Prairie Weather

Those aren't smoke bombs. They're grenades.

For all the talk of economic crisis should Congress fail to raise the debt ceiling by August, the financial markets are likely to yawn at this vote — if only because Republican leaders have privately assured Wall Street executives that this is a show intended to make the point to Mr. Obama that an increase cannot pass absent his agreement to rein in domestic programs.

“Wall Street is in on the joke,” said R. Bruce Josten, executive vice president of the U.S. Chamber of Commerce.

Wall Street should worry, Times reporter Jackie Calmes writes.

Investors have grown accustomed to partisan games of chicken that always end with the needed increase in the government’s borrowing authority. But this showdown, many say, is riskier because of the strongly held antispending, antitax views of the many freshman House Republicans combined with the fragility of the economic recovery.

The tea party, however, is surely being used as a stalking horses for a Republican party.  Republicans believe that if they can hand Obama a lousy economy a year or less before the election, he's sure to lose.

Republicans, on the other hand, are facing signs that their usually staid and moderate voters are fed up with the irresponsible antics of their own party.  Unless the party nominates an acknowledged miracle worker, they'll vote their party locally but not nationally.  They understand that a government shutdown doesn't save money. 

Far from it:  the costs of getting the whole government back online after a shutdown -- not even adding the accrual of interest on debt -- are high.  That hasn't gotten through to Republican voters yet, according to surveys.  But it will when the bills start coming in -- and time is not on Congress' side.

... The time frame for action on a deal is shorter than the Treasury’s debt-limit deadline would suggest: The House’s unusual schedule of recesses this year means both chambers of Congress will be in session simultaneously for just four of the nine weeks before Aug. 2.

Whichever way you look at it, we're facing serious problems if the debt limit is not raised.  The self-righteous and the know-nothings in Congress's Republican ranks are playing Russian roulette with the economy.  Already they're costing us some real money in both the short and long terms even if they stop in time to avoid default.

Just as the political dynamic is more precarious than in years past, so too, say some analysts, is the economic recovery. The combination “definitely makes it more dangerous” to even flirt with default, said Rick Rieder, a managing director of BlackRock, the world’s largest investment management firm.

“The practical ramifications of it are dramatic, and I truly believe this,” Mr. Rieder said. At some point short of actual default, he said, “you’re going to run down the road where the rating agencies are going to have to react, the Fed is going to have to make a set of decisions, international investors are going to have to interpret what this means, and you could functionally have a self-fulfilling prophecy in terms of the risk while not actually having a default. That is such a dangerous path to go down.”

Even assuming a quick resolution, he added, the nation could face higher borrowing costs for the long term, increasing the national debt.

The following should serve as a reminder to Republicans about what game playing can do.

Increasingly, worriers from Washington to Wall Street recall the how House Republicans by a 2-to-1 margin first rejected the Troubled Asset Relief Program, better known as the bank bailout, on Sept. 29, 2008, though the financial system was near collapse and a Republican president, George W. Bush, was pleading for their support.

That afternoon, cable networks split screens to capture the stock markets going down simultaneously with the House vote; the Dow Jones industrial average fell more than 777 points, its largest single-day point drop. Four days later, following the Senate’s lead, the House approved a revised bailout and Mr. Bush signed it into law.

The tea party campaigned on their antipathy to TARP  and to bailout.  They're hugging that hobgoblin --consistency -- and their consistency could cost them and the rest of us the gains we've managed to make in economic and financial stability during the two years since the bust.  No one in America is voting for a return to chaos ...or are they?

Military industrial etcetera

Can we have an "honest military"?   Is it even possible to separate Defense from corporate profit? 

The Pentagon’s top weapons buyer has concerns about a House-approved plan to terminate a missile defense system Washington is working on with Italy and Germany.

A section of the House-approved Pentagon policy bill would place limits on federal funds for the Medium Extended Air Defense System (MEADS) program until it is terminated or restructured to provide technologies that could be used in other weapon programs.

The measure would reduce MEADS funding by $149.5 million in 2012.

The MEADS is a joint missile defense program between Washington and two European allies. Work on the system is done and financed in by Lockheed in United States, MBDA in Italy, and by EADS in Germany.

