Careers on The Huffington Post

Bill Scher: Missing From Obama's Speech: Business Tax Cuts

2009-01-08T18:27:56Z

In President-elect Barack Obama's major economic address today, he laid out one dozen key planks of the American Recovery and Reinvestment Plan, including initiatives to:

1. "double the production of alternative energy in the next three years"

2. "modernize more than 75 percent of federal buildings and improve the energy efficiency of 2 million American homes"

3. "[create] jobs building solar panels and wind turbines, constructing fuel-efficient cars and buildings, and developing the new energy technologies that will lead to even more jobs"

4. "make the immediate investments necessary to ensure that within five years all of America's medical records are computerized [to] save billions of dollars and thousands of jobs"

5. "equip tens of thousands of schools, community colleges and public universities with 21st-century classrooms, labs and libraries"

6. "put people to work repairing crumbling roads, bridges and schools"

7. "starting to build a new smart grid that will save us money, protect our power sources from blackout or attack, and deliver clean, alternative forms of energy to every corner of our nation."

8. "expand[] broadband lines across America so that a small business in a rural town can connect and compete with their counterparts anywhere in the world"

9. "invest[] in the science, research and technology that will lead to new medical breakthroughs, new discoveries, and entire new industries."

10. "[give] 95 percent of working families will receive a thousand-dollar tax cut"

11. "continue the bipartisan extension of unemployment insurance and health-care coverage"

12. "help struggling states avoid harmful budget cuts"

All the chatter this week has been about the suggestion that Obama would add several business tax breaks to the package, but there was no mention of that today.

Meanwhile, the widespread criticism that such tax breaks would be ineffective at healing the economy appears to have taken root among key congresspeople, raising the likelihood that business tax cuts won't be part of the final bill.

I can't fully predict that business tax cuts will get stiff-armed by Congress. But it is clear from today's speech that business tax cuts are not the centerpiece of Obama's plan. The centerpieces are major public investment in America's foundation, tax cuts for working families and aid for squeezed state governments.

Even if business tax cuts end up in the final package, they will not negate all of those positive components, so crucial to mitigate the pain of recession in the short-term and to put America on a sustainable path in the long-run.

So keep pushing against ineffective business tax breaks, but also push for swift passage of the overall American Recovery and Reinvestment Plan. (Campaign for America's Future has set up a page to easily contact your congresspeople and voice your support.)

Because every day of delay limits our ability to blunt the impact of the already 13-month long recession. And we need jobs now.

Originally posted at OurFuture.org

Kim Stolz: On TV, Life, and Gossip Girl

2009-01-08T15:45:42Z

I haven't watched many episodes of Ugly Betty but I turned it on recently to find that the current plotline is right in line with life if you work at a media company. Daily questions include... Should we cut staff? Cut one of our publication? Go under? Such were the decisions being made by Meade Publications, the mock corporation on Ugly Betty that is currently, you guessed it, facing budget problems.

I work at MTV Networks, and watching that Ugly Betty episode in light of our recent layoffs got me thinking about the age-old question of whether television imitates life, life imitates television, or perhaps, or whether the answer lies in a mix of the two. I then remembered the cancellation of both Lipstick Jungle and Dirty Sexy Money, two shows that accentuate lavishness, luxury, and "the good life." Is our economic crisis undermining people's desire to watch the wealthy on television? Huh.

Yes, television is absolutely reflective of the economic downturn and fiercely threatened media climate that we are living in now -- it is no surprise that Dirty Jobs and other "blue collar"-like shows are thriving. If we turn back to the 70s, we see a similar trend. For instance, an economic recession inspired All in the Family, One Day at a Time, and others. But ratings these days don't really reflect a desire for more dramas and comedies. Rather, in recent years, most of the new hit shows on television have been reality or "faux" reality based. I wouldn't expect a comedy or drama about a financially destabilized family to emerge right now. Instead, I bet we'll see some new reality television shows that exemplify what American families are going through right now. Upon a bit of research, I found out exactly that to be true.

There's a lot of buzz right now in the entertainment industry around a new "headhunter" reality show. Kind of a brilliant idea, if you ask me. Plus, we'll definitely be seeing more DIY fashion reality shows, and of course, a plethora of shows about losing -- and subsequently, finding-- homes. Or... Remember that big time banker who worked at Lehman last year? Yeah. You'll probably see him on a reality show this fall. Nothing like a life turned upside down to bring in the ratings!! (Ok ok, I'll be watching too.)

So my question is... What happens to shows like Gossip Girl? That show certainly isn't relatable to kids who can't afford gas money to get to their job interview or kids who can't go to college because their parents are suddenly jobless... Will Gossip Girl's lure of escapism and fantasy win out? Will Blair suddenly fall for a kid who lives in the Bronx and goes to PS ____? Or will the show's ratings plummet and lose its primetime spot to a reality show based around housekeepers who've lost their jobs because Park Avenue families can't afford them anymore? Or wait! Maybe Gossip Girl's Dorota will be given a greater role?? -- She's the Waldorf housekeeper for those 7 of you not watching.

Perhaps Barack's bailout plan will save us all and none of this is cause for concern... More likely, though, we'll see an emergence of some new storylines, TV shows, and perhaps they (along with the bailout plan -- fingers crossed!!) will save their networks and our jobs.

Obama: Green Stimulus Will Include Smart Energy Grid

2009-01-08T15:32:13Z

On Thursday, President-elect Barack Obama called for doubling production of alternative energy in the United States over the next three years as part of his "American Recovery and Reinvestment Plan." In a speech officially rolling out the plan, he also set a goal of retrofitting more than 75 percent of federal buildings and 2 million homes to make them more energy-efficient.

"In the process, we will put Americans to work in new jobs that pay well and can't be outsourced -- jobs building solar panels and wind turbines; constructing fuel-efficient cars and buildings; and developing the new energy technologies that will lead to even more jobs, more savings, and a cleaner, safer planet in the bargain," he said. (He did not say, nor is it entirely clear, why jobs manufacturing turbines and cars can't be outsourced.)

Obama also pledged to make major investments in infrastructure, including not just road and bridge repairs but construction of a new, national "smart grid" that "will save us money, protect our power sources from blackout or attack, and deliver clean, alternative forms of energy to every corner of our nation."

Jodi R. R. Smith: Top Twelve Tips to Saving Time in 2009

2009-01-08T11:55:30Z

The work smarter not harder philosophy brought to life...

Happy New Year to all! To help you succeed for another year, during January take the time to pause, reflect and refocus. After all, we know it is easy to keep busy. Yet one can be perpetually busy without accomplishing anything. One must work well. As you prepare for the new year, here are some tips to help you work smarter, not harder in 2009.

Face
1. Beat the Clock ~ Working backwards, estimate the amount of time it takes you from waking to walking out the door in the morning. Set your alarm appropriately and rise when it rings. Snooze does not allow you the restful REM sleep you require and only lulls you into a cranky morning routine.

2. Name Your Neutral ~ Whether it is navy, black, or brown, build your work wardrobe around one neutral color. This will allow you to have a stable set of accessories that always match and save you the time of switching things back and forth.

3. Dress the Part ~ Before going to bed, consider your obligations for tomorrow. Pull your outfit in advance, check for rips, stains, and loose buttons. Set out the foundation garments and accessories so once you are showered, your attire for the day is waiting for you.

Space
4. Come Clean ~ Have you recently taken a good hard look at your workspace. Try this; take everything off your desk. How clean is it? How about those drawers? The keyboard tray? What about the keyboard itself? Give yourself the belated holiday gift of a fresh start. With some Windex, paper towels and a few Clorox wipes you too can have a clean office.

5. Lose the Weight ~ Forget the diet for now and focus instead on the extraneous materials that are weighing your office down. As you clean, have within arm's reach a recycle bin (with shredder as needed) and a large garbage can. Give yourself permission to chuck anything you do not need or use. File those piles, and send to off site storage anything that must be retained for legal purposes. You may have saved that magazine/business card/training binder, but if you have not acted upon them in over a year chances are they are just taking up space.

