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How J.P. Morgan Chase Has Made the Case for Breaking Up The Big Banks and Resurrecting Glass-Steagall

Evans Liberal Politics
May 15, 2012

The Best in Truthful Liberal News
And US Politics

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How J.P. Morgan Chase HasMade
the Case for Breaking Up The Big Banks
and Resurrecting Glass-Steagall

How J.P. Morgan Chase Has Made the Case for Breaking Up The Big Banks and Resurrecting Glass-Steagall, Robert Reich.org, May 10, 2012, by Robert Reich: Evans Liberal Politics wishes to thank Professor Reich for permission to publish his articles on an ongoing basis:

J.P. Morgan Chase & Co., the nation’s largest bank, whose chief executive, Jamie Dimon, has led Wall Street’s war against regulation, announced Thursday it had lost $2 billion in trades over the past six weeks and could face an additional $1 billion of losses, due to excessively risky bets.

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The bets were “poorly executed” and “poorly monitored,” said Dimon, a result of “many errors, “sloppiness,” and “bad judgment.” But not to worry. “We will admit it, we will fix it and move on.”

Move on? Word on the Street is that J.P. Morgan’s exposure is so large that it can’t dump these bad bets without affecting the market and losing even more money. And given its mammoth size and interlinked connections with every other financial institution, anything that shakes J.P. Morgan is likely to rock the rest of the Street.

Ever since the start of the banking crisis in 2008, Dimon has been arguing that more government regulation of Wall Street is unnecessary. Last year he vehemently and loudly opposed the so-called Volcker rule, itself a watered-down version of the old Glass-Steagall Act that used to separate commercial from investment banking before it was repealed in 1999, saying it would unnecessarily impinge on derivative trading (the lucrative practice of making bets on bets) and hedging (using some bets to offset the risks of other bets).

Dimon argued that the financial system could be trusted; that the near-meltdown of 2008 was a perfect storm that would never happen again.

Since then, J.P. Morgan’s lobbyists and lawyers have done everything in their power to eviscerate the Volcker rule — creating exceptions, exemptions, and loopholes that effectively allow any big bank to go on doing most of the derivative trading it was doing before the near-meltdown.

And now — only a few years after the banking crisis that forced American taxpayers to bail out the Street, caused home values to plunge by more than 30 percent, pushed millions of homeowners underwater, threatened or diminished the savings of millions more, and sent the entire American economy hurtling into the worst downturn since the Great Depression — J.P. Morgan Chase recapitulates the whole debacle with the same kind of errors, sloppiness, bad judgment, and poorly-executed and excessively risky trades that caused the crisis in the first place.

In light of all this, Jamie Dimon’s promise that J.P. Morgan will “fix it and move on” is not reassuring.

The losses here had been mounting for at least six weeks, according to Morgan. Where was the new transparency that’s supposed to allow regulators to catch these things before they get out of hand?

Several weeks ago there were rumors about a London-based Morgan trader making huge high-stakes bets, causing excessive volatility in derivatives markets. When asked about it then, Dimon called it “a complete tempest in a teapot.” Using the same argument he has used to fend off regulation of derivatives, he told investors that “every bank has a major portfolio” and “in those portfolios you make investments that you think are wise to offset your exposures.”

Let’s hope Morgan’s losses don’t turn into another crisis of confidence and they don’t spread to the rest of the financial sector.

But let’s also stop hoping Wall Street will mend itself. What just happened at J.P. Morgan – along with its leader’s cavalier dismissal followed by lame reassurance – reveals how fragile and opaque the banking system continues to be, why Glass-Steagall must be resurrected, and why the Dallas Fed’s recent recommendation that Wall Street’s giant banks be broken up should be heeded.

Robert Reich was President Clinton’s Secretary of Labor and is Chancellor’s Professor of Public Policy at California Berkeley. Time Magazine named Prof. Reich one of the ten most effective Secretaries in U.S. history. This article is from Professor Reich’s blog and can be viewed here.

Recommended: JPMorgan Chase Has Lost $20 Billion On Its Bad Trade, Taking Into Account Share Price, HuffPost Business, May 14, 2012, by Mark Gongloff:

By now you may have heard that JPMorgan Chase lost $2 billion on a bad trade. Multiply that by 10, and you’re starting to get a better idea of how much it has really lost.

That’s because the share price of the biggest U.S. bank by assets has tumbled by more than 11 percent since it announced the trading loss, shaving about $17.5 billion from its market value. JPMorgan shares were down another 2 percent on Monday, following a 9 percent tumble on Friday.

Shareholders aren’t necessarily upset about the $2 billion loss itself. The bank has lost more money than that at different times in other businesses, the New York Times reminded us this morning, without causing much of a ruckus. Though the loss could grow to $4 billion or more, by some estimates, that’s still a far cry from the $90 billion or so in revenue the bank has raked in over the past year.

The real worry for investors is the damage the episode has done to JPMorgan’s previously sterling reputation for managing its risks, the increasing heat of the water around CEO Jamie Dimon and — maybe most importantly — the fact that this debacle comes at the worst possible time for the bank, regulation-wise.

See White House urges bank reforms after JPMorgan loss, The Raw Story, May 14, 2012, by Agence France-Presse:

Investors punished the bank’s shares again Monday, sending them 3.2 percent lower, as JPMorgan announced that chief investment officer Ina Drew was stepping down and news reports said more heads were likely to roll.

See Romney Vowing Dodd-Frank Repeal Hits JPMorgan Risky Trades (Update 1), Bloomberg, May 14, 2012, by Julie Hirschfeld Davis and Lisa Lerer:

Mitt Romney says he wants to talk about the economy in this presidential campaign, including his call to repeal the Dodd-Frank financial regulation law. JPMorgan Chase & Co. (JPM)’s $2 billion trading loss in risky transactions isn’t the sort of conversation he had in mind.

