"...if it weren't for the politicians, the economy would have a fighting chance."

The Economist explains how politicians are getting in the way of, rather than spurring on, a recovery:

"In America, the biggest policy-related threat is the fiscal tightening that will happen automatically in the next four months as prior stimulus expires and legislated cuts to discretionary spending bite. Barack Obama has proposed $447 billion in new or renewed stimulus to neutralise that threat, but it requires an ambitious deal in Congress’ super committee, and odds of such a deal by its November 23rd deadline are shrinking. Democrats are reportedly trying to get it to consider tax hikes immediately, and Republicans are apparently saying that puts a big deficit reduction deal out of reach."

Blue-collar Republican voters vote against their self-interest. It was only a matter of time before Republican politicians started doing the same. Old habits die hard, I guess.

About that big fat lie that regulations and taxes kill small businesses...

Great pieces in McClatchy and The Economist about the fallacy that regulations kill small businesses. A perfect read for anyone that believes this drivel without any idea as to what they're talking about.

Schumpeter: American idiocracy | The Economist

Great blog post in The Economist chastising Washington for their handling of pretty much everything over the past few years. Here's a part on why there may not be any hope:

"Optimists argue that S&P’s decision may act as a wake-up call. Yet in Washington it is being treated as another battle cry, with Republicans raging about “the Obama downgrade” and Democrats railing against “tea-party terrorists”. The roots of America’s current polarisation are distressingly deep. The parties have reorganised themselves along ideological lines, as white conservatives have abandoned the Democrats and northern liberals the Republicans. The ideological factions have built mighty propaganda machines stretching from Washington think-tanks to the studios of Fox and MSNBC. And ideologues have resorted to previously taboo weapons, such as the threat of default.

This ideological civil war has led to the marginalisation of corporate America. In the Republican Party country-club types have been elbowed aside by Rush Limbaugh listeners. In the Democratic Party the business-friendly centrists who flourished under Bill Clinton have been sidelined by Ivy League intellectuals and trade-union and minority activists."

Fiscal policy: Flying blind | The Economist

This is why politics is scary:

"...as new data have revealed the true dimensions of the 2008 collapse, the public's perception of events hasn't much changed. Critics still jeer the stimulus for its failure to deliver promised results, despite the now-obvious inadequacy of the package."

More on the schism between 'Conservative' and 'Republican'

I blogged yesterday about David Brooks' column in The New York Times criticizing the Republicans' handling of the debt ceiling negotiations. The Economist also weighs in on the Brooks column:

"In all probability, America won't default; it's still difficult to imagine that it cold come to that. The bigger danger, I think, is that the Republican strategy will either lead Democrats to accept short-term cuts large enough to endanger recovery or will result in a short period of "prioritisation", in which spending is suddenly and dramatically cut back to prevent a default once the money runs out (on or about August 2nd). America may make it through this episode with its credit rating intact and still sustain significant economic damage."

"Managerialist America"

This is an interesting take on things:

"...this suggests a structural antagonism not between the rich and the not-rich, but between the corporate managerial class, the diffuse crowd of individuals who actually own the companies the managerial class so jealously control, and the rest of us, who are harmed by the knock-on effects of the sorts of managerial malfeasance enabled by the regulatory reinforcment of the separation of ownership and management, and the amplification of agency problems that reinforcement entails."

Time to synergize

I blogged yesterday about Steven Pearlstein's column on the inability of the two parties to come together to offer constructive, synergistic solutions on a range of issues facing the country.

The Economist opines about how Kathy Hochul's victory in upstate New York will only just exacerbate the problem, comparing solutions to Medicare's finances to a used car dealer selling a lemon. Dana Milbank of The Washington Post goes further by explaining how Paul Ryan was a victim of his own scare tactics, which illustrates the problem but doesn't help solve it.

Lastly, Matt Miller writes a column about acknowledging that the entire RyanCare plan is not a disaster and it does have some good ideas to build around.

Getting back to the Economist piece, a very good point is made that represents a very sad reality:

"Both parties have, somewhere inside them, a serious proposal to reform Medicare. If they thought they could be elected by offering such a plan, they would do so."

What both parties miss in all of this is they've inadvertently synergized already. The "Premium Support" (aka Vouchers) in RyanCare were a Democratic idea. The individual mandate in the Affordable Care Act were a Republican idea. And the fact that each is being ripped apart after being embraced by the other side is the saddest part of all.