6. Find Your Flow ~ With a clean desk and mountains of unnecessary items leaving your workspace, consider your station. Is your phone positioned so that it is easy for you to answer and take notes? Is your computer forcing you to sit with your back to the door? Are movements from your office mate distracting? This is your chance to rearrange your space to better suit you. You may find that removing unneeded furniture allows you the space you do require.

Time
7. Lots of Lists ~ Whether they are electronic, typed or handwritten, you will need to know what you need to do. Life without lists is like getting in the car and driving without knowing where you are going. Once you have a list of your projects and obligations, you must set priorities. This allows you to know where to spend your time. While your boss may insist it is so, you can not focus your attention on more that one thing at once. Know what deserves your time first.

8. Do, Delay, Delegate or Delete ~ As part of setting priorities, consider what is worthy of your time. Are there others to whom you can offload whole projects or even certain tasks? Each item on your list will need to be done, delayed, delegated or deleted.

9. Manage Your Minutes ~ For any items worth doing; you will need to schedule time into your calendar to accomplish those tasks. Being realistic, block off the time on your calendar to actually get the work done. It is amazing how quickly your time fills. Which brings us to...

10. Meeting Avoidance ~ It is common for employees to spend so much time in meetings there is no time to actually do the work. Give yourself a meeting audit. On an average week, how much time are you in meetings? Do you need to be there? Is there information being shared you could obtain through other means? Is your approval required to move the project forward? Would it be possible to attend only those parts relevant to you? Speak with colleagues and management to determine which meetings you truly must attend and which can slip from your schedule.

11. Insist on Having a PAL ~ For meetings worthy of your time, insist on having a Purpose, Agenda and Limit sent in advance. If you do not know why the meeting is taking place, what is to be discussed or how long you will need to stay, you should consider if you want to attend at all. Meetings without focus drag on forever with no outcomes.

12. Be the Master of Your Domain ~ Use technology to your advantage. Look to see who is calling before answering your phone. Set aside specific times to check your email instead of constantly scanning. Know when to turn on and off your cell phone. Record outgoing messages with preset times you plan to return calls. Use your email out of office option to signal when you do check emails or when you will be at your desk.

Here's to working well in the New Year!

Jodi R. R. Smith is a nationally known etiquette expert and author. To email your etiquette emergency, click to www.Mannersmith.com. Copyright © 1996-2009 Mannersmith Etiquette Consulting. All rights reserved. Permission is granted to reproduce, copy or distribute this newsletter as long as this copyright and full information about contacting the author is attached.

Hale "Bonddad" Stewart: The Great Depression, Part IV

2009-01-08T07:43:58Z

Q. "Do you feel the New Deal saved our society?"
A. "By and large? (Pause) Yes."

- Alf M. Landon, 1936 Republican candidate for President, to Studs Terkel, Hard Times

As we have already seen, the New Deal succeeded in reversing and dramatically improving all of the objective measures of the economy, and most of them had returned to pre-depression levels by 1937. Since the RW noise machine can't rebut those objective facts, their effort to discredit the New Deal relies on 3 arguments:

1. By 1939, unemployment had only fallen to about 10%

2. Business's uncertainty about changing New Deal enactments led them to invest less

3. The economy of the New Deal failed to measure up to theoretical mathematical economic perfection.

We will examine the RW meme via its three usual sources: "The Forgotten Man" of Amity Schlaes, "Regime Uncertainty" by libertarian think-tanker Robert Higgs; and an economics paper by UCLA Profs. Ohanian and Cole.

1. The polemic The Forgotten Man by Amity Schlaes (what was being regurgitated by George Will when he was schooled by Prof. Paul Krugman in the videoclip from Part 2 of this series) is the leading example of this effort. Ms. Schlaes is neither an economist nor a historian. She holds a a Bachelor's degree in English, first found employment as an Op-ed writer for the Wall Street Journal, and has generally fed at the RW noise machine trough ever since. In other words, her forte is rhetoric and her career is as a RW shill. Now, in terms of credibility, Ms. Schlaes' other sage analyses include the following about Hurricane Katrina:

Still, Iraq has not caused the US to botch Katrina -- either the preparation or response. On the contrary, the fact that the country and President Bush personally were already mobilised for disaster has saved lives.

and this gem from earlier this year:

Gramm said that the country was not in a true recession but a "mental recession." He also said, "We have sort of become a nation of whiners" and "You just hear this constant whining..."
Gramm was right about the recession .... A recession is two consecutive quarters in which the economy shrinks, and last quarter it grew. But no matter. Voters feel they are in a recession, and so they are, at least according to Campaign Econ.

So perhaps we should just say that her analysis of the Great Depression is equally cogent and leave it at that. But as her "analysis" of the Great Depression is obviously the designated meme of the RW echo chamber, a detailed rebuttal is in order. Ms. Schlaes gave an summation of her argument in a speech at the American Enterprize Institute, which serves as a convenient foil to respond with, you know, the truth.

Ms. Schlaes judges the New Deal entirely on two factors, charging that:

[FDR] flunked by two other meters that we today know are critically important: the unemployment rate and the Dow Jones Industrial Average. In his first inaugural address, Roosevelt spoke of a primary goal: "to put people to work." Unemployment stood at 20% in 1937, five years into the New Deal. As for the Dow, it did not come back to its 1929 level until the 1950s. International factors and monetary errors cannot entirely account for these abysmal showings.....

Let's look first of all at Ms. Schlaes metrics. Why has she not chosen GDP? Or median household income? Or the foreclosure rate? Or the rate of bank failures? Or industrial output? All of those are good, valid measures of how well parts or all of the population/economy is doing. But our readers by now know why: because by those measures the New Deal was a stunning success.

On the contrary, the Dow Jones Industrial Average has never been considered "critically important" to determine how well the economy is doing (The S&P 500 is a leading indicator, but by no means the most important one), especially in an era like the 1920s and 1930s when only about 3% of the populace owned stock; the simple fact of the matter is, under Roosevelt, the S&P 500 did fantastically well! The inflation level rose 20% from March 1933 to 1937 and ended the decade up 11%. By contrast, in March 1933 when Roosevelt took office, the DJIA was near 60; it rose to 185 in 1937 (a gain of over 200%!) before ending the decade at 150 (a gain of merely 150%!). By 1937 in real terms the DJIA had recovered ~60% of its losses from 1929, and considering the obscene disparities in wealth during the 1920s Guilded Age that gave rise to such corporate values, a 60% rebound is certainly impressive. In fact, in real terms the DJIA was higher than at any point except for 1928 and 1929 stock bubble.

More importantly, Ms. Schlaes' odd use of the "DJIA compared with 1929" as a yardstick to measure the New Deal's effectiveness appears deliberately chosen to mislead. Here is a graph of something called Q (or Tobin's) ratio, which measures stock valuations as a percentage of GDP. This is a measure for how manic vs. pessimistic stock investors are. As you can easily see, in 1929 the DJIA was at its most "bubblicious" in 70 years!

Essentially, Ms. Schlaes claims FDR was a failure because he failed to produce another stock market bubble! To the contrary, the return of stock prices to their more sober norm of about 80% of GDP by the mid 1930s -- a level equivalent to the booming 1960s -- appears from this vantage-point to be a thorough success.

That leaves Ms. Schlaes with exactly one metric one which her entire thesis that the New Deal "failed" must rely: unemployment never recovered to its 1929 level until the cusp of World War 2. That the banking system was stabilized, that Wall Street was regulated to minimize fraud, that millions were put to work in public infrastructure programs, that the elderly were elevated from poverty by Social Security -- none of this matters. The New Deal was a failure, according to Ms. Schlaes, because only 2/3 to 3/4 of the Great 1929-32 Contraction's (depending on how you count) joblessness was remedied as of 1936-37. In other words, because the New Deal did not 100% succeed on each and every front, therefore it was a failure.

Ms. Schlaes has a number of other "doozies" in her book, for example:

* defending her cherry-picking of unemployment data, she refers to the official US Census as "obscurer data" (you know, the very same data relied on by St. Milton Friedman in his "Monetary History of the United States).