So far, presumptive Republican nominee Romney has said little about the transaction that is roiling Wall Street and Washington, prompting an inquiry by the Federal Reserve, a call for a congressional investigation and a demand by Elizabeth Warren, a Democratic Senate candidate in Massachusetts, that JPMorgan Chief Executive Officer Jamie Dimon resign from the board of the New York Federal Reserve.

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Romney, co-founder of private-equity firm Bain Capital LLC, has spotlighted his vow to repeal the Dodd-Frank law that aims to strengthen financial regulations, calling it one of several overly burdensome laws backed by President Barack Obama that costs jobs. Romney hasn’t directly commented on the JP Morgan losses since Dimon disclosed them on May 10; he ignored a reporter’s shouted question about the matter at a May 11 rally in Charlotte, North Carolina.

Also See JPMorgan Said to Weigh Bonus Clawbacks After Loss, Bloomberg, May 14, 2012, by Laura Marcinek, Donal Griffin and Dawn Kopecki:

JPMorgan Chase & Co. (JPM), the biggest U.S. bank, will consider reclaiming incentive pay from employees including former Chief Investment Officer Ina Drew after her unit had a $2 billion trading loss, said two senior executives.

The lender can cancel stock awards or demand they be repaid if an employee “engages in conduct that causes material financial or reputational harm,” JPMorgan said in its annual proxy statement. The company will claw back pay if it’s appropriate, said one of the executives, who asked not to be identified because no decisions have been made.

The incident, which led to Drew’s retirement yesterday, may test JPMorgan’s claw-back policy amid mounting investor criticism over Wall Street pay practices and as regulators investigate the trades. Chief Executive Officer Jamie Dimon said the strategy that led to the loss was “poorly executed and poorly monitored” and that it gave ammunition to proponents of stricter bank regulation.

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Posted on May 15, 2012 by , Reply

The Economy, Entitlements and Welfare: The Democratic Position — A Secular and Rational Validation

Evans Liberal Politics
April 24, 2012

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and US Politics

The Economy, Entitlements and Welfare:
The Democratic Position –
A Secular and Rational Validation

Evans Liberal Politics, April 24, 2012, by Paul Evans:
I have written quite a few articles arguing for compassion towards our fellow man in the form of funding for entitlements, welfare, and the like. More often than not, the primary rationale I have used has been not only coming out of liberalism and liberal values, but also from Christianity. I took Jesus’ life, as recorded in the Gospels, and the way the early Christian community was run in the years after his resurrection, from Acts, as well as the concept of Logos, and tried to translate that into my own vision for society, which, as I see it, amounts to a basically liberal conception. I was trying to say that if we listened to the words of Jesus and saw how he lived his life on earth, and how the early church was run, it points to a model for living and for a society, an economy and a government which must necessarily be very caring towards all of our people.

photo of Evans Liberal Politics owner Paul Evans against a background of white roses

However, I don’t think that one necessarily needs to take one’s model for society from the Gospels or from the model of the early church in order to justify a society and a government which acts as its brothers’ keeper and takes care of society’s less fortunate citizens. In fact, growing up, I was agnostic, really basically into my late forties (I am 55 now), and I have always tended to follow ideals which followed those of New Deal sorts of Democrats.

I believe that there are so very many ordinary citizens, both Christians and secular citizens, who simply do not understand the situation faced by America’s poor and even, currently, that faced by much of our middle class. There is a lot of suffering in America, and many Republicans seem to feel it is the fault of the less fortunate that they find themselves in the predicament which they are in.

The right wing media, financed by very rich hard line Republicans who do not want to pay for social programs, have brainwashed far too many ordinary Americans. I refer to people like Rush Limbaugh, who (I believe) made about $53 million in 2009 or 2010. And now it seems that Mitt Romney is going to be nominated for 2012, and is being pushed by some Republican spokespersons as someone completely in touch with the “heart and soul” of ordinary Americans. This is just pure garbage, and we need to understand the facts: Mitt Romney is worth about a half a billion dollars ($500,000,000.00). Further, he has investments in the tax free Cayman Islands and owns at least one Swiss bank account. He may not be as extreme as someone like Newt Gingrich, but he certainly is much richer, and he is FAR from being any sort of “ordinary American.”

I would argue that someone like that, who grew up in a wealthy family, simply cannot be likely to understand the problems of ordinary Americans and also, may not even truly care about us. It is easy to make speeches which seem to be reaching towards us, but what does he know about running out of money halfway through almost every month, scrambling or even begging friends for money for gas, or being unable to pay the phone bill? What experience does Romney have working with the poor, and interacting with them on any sort of level of equality whatsoever?

One seventh of us live in poverty, you know. Are we beneath the rest of Americans in worth?

Barack Obama worked with the unemployed factory workers of South Chicago, and tried to help give them a hand up out of poverty and to advocate for them. He grew up in a rather modest middle class family. I would argue that he must necessarily understand ordinary Americans better.

FDR grew up wealthy. But he showed, time after time, for nearly four terms as President, that his heart and soul was with the less fortunate of society. And for that, most Republicans hate him and almost all the legislation he enacted, and everything he stands for.

What are the facts? Right now, about 400 or so people in America own one half of this nation’s wealth. The lower 80 percent of us actually only own 17 percent of the wealth. We are HURTING.

