One of the major growth industries in Washington is the promotion of budget hysteria. Well-funded groups have weekly, if not daily, events designed to hype the country’s budget situation. Much of the national media, most importantly the Washington Post, have enlisted in this effort, devoting both their opinion and news sections toward this goal.
Unfortunately for the deficit-crisis industry, the facts may stubbornly refuse to cooperate. Any discussion of the deficit requires separating out the short-term and the long-term story. The short-term story is very simple. The economy collapsed in 2008 when the housing bubble burst. That is the story of the large budget deficits that we have seen in the last five years: full stop.
Fans of the Congressional Budget Office (CBO) can go back to see their projections from January of 2008, before CBO recognized the consequences of the bursting bubble. The deficit had been a modest 1.2 percent of GDP in 2007. The deficit was projected to stay near 1.0 percent of GDP over the next three years until the end of the Bush tax cuts was projected to push the budget into surplus in 2012. Even if the Bush tax cuts had not been allowed to expire the country can literally run deficits of 1.0-2.0 percent of GDP forever.
There were no huge new permanent spending programs or tax cuts put in place in 2008 or 2009. The deficit soared because the recession sent tax revenue plummeting and caused spending on programs such as unemployment benefits to jump. There were also temporary measures designed to ...
Published: Tuesday 16 October 2012
The amount of damage being inflicted on countries around the world by bad economic policy is astounding.
There is an old story from the heyday of the Soviet Union. As part of their May Day celebrations they were parading their latest weapon systems down the street in front of the Kremlin. There was a long column of their newest tanks, followed by a row of tractors pulling missiles. Behind these weapons were four pick-up trucks carrying older men in business suits waving to the crowds.
Seeing this display, the Communist party boss turned to his defense secretary. He praised the tanks and missiles and then said that he didn’t understand the men in business suits. The defense secretary explained that these men were economists, and “their destructive capacity is incredible.”
People across the world now understand what the defense secretary meant. The amount of damage being inflicted on countries around the world by bad economic policy is astounding. As a result of unemployment or underemployment, millions of people are seeing their lives ruined. The current policies have led to trillions of dollars of lost output. From an economic standpoint this loss is every bit as devastating as if a building had been destroyed by tanks or bombs. And people have lost their lives, due to inadequate health care, food and shelter, or as a result of the depression associated with their grim economic fate.
If an enemy had inflicted this much damage on the United States, the countries of the European Union, or the countries elsewhere in the world that have been caught up in this downturn, millions of people would be lining up to enlist ...
Published: Friday 12 October 2012
Published: Friday 12 October 2012
“The selection surprised many as it comes at a time when much of Europe is facing an economic crisis that threatens the EU’s future. Just this past week, thousands of Greeks protested in Athens against a visit by German Chancellor Angela Merkel who has pushed Greece, Spain and Ireland to enact deep austerity measures.”
The European Union was awarded the Nobel Peace Prize earlier today for its historic role in uniting the continent. Committee chair Thorbjoern Jagland praised the EU for transforming Europe "from a continent of wars to a continent of peace." The selection surprised many as it comes at a time when much of Europe is facing an economic crisis that threatens the EU’s future. Just this past week, thousands of Greeks protested in Athens against a visit by German Chancellor Angela Merkel who has pushed Greece, Spain and Ireland to enact deep austerity measures. For more, we go to London to speak with Tariq Ali, political commentator, historian, activist and editor of the New Left Review. "My initial response was to burst out laughing. Because this Nobel Peace Prize committee, basically run by clapped out former politicians in Norway, never fails to amuse and disappoint,” Ali says. “To give the prize to the European community, at a time, effectively, when economically, it is promoting unemployment, creating real class divides in virtually every country in Europe, where it has led to enormous violence on the streets of Greece, because of the policies being pushed by the EU ... it is a complete and utter joke."