* She claims that "the New Deal hurt the economy, and that mattered more. At some points Roosevelt seemed to understand the need to counter deflation. But his method for doing so generated a whole new set of uncertainties....", actually upping the ante from an argument that FDR didn't simply retard recovery, he actually made things worse. As we have discussed at length (ad nauseum?) in this series, by every single measure, including employment, the economy improved dramatically under the New Deal.

* As for the alleged fallacy that "price cutting caused deflation", Ms. Schlaes book, alas, came out only a year before Oil price decreases from $147/barrel to $35/barrel caused the CPI to decline -3.4% over only 4 months!

* that "Herbert Hoover was... an interventionist in spite of himself [who] bullied companies into maintaining high wages and keeping employees on their payrolls when they could ill afford to do so". In addition to bordering on the vile -- if only corporations had cut wages even more, then surely the privations of the American people would have ended -- this charge is also patently false. Despite Hoover's exhortations, the fact is that by the middle of 1930, companies cut wages with wild abandon, contributing to the deflationary death-spiral. Further, as noted by the New York Times' review of her book:

There is very little support for this idea among professional economists. Consult Essays on the Great Depression by Ben S. Bernanke, for example, and you will learn that a majority of macroeconomists have concluded in recent years that prolonged adherence to the gold standard played a dominating role in determining the worldwide monetary contraction of the 1930s. ... In other words, something approaching a consensus exists among economists that poorly-designed institutions and short-sighted policies were at the heart of the Great Depression.... (About this considerable volume of work, Shlaes has very little to say.)

* that "After the 1980s and 1990s we know that markets can do much of the work that Roosevelt believed only government capital could do..... After all, the argument of markets has its own powerful morality. It is immoral to cause unemployment by pretending that a big government policy is morally necessary. When Andrew Mellon and Calvin Coolidge put through their tax cuts in the 1920s, they made the efficiency argument that supply-siders make today: lower rates could yield, they posited, higher revenues." Such supply-side nonsense has been endlessly debunked by nearly every reputable economist there is. Morever, suffice it to say, from the viewpoint of January 2009, a paeon to the deregulatory frenzy that has already ended the investment banking industry and required the commitment of over $1 Trillion of public funds to bail them out, the "argument that markets have their own morality" is ridiculous nonsense.

Ms. Schlaes argues, in support of her conclusion, that

"the intervention, the lack of faith in the marketplace. Government management of the late 1920s and 1930s hurt the economy... Fear froze the economy, but that uncertainty itself might be a cost was something the young experimenters simply did not consider."

because

the cost of uncertainty, as the economic historian Robert Higgs first pointed out[, is] that unknown unknowns are inherently destabilizing. Roosevelt, a man of impulses, changed policies routinely. He moved from supporting big business to attacking it to supporting it again, many times in his presidency.....

..... Policies like this caused the most unnecessary part of the Depression: the Depression within the Depression of the late 1930s.

2. This is the second prong of the argument; that business uncertainty prolonged the Great Depression.

This argument was advanced by Robert Higgs in the paper "Regime Uncertainty; Why the Great Depression Lasted so Long and Why Prosperity Resumed After the War." Let's begin this critique with this chart from the third part of the series.

This is a chart of gross private domestic investment in 2000 chained dollars. It shows that in 1929 total investment was $91.3 billion and in 1937 total investment was $91.1. In other words, according to the BEA total private domestic investment rebounded to 1929 levels in 1937 in chained 2000 dollars.

Here is a chart of GDP in 2000 chained dollars:

Also note that by 1937 GDP had rebounded to 1929 levels.

Also remember the graphs of GDP growth for each year from 1934 to 1937 from the third installment. Total private domestic investment was responsible for 25% of growth in 1934, 50% in 1935, 19% in 1936 and 50% in 1937. So, in chained dollars there was investment and in the growth of real (inflation adjusted) GDP there were two years where investment was responsible for half of all GDP growth. So someone was obviously investing.

Higgs presents this information in two graphs. Here is the first one.

The skinny line represents gross private domestic investment in 1987 dollars. According to this graph gross private domestic investment was higher in 1929 than 1937. With me so far? Good.

Also note the following:

According to Higgs, the columns are GDP, again in 1987 dollars.

Anyone notice something funny?

Look again at the skinny line. This chart is in 1987 constant dollars. It shows GDP rebounding to 1929 levels by 1937 but private investment not rebounding. The BEA's chained dollar chart directly contradicts Higgs' first chart.

Higgs next shows investment as a percent of GDP in the following chart:

According to him, the second chart has investment at 16% of GDP in 1929 and 13% in 1937 -- much more in line with the official BEA data and hardly the dearth of investment that he later claims existed in the Great Depression.

Why did Higgs provide this second chart? The first was in 1987 dollars; in other words it was inflation-adjusted. Higgs admits that the second chart "avoids the distortions potentially affecting data shown in exhibit 1". In other words -- by Higgs' own admission -- the first chart is misleading. If the second chart was more accurate -- if it avoided "distortions" (again his words) -- why include it at all? Wouldn't the second chart -- which by his admission is more accurate -- suffice?

So far we have the following:

1.) Higgs' included two charts, the first of which is (in his own words) "misleading"

2.) The BEA's data directly contradicts Higgs' assertion regarding inflation adjusted gross private domestic investment.

3.) Higgs provides a second chart which is much more in line with the information provided by the BEA.

Higgs than argues that "regime uncertainty" created a lack of investment. He argues that literally every major New Deal Program "substantially attenuated or threatened private property rights" (here is the list)

And then uses polling data that shows business was hostile to the New Deal. This is the cause of "regime uncertainty" which lead to the lack of investment.

Higg's list of New Deal programs that threatened private property rights is, well, delusional. What he's really saying is any law is bad. Period.

But more to the point, Higg's spends a great deal of energy avoiding the most logical conclusion. The country was in a deflationary spiral from 1929-1934. There was no reason for there to be any investment over these years -- as evidenced by the BEA's decreasing chained numbers above. Also remember that by 1934 the country had lost 25% of its total GDP. This is not an environment where business opens their wallet and builds mammoth new projects. Also remember the country grew at strong rates from 1934 - 1937 and gross private domestic investment was responsible for a lot of that growth. Total private domestic investment was responsible for 25% of growth in 1934 when the economy grew 10.8%, 50% in 1935 when the economy grew at 8.9%, 19% in 1936 when the economy grew 13% and 50% in 1937 when the economy grew 5.1%. Bottom line -- the economy was growing as fast as it could (given that it was getting out of the worst economic slump in its history) and gross private domestic investment was responsible for a lot of that growth. Higgs is saying "it could have grown faster" -- but can't prove that with any facts save those lovely Chicago school models which we discuss below.

While consumer demand started to return for the years 1934-1937 unemployment was still above 10% in 1937. In addition, GDP has just at 1929 levels by 1937, so arguing investment should have been higher (especially with 10% unemployment) is a stretch -- at best.

3. Ultimately, Amity Schlaes charges that, had the evil New Dealers not intervened,

" the economy would have quickly equilibrated by itself, with wages and share prices quickly 'marked to market.'

Why didn't it? Because

The most useful economic philosophy for understanding what went on is not Keynesianism. It is the public choice theory of James Buchanan and others, which says that government is a competitor that will annihilate what comes in its path.

Here Ms. Schlaes finally gets to the third prong of New Deal denialism: she is a true free market fundamentalist. As before, alas, her book hit the shelves only a year before the 1980s, 1990s, and 2000s worshiping of free markets without regulaton came home to roost in the biggest Wall Street financial collapse ever, that has economists worried that the next Depression might be just around the corner. And the reference to "public choice theory" is telling. This is the theory by which, in its hard version preferred by RW ideologues, the Let's-Pretend-as-if Fairyland of Econ 101's "perfect competition" is enshrined in "Pareto optimality" meaning that if 1 million starving people can only be saved by causing heartbreak to Paris Hilton due to her inability to get pedicures, then intervention to save the starving is "sub-optimal" and therefore should not be done.