They say that the unemployment rate is dropping, that in fact it has dropped about a percent, now. Fine. Let’s just look for a minute at what the situation was about a year ago. Certain of these statistics in particular are burned into my consciousness and actually, I would bet my nose that they simply have not changed that much. In February, 2011, for those Americans making $100,000 a year or more, the unemployment rate was 3.2 percent. I hope they didn’t suffer too badly. For those making $20,000 a year or less, the unemployment rate was actually 31 percent. So, with the unemployment picture finding five applicants for every job opening, who do you think was getting the jobs, and what sort of jobs were these?

What is the Republican solution to our current economic malaise? They want to cut spending, in particular entitlements and welfare, and to enact tax cuts which would almost certainly be in favor of the rich. Every since Ronald Reagan, the Republican line has been that tax cuts for the wealthy result in a “trickle down” effect which benefits everyone. This has been enthroned in the grand theory of “supply side economics.” But it’s bunk!


From Truman to Eisenhower the highest bracket tax rate was about 94 percent and the economy grew steadily at four percent, without deficits. Then the highest bracket was lowered to 75 percent. Still, the economy grew at about four percent. This continued, at decreasing tax rates under Nixon and Ford, with a downturn at the end of Ford’s term. We had a problem under Carter which I recall was called “stagflation.” The economy was contracting and there was inflation which reached about 17 percent.

Reagan swept into office under the banner of supply side economics, and two things did occur which stimulated the economy into growth. First the overall normal business cycle came around and the economy, as normally occurs after a recession, began to grow again. Normal recession, normal recovery. Secondly, tax cuts were enacted which, it could be argued, served as an effective stimulus to the economy. But the economy did not grow nearly as fast as it did under Reagan’s successor, Bill Clinton. Clinton raised taxes on the rich, and, what happened? We saw economic growth return to its “normal” post WWII rate of four percent a year, and a fairly severe budget deficit was entirely erased and turned into a surplus.

Let’s look at President Bush’s economy. In the first place, regulations which governed the banking and investment industry had just been trashed and these institutions then grew ascendant and arrogantly powerful, growing from about 14 percent of the economy to about 34 percent. This problem actually began in the Clinton administration but that most of the abuse was under Bush. There were then in fact two sets of tax cuts which strongly favored the rich. We saw economic growth of about 2 to 3 percent, followed by a severe turndown due to a typical Republican failure to regulate business. In this case the main problem was the investment industry, and the banking industry in particular with regard to the nearly unrestricted enactment of mortgage loans. Even after the picture for mortgages had deteriorated, the severe structural problem was concealed in the practice of issuing “derivatives,” as investments, which disguised bulk packages of trash mortgages in packages of corruptly highly rated bonds.

It was this combination which has put us in the severe downturn in which we find ourselves. It has not been a typical cyclical contraction but a severe structural problem in the economy because, mainly, America’s middle class lost the ability to finance loans, having lost any equity they had in their homes, assuming they were able to keep them. Progressive economists have argued that because of the severe and structural nature of the contraction, which some argue did in fact reach the level of a depression, only real stimulus of the overall economy by the government would pull us out of the slump. It has been shown factually, for example, that one dollar invested in infrastructure returns money into the economy at a significantly higher rate than does one dollar in tax cuts. But of course, the Republican line is that Obama’s stimulus accomplished little or nothing. Yet without it, we might have suffered far worse.

Recently among other things, the Republican majority in the House forced a continuation of the low Bush tax rates for the wealthy. Democrats wanted a return to the proven success of the Clinton tax rate levels, but did not have power to enact this. Has the continuation of low tax rates for the rich stimulated the economy into any sort of stiff growth? I would argue that, in fact knowing the facts about what tax cuts for the wealthy really are for (and it isn’t to stimulate economic growth), the almost single minded purpose behind a great deal of the proposals and enactments of Republicans during Barack Obama’s three plus years has been to PREVENT the economy from growing fast at all.

This is of course so that a “pro-business,” President can be elected who is a “true Christian” and has the “right sorts of social values.” In fact, Mitch McConnell has been quoted as saying at one point recently that he would allow no legislation to pass which would materially help Barack Obama to be reelected. This is the sort of “true patriotism” which the Republican Party demonstrates.

The leaders of the Republican Party don’t care how much ordinary Americans suffer so long as they can have full political power to do as they will. In other words, they will do whatever is necessary to have full control of the House, the Senate and the Presidency. And why should they care about ordinary Americans? Because of their – I might call it almost a pure capitalist religion, but, you know, “their sort” of capitalism – corporations are growing, Wall Street is again expanding, and the rich are seeing their stock portfolios once again grow fatter. While ordinary Americans suffer.
To sum it up, these Republicans are entirely for the wealthy, for big corporations, against any sort of prosperity so long as a Democratic President is in office, against continued aid to society’s less fortunate at current levels, and they lie about their true purposes. They are adamantly pro-life, but pro-life ends at birth. Children of the poor are supposed to get by as best their parents are able, and if this means babies and children suffer or even die, somehow this is the fault of the poor. This is not the Republican Party of Lincoln or Eisenhower. This is the truly patriotic and morally steadfast Republican Party at it’s absolute best, as it has been over about the last eleven or twelve years.

In conclusion, if we always favor the rich, even when in fact it has been shown that this does NOT stimulate the economy effectively, if we fail to enact or even roll back crucial regulations and laws which keep our economy functional and support the welfare of all of our people, and if we are against continuing aid to society’s less fortunate, I ask you: how moral is that? I would argue that purely secular and rational considerations point to a strong superiority in the liberal or Democratic positions about government, and that the current Republican agenda is in fact morally bankrupt.

