong? Not a big surprise, really. Ideologues, politicians, and capitalists can't (or won't) change their spots.

Monday, August 15, 2011

Warren Buffett - What's his Agenda?

Warren Buffett, that affable billionaire who marches to the beat of his own drum, said that the government needed to stop coddling the super-rich. (original NYT op-ed piece here, but it's on the NY Times website so if you've run out of free clicks this month or don't want that liberal rag showing up in your browsing history, stick with CNN)

He's right, of course. As I've explained time and again in this blog, the wealthy are paying a lower income tax rate than they've paid in decades and yet we've got the largest deficits in our history. It doesn't take a genius to put two and two together and understand that raising the tax rates would close the deficits.

Buffett doesn't even call for something particularly radical. He suggests a new tax on those making over $1M/year on anything over $1M/year. And an additional tax on anything over $10M/year. And he means anything. He'd tax capital gains at the same rate as income. It's all income for these super-rich. In fact, 88 of the 400 richest Americans in 2008 reported no income at all. Everything was a capital gain. For that they paid 15% tax.  That's less than their limo drivers, chefs, personal trainers, or butlers likely paid. That also means they paid 0% in social security, Medicare, or unemployment insurance taxes, which is less than everyone in America who worked an hour "on the clock" in 2008.

Fiscal conservatives, by whom I mean the staunch apologists for corporate greed, have so captured the narrative for taxation that some of the early responses to Buffett's piece have ranged from the tired canard that corporate taxes in America are higher than anywhere else to shrill cries from the great unwashed masses on facebook. The following gems are plucked from some friend's walls:

Buffett is being disengenious. First, if he wants to pay more he can go to the treasury's website and write a check. The government happily accepts any money sent its way. Second, a large part of his income is from capital gains and dividends. He pays "only" 15% of that income but that is on top of the 35% corporate tax he already paid on that money as a shareholder. Third, he isn't admitting that social security is tilted in favor of the poor. He is paying ss tax on only the first $100k or so because that prevents the gov from having to pay a correspondingly huge benefit.
you should look up data on the break-down of US tax revenue and who pays what, all too easy to lay everything at the feet of the 'super-rich'
To the Forbes op-ed, there's not much to say. Very few corporations pay full taxes thanks to things like tax deductions for corporate jets and accounting tricks that allow a company like ExxonMobil or GE to hide virtually all of their profits overseas. This is a typical example of the defense of greed by the corporate media. Remember, Steve Forbes ran for the GOP presidential nomination ... twice. He's anti-tax, anti-regulation, and anti-government. No surprise here.

The facebook comments from the gallery are a bit harder to understand except that they clearly represent the successful media campaign against a taxes by influential power pedaling ideologues like Grover Norquist and his ridiculously named Americans for Tax Reform. Nordquist doesn't seek tax reform. He seeks tax evisceration. He seeks to end the government's ability to perform any tasks not deemed vital by Grover Norquist and his corporate overlords.

I guess what's so surprising in all of this is that most opinion polls show that most Americans support higher taxes on the wealthy. It's got a clear majority of voter support and yet any time someone comes out and actually calls for this common-sense reform to the tax code, the usual suspects and their blind followers bring out the claims that it is variously: unfair, unAmerican, wealth redistribution, and won't work.

All are false.

It's not unfair. 

Wealthy Americans benefit far beyond most of us from the security, infrastructure, and well-trained workforce provided by the American government. Therefore, there is no reason why they shouldn't pay taxes proportional to that benefit.

It's not unAmerican. 

Over the past century the top marginal income tax rate has ranged from 35% (today) to 91%. For most of the past century (including during the longest sustained era of growth in our country's history - 1945-1973), the top marginal income tax rate was over 70%. Buffett doesn't explicitly state how high he thinks the tax rate should be on these $1M and $10M income groups, but even if the rate were raised to say 40% on $1M-$9.9M and 50% on $10M+, this isn't particularly high given historic norms.

