Thursday, January 31, 2013

Worth Reading

Smart young Ezra Klein.

Money quote:

And there is a quite real risk that efforts to cut the deficit could be counterproductive in bringing down the debt burden. Britain has been implementing deficit-reduction measures for the past three years, and while it has succeeded in cutting deficits, its economy has been stagnant as austerity sucks the wind out of growth. As a result, its debt to GDP ratio has been rising! (By the IMF’s numbers, Britain’s deficit has fallen from almost 9 percent of GDP in 2008 to 5.6 percent in 2012—yet in that span its debt level has risen from 61 percent to 84 percent).

Worth Listening To

Paul Krugman on Bloomberg Television’s “Street Smart.”.

Wednesday, January 30, 2013

Anticipating the Sequester

The childishly enacted sequester is due to kick in a month or so from now, requiring large cuts in federal spending with the attendant loss of jobs and slowing of economic growth. Of course, the adult thing to do would be to simply repeal the requester legislation, but we are sadly short of adults in today's DC.

The Democrats should be preparing the public to see who will be responsible for the economic consequences to come by pointing out that, although they would be happy to repeal the sequester, the Republicans refuse to do so. The Democrats need to be loudly pointing out that cutting federal spending means jobs will be lost, and when it happens the Republicans will be to blame.  It's an opportunity for them to press home the simple fact that cutting spending means lost jobs, as they should have been doing for the past three years.  If the consequences of the sequester means more of the public will come to see the connection between federal spending and employment rates, then the Democrats will be in a better position to stand up against future irresponsible calls from the Republicans to cut spending, and they may even be able to push for more spending to boost employment, as our Nobel prize winning economists have been pleading.

But the Democrats meed to be laying the groundwork now - we know the Republicans will be blaming the administration for the coming downturn, and they may persuade an unprepared and gullible public.

Tuesday, January 15, 2013

No Ransom!

When Major Garrett asked the president
"What Chuck and I and I think many people are curious about is this new adamant desire on your part not to negotiate when that seems to conflict with the entire history in the modern era of American presidents in the debt ceiling and your own history on the debt ceiling,"
I wish the president had been more forceful in his answer, something along the lines of: "Look, the Republicans are attempting to hold the national and world economy hostage to exact a ransom. When you talk about 'negotiate', you mean accepting that a ransom will be paid:  'negotiations' just mean dickering over the amount of the ransom. It's my belief that the United States should not pay ransom to hostage takers, but should instead demand the immediate release of the hostage - in this case, by increasing the debt ceiling.  You should not make the mistake of seeing this as a Republicans vs. Democrats issue. It's a Republicans vs the United States issue."

Monday, January 14, 2013

Pithily Stated

Duncan Black puts in a nutshell our frustration with the deficit reduction policies being pushed by the Obama administration, and even more destructively by the GOP:
The additional maddening thing is that if you fix the jobs problem you largely fix the deficit problem. The reverse is not true. If you "fix" the deficit you kill the jobs.
( And as one of the commenters on the post noted:
"And you still don't fix the deficit."  )

Saturday, January 12, 2013

Realism about Afghanistan

Emile Simpson has a column laying out the strategic narrative the administration should be employing about how things are going to go in Afghanistan.  One of the ways Simpson says the administration needs to frame the narrative:
We should not invest any coalition credibility in holding the peripheral areas: Over the next three years, the Taliban flag may go up in some towns and villages. In our current narrative, that will be seen as a major victory for them. In reality, to control dusty villages on the periphery, and even remote district centres, means little. We need to adjust our narrative so people expect that, and when it happens, people believe us when, legitimately, we point out that this is insignificant. By so adjusting the narrative, we take pressure off the Afghans to hold the peripheral areas, which they do not want to, only being there because they perceive it as a condition for us giving them support. 
 The main point of his column is that this is not a binary conflict where one side loses, the other wins, and both the US and Afghan publics should understand that there will be no clear victory, and nor could there be.

But is the Obama administration explaining this forcefully enough?
I don't think so.

Friday, January 11, 2013

Another Good Use of Time

An excellent use of a spare 48 minutes would be listening to this interview with Paul Krugman.

(Even if you already spent an hour as I recommended earlier.)

Sunday, January 6, 2013

Avoiding the Debt Ceiling Crisis

While the platinum coin idea is ingenious, it does seem a ridiculous solution to the Republicans' taking the economy hostage, and would probably not go over well with the public. ( Ezra Klein provides a sturdy argument against the coin solution.)

Steve Waldman has what sounds like a more acceptable solution:

The Treasury Secretary would announce that he is obliged by law to make certain payments, but that the debt ceiling prevents him from borrowing to meet those obligations. Although current institutional practice makes the Federal Reserve the nation’s primary issuer of currency, Congress in its foresight gave this power to the US Treasury as well. Following a review of the matter, the Secretary would tell us, Treasury lawyers have determined that once the capacity to make expenditures by conventional means has been exhausted, issuing currency will be the only way Treasury can reconcile its legal obligation simultaneously to make payments and respect the debt ceiling. Therefore, Treasury will reluctantly issue currency in large denominations (as it has in the past) in order to pay its bills. In practice, that would mean million-, not trillion-, dollar coins, which would be produced on an “as-needed” basis to meet the government’s expenses until borrowing authority has been restored.

A reasonable workarounnd.  But the priority for President Obama right now should be to frame the issue so the public understands why extraordinary measures are necessary.

Tuesday, January 1, 2013

Start Framing Now!

The Republicans have made it clear that they will demand concessions from the Democrats before raising the debt ceiling.  When the time comes, they will present it as a a partisan issue - the Democrats want to raise the debt limit, the Republicans want to cut spending.  i.e. the Republicans want something, the Democrats want something, so let's compromise.

If it's it put in those terms, Democrats have to lose.  The public favors compromise, and if the Democrats hang tough and refuse to "compromise", then they will get the blame if the failure to reach agreement results in default and the resulting economic fallout.

The Democrats need to frame the issue correctly now.  Raising the debt limit is not a partisan difference in priorities: the Congress has written a check for the budgeted revenues and spending, and raising the debt limit is just making sure the funds are in the bank to honor that check.  For the Republicans to threaten to refuse to honor the country's commitments, and threaten the whole economy, is hostage taking.  And any spending reductions they demand are a ransom to "free" the hostage (i.e. to  preserve the creditworthiness of the USA and our present [fragile] economy).

It's not a question of partisan differences that can be resolved by "compromise".  You don't compromise with hostage takers: you pay the ransom or you don't. (If you do negotiate, it's on the size of the ransom.)

So that's how the issue should be framed starting today: do the American people want to pay ransom to hostage takers, or don't they?

Update 1/4/13  Advice from a hostage negotiator.

Update 1/6/13  And in case you think the hostage/ransom metaphor is overly anti-Republican - note that the Republicans have used it themselves :

“I think some of our members may have thought the default issue was a hostage you might take a chance at shooting,” (Senator Mitchell)  said. “Most of us didn’t think that. What we did learn is this — it’s a hostage that’s worth ransoming."