These are some of the secular arguments which come to my mind in favor of basically Democratic positions about the economy, entitlements and welfare. ~ Paul

Comment by Evans Liberal Politics owner Paul Evans: So fiscal conservatives want to slash Medicaid. OK, fine, note to world: many doctors and most dentists no longer accept Medicaid. I have a broken off tooth with inflamed gums and my jaw hurts. Well, there is only one Medicaid dentist in Wooster, serving a county of 105,000. So there’s a long wait, and many people just resort to going to the ER. See Hidden America: Medicaid’s Youngest Face Dental Crisis, ABC News, April 24, 2012, by Chris Cuomo:

With more than 16 million low-income U.S. children on Medicaid not receiving dental care — or even a routine exam — in 2009, according to the Pew Center on the States, dentists and ERs say they are treating very young patients with teeth blackened from decay and bacteria and multiple cavities.

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See “Supply Side Economics, the Bush Tax Cuts & John Boehner Completely Discredited,” Evans Liberal Politics, December 31, 2011, by Paul Evans.

See In Addition to Geithner, Republican Economists Also Argue That Tax Cuts Do Not Pay for Themselves, Center for Budget and Policy Research, August 8, 2012, by CEPR.

See Americans Believe in Tax Equity: Polls Show Americans Want Tax Fairness as Part of Deficit Fix, Center for American Progress, April 15, 2011, by James Hairston.

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Posted on April 24, 2012 by , Reply

Robert Reich: The Precarious Jobs Recovery

Evans Liberal Politics
March 10, 2012


The Best in Liberal Christian News
and US Politics

Robert Reich: The Precarious Jobs Recovery

The Precarious Jobs Recovery, Robert Reich.org, March 9, 2012, by Robert Reich, used with permission, quoted verbatim:

February’s 227,000 net new jobs – the third month in a row of job gains well in excess of 200,000 – is good news for President Obama and bad news for Mitt Romney.

Jobs are coming back fast enough to blunt Republican attacks against Obama on the economy and to rob Romney of the issue he’d prefer to be talking about in his primary battle against social conservatives in the GOP.

The Seven Biggest
Economic Lies

But jobs aren’t coming back fast enough to significantly reduce the nation’s backlog of 10 million jobs. That backlog consists of 5.3 million lost during the recession and another 4.7 million that needed to have been added just to keep up with the growth of the working-age population since the recession began.

If the American economy continues to produce jobs at the good rate it’s maintained over the last three months, averaging 245,000 per month, the backlog won’t be whittled down for another five years — long after Barack Obama finishes his second term, should voters grant him another.

But whether even that good rate continues depends largely on whether consumer demand can be revived. Spending by American consumers is 70 percent of U.S. economic activity. But so far, spending is anemic.

American consumers have replaced worn-out cars and appliances, but little else. They haven’t had the dough. Their wages are still falling, adjusted for inflation. The value of their homes – most consumers’ single biggest asset – continues to drop.

Save the Children Tax

Home values are down by an average of a third from their 2006 peak. Consumers understandably feel far poorer as a result. Declining home prices also mean consumers can’t use their homes as collateral for new loans, as they did before 2008. And even with low interest rates, refinancing is difficult.

Corporate profits are up but the money isn’t flowing to American workers. The ratio of profits to wages is the highest on record – since the government began keeping track in 1947. Not only has the median wage continued to drop, adjusted for inflation, but a far smaller share of working-age Americans is now employed (58.6 percent) than was employed five years ago (63.3 percent). Today’s employment-to-population ratio isn’t much higher than it was at its lowest point last summer, when it dropped to 58.2 percent.

The major driver of the U.S. economy over the past several months hasn’t been consumer spending. It’s been businesses rebuilding depleted inventories. Wholesalers increased their stockpiles again in February, bringing them up almost a quarter from their low in September 2009.

But businesses won’t continue to rebuild inventories unless consumers start buying again. big-time. And consumers won’t resume spending as they did before the recession until they’re far better off financially.

Yet how can they be sufficiently better off when their major asset has shrunk so much and when so few of the economic gains are going to them?

This is the central paradox at the heart of the American economy today. If it’s not resolved, the jobs recovery will stall, as it did last spring.

A year ago, remember, we had another three-month run of good job numbers. Last February, March, and April saw net gains of more than 200,000 jobs a month. But that job boomlet abruptly ended.

At the time most observers blamed the stall on external events – the Japanese earthquake, Europe’s gathering debt woes, and higher gas prices. In reality, it stalled because of the shallow pockets of American consumers.

Another stall this time might be blamed on any number of external events – slower growth in China and India, the unraveling of Europe’s debt-crisis deal, and higher gas prices.

But if another stall occurs, the real reason will be Americans once again ran out of money.

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Posted on March 10, 2012 by , Reply

Robert Reich — Bye Bye American Pie: The Challenge of the Productivity Revolution

Evans Liberal Politics
March 6, 2012


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and US Politics

Robert Reich — Bye Bye American Pie:
The Challenge of the Productivity Revolution

Bye Bye American Pie: The Challenge of the Productivity Revolution, Robert Reich.org, March 1, 2012, by Robert Reich, used with permission, quoted verbatim:

Here’s the good news. The economic pie is growing again. Growth in the 4th quarter last year hit 3 percent on an annualized rate. That’s respectable – although still way too slow to get us back on track given how far we plunged.


Here’s the bad news. The share of that growth going to American workers is at a record low.

That’s largely because far fewer Americans are working. Although the nation is now producing more goods and services than it did before the slump began in 2007, we’re doing it with six million fewer people.

Why? Credit technology. Computers, software applications, and the Internet are letting us produce more with fewer people.

In theory, this is a huge plus. We can live better and have more time off.

But as Tonto asked the Lone Ranger, “who’s ‘we,’ kemosabe?”

The challenge at the heart of the productivity revolution – and it is a revolution – is how to distribute the gains. So far, we’ve been failing miserably to meet that challenge.