The 'Joe Friday' explanation of tax policy

Joe Friday would be proud with The Economist's list of facts, which are often contradictory, about defining fair tax policy:

"When it comes to taxing high earners more, I am not sure what fairness has got to do with it. According to the Tax Foundation in 2008 the 5% of earners earned 34.7% of the nation's adjusted gross income, but paid approximately 58.7% percent of federal individual income taxes. Is that not their fair share?

Defenders of progressive taxation usually make a utilitarian argument. If you earn $250,000 parting with $20,000 is not as big a deal as it would be if you earned $25,000. In economics we’d say high earners receive a smaller benefit from an extra unit of consumption (assuming they spend more than poor people). So parting with some of your disposable income is less painful."

"Just the facts, ma'am."

Immigration, Canadian-style

In a blog post on May 12th, I weighed in on a Slate article about our immigration policies and compared it to the Canadian model, which is more welcoming to highly-skilled immigrants and got some positive thoughts in a blog post on The Economist:

"...the United States really should be more open to high-skilled immigrants. They're good for the economy, and an uptick in demonstrably uncontroversial immigrants might mitigate anxiety about the group as a whole."

Making the drain go up...

The Economist weighs in on the same topic I blogged about yesterday:

"At a time when America is concerned about excess housing supply and anxious to boost its innovative capacity it is madness that so many willing immigrants, including high-skilled workers, including those educated in America, find it difficult to impossible to gain permission to work in the country on a stable, long-term basis."

The rest is just commentary...

From a blog post on the Economist:

"...neither party is prepared to make the basic compromises that are essential to a deal. Republicans refuse to accept that taxes will have to rise, Democrats that spending on “entitlements” such as health care and pensions must fall. No real progress is likely until after the 2012 presidential election."

This is the entire issue at hand here. The rest of the column is just commentary, which makes me wonder if the work of the Gang of Six can be so promising with the 2012 election hanging in the background:

"The popular culture tends to treat “politician” as a synonym for “craven.” But I think the Gang of Six is the kind of undertaking that should give politics a good name. After all, true believers are usually the ones who get us into wars; negotiators get us out of them. Revolutionaries are the people to see if you’re trying to overthrow a bad government; politicians are the folks to call if you’re building a better one.

In my experience, the great reformers tend to have three things in common. They are optimists, because reform begins with a sense that things can be better. They have the courage to stand up not only to their adversaries but also to their allies. And they can bend. People tend to remember Nelson Mandela as the moral champion who liberated South Africa by suffering in prison for 27 years. The fact is he liberated South Africa by sitting down and cutting a deal with the white leaders who put him in prison."

India needs Wal-Mart? Perhaps/Perhaps Not.

The Economist has an interesting blog post that suggests India could transform its retail sector by opening up foreign direct investment to firms like Wal-Mart. There are two ways to look at this. Wal-Mart will either take advantage of its legitimate supply chain management and illegitimate business practices to end up becoming the only game in town, much like it has done in small-town America OR Wal-Mart’s reputation for unethical business practices combined with its leverage could be the only thing capable of taking on and taking down the hideously corrupt Indian bureaucracy.

The thing is politicians in India have two gravy trains:
1) Rural villagers exploited into thinking they’re going to be exploited by foreigners or urban Indians.
2) Wealthy interests greasing the politicians’ palms to get what they want at the expense of everyone else not willing/able to pay a bribe.

Neither of these is conducive to Wal-Mart ending up in India, regardless of whether you think it will be a blessing or a curse.

"Everyone involved should be embarrassed"

America's deficit: A brief word about the budget deal | The Economist

That's kinda the point Joe

From Joe Scarborough's weekly column in Politico:

"White House watchers believe the president will not touch Social Security until he is safely ensconced in his second term."

This is seemingly passing comment in the column is unfortunately the problem for as long as politics has existed in the human community. When unpopular decisions need to be made, political leaders don't make them because it reduces their chances of getting re-elected. It's not necessarily a sign of cowardice. That political leader believes he or she is doing the right thing for his or her town, city, state, and country and can only continue doing so while in office and not out of it.