Thus, when overmatched by a credentialed opponent, such as Prof. Krugman, she like all the other New Deal denialists, goes running back to the other academic sourcewater of the third argument, an economic paper by Profs. Ohanian and Cole of UCLA. These papers purport to demonstrate that New Deal policies actually prolonged the recovery from the Great Depression. So, to refute the RW noise, we need to examine Ohanian and Cole's paper.

To summarize, the authors note that wages and prices increased dramatically beginning with the "First New Deal" of 1933 which featured the National Industrial Recovery Act (NIRA) which encouraged collusion among manufacturers and collective bargaining by workers in those industries. When the Supreme Court struck down the NIRA, in the "Second New Deal" collective bargaining was enshrined by the National Labor Relations Act (NLRA) which explicitly permitted unions and collective bargaining, plus de facto encouragement of collusion in industries by declining to enforce the Antitrust acts. Not surprisingly, this led to inflation in prices and wages. Ohanian and Cole posit that workers and employers would seek to become part of this cartelized economy in which wages and prices were higher. Therefore there would be more employment and effort in these industries than would otherwise be the case.

Again, not surprisingly, when compared with an alternative universe in which these things didn't exist, wages and prices are higher than they would otherwise be. The authors posit that, had the New Deal not happened, lower wages and prices would have led to rapid rise in production and output, and faster growth. This faster growth would have returned the economy to its 1929 growth path in 1936, as opposed to a later parity in 1943 for which they claim the New Deal was responsible.

This argument sounds very powerful, until you recall the axiom that "Assumptions make an ass out of u and me." And in this case, that axiom is spot on. Let's look at the actual critical paragraphs of their paper. In the first place

These data [from the 1930s] contrast sharply with neoclassical theory, which predicts a strong recovery from the Great Depression with low real wages, not a weak recovery with high wages.

Ohanian and Cole tell us up front that the "data" (i.e., "reality") from the Great Depression conflicts with neoclassical economic "theory." Now, if a physicist, neurobilologist, or behavioral psychologist were confronted with such a conflict, there would be a focused effort to determine what might be wrong with the theory. Not so RW neoclassical economists. Ohanian and Cole never give a moment's thought to questioning the theory; instead, their entire endeavor is focused on what went wrong with the reality!

And on page 18 of their paper, they cut to the chase.

Our model abstracts from monetary and financial factors, which substantially simplifies our analysis. This abstraction seems reasonable since, as [we] note, the money supply grew substantially after 1933, and banking panics ended shortly after the introduction of deposit insurance. Both of these developments might be expect to foster a rapid recovery, rather than have impeded the recovery.

In other words, the authors are going to say that the New Deal was bad, by starting out with an assumption that the FDIC, a New Deal enactiment, "foster[ed] a rapid recovery"!

Our analysis also abstracts from explaining the downturn of 1929-33, but rather focuses on what happened after New Deal policies were adopted. By abstracting from the downturn of 1929-33, our analysis proceeds by assuming that either the negative shocks that caused the downturn no longer depressed the economy after 1933 -- as argued [previously] ... -- or that if the effects of these shocks did continue, that they did not significantly affect the impact of New Deal policies.

in more simple, layperson's terms, the two bedrock assumptions of their work are:

1. the New Deal is not compared with other historical panics and recoveries, such as those of 1837 and 1873, but rather with the Fairyland of Let's-pretend-as-if Econ 101 perfect competition!

2. In their alternate "reality", the Let's-pretend-as-if Fairy magically sprinkled pixiedust on the economy and it spontaneously started to recover in Spring 1933 with no effort whatsoever. No need to worry about banking panics, debt deflation, starvation and privation, the Let's-pretend-as-if-onomic Fairy gave everybody a clean slate on FDR's first day in office!

It is only under these two explicit assumptions, which at no point in the paper are relaxed, that their results are valid. Nowhere in their paper is there an attempt to compare the actual reality of the 1930s with a comparable period that did not feature government intervention (such as the 19th Century great Panics). At best they make a theoretical comparison to a 1920s which featured some monopolies, and surprise, surprise, even under that limitation they concede that their results are considerably more tepid.

Despite the fact that their entire reasoning rests on economic fairydust, their conclusion pretends as if it is comparing two realities:

Our results suggest that New Deal policies ... reduced consumption and investment about 14 percent relative to their competitive balanced growth path levels. Thus, the model accounts for about half of the continuation of the Great Depression between 1934 and 1939.

New Deal labor and industrial policies did not lift the economy out of the Depression as President Roosevelt and his economic planeers had hoped. Instead, the joint policies of increasing labor's bargaining power, and linking collusion with paying high wages, impeded the recovery by creating an ifefficient insider-outsider friction that raised wages significantly and restricted employment. The recovery would have been stronger if wages in key sectors had been lower.

In fact, all they have proven -- theoretically, not experimentally nor even by real historical comparisons -- is that the New Deal slowed down recovery compared with an imaginary world where there was Econ 101 perfect competition and magical economic pixiedust ended the contraction in spring 1933. Take away the two preposterous assumptions, and Ohanian and Cole have proven nothing except the ability of neoclassical economists to indulge in thoeretical autoeroticism.
(hat tip to Mr. Francesco for the images of the fairygodfriedman)

In short, as Bruce Wilder has said, they "compare and contrast an entirely imaginary, right-wing fantasy economy with the actual economy, and then blame the actual economy for falling short of the imaginary economy," without even bothering to "test the realism of their imaginary economy." To which we can add, under the substantially "lower real wage" rate desired by Ohanian and Cole -- a rate apparently close to 1932-33 wage rates -- there would certainly have been a great deal more privation and death. But no concern to the economist authors. After all, it would have been much more efficient privation and death.

In Conclusion, our series of essays on the Great Depression and the New Deal has shown that:

1. The Republican reaction to the Great Contracition of 1929-32, the first-ever globalized contraction of industrialized economies, was to insist on balanced budgets and to resist virtually all efforts to directly relieve the privation of tens of millions of Americans who suffered even unto starvation.

2. As soon as FDR and the New Deal democrats took office, they immediately passed measures to Relieve the suffering of ordinary people, to promote economic Recovery, and to Reform the system to try to prevent similar meltdowns in the future.

3. The effort was tremendously but not perfectly successful. Faith in the banking system was almost immediately restored, as was confidence in the future. The economy grew in more rapid and sustained fashion through 1937 than in virtually any other period. Millions were relieved of unemployment, and we still are beneficiaries of their legacy of laws and sweat and toil. The most significant shortfall, the Recession of 1938, was in part brought on by Roosevelt's effort to become more conservative, even balancing the budget!

4. The New Deal doubters cannot dispute the numbers and the overwhelming accomplishments, so they focus on the few incomplete successes (persistent unemployment) and compare the New Deal to "let's pretend as if" fairyland economies that never existed.

Financial Times Opinion Piece of Ms. Schales

Jeff Biggers: Native America and Green Jobs: Spring Wind Rising from Sand Creek

2009-01-07T16:18:52Z

A network of over 250 Native American organizations recently issued an important challenge to the Obama administration for any Green Recovery plan: Look to the First Nations.

"The reality is that the most efficient, green economy will need the vast wind and solar resources that lie on Native American lands. This provides the foundation of not only a green low carbon economy but also catalyzes development of tremendous human and economic potential in the poorest community in the United States--Native America."

As the recent scandalous decision to expand coal strip mining on Black Mesa in northern Arizona revealed, Native Americans have been saddled with a toxic legacy of fossil fuel and uranium development. According to the statement released by the Native organizations, including Honor the Earth, Intertribal Council On Utility Policy, International Indian Treaty Council and Indigenous Environmental Network:

"Mines and electrical generation facilities have had devastating health and cultural impacts in Indian country at all stages of the energy cycle- cancer from radioactive mining waste to respiratory illness caused by coal-fired power plant and oil refinery air emissions on and near Native lands. Native communities have been targeted in all proposals for long-term nuclear waste storage.

When considering energy and climate change policy, it is important that the White House and federal agencies consider the history of energy and mineral exploitation and tribes, and the potential to create a dramatic change with innovative policies. Too often tribes are presented with a false choice: either develop polluting energy resources or remain in dire poverty."