True, some of the gains are widely spread in the form of lower prices and higher value. My 3-year-old granddaughter gets more out of an i-Phone in five minutes than my 98-year-old father ever got out of reading the daily paper (putting to one side their relative capacities to process the information).

But many of the gains are distributed narrowly in the form of profits to owners, and fat compensation packages to the “talent.”

The share of the gains going to everyone else in the form of wages and salaries has been shrinking. It’s now the smallest since the government began keeping track in 1947.

If the trend continues, inequality will become ever more extreme.

We’ll also face chronically insufficient demand for all the goods and services the productivity revolution can generate. That’s because the rich save more of their earnings than everyone else, while middle and lower-income families – with fewer jobs or lower wages – no longer have the purchasing power to keep the economy going at full tilt. (Before 2008 they kept up their buying by sinking deep into debt. This proved to be an unsustainable strategy.)

Insufficient demand – as everyone but regressive supply-siders now recognize – is a big reason why the current recovery has been so anemic and the pie isn’t growing faster.

So while the productivity revolution is indubitably good, the task ahead is to figure out how to distribute more of its gains to more of our people.

One possibility: higher taxes on the rich that go into wage subsidies for lower-income workers, combined with job sharing.

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We also need better schools (from early-childhood through young adulthood, followed by systems of lifelong learning) so everyone has a fair shot at a larger share of the gains.

Finally, the benefits of the productivity revolution should be turned into more abundant public goods – cleaner air and water, better parks and recreation, improved public health, and better public transit.

Regressive right wingers want Americans to believe we’ve been living beyond our means, and can no longer afford it.

The truth is just the reverse. Most Americans’ means haven’t kept up with what the economy could provide – if the fruits of the productivity revolution were more widely shared.

Regressives growl about America’s borrowing and tut-tut about future federal budget deficits. The reality is the world is willing to lend us vast amounts of money because we’re so productive. And the productivity revolution is making us ever more so.

Get it? The pie is growing again but most people aren’t getting much of a slice. That’s bad even for those getting the biggest pieces. They’d do better with smaller slices of a pie that grew much faster.

Robert Reich was the nation’s 22nd Secretary of Labor under Bill Clinton and is Chancellor’s Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley. He has served in three national administrations. In 2008, Time Magazine named him one of the Ten Most Successful Cabinet Members of the century. He has written eleven books, including “The Work of Nations,” which has been translated into 22 languages. His recent book is “Supercapitalism.” For Professor Reich’s book page for Supercaptialism at Amazon, go here. Reich’s newest book, Aftershock: The Next Economy and America’s Future has been released September 21, and is available for ordering at this link (Amazon.com). The above article is from Reich’s new blog, and can be viewed here.

Robert Reich’s commentaries are available for listening to at Publicradio.com. Watch the video Aftershock: The next economy and America’s future (about his new book). Thanks to Professor Reich for permission to publish his articles on an ongoing basis.

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Posted on March 6, 2012 by , Reply

Soros: Not much difference between Obama and Romney

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Soros: Not much difference
between Obama and Romney

Soros: Not much difference between Obama and Romney, The Raw Story, January 25, 2012, by Eric W. Dolan, used with permission, quoted verbatim: Logos57: a Caring Community is pleased to partner with The Raw Story to bring you cuttiing edge news.

Billionaire investor and philanthropist George Soros told Reuters Global Editor-at-Large Chrystia Freeland that he still supported President Barack Obama, but predicted voters would not be very enthusiastic about the 2012 elections if former Massachusetts Gov. Mitt Romney was nominated by Republicans.

Soros on Romney vs. Obama

“Well, look, either you’ll have an extremist conservative, be it Gingrich or Santorum, in which case I think it will make a big difference which of the two comes in,” he said. “If it’s between Obama and Romney, there isn’t all that much difference except for the crowd that they bring with them.”

But he acknowledged that a major difference between Romney and Obama would be their potential Supreme Court nominations and their stance on taxation.

“That is the big difference, and that has led my hedge fund community to abandon Obama in favor of any Republican because they don’t like to be taxed,” Soros explained. “I personally believe that when it comes to policy, you shouldn’t be pursuing self-interest, but the public interest. And I think that the income differentials are too wide and ought to be narrowed.”

Soros has been demonized by some, most notably Lyndon LaRouche and Glenn Beck, for his liberal views and influence. He has donated millions to the Center for American Progress, MoveOn.org and the Drug Policy Alliance.

“Are you one of Lenin’s useful idiots in the view of your fellow hedge fund billionaires?” Freeland asked.

“Well, I suppose so,” he replied. “I am a traitor to my class.”

Comment by Paul Evans: It does seem to me that Ms. Freeland, the interviewer, went too far when she refered to Soros as “one of Lenin’s useful idiots.” The man courageously advocates for a fair and progressive system of taxation. That hardly makes him anyone’s “useful idiot.” As to the comparison of Romney with Obama, the fact of Obama’s advocacy of a fairer system of taxations has ramifications through much of the budgetary process. If a more progressive system of taxation could somehow be put in place, for example, the political pressure to cut entitlements would be much less (and the Democrats’ ability to succesfully oppose such cuts would be stronger). To liberals and progressives everywhere, this should be understood as a huge difference. Obama only advocates bringing the level of taxation back to what it was under Clinton. It may be noted that Clinton balanced the budget and that during his Presidency the economy grew at 4 percent per year. For the very rich, it was in fact not much of a burden at all.

Recommended: Feeling Heat From Gingrich, Romney Enters Attack Mode, The NY Times, January 25, 2012, by Michael D. Shear.

Also Recommended: Candidates Scramble to Win Hispanic Votes in Florida, The NY Times, January 26, 2012, by Michael D. Shear and Trip Gabriel.