And the "unAmerican" thing is bullshit anyway. What's "American" is whatever the American people prioritize as necessary for the continued governance of our country. Without special interests running our government you can be sure that the top tax rates would have been raised long ago.

It's not wealth redistribution. At least not in the direction assumed.

Wealth is now more concentrated at the top than it's been since the Gilded Age (1865-1893). Real wages among the bottom 90% have been nearly flat for a decade. If wealth is being redistributed, it's being redistributed upward with ever increasing tax loopholes for the wealthy while the rest of us are stuck paying income taxes on our ever less valuable paychecks. So yes, wealth is being redistributed, but it sure as hell isn't trickling down.

It will work (better than the status quo).

I'll leave the refutation of this myth to Mr. Buffett himself:
To those who argue that higher rates hut job creation, I would note that a net of nearly 40 million jobs were added between 1980 and 2000. You know what's happened since then: lower tax rates and far lower job creation. 
Granted this is a blunt instrument comparison, but it's the only evidence we've got. An era of sustained longterm job growth accompanied high top marginal tax rates. A subsequent era of low top marginal tax rates results in negligible job growth. The message, of course, which is so hard for many people to see through their biases, is that the top marginal tax rate is unrelated to job growth. So raising taxes on the wealthy won't create jobs directly - but it will narrow the budget deficit and help get our country's finances in order. It won't require us to make such enormous cuts to social safety nets that help prevent the further erosion of the economic security of the working class.

I guess it should be unsurprising that a super-rich guy asking for higher taxes would be met by such resistance from the corporate media, but by any measure Warren Buffett represents everything a wealthy American should be. He's innovative, speaks his mind, and puts the best interests of his country above his own selfish motivations. Of course, I would argue that Mr. Buffett simply has a longer term view of the opportunities presented by the American economy.

The recent recession has decimated the American middle class and with it the spending power of the largest portion of our economy. If we really want a sustained recovery and continued growth in the American economy, the best way to accomplish that is by creating jobs (the federal government is responsible for approximately 25% of the GDP - so cuts in federal spending result in job losses) and protecting the safety nets available for the middle class. Deep cuts to social security, Medicare, Medicaid, and jobless benefits will cripple our ability to consume the goods and services necessary to continue growing the economy. It's a vicious circle.

Given how terrible our recovery has been and how fractious our politics have become, the big question is, "Why not give it a shot?" If raising taxes on the wealthy closes the budget gap and the rest can be made up with reforms to entitlements and cuts in military spending, why not? If a more fiscally responsible government can help create and retain jobs through continued spending, why not?

The answer, of course, is because all of this is not about doing what's best for the country. It's about winning an ideological war against progressive gains in the 20th century. Never forget. Corporatists hate protecting workers. It costs them money in their own narrow world view.

Sunday, August 7, 2011

Debt Deal Fallout

Let's see. In the few days since the debt deal was announced:

The New York Stock Exchange took the 9th worst single day plunge in its history.

S&P downgraded US treasury bonds for the first time since US treasury bonds began being rated.

The U.S. Postal Service announced plans to shut 2,500 post offices around the country (16% of all post offices) and cut tens of thousands of jobs.

HSBC announced plans to cut 30,000 jobs from their workforce by 2013.

This is only the beginning of the double dip, folks. We're headed for more pain, weak if any growth, a more sustained jobless period, and a continued widening inequality between the wealthy and the rest of us. Federal programs aiding the poor are being cut while no taxes will be raised on the wealthy, so the incomes of the poor will decline while the rich continue on unabated.

This is unsustainable. If the middle class, which has already been decimated by the financial crisis, doesn't have disposable income to spend, there won't be any growth. The lower 90% of the country is responsible for 70% of consumer spending. If they don't have anything to spend, the economy can't grow. At least not robustly enough for the private sector to pull our economy out of the high unemployment rut we're stuck in.