Recognizing that unemployment and poverty rates on Indian reservations are twice the national average, and a large part of reservation housing is energy inefficient and lacks adequate weatherization, the Native groups called for federal support to "own and operate a new crop of renewable electricity generating infrastructure providing the dual benefits of low carbon power and green economic development where it is needed most."

This means more green jobs and clean energy training programs at tribal colleges and institutions, financial support for efficiency in federal fuel assistance programs and for the installation of solar heating panels and other innovations that deflect rising fuel costs, recognition of the Production Tax Credit for renewable projects on tribal lands, and a renewable energy Investment Tax Credit for tribes to attract investors that have tax credits.

Here's the news flash: Expanding the green economies in Native communities could have a massive impact on solving our national energy needs. According to studies cited by the Native organizations:

• Tribal lands have an estimated 535 billion kWh/year of wind power generation potential.

• Tribal lands have an estimated 17,000 billion kWh/year of solar electricity generation potential, about 4.5 times total US annual generation.

• Investing in renewable energy creates more jobs per dollar invested than fossil fuel energy.

• Efficiency creates 21.5 jobs for every $1 million invested.

• The costs of fuel for wind and solar power can be projected into the future, providing a unique opportunity for stabilizing an energy intensive economy.

Ten years ago, in her brilliant chronicle, All Our Relations: Native Struggles for Land and Life, White Earth author Winona LaDuke examined long-time Native endeavors for sustainable green development, often in resistance to full scale assaults of environmental and cultural destruction. LaDuke called for closing the circle between western science and Native traditions: "Those who watch carefully--onaanaagadawaa-bandanaawaa--know that this will require a technological, cultural and legal transformation."

A massive green energy and jobs infusion on Indian reservations would be a first step in that transformation for our nation.

Or, as poet Simon Ortiz wrote in "From Sand Creek":

"This America
has been a burden
of steel and mad
death,
but, look now;
there are flowers
and new grass
and a spring wind
rising from Sand Creek"

Robert D. Atkinson, Ph.D.: A Stimulus Package We Can Believe In

2009-01-07T15:35:39Z

President-elect Obama made his campaign about change and promises to do the same with government. One area to start is with the proposed stimulus package.

Already he has said this one will be different. His transition team released a statement yesterday that they were going to ban all earmarks from the proposed stimulus package.

But with the stimulus package having a proposed price tag of around $775 billion, of which approximately $300 billion is in tax breaks for low- and middle-income earners, we also need change in how the money is spent.

In the past, to the extent stimulus packages did more than spur additional consumer demand, they usually included some investments in traditional infrastructure -- building or improving roads, bridges and sewers -- to create jobs, and quite literally, dig our way out of a recession. Given America's decaying infrastructure, these projects are also needed today and will help cash-strapped states move forward with projects that have been stalled.

But the fact is that investing in physical infrastructure will not have the same short-term impact on American jobs, or long-term impact on U.S. competitiveness, productivity, and quality of life as a similar investment in our "digital infrastructure."

ITIF released a report today that finds that a $30 billion investment in our IT network infrastructure would create almost 1 million jobs. The report looks at a $10 billion investment in each of three technologies: broadband networks, health IT, and the smart power grid. It finds that by spurring or supporting this level of additional investment would create or retain 498,00 jobs from broadband, 212,000 jobs from health IT, and 239,000 jobs in the smart grid. Approximately 525,000 of these jobs would be in small businesses.

Investing in these IT infrastructures has a number of benefits. For one, IT jobs are generally higher-skill, high-paying jobs from telecommunications line installers, to software engineers, to electric utility workers.

In addition, these types of IT infrastructure enable a whole host of innovations and new industries that a comparable investment in physical infrastructure would not. For example, broadband has spawned entirely new industries -- from Internet search to online retail -- creating employment not just in the new firms in these industries (e.g. Google, E-Bay) and the new occupations needed to support them (e.g. user interaction designers and online experience managers) but also through jobs created by individuals leveraging or using these technologies and services. To take but one example, Ebay has found that more than 724,000 Americans report that Ebay serves as their primary or secondary source of income. While obviously these are not all full time jobs (though many are), this lone example demonstrates the powerful ability of digital infrastructure to create jobs from this "network effect." These are new jobs being generated far upstream from the direct jobs associated with the initial investment to lay fiber optic cable, purchase hardware, or develop new software that supports health IT or a smart electric grid and the ensuing indirect and induced jobs.

Finally, these technologies are transformative -- that is they have the potential to fundamentally improve our society. Take the smart grid. Modernizing our grid infrastructure with sensors and two-way communication will not only allow utilities to generate and distribute energy more efficiently and reliably, it will allow widespread use of new technologies like plug-in hybrid electric vehicles, commercial energy storage, and residential solar generators. It will also time-of-use pricing which will create new demand for smart appliances that not only use energy more efficiently, but also they will use it more intelligently.

President-elect Obama has promised to do things differently in Washington. Let's start with new ideas for a stimulus package.

Bob Ostertag: Hoping for Audacity (on Climate Change!)

2009-01-07T12:04:54Z

What I want from my new administration this year: a program to address climate change that is stunning in its breadth and scope.

The weird thing is: I might get it.

* The new administration will quickly pass an economic stimulus plan approaching something like a trillion dollars.

* At the same time, the administration will be handed effective control of the American automobile industry.

* All this at a time when the siren songs of free markets and small government that have dominated American politics for decades have suddenly gone silent. In their place, we have a nation, indeed much of the entire world, eagerly looking to the black man in the white house for that "change we can believe in" we have heard so much about.

A couple of years ago, if you had asked a climate change expert what it would take to begin to address climate change in a meaningful way, one likely answer would have been, "Well, you would need about a trillion dollars to spend on infrastructure, and you would need real political leadership. Oh, and you would probably need control of the automobile industry. But fat chance."

Ahem.

Think of what might be possible! Dormant factories in Michigan could be retooled to build light rail trains and wind turbines. Or high tech double-paned windows. Or or or... so many things! This country's blue collar workers could be put back to work. In the process of rebuilding our roads and bridges, we can re-tool them to accommodate the new cars, trains, and bikes that we will be building.

Specifics are beyond my expertise, but I know the big picture. The plan should:

1. Be stunningly audacious. It should take everyone's breath away in its scope. I am not talking about encouraging everyone to recycle, buy hybrid cars, and inflate their tires.

2. It should move fast. The present alignment of political opportunities will not last long.

3. It should have a significant component of public mobilization. First, because the scale of change we will need to address climate change will be absolutely impossible without massive public participation. Second, because this is what Obama is so good at. Third, because this will be the key to keeping the program alive once the political winds shift, as they inevitably will.

This is now a bipartisan issue, Obama's favorite kind. He can enlist John McCain. He can enlist Rick Warren, Obama's controversial pick to lead the prayer at the inauguration, who has been the loudest voice among the new generation of evangelical leaders addressing climate change.

It is a technocratic issue, another specialty of Obama's. The politics of it seem to have almost miraculously quieted, and what is now needed is political vision, sound science, good government, inspirational leadership, and social mobilization. Any of that sound familiar?

And it is an issue on which the United States could, umm, "reclaim its leadership in the world" (sic). This is Obama's game all the way.

There are many crucial matters on which Obama's administration will be hemmed in with precious little room for maneuver. I will not be surprised if Obama is hugely disappointing on Iraq. Remember, he ran on the fact that he opposed the war before it started. When he finally gets to the White House he will be confronting an entrenched debacle with no good options. Likewise in Afghanistan, where Obama is preparing a major escalation of the war, a move I very much oppose and which I am afraid will have catastrophic consequences. His most immediate foreign crisis will be in Gaza, and there is not a single thing he has said, either during the campaign or in recent weeks, that give me even a glimmer of hope that his administration will be an improvement over other recent administrations in the handling of the Israeli-Palestinian conflict. Another immediate mess he will find himself entangled in is the fate of the prisoners in Guantánamo, and here again I am almost expecting to be profoundly disappointed. (Remember his total collapse on the FISA bill last summer?)