Watch Colbert: ‘Gingrich would totally win a wet t-shirt contest’, Comedy Central on The Raw Story, January 25, 2012, by Andrew Jones — Paul Evans: That’s the funniest claim I’ve heard yet this year, maybe longer. Gingrich? Win a wet t-shirt contest??? ROTFL… The guy is about as ripped as a stuffed elephant!

Also See: Obama and GOP candidates offer a campaign preview, AP News on CenturyLink, January 26, 2012, by David Espo.

Also See: Obama Calls for Wealthy to Pay More Taxes to Restore Fairness, Bloomberg Businessweek, January 25, 2012, by Catherine Dodge and Kate Andersen Brower.

Posted on January 26, 2012 by , 1 comment

Supply Side Economics, The Bush Tax Cuts & John Boehner Completely Discredited

Logos57: A Caring Community
December 31, 2011

 

Supply Side Economics, The Bush Tax Cuts
& John Boehner Completely Discredited

The Bush Tax Cuts and Supply Side Economics
by Now Should Be Completely Discredited
as Economic Evidence, History Show

Logos57: A Caring Community, edited version published December 31, 2011, original version May 15, 2011, by Paul Evans: This article is dependent on John Boehner says Bush tax cuts created 8 million jobs over 10 years, PolitiFact Truth-O-Meter, May 11, 2011, The Laffer Curve in Real Life, Atlanta Journal Constitution, September 15, 2010, by Jay Bookman, and other sources, especially the Center for Economic and Policy Research.

Also Published on OpEdNews.

Be Sure and Watch Top 10 Greatest GOP Moments of 2011 on Video.

Starting Point: FALSE: John Boehner says Bush tax cuts created 8 million jobs over 10 years

In 1980, Ronald Reagan swept into office on the corpse of Jimmy Carter’s “stagflation” (economic stagnation with increased unemployment + inflation of about 17.5 percent, I remember it well). Republicans were chanting a new mantra called supply side economics, which stated, basically, cut taxes, particularly cut taxes for the rich, and this will result in economic growth. They even had so-called mathematical theory to back them up in a graphical representation known as the Laffer curve.

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A cursory look at the literature on the economic successes of recent administrations shows that Boehner’s claim and supply side economics in general are base lies. The only real reason for supply side economics is to raid the nation’s resources (hopefully for the right wingers in terms of cuts to entitlements, or at the least privatization of them), to make the rich richer. The record, as documented below, shows that higher tax rates, particularly higher tax rates on the wealthy, have resulted in 1.) higher GDP economic growth, 2.) lower deficits and 3.) a healthier economic climate with lower unemployment.

In private meetings, the wealthy chortle over their success at hoodwinking the American people into lowering taxes for the wealthy. In an article by Mark Weisbrot called Extending the Tax Cuts: The Ninety-Eight Percent Solution, published in at least 29 newspapers or websites, the snobbery and effrontery of the rich is laid bare:

George W. Bush summed it up at an $800-a-plate dinner back in 2000 with a joke: “This is an impressive crowd – the haves and the have-mores,” he said. “Some people call you the elites; I call you — my base.” What made the joke really funny is that it was true.

Getting back to the PolitiFact article, from which I take one of the main subjects of my own article, that is, John Boehner’s claim about the Bush tax cuts (in other words, one of the main of examples of supply side economics in practice) and these tax cuts’ economic effectiveness, PolitiFact introduces the subject as follows:

During an interview on NBC’s Today show (May 10, 2011), House Speaker John Boehner, R-Ohio, offered some job-creation statistics to cast a favorable light on the tax cuts passed under President George W. Bush in 2001 and 2003.

Host Matt Lauer said to Boehner, “You talk about creating jobs. When the Bush era tax cuts were passed in 2001, unemployment in this country was 4.5 percent. Today it’s at 9 percent, just down from 10 percent. So why are the Bush era tax cuts creating jobs?”

Boehner responded that the tax cuts “created about 8 million jobs over the first 10 years that they were in existence. We’ve lost about 5 million of those jobs during this recession.”

Let me state, before we get into the Bush tax cuts and supply side economics, with a summary of PolitiFact’s arguments and also additional evidence, that PolitiFact’s conclusion was that, essentially, Boehner’s statement is FALSE. PolitiFact examines Boehner’s claim about the Bush tax cuts in the time frame of 2001 to 2009, but an examination of the U.S. economy in a larger time frame is more instructive, as we shall see.

There were two Bush tax cuts, the first passed in June, 2001. PolitiFact points out that this means that Boehner’s contention cannot be true, in that ten years have not passed since the tax cuts (the first package) went into effect. They note, moreover, in the first place that there is no direct evidence that it was these tax cuts which accounted for the job growth during the Bush administration at all. Any rational examination can put job growth during these years as the result of a housing bubble and stock speculative bubble, and not true economic growth with a valid basis — but that is just my opinion, although it is held by many.

Let’s look at PolitiFact’s numbers more closely. There are actually two measures of job growth used by economists. By the most commonly used measure, the “Current Economic Statistics” or CES figures, here is what PolitiFact found was true for the Bush years:

June 2001: 132,047,000 people employed
January 2008: 137,996,000 people employed
Increase during that six-and-a-half-year period: 5,949,000 people

That’s roughly 6 million jobs — significantly below the 8 million Boehner cited.

Now let’s turn to the jobs lost during the recession. We once again calculated the numbers in the way most favorable to Boehner — from the peak of employment (January 2008) to the lowest point (February 2010). Here are the figures:

January 2008: 137,996,000 people employed
February 2010: 129,246,000 people employed
Decrease during the roughly two-year period: 8,750,000 people

That’s almost 9 million jobs lost — almost twice what Boehner had said on Today.