Published: Thursday 4 October 2012
Republicans will blame their defeat in November on the Fed’s monetary stimulus (if not on the ineffectiveness of Mitt Romney’s blunder-filled campaign).
James Carville, Bill Clinton’s chief campaign strategist in 1992, famously expressed a bit of established insider wisdom about winning elections: “It’s the economy, stupid.” Incumbents win if the economic outlook is rosy, and are vulnerable – as George H. W. Bush was – when times are hard. Indeed, throughout Europe – in France, Greece, Ireland, Portugal, Spain, and the United Kingdom – governments have been turned out of office in the face of a crisis that they have seemed unable to address.
By this standard, President Barack Obama should now be in a hopeless situation. According to United States Census data, household income fell in 2011 for the fourth consecutive year. Unemployment remains persistently high, despite the $787 billion stimulus package in 2009, and house prices, though recovering slowly, remain far below their pre-2008 peak.
And yet Obama seems likely to be reelected in November. One reason is that there is no reliable way to render an instant judgment about ...
Published: Tuesday 25 September 2012
People are calling it the “Fall of Rage,” pouring into the streets of Madrid and other Spanish cities to tell their leaders that budget cuts and austerity measures are not working — that with unemployment skyrocketing amid the second recession in four years, “enough is enough.”
On Saturday, thousands rallied in front of key buildings including the Madrid stock exchange, the Bank of Spain and several ministries. The protest, organized by the M-15 platform and composed of indignados and others under the slogan “Deconstructing Lies, Building Alternatives,” served as a preview for the rally to be held Tuesday, Sept. 25, when thousands are expected to surround the Spanish Congress during a plenary session and demand that the government, lawmakers and the king resign.
“We want to go a step beyond the other protests because after many marches, rallies, strikes and even campsites, nothing has changed,” said Mercedes Garcia, a spokesperson for the Occupy Congress action. “Our final goal is to show that democracy is outside Congress, not inside.”
The public's disgust with politics is at its peak since the Franco' dictatorship fell in 1975. In polls, Spaniards rate the political class as their third highest concern, only after unemployment and the economic crisis. Data released by the Center for Sociological Research showed that 79 percent of the country does not believe politicians will meet the current challenges.
“We feel our democracy has been stolen and we have no power ...
Published: Sunday 9 September 2012
Published: Sunday 2 September 2012
Published: Saturday 1 September 2012
Published: Thursday 30 August 2012
“The coming unrest in Europe will likely include a demonstration of German dissatisfaction as well as a strong showing of French frustration and anger in addition to rioting and unrest in Spain, Greece, and other financially unstable countries.”
While widespread, violent riots over running the streets of Europe may not be in the near future, there are strong indications that Europe is in for a tumultuous autumn. The combination of the of the general feeling of helplessness brought about by the Eurozone economic crisis, the resentment felt by voters who elected anti-austerity government officials only to find their leaders are toothless, and the rise in food prices due to extreme weather patterns have the potential to bring about widespread protest in Europe. The coming unrest in Europe will likely include a demonstration of German dissatisfaction as well as a strong showing of French frustration and anger in addition to rioting and unrest in Spain, Greece, and other financially unstable countries.
Anti-austerity, and in some instances, anti-European Union, sentiments have swept Europe following the 2008 global financial crisis, in which loans to rescue failing economies such as Greece and Spain were dependent upon harsh budget cuts other austerity measures. Protests and riots with varying degrees of violence broke out in nations with faltering economies, largely motivated by a disdain for the policies they perceived as being forced upon them by the European Union. However, frustration concerning the state of the Eurozone is not confined to troubled nations such as Greece, Portugal, Spain, and Italy. Even Germany, generally considered the most powerful and economically stable country in the Eurozone, is faced with an increasingly stubborn public. The establishment of the European Stability Mechanism has been ostensibly delayed until September 12th, when the German Constitutional Court will resolve a lawsuit brought by Germans who believe that the fund defies domestic laws
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