In the days leading up to last summer's Democratic convention, I wrote a blog pleading with Obama to stop talking so exclusively about compromise and tell us the one or two core issues on which he was willing to stand and fight. To the degree that he has answered that question, he has suggested that climate change and energy policy were at the top of his list.

Obama spent the last year telling me about the audacity of hope. I listened. Now, at least on climate change, I am hoping for audacity.

North Carolina Jobless Claims Crash State's Web Site

2009-01-06T22:42:11Z

RALEIGH, N.C. — Unemployment is up so much in North Carolina that the state's Internet site for benefits crashed twice this week under a rush of claims.

Once the system was back up, the state set one-day records both for the amount of unemployment benefits paid and for the number of transactions, officials said Tuesday.

Alcoa To Cut 13 Percent Of Global Work Force

2009-01-06T21:20:06Z

PITTSBURGH — Alcoa Inc., the world's third-largest aluminum maker, said Tuesday it will cut 13,500 jobs, or 13 percent of its work force, and slash spending and output to cope with the global economic slowdown.

The reductions expand on cost-cutting measures announced in October, when Alcoa reported a 52-percent decline in third-quarter profit due to sharply lower aluminum prices, weaker demand and a charge from curtailing a smelter in Texas.

Robert L. Borosage: The Price of Consensus: Obama and Congressional Republicans

2009-01-06T19:53:05Z

President elect Obama is calling for "swift and bold" action on his "American Recovery and Reinvestment Plan" to stop the hemorrhaging of the economy. He also wants to change the way Washington does business, "turn the page" on the petty partisanship of the last decades. He's said to want "substantial Republican votes" for the plan. Politico reports he's looking for as many as 80 votes in the Senate, requiring that more than twenty Republicans climb on board. He's not only invited congressional Republicans to offer their ideas, he is building tax breaks into his plan that Republicans say would make it easier to support. (For updated reporting on this debate over the recovery package go here.)

Now Barack Obama has proven his political brilliance time and time again, so he has earned the benefit of any doubt. But frankly, this strikes me as a really dubious idea - both in terms of policy and politics.

In policy terms, the economy needs exactly what Obama calls for -- swift and bold action.
But inviting Republicans into the discussions insures only one thing -- delay. Their leaders, Mitch McConnell and the perpetually tanned John Boehner, have already scorned the need for dispatch, with Boehner calling for "public hearings in the appropriate committees." Delay will simply ebolden the lobbyists swarming to get their special interest built into the plan. Obama has a better chance getting a sound bill passed quickly than opening it up to the feeding frenzy that is the normal legislative process.

Second, Obama's aides say sensibly that they are looking to "do what works." But tax cuts come in a distant second to public investment in actually creating jobs. We saw that last year when the rebate checks didn't have much effect. Much of the money sensibly was used to pay down debt and didn't do much to lift consumption or create jobs. Much of what was spent went to products made in China. In contrast, public investment will be spent, and it is more likely to create jobs here.

Reports are that the Obama plan, still being put together, will contain about 40% in tax cuts. Half of those are devoted to a $500 tax credit for middle and low income workers. Since middle class tax cuts were a centerpiece of the Obama presidential campaign, he's right to dismiss those who say these are designed solely to win Republican support. He's fulfilling a campaign promise that was designed to win voter support. And the money can be dispensed rapidly so the whatever effect they have could be felt quickly.

But the other half of the tax package reportedly will go to businesses -- $150 billion or so. These are said to include a Republican measure - blocked repeatedly last year by the Democratic congress -- to allow businesses to write off current losses retroactively against taxes paid on profits over the last five years. This will benefit significantly the very financial and housing companies that inflated profits blowing up the bubble that brought us this mess. Worse, there is little reason to assume that giving a tax break to businesses that are losing money will do much to create jobs. Treasury and the Federal Reserve have pumped in trillions in equity and credit to banks without getting them to make loans. Most companies will use the break simply to bolster their books. Businesses hire people when the markets for their products expand, not because they have more money in their coffers.

There's also talk about a tax credit for companies that create new jobs. This sounds better but it will mostly reward companies for jobs that they would have created anyway. And worse, it will generate a tsunami of fraudulent maneuvers designed to qualify for the break. A retail store firing clerks because business is off isn't likely to add someone to get the tax break. But the less scrupulous could well lay off three workers and hire back the one they meant to retain anyway to pocket the benefit. The administration will no doubt add provisions designed to discourage such fraud. But enforcement will be a nightmare with only one saving grace: effectively policing the provision will surely create more new jobs than the tax break itself.

Politically, Obama's generosity is unlikely to be rewarded. The congressional Republican caucus is more conservative and clueless than ever. They will see Obama's pe-emptive concessions as weakness, not generosity. They are already pocketing them and asking for more. Boehner is grousing about "the size of the package" Mitch McConnell responded by calling for more tax cuts and peddling the lunatic notion that rather than providing grants to states and localities to avoid massive layoffs -- perhaps the most effective dollar for dollar spending that we can do in terms of saving jobs -- the federal government should loan them the money instead. Republicans don't want unemployment insurance to go to part-time workers, and oppose paying for health care for those who have been laid off. They are pushing for permanent reductions in capital gains and income tax rates for -- imagine our surprise -- business and the highest income earners. These are the very ideas that helped get us into this hole.

My guess is that Obama's maneuver reflects a strategic decision, not a tactical one. Substantively, he wants a broad and inclusive package -- "making sure [consumers] have money in their pockets, as well as "incentives for business" and "investing in job creating growth industries..." Politically, he seeks as broad a consensus as he can get on a bold measure in desperate times.

But he's likely to pay a price both in delay and in diminished effectiveness for the plan that emerges. He'd be more likely to get a big and bold plan passed swiftly if he had put together his package, called on the Congress to pass it, invited Republicans to join or take the risk of standing in the way, while saving any concessions on business taxes until the end if he actually needed to round up the votes. I suspect that he'd have won just about as much Republican support that way.

Obama seems to be choosing a path that builds consensus at the potential cost of effectiveness. But if the plan fails, he'll take the blame no matter how many Republicans vote for it. And Republicans will attribute the failure to government spending, no matter how much of the plan consists of tax cuts.

We shouldn't treat this as a spectator sport. Americans should be getting in touch with their legislators -- particularly Republican Senators and conservative Democrats -- and calling on them to support the swift action the country so desperately needs.

Richard A. Smith: The Facebook Effect: How Social Media are Transforming Our Capacity to Achieve

2009-01-06T15:51:08Z

In just 4 years, Facebook and other social media have revolutionized the way in which young people communicate. Now, they are unlocking a vast and unexpected potential for the rest of us.

Achievement in almost any area of life is heavily dependent upon other people. We tirelessly spend time cultivating social relationships, choosing whom we would like to know, and rejecting people who live to far away or root for the wrong football team. The result of all our efforts is our own tightly knit community, our personal network.

Our networks are important for more than simply the number of people that we know, but for the kinds of people that we know. Sociologists label those in our inner circle -- family, best friends from high school or college, longtime co-workers and perhaps a handful of others -- as "strong ties."

Then there is the larger circle, those with whom we are acquainted but are not nearly as close to. We know who they are and we know how they relate to us, and would likely join them for a cup of coffee if we ran into them unexpectedly. These are our "weak ties."

Each of our personal networks is made up of a similar combination of strong and weak ties. This much is not surprising, given the uniformity of how we organize and grow and live in the western world. But what may surprise you is the difference in relative importance of these two groups in our life's journey.

Cultivating Weak Ties

In his oft-cited 1974 study "Getting a Job," sociologist Mark Granovetter arrived at a startling conclusion -- weak ties are almost always more valuable to us than strong ties. Most people, Granoetter discovered, find new jobs, or for that matter new information or new sparks of insight not from those we are close to, but rather from those we are acquainted with -- those who are currently leading different lives than us. For example, if you get fired today, your current co-workers are the least likely source of finding a new job. Those who are outside of our insular circle of family and very close friends occupy a distinctly different space in the world than us, and they are much more likely to know something we don't, or to have experienced something we haven't. In so doing, they often lead us to the bright colors in our lives, the unexpected changes of direction, the rare opportunity or critical knowledge that on our own we would likely never have discovered.