Don’t you love the way politicians throw numbers around without checking the facts? (Many times, of course, they are well aware of the facts and are just baldly lying.) Here please note that the figures indicate that in the time, thus far, since the Bush tax cuts began, that is, from June, 2001 to the time at which PolitiFact’s analysis ends, February 2010, or less than nine years, the economy actually lost about 2.8 million jobs, by the CES statistics. (Boehner’s claim for jobs created by the Bush tax cuts was for ten years.)

As it turned out, Boehner got his figures as provided by that paragon of intelligence, Michael Steele, and from a different set of economic numbers, the “Current Population Survey” or CPS data, and those figures more or less bear him out, to some extent:

June 2001: 136,873,000 people employed
January 2008: 146,407,000 people employed
Increase over about six and a half years: 9,534,000 people

January 2008: 146,407,000 people employed
February 2010: 138,698,000 people employed
Decrease over about two years: 7,709,000 people

So using the CPS figures, Boehner actually underestimated the jobs created after the passage of the Bush tax cuts, rather than overestimating them. And his number of jobs lost in the recession was closer to the CPS number than to the CES number.

Politifact is not stressing the main point here, that Boehner was making his claim of job growth owing to the Bush tax cuts for a span of ten years, and that even by the CPS numbers, only about 1.75 million jobs have been created (thus far). His figures for jobs lost during the recession, while somewhat inaccurate by either measure, are somewhat closer to the mark, but so what? Bush caused the economic and regulatory climate which led to the recession, did he not?

PolitiFact does in fact examine the job creation numbers over a much wider time frame encompassing various recent presidents, citing numbers from Gary Burtless, a labor economist with the Brooking Institution. Burtless looks at the first 81 months of several presidencies, examining only those presidents who served two terms:

Employment under Bush grew by 4.5 percent using CES and 7 percent using CPS, whereas employment grew by double digits under presidents Bill Clinton and Ronald Reagan, and also under the combined eight-year administrations of Richard Nixon and Gerald Ford, who finished Nixon’s term after he resigned, and John F. Kennedy and Lyndon B. Johnson. Only under Eisenhower was job growth more sluggish than it was under George W. Bush, and even then, it was only the case using one of the two BLS statistics. (Burtless did not compare job growth during the administrations of George H.W. Bush or Jimmy Carter because they served only one term each.)

Where does all this leave us? First, under the most common yardstick for measuring employment — the CES data — Boehner’s claim is significantly overstated. Second, while Boehner is closer when using a different statistic, it’s only more accurate if he uses a time period much different than the one he stated in the interview. And third, his suggestion that the tax cuts are primarily responsible for subsequent job growth is contentious at best (and the job growth he points to is modest compared to previous administrations).

So the numbers Boehner offers are accurate only with significant adjustments. Overall, we find his statement too flawed to give it a rating higher than False.

Score one for PolitiFact. It’s good to see centrist news and politics websites which claim to discern the truth of politicians’ statements get it right. Let’s look at a similar, but more devastating analysis by Jay Bookman, The Laffer Curve in Real Life, Atlanta Journal Constitution, September 15, 2010. There is no better way to describe this analysis — and it is devastating to any who would maintain that supply side economics and tax cuts for the rich are good for the economy — than to make an extensive quote from the article:

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So how do we gauge the effectiveness of supply-side theory in practice? I propose we look at three specific measures:

  • The core claim of supply-siders is that tax cuts spur investment, so we’ll look at growth in private investment;
  • Supply-side theory also claims that tax cuts increase government revenue, so we’ll look at whether that actually occurred;
  • And since growth in gross domestic product is the ultimate aim of any economic policy, we’ll include that in the analysis as well.

(Note: All data below have been adjusted to account for inflation.)

Private investment:

After the ‘81 Reagan tax cuts, private nonresidential investment over the next seven years grew at an annual rate of 2.8 percent.
After the ‘93 Clinton tax hike, private investment over the next seven years grew annually at 10.2 percent.
After the 2001 Bush tax cut, private investment grew annually at 2.7 percent. (Data source: CAP/EPI study, Sept. 2008,, based on Bureau of Economic Analysis data.)

Federal revenue:

From 1981-1993, federal revenue increased by 20.7 percent over 12 years.
From 1993-2001, federal revenue grew by 46.6 percent over 8 years.
From 2001-2009, federal revenue decreased by 13.9 percent. (Even if you don’t include the deep recession year of 2009 — you might say we’re invoking the mercy rule — revenue increased just 3.3 percent over the eight years of Bush’s presidency.
(Source: OMB Historical Table 1.2)

GDP growth

From 1981-1993, real GDP grew by an annual average of 2.97 percent.
From 1993-2001, real GDP grew by an annual average of 3.56 percent.
From 2001-2009, real GDP grew by an annual average of 1.56 percent.
(Source: U.S. Bureau of Economic Analysis)

In conclusion, in all three categories central to the claim of supply-side proponents, the economy performed significantly better in the wake of tax increases than it did in the wake of major tax cuts.

Also see In Addition to Geithner, Republican Economists Also Argue That Tax Cuts Do Not Pay for Themselves, Center for Economic and Policy Research, August 5, 2010, no author, in which both Timothy Geithner and Douglas Holtz-Eakin, “a prominent Republican economist who was the chief economic advisor to John McCain in his presidential campaign,” dismissed the contentions that tax cuts pay for themselves as “myths.”