That's part of the reason presidents don't attempt any real reform until their second term, such as Reagan's 1986 Tax Hike. Obama addressing Social Security now would be akin to George H.W. Bush breaking his "read my lips, no new taxes" pledge. Presidents make controversial decisions in their second term because they don't have a re-election to worry about. As a two-term president, your place in history will be determined by how much you accomplish, not just if you're a two-termer. Unfortunately the fickle voting public will never re-elect you to a second term if you do something unpopular in your first term no matter how beneficial it is to the greater good.

Why is that a problem? Because the loss is usually due to the unpopular decision and, more often than not, the challenger will have run on a platform to get rid of whatever good yet unpopular thing the incumbent did, setting the whole country back.

So isn't the issue equally divided between the politicians in charge as well as the naivete of the voting public?

U-G-L-Y, You ain't got no alibi...

This chart, to begin with, is U-G-L-Y. Read the blog post on the Economist to really get scared.

If you scratch my back...

It's kind of embarrassing for India that the three countries ahead of it for having the most prevalent cultures of bribery are Liberia, Afghanistan, and Iraq: one country artificially created by the United States in the 19th century that is forever enthralled in political turmoil and two countries where the United States has actively engaged war recently. Perhaps this means the reason we Americans are so far down on the list is because we tend to export bribery inducement to other places?

On the other hand, considering India's economic progress over the past decade or so, I'd be curious to know if this percentage has actually decreased over that period.

Wouldn't starving the beast just make it angry enough to consume disproportionately more than it should?

The Economist's Democracy in America blog has an interesting post about a column in The Fiscal Times by Bruce Bartlett, a former Jack Kemp staffer, advisor in the Reagan Administration, and Treasury official under Bush 41.

In talking about Reagan and Bush 43, the The Economist's blog writes:

"...both administrations revved up spending at the same time they were cutting taxes, in the political equivalent of an overweight person who rewards himself with an extra helping of ice cream because he has just purchased a membership in a gym."

The Bartlett column also provides empirical evidence contradicting its counterpoint, that raising taxes results in uncharacteristic increases in government spending:

"By this logic, the tax increase enacted in 1993, which raised the top federal income tax rate to 39.6 percent from 31 percent, should have caused a massive increase in the federal budget deficit. In fact, it did not. Spending was 22.1 percent of GDP in 1992 and it fell every year of the Clinton administration, to 21.4 percent of GDP in 1993, 21 percent in 1994, 20.6 percent in 1995, 20.2 percent in 1996, 19.5 percent in 1997, 19.1 percent in 1998, 18.5 percent in 1999, and 18.2 percent in 2000."

When a staunch Reaganite involved in its fiscal policy is jumping the ship on the economic theory they so dearly espoused, why are today's Republicans still hanging on dearly hoping against hope that they might be proven right this time against all evidence otherwise?

“India and China, China and India; Elaine and Susie, Susie and Elaine”

(In case you didn’t get the Seinfeld reference.)

A couple of articles about India and China recently, related to population growth, economic growth, and issues related to economic growth. A few passages that stand out:

“The Indian government recognises the need to tackle the infrastructure crisis, and is getting better at persuading private firms to stump up the capital. But the process is slow and infected with corruption. It is hard to measure these things, but many observers think China has done a better job than India of curbing corruption, with its usual brutal methods, such as shooting people.” {emphasis mine}

“Many universities turn out graduates who are good at exams but unaccustomed to thinking about real-world problems.”

I have many personal anecdotes that corroborate this 2nd statement but will not make them here openly. I have a feeling that the people that will be offended by this statement are exactly the people I’m thinking about.

Is this the Military-Industrial Complex Ike warned us about 50 years ago?

A blog post at The Economist offers a counterpoint to a Wall Street Journal op-ed piece authored by AEI's Arthur Brooks, Heritage's Ed Feulner, and the Weekly Standard's Bill Kristol. One key point that jumped out at me was:

"The reality is that much of the world is free-riding off the security provided by American military dominance. Were American taxpayers to refuse to bear so much of the burden of keeping the world safe for Danish container ships, other countries would surely step up. Furthermore, considerations of basic distributive fairness suggest they should."

The blog posting also cites another great column at The Washington Post by Linda J. Bilmes and Nobel Prize winning economist Joseph E. Stiglitz, which breaks down the actual direct and indirect costs of the Iraq War.

The Economist: "There's rich, and then there's rich"

This is totally mind-boggling:

"...the top twenty-five hedge fund managers combined appear to have earned more than all five hundred S&P 500 CEOs combined (both realized and ex ante)."