It turns out, our quest to manage more and more of these beneficial weak ties has been a major factor in the evolution of our species. The human brain has changed more in the last 3 million years than in the previous 500 million, nearly doubling in volume. What changed the most was the growth of the neo-cortex, the part of the brain that deals with complex thought and reasoning. Interestingly, if you look at any species of primate (any variety of monkey or ape), the more developed their neo-cortex the larger the groups of people they live with. Many scientists now believe that our brains have evolved so dramatically in direct response to handling the complexities (and reaping the enormous benefits) of larger social groups.

But as human beings, we can only deal with so much information at once. Understanding how we relate to each person in our network, and how they in turn may relate to each other requires a significant amount of brain capacity. This upper limit, which cognitive psychologists refer to as "social channel capacity," results in very similar numbers of weak ties that exist within each of our personal networks. Studies show that for the majority of us, this number is typically less than 300.

That is, until now.

For the first time in human history, technology enabled social media allow us to exponentially expand our network of weak ties, potentially into the thousands over a lifetime. In so doing, these tools dramatically increase the flow of knowledge and opportunity available to each of us.

Think back to the company where you were working ten years ago. How many coworkers are you still in contact with? I would be surprised if the number is more than 5.

Contrast this illustration against the current circumstance of Marc Matieu, who recently left the Coca-Cola Company after a successful international career built over decades. Marc is on Facebook, and leaves Coke with more than 100 facebook "friends" from around the world. What are the odds that nearly all of these people will remain in Marc's social network for the next ten years? The next 20? How many ideas or opportunities do you think they will stimulate to his benefit over the same time period?

Our species has strived for millions of years in pursuit of increased ability to manage social networks. The advent of Facebook and other social media tools, and the resulting explosion in our capacity to manage and benefit from larger and larger social circles may very well be one of the most important outcomes of the digital age.

How has Facebook or other social media impacted your professional life?

If you are not yet on Facebook, is 2009 the year you plan to join?

Alan Schram: How to End the Recession

2009-01-06T13:06:07Z

As the country struggles with this vicious recession, we look for ways to rejuvenate the economy and reverse the downturn.

What end recessions are the following:

First, producing and saving, as opposed to spending and borrowing.

Second, economic stimulus in the form of tax cuts and rebates, which are truly stimulative and go to the people that need them most, and not random bailouts nor new massive government bureaucracies.

Alarmingly, both the Bush and Obama policies are on the wrong track.

What should be intuitively clear is that spending is no way to repair our woes. Indeed, spending irresponsibly is exactly what got us in the current lugubrious position. If your family had large debts and annual expenses exceeding its income, would you accept advice from financial experts beseeching you to spend even more, and borrow further? That sounds absurd, and it is. The definition of insanity is doing the same thing again and again, expecting different results. Why then are we trying to get out of this hole by digging further with the same infernal shovels of consumption and debt?

President Bush and his Treasury Secretary have long failed to provide relief. But now, I have a very bad feeling about the incoming administration plans as well. Instead of focusing on cuts of marginal tax rates, President Elect Obama has come up with an economic stimulus plan that is completely misguided. The Obama team proposed a payroll tax credit rather than a real tax reduction. An increase in spending coupled with lower tax collections is an increase in taxes, not a tax cut, because it means the government will have to collect more taxes in the future. And when you don't cut rates but instead give people a lump sum of $500, you create little stimulus and further weaken the country's financial strength by adding to the national debt.

Or take the incoming administration plans to reform healthcare, which comprises 14% of GDP. It is simply not possible to spend $1 trillion so quickly and do it well. This kind of hurried spending is gravid with danger and will not abet the economic recovery.

Or consider the plan to create "green jobs." Not only do we not have the slightest clue how to do that, but we don't even know if there is demand for whatever product those jobs will produce, especially not with oil prices down 54% last year. Moreover, government should not be engaged in creating jobs. Taking resources from the private sector can't possibly be an efficient way to utilize our means.

As stimuli plans go, this one is deeply flawed and will put us on the wrong track, exactly at the time when we need change we can rely on and not another false start.

Meanwhile, the Bush administration has been engaged in a gargantuan endeavor to bail out banks. Thomas Jefferson said that banks are more dangerous than standing armies. Judging by the damage done by Wall Street in the past year, he was correct. Nonetheless, Secretary Paulson has been handing the most abominable banks hundreds of billions of our money. Citigroup alone received a $300 billion guarantee of its debt, a gift, and a very large one at that, from Americans to the shareholders of Citigroup. Many other banks got large sums as well (and to add insult to injury, the banks on the receiving end of all this liquidity have been hoarding the cash rather than lending it).

With this bailout we are saddling the Federal Reserve's balance sheet with toxic assets banks foolishly loaded up on. What we have been doing is replace private credit, which has been destroyed, with the credit of the federal government. But we taxpayers ultimately shoulder that burden. The Fed's balance sheet is really ours, and even if we try to sweep the problems under the carpet in Washington, the day of reckoning will come and we will have to face those losses. More federal debt undermines confidence and compounds the very problem it was meant to fix. It might even create a new crisis in which we will find it hard to pay our social security and healthcare obligations to aging baby boomers. This Mad Hatter tea party approach is good for Alice in Wonderland, not for a prudent economic policy at this crucial time.

If we are going to rescue anyone, we should rescue homeowners and not banks. We can do that by issuing homeowners new government loans based on the current appraised value of their homes, so that they no longer owe more than their house is worth. This will stabilize the value of the collateral underlying all those non-performing loans, allay fears and stop the credit freeze. And if we want the banks to lend, we need to force them to recognize their losses and write off their bad loans, which predictably they have been reluctant to do.

Finally, as far as confidence goes, one can't simply tell people to be confident and expect them to comply. People have a very good reason to be scared, and they won't become panglossians because Washington implores them to. Confidence is created by having consistent policies, not erratic, ad-hoc decisions. The crucial flaw in the Bush administration's actions has been that they actually increased uncertainty by being so unpredictable, with different responses to different institutions, rapidly changing strategies and obscure reasoning that created confusion and drove capital away.

Rather than deal with the source of the problem and drain the swamp, the Treasury department is chasing the individual mosquitoes, engaged in a desperate effort to pump up that atrocious credit bubble again, support the stock market and avoid a recession. That strategy is doomed to fail, especially when so many decisions seem to be made over chaotic weekends, in a bizarre effort to get things done before "markets in Asia open."

Stock prices ultimately reflect reality, and they should not be manipulated. If we deal successfully with the underlying problems, pay down debts, cut taxes and go back to producing and saving, the recession will be over and equity markets will respond accordingly.

Alan Schram is the Managing Partner of Wellcap Partners, a Los Angeles based investment firm. Email at aschram@wellcappartners.com.

Nicole Williams: New Year, New You -- 10 Tips for a New Career Outlook in 2009

2009-01-06T12:50:06Z

1. Don't skimp on the primp. No more half-assing your work attire. Pick it out ahead of time and you'll cut down on fashion faux pas and the time it takes to get ready in the morning.

2. No excuses--write down your goals. You've heard by now that writing down your goals has been proven to increase your chances of meeting them. What have you got to lose? Decide what you want out of '09, and at every three-month mark, assess how far you've come and what it will take to stay on course.

3. Take care. Whether it's the physical or mental kind, you'll be at your productivity peak when your health is in tact. Make exercise and stress relief a priority so you can spend more of your sick days out having fun.

4. Give yourself a price tag. Do the math, go to the salary sites, ask people in the biz... Knowing your value will make it easier to ask for (and receive!) the raise you've been wanting.

5. Spread the wealth. Build your leadership experience, network, do more meaningful work... There are plenty of reasons to volunteer, many of which can have a positive impact on your career. Find a charity you can sink your teeth into, and watch as new doors open.