The Pentagon announced in February that, due primarily to delays and cost breaches, it will not buy and field the system. ...The Hill

The name of the Pentagon's "top weapons buyer" is buried in the article.  He's Ashton Carter.  Part of his bio, posted at the Department of Defense's website, shows a distinguished academic and professional background.  And this:

Dr. Carter was also Senior Partner at Global Technology Partners and a member of the Board of Trustees of the MITRE Corporation and the Advisory Boards of MIT’s Lincoln Laboratories and the Draper Laboratory. He was a consultant to Goldman, Sachs on international affairs and technology matters. ...Department of Defense

If you're in charge of a hugely costly program paid for by American taxpayers, are these affiliations inevitable?  acceptable?  Or do they indicate that we are now living in a society in which buyer is simply expected to accept the power of the relationship of government and industry no matter whether the buyer -- American taxpayer -- even wants the program or is willing and able to pay the freight?

Ashton Carter, the DOD acquisition chief, doesn't like the idea of ending the program.  "Our partners," he says, "have no interest in a mutual termination of the MEADS program and the options open to use are: (1) terminate unilaterally in accordance with our agreement, or (2) restructure the program to … a demonstration..." 

Who are our partners?  Just the European allies involved in this program?  Or is Lockheed a "partner" and not just a supplier?  Here's a clip from the Hill's report again:

The MEADS is a joint missile defense program between Washington and two European allies. Work on the system is done and financed in by Lockheed in United States, MBDA in Italy, and by EADS in Germany.

This isn't just a complaint against the Hill reporter.  It's a question about whether the lines between partners and suppliers are clear or whether and to what degree DOD has an interest in fudging the relationship between itself -- as an agency of the taxpayer -- and its suppliers as the very costly providers of goods and services.  Boring?  Absolutely!  Important?  You bet.

Just askin'.

Stand up to Congress

That, clearly, is what Obama will have to do.

...When revised data were released last week, the growth estimate remained stuck at an annual rate of 1.8 percent, compared with 3.1 percent at the end of last year.

More troubling in the latest figures, consumer spending — the largest component of the economy — was especially slow. Stagnant wages and higher prices for gas and food are squeezing family budgets, while falling home equity hurts consumer confidence. That suggests more bad news to come. ...NYT editorial

We have a political party which is so set on winning an election that it is willing to throw us back into deep recession to accomplish its aims.  Sooner rather than later, the President will need to take a stand which throws the Republican party's brinkmanship into high relief. 

Republican lawmakers have responded to renewed signs of weakness with a jobs plan that prescribes more of the same “fixes” that Republicans always recommend no matter the problem: mainly high-end tax cuts, deregulation, more domestic oil drilling and federal spending cuts.

The White House has offered sounder ideas, including job retraining, plans to boost educational achievement and tax increases to help cover needed spending. But its economic team is mainly focused on negotiations to raise the debt limit, presumably parrying Republican demands for deep spending cuts that could weaken the economy further while still reaching an agreement on the necessary increase.

The grim numbers tell an unavoidable truth: The economy is not growing nearly fast enough to dent unemployment.

Time's up.

... Without a strong recovery, it will be even harder to repair the budget. Continued hard times means low tax revenues and high safety-net spending. ...There’s a long way to go before the economy will thrive without government help.

Republicans in Congress aren't just wrong.  They have become morally and politically repugnant.  Obama is running the real risk of becoming one of them.

Doctors desert Republican party

Sheesh!  Not even the liability issue works as a scare tactic anymore.

Doctors were once overwhelmingly male and usually owned their own practices. They generally favored lower taxes and regularly fought lawyers to restrict patient lawsuits. Ronald Reagan came to national political prominence in part by railing against “socialized medicine” on doctors’ behalf.

But doctors are changing. They are abandoning their own practices and taking salaried jobs in hospitals, particularly in the North, but increasingly in the South as well. Half of all younger doctors are women, and that share is likely to grow.

There are no national surveys that track doctors’ political leanings, but as more doctors move from business owner to shift worker, their historic alliance with the Republican Party is weakening from Maine as well as South Dakota, Arizona and Oregon, according to doctors’ advocates in those and other states.

That change could have a profound effect on the nation’s health care debate. Indeed, after opposing almost every major health overhaul proposal for nearly a century, the American Medical Association supported President Obama’s legislation last year because the new law would provide health insurance to the vast majority of the nation’s uninsured, improve competition and choice in insurance, and promote prevention and wellness, the group said. ...NYT

It's interesting that this change in the medical community here in Texas, too, hasn't had much coverage even though it's been going on for years -- even before Obama and before reform legislation. 

First you lose your job. Then you lose your vote.