The solutions for all of this are simple, and unfortunately, toxic to many of our elected officials and the rabid tea partiers who are now given outsized power in our representative government. We need to throw the bums out in 2012. Unfortunately, as usual, the wrong bums will probably get thrown out. Those willing to govern rather than pander to special interests and compromise rather than stand as rigid ideologues.

As usual, voters get what they deserve.

We can do better.

Monday, August 1, 2011

Debt Ceiling? We don't need no stinking Debt Ceiling!

The latest news out of DC is that Congress & the President have finally come to broad terms on a debt limit increase. This will be the 79th time in our history we've raised the debt ceiling, which until this past few months has always been a formality.

Why do we even have a debt ceiling? Well, it made some sense when it was instituted in 1917. At that time Congress did not have discretionary control of the federal budget - the president did. The Congress had broad powers about how much to spend and how much to tax, but the specifics were largely left to the president's priorities. That's no longer the case. It hasn't been since 1974 when Congress first began writing full budgets with line items for every spending appropriation and every form of federal revenue. Since that budget 37 years ago, Congress has done the same thing every year. And since that time the debt ceiling has been obsolete. The ceiling is no longer a curb on the president's ability to over-allocate resources, but now represents an artifact of a bygone era.

The rational course of action, of course, is to terminate the debt ceiling altogether, because now the fox is guarding the hen house. Congress appropriates the spending and raises the debt ceiling whenever they over-spend, which they usually do. The president's only role in all of this is to authorize spending that's already been approved by Congress.

I hope you see the absurdity of this ... Congress has approved spending and now must raise the debt limit, because the government cannot currently meet the obligations that Congress mandated. And Congress is refusing to do so unless the President agrees to cut spending.

The thing of it is, we can't not raise the debt ceiling, because the money has already been allocated. It's already been promised and according to the 14th amendment the federal debt shall not be questioned - meaning we are required to always pay our bills. So if for some reason this latest "deal" fell apart, the president could rely on the constitution to defend his decision to continue paying our debts. But instead, the Great Compromiser has agreed to bend over backward to slash spending in order to placate a fringe group that's got much of the House by the balls. I guess the Tea Partiers only agree with the Constitution when it agrees with them. Those pesky amendments were clearly mistakes.

So the plan that's been broadly agreed upon looks like it'll cut $1T to $2.4T over the next 10 years. It'll also establish a "Super Congress" (where is that in the holy Constitution?!) that will be authorized to find ways to slash spending and narrow the federal deficit. Notice all the focus on cutting spending ... almost no talk of raising taxes. This, of course, is because taxes are unpopular and everyone in DC is a child when it comes to responsible governance.

I don't argue that we should not find and eliminated inefficiencies in federal programs. No doubt that we should. But attacking programs vital to the working classes is not acceptable when there is enough waste in the system in defense and tax breaks for the wealthy to cover virtually all of our current budgetary shortfalls.

Unemployment stands at 9.2% according to the latest figures. That's still the official unemployment rate. Word is unofficial unemployment is still above 16% of all able bodied, working adults. The additional 7% represents those long-term unemployed. They've lost their unemployment benefits and are now unemployable, because employers have a strong bias against hiring the unemployed. So nearly 1 out of every 6 working age Americans is out of work. Think about that for a moment. 1/6th of our labor force is performing no productive labor - at least according to how we currently define productive, but that's another story.

And rather than tackling unemployment through direct spending as we did in the 1930s. Rather than extending benefits to those most in need. Rather than finding ways to create jobs, Congress has spent the past several months trying to find ways to reduce the size of the government, which will no doubt, cost thousands of federal employees their jobs. Where are they supposed to go work? You know where they'll go? They'll go on unemployment and they'll be scraping by and losing their houses while not being productive.

This entire debacle was self-created. There is absolutely no rational reason for this crisis. We've doused ourselves in gasoline and now we're trying really hard not to light that match in our hand. Idiots Rule. Unabated.