6. Nix negativity. There will always be co-workers who like to disagree, who think they're never wrong, and who have the ability to suck the energy right out of the room. Don't let the nay-sayers bring you down. Accept that they'll never change, surround yourself with positive people, and spend your time doing something more productive--like proving them wrong!

7. Say goodbye to guess work. No more wondering what your boss really thinks. Take a proactive role and make an appointment to find out what your areas of improvement are--then set out to command and conquer.

8. Give your Mac a makeover. Those icons you have splattered all over your desktop? The thousands of uncategorized emails in your inbox? And you wonder why that feeling of anxiety sets in every time you load up. Organize, archive, and don't waste a single second searching for the files you need.

9. Maximize mistakes. True, it'd be nice if you could eliminate them altogether, but it's inevitable you'll mess up now and again. Turn these "oh no's" in to opportunities by fessing up immediately, starting fresh, and coming back with more to offer than before.

10. Turn yourself off. No calls during dinner, no blackberry in bed--whatever the rule needs to be, detach yourself from work for at least some portion of the day and use the down time for rejuvenating.

Mark Weisbrot: Stimulus Time: The Fierce Urgency of Now

2009-01-05T17:21:03Z

Nobody needs to be told that our economy is going down the tubes at a rate unseen for decades. Every week brings new numbers that are setting records. In just the three months ending in November, the job loss was 1.26 million, the worst since 1975. We have lost more than 2 million jobs in 2008.

To arrest this downward spiral, the Obama team is talking about an economic stimulus package of about $800 billion over two years. Some are complaining that this is too much. But it is actually not so large considering the size of the problem we are facing. It is about 2.7 percent of GDP. The recent increase in military spending plus tax cuts for the rich -- compared to 2001 levels -- adds up to about the same.

Even if we take into account the rest of our red ink, and we actually hit the dreaded "trillion-dollar deficit" in 2009, how extreme would this be? A trillion-dollar deficit would be about 6.7 percent of GDP. In 1983, coming out of our last deep recession, President Reagan ran a deficit of 6 percent of GDP. And the current recession could easily be worse than that one. We really don't know where the bottom is yet.

The Obama stimulus also differs from the deficit spending that we accumulated in the Bush (or Reagan) years in a profound way. Tax cuts for the rich -- and much more horrifically in the case of spending on the Iraq war -- are unnecessary and socially destructive. By contrast, President Obama is proposing to spend money on things that we actually need.

State and local governments will need at least $100 - $150 billion next year to keep from cutting back on their employment and education and making the recession much worse. We will need increases in food stamps, unemployment insurance, and Medicaid spending for the poor -- who are most at risk of suffering from the destruction caused by the excesses of Wall Street financiers and the government officials who failed to police them.

Obama's plan will also include spending to repair our roads, bridges, and schools -- much of which is long overdue. There will inevitably be tax cuts in the package, but at least these will go to working and middle class people, unlike the bulk of the Bush tax cuts.

Two things that could turn the stimulus package into an even more positive force for change would be health care and environmental spending. The federal government can subsidize health insurance for the uninsured, with public sector insurance like Medicare, as President-elect Obama promised during his campaign. This would advance health care reform while also providing jobs and spending in the health care sector. To begin the transition to a less fossil-fuel based economy, the federal government can also subsidize mass transit, the retrofitting of buildings to make them more energy efficient, and start to build a 21st century electricity grid that can handle wind and solar energy sources.

The exact details of the package are not as urgent as its size and the speed with which it is implemented. President Bush and his Republican party have unforgivably destroyed thousands of businesses and hundreds of thousands of jobs by delaying the package until Obama takes office. Further delays by Republicans in Congress should be met with mass outrage.

If anything, the Obama team's proposed stimulus may not be enough. Nobel laureate economist Paul Krugman has suggested four percent of GDP, or $600 billion for just next year. He may well be right. Better to err on the side of caution, than risk falling into a deeper hole that is even more difficult to get out of.

This article was distributed by McClatchy Tribune Information Services on January 2, 2009.

Jesse Jenkins: The Danger of Green Stimulus

2009-01-05T16:22:26Z

By Teryn Norris and Jesse Jenkins

Barack Obama's final appointments in December indicate a strong commitment to action on climate change. Steven Chu as Energy Secretary, Carol Browner as Energy & Climate Czar, John Holdren as Assistant for Science and Technology -- just to name a few recent selections -- are all proponents of vigorous action to cut U.S. global warming pollution and take leadership on a new international climate treaty. And Hilda Solis, Obama's new Labor Secretary, is a champion of "green jobs."

All is well on the climate front, it seems. Except that it's not.

Carbon cap and trade regulation remains the top federal policy priority for the majority of environmental groups. But in June, cap and trade legislation failed in the Senate, and sixteen Democratic Senators from coal and manufacturing-heavy states voiced their opposition to high carbon pricing. The policy faces even greater obstacles in today's economic climate, since it would increase the energy bills of the American public.

Despite Obama's appointments, climate advocates are thus left to worry: is Obama really prepared to expend his political capital championing a policy that will increase U.S. energy prices in the midst of a recession?

Not likely. Until recently Obama voiced support for carbon regulation, declaring at a governors' climate conference in mid-November that his climate agenda "will start with a federal cap and trade system." But since then, as the recession has deepened, he has said little to nothing about cap and trade. His apparent change of heart may reflect a larger global trend, with European nations increasingly voicing opposition to their Emissions Trading Scheme and Canadians rejecting the Liberal Party's proposed carbon tax in their October election.

Does Obama have an alternative climate strategy? So far, he appears to be wrapping his climate policy into a "green stimulus" plan, focusing on public investments to create "green jobs" in the construction of energy efficient infrastructure. He has even mentioned some investment to build renewable power plants. But the large majority of the stimulus seems set to go toward short-term investments that will quickly create jobs -- retrofitting buildings and constructing traditional infrastructure projects like highways and bridges.

Replacing sustained climate legislation with a short-term "green stimulus" program to create green jobs and perform energy efficiency retrofits is a dangerous possibility. Increased energy efficiency can only satisfy a portion of the necessary reductions in global warming emissions, and it will not help develop and deploy the low-carbon energy technologies that are essential to transform U.S. and global energy systems. Yet with green jobs now positioned as "the solution" to both the economy and the climate, Obama has cover to take the politically expedient route of short-term green stimulus while ignoring serious climate policy.

Avoiding this outcome demands a shift from green jobs to a broader focus on green technology. The single greatest obstacle to creating a "green energy economy" is the high cost of low-carbon energy technology. Technologies like solar photovoltaics, plug-in hybrids, and advanced geothermal are all more expensive than their conventional market competitors.

A serious alternative to cap and trade would therefore focus on making clean energy cheap, prioritizing major, sustained public investments to drive down the price of green technologies as quickly as possible. This would require federal investments on the scale of $500 billion over the next decade to support and accelerate each stage of the energy innovation pipeline: research, development, demonstration, and deployment.

Obama has made it increasingly clear that public investment is his preferred climate policy mechanism. What Obama has not made clear is whether or not he will embrace the type and scale of investments necessary to seriously confront the climate challenge.

If cap and trade is a no-go in today's economic climate, Obama must redouble his commitment to public investment in clean energy, investing at least $500 billion in green technology over the next ten years. And while cap and trade may still be the preferred policy mechanism of most environmental groups, new political circumstances demand new tactics. Public investments in green technology are clearly more viable, and climate advocates should embrace them, while remaining vigilant that Obama's climate agenda does not stop with efficiency and green jobs.

The prosperity and security of the United States in the 21st century will depend largely on the course of action set by the nation's new leadership. The scale of our climate challenge is great, and so is the scale of public investment needed to overcome it. The Obama administration and 111th Congress must seize the moment not only to stimulate short-term economic recovery and job creation, but also the long-term technology innovation and deployment that will make clean energy cheap and secure our nation's energy and climate future.

--
Teryn Norris and Jesse Jenkins are Project Director and Director of Energy & Climate Policy, respectively, at the Breakthrough Institute, and co-authors of the National Energy Education Act proposal.