Come on people. We are not fools. Looking at Jay Bookman’s analysis, which seems pretty formidable to me, as it would to any logical thinker, and giving credence to Timothy Geithner as well as the PolitiFact analysis, I believe supply side economics, the damned Laffer curve, and the Bush tax cuts should be pretty thoroughly discredited. And the American people think so too! According to a recent look at Americans attitudes on taxes, Americans Believe in Tax Equity, Center for American Progress, April 15, 2011, by James Hairston, we overwhelmingly want progressive tax rates and dislike the Bush tax cuts:

  • More than four-fifths of Americans favor a surtax on federal income taxes for people earning more than $1 million a year, according to a recent NBC News/Wall Street Journal poll.
  • Almost 7 out of 10 Americans favor eliminating the Bush tax cuts for households earning $250,000 a year or more.
  • (Also): The least popular deficit-reduction proposal is turning Medicare into a voucher program where seniors get government coupons for private insurance, as House Republicans have proposed.

Here it is worthwhile to note that Representative Ryan’s budget plan to gut and privatize Medicare, according to the New York Times (CEPR article), “would add $30 trillion to the cost of buying Medicare equivalent plans over Medicare’s 75-year planning horizon.”

This is not the sum transferred from the government to beneficiaries. It is the increase in total costs — waste to the government, income to insurers and health care providers. This $30 trillion figure is approximately 6 times the size of the projected Social Security shortfall. It comes to almost $100,000 for every man, woman, and child in the country.

Well, Boehner and the Republicans have had their way, and by way of budget blackmail, the Bush tax cuts have been extended for two years.

These tax deals have been going on for some time, either with Obama’s complicity or out of political necessity. See the Guardian.co.uk, in an article by Dean Baker of CEPR, about tax cuts for the rich passed at the end of 2010. On this also see Tax Cut Deal: Extends Current Programs, Provides Little Spur to Further Job Growth, CEPR, December 7, 2010, by Eileen Applebaum, an article originally published in The Hill. Again, this was an earlier giveaway that Republicans forced Obama to make to the rich.

Now we have at least two more years of the Bush tax cuts, thanks to Boehner’s and the Republicans’ blackmail, and the political necessity of accepting a deal to get a budget which Obama faced passed. At this point, there are a few things we should know about these tax cuts. They won’t stimulate investment. And there is no evidence they will create much job growth or overall economic growth in the economy. At least if history means anything. All it will do is line the pockets of the Republicans’ real base, and their real masters, the rich and very rich.

Posted on December 31, 2011 by , 1 comment

Paul Krugman: The Post-Truth Campaign

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December 24, 2011

 

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Paul Krugman: The Post-Truth Campaign

The Post Truth Campaign, The New York Times, December 22, 2011, by Paul Krugman:

Note by Paul Evans: I often stop by the NY Times since they correctly wear the mantle of the best run, most highly thought of liberal and truthful online news source. When I go there, I make it a point to take in the latest column by Paul Krugman, who is a strong voice for truth and progressive economic opinion. Usually I do not usually post any of his articles on my website, since they are copyrighted and in fact I have no right to post them on Evans Community of Caring. I am making an exception for the first half of Krugman’s opinion piece from December 22nd. I know we are only supposed to take small excerpts, but if the people who run the Times would take the time to read this editorial, they would see how important it is and let myself and others publish the whole article. I am compromising with the first half of Krugman’s article.

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I only wish the American people would take the time to read this piece and realize its importance.

Paul Krugman: Suppose that President Obama were to say the following: “Mitt Romney believes that corporations are people, and he believes that only corporations and the wealthy should have any rights. He wants to reduce middle-class Americans to serfs, forced to accept whatever wages corporations choose to pay, no matter how low.”

How would this statement be received? I believe, and hope, that it would be almost universally condemned, by liberals as well as conservatives. Mr. Romney did once say that corporations are people, but he didn’t mean it literally; he supports policies that would be good for corporations and the wealthy and bad for the middle class, but that’s a long way from saying that he wants to introduce feudalism.

But now consider what Mr. Romney actually said on Tuesday: “President Obama believes that government should create equal outcomes. In an entitlement society, everyone receives the same or similar rewards, regardless of education, effort, and willingness to take risk. That which is earned by some is redistributed to the others.”

And in an interview the same day, Mr. Romney declared that the president “is going to put free enterprise on trial.”

This is every bit as bad as my imaginary Obama statement. Mr. Obama has never said anything suggesting that he holds such views, and, in fact, he goes out of his way to praise free enterprise and say that there’s nothing wrong with getting rich. His actual policy proposals do involve a rise in taxes on high-income Americans, but only back to their levels of the 1990s. And no matter how much the former Massachusetts governor may deny it, the Affordable Care Act established a national health system essentially identical to the one he himself established at a state level in 2006.

Over all, Mr. Obama’s positions on economic policy resemble those that moderate Republicans used to espouse. Yet Mr. Romney portrays the president as the second coming of Fidel Castro and seems confident that he will pay no price for making stuff up.

Welcome to post-truth politics.

Why does Mr. Romney think he can get away with this kind of thing? Well, he has already gotten away with a series of equally fraudulent attacks. In fact, he has based pretty much his whole campaign around a strategy of attacking Mr. Obama for doing things that the president hasn’t done and believing things he doesn’t believe.

For example, in October Mr. Romney pledged that as president, “I will reverse President Obama’s massive defense cuts.” That line presumably plays well with Republican audiences, but what is he talking about? The defense budget has continued to grow steadily since Mr. Obama took office. ….

Read the full article, here.

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Paul Evans: OK, I just wanted to throw in a couple quotes here:

Adlai Stephenson II (Democratic nominee and candidate in 1952 and 1956): “I have been thinking that I would make a proposition to my Republican friends… that if they will stop telling lies about the Democrats, we will stop telling the truth about them.

This is particularly for my friend Betsy: “Someone once asked me why do you always insist on taking the hard road? and I replied why do you assume I see two roads?” ~ unknown

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