A strange thing has happened to policy discussion: on both sides of the Atlantic, a consensus has emerged among movers and shakers that nothing can or should be done about jobs. Instead of a determination to do something about the ongoing suffering and economic waste, one sees a proliferation of excuses for inaction, garbed in the language of wisdom and responsibility. ...Paul Krugman

We're talking international-scale unemployment. Well, some of us say they know what's what.  If a guy can't get a job, there's something wrong with him, not with our economic system. 

In any event, "The room for macroeconomic policies to address these complex challenges is largely exhausted," according to the intergovernmental think thank, the Organization for Economic Cooperation, quoted by Krugman in the Times today.  Krugman points out that the OECD has decided to write off unemployment,as high as 21% in some countries.  They don't even try for a solution.  In this country, neither the Republican party nor the Obama administration are even trying for (even interested in?) a solution.

In a country where there is something we could be doing about unemployment, we're falling back on "learned helplessness," a good description of what's happening to able-bodied people looking for jobs.  But it goes beyond that. The people who are able to do something won't.

As I see it, policy makers are sinking into a condition of learned helplessness on the jobs issue: the more they fail to do anything about the problem, the more they convince themselves that there’s nothing they could do. And those of us who know better should be doing all we can to break that vicious circle.

The new poor -- the jobless --  are desperate while the rest of us behave as though we'd rather turn our eyes away than make our elected officials do something about it.  That has to change.  There are plenty of remedies, but we're up against the Party Of No.  Still, the new poor -- and the poor in general -- still have votes, don't they?

Well, at least for now they do...  But Republicans have mounted a successful effort to take the vote away from them.  State by state they are creating "new logistical and financial barriers for many people attempting to vote."

The real failures

Have you seen (pant! pant!) HBO's docudrama about, "Too Big To Fail"?  Were you attentive but a tad over-Hollywooded by it?  Do you agree with financial writer, Jesse Eisenger, that  it is "extraordinarily revealing about the financial crisis... only its revelations are almost entirely inadvertent"?

Ostensibly it's a story of their success against all odds. Michael Kinsley, reviewing the movie in the New York Times, labeled Hank Paulson the "hero" of the account.

Except that the movie actually depicts something entirely different: failure upon failure. "Too Big To Fail" The Movie isn't the story of how the Three Musketeers saved the global economy. It's a story of how the three didn't see the financial crisis coming; hadn't prepared for it; made mistake after mistake as it was cresting; and then, in their moment of triumph, made their most colossal blunder of all.

That, it turns out (whether or not "Too Big To Fail" knows it), is the true story of the financial crisis...

The crisis, after all, hit all of America, up and down, side to side.  The financial crisis is far from over beyond Wall Street and its backyard.

___

... They (and we) could avoid crises by just paying attention.  But there's plenty of evidence that attention is exactly what we do not pay.  James Surowiecki looks at the ramshackle way in which we gather information and then fail to put it to use, or get it to us too late, or find that it isn't telling the whole story.  Example:  check out our (and our elected officials') consistent failures with inflation data.

The government continues to track inflation, for instance, by gathering price data much as it did in the nineteen-fifties: it surveys consumers by phone to see where they buy, surveys businesses to see how much they charge, checks out shopping malls to price goods. This leaves out consumers who have only cell phones, and it probably overstates inflation by not fully accounting for things like the impact of big-box stores. The larger problem, though, is the time it takes: the Consumer Price Index’s figures don’t come out until a month after the fact. In turbulent times, that’s too slow.

A new venture called the Billion Prices Project may help change that. The B.P.P., which was designed by the M.I.T. economists Alberto Cavallo and Roberto Rigobon, gathers price data not via survey but, rather, by continuously scouring the Web for prices of online goods around the world. (In the U.S., it collects more than half a million prices daily—five times the number that the government looks at.)

Oh goody!  We'll get less scary and much more accurate reports about inflation, right?  Our members of Congress and people in the Treasury -- people who depend on accurate information -- will be able to do  better job.

Not really.

Giving policymakers more information doesn’t mean that they’ll believe it or act on it. In the years leading up to the financial crisis of 2008, after all, there was a lot that people didn’t know, but the fundamental problems were obvious: housing prices were rising too fast and banks were flinging loans at unqualified borrowers with reckless abandon. Yet the Federal Reserve and banking regulators failed to take any action to try to pierce the bubble before it brought the economy crashing down. These days, all the available numbers, including the C.P.I. and the Billion Prices Project, suggest that inflation is under control. Still, politicians and some Fed members are fretting that a huge price spike may be imminent, and are pushing to make monetary policy tighter, even in the face of unacceptably high unemployment. An enormous amount has been done lately to make sure that policymakers have the numbers they need. The question is whether they’ll use them.