And The Economist Endorsement Goes To ...

The Economist may not be especially cheerful about the election:

"FOUR years ago, The Economist endorsed Barack Obama for the White House with enthusiasm. So did millions of voters. Next week Americans will trudge to the polls far less hopefully. So (in spirit at least) will this London-based newspaper. Having endured a miserably negative campaign, the world’s most powerful country now has a much more difficult decision to make than it faced four years ago."

Of course, some would say we shouldn't expect cheerful enthusiasm to be the norm from a publication named for "the dismal science".

But nonetheless The Economist has issued an endorsement for President Obama, even if mainly because "Mr Romney has an economic plan that works only if you don’t believe most of what he says".

Russia a Rival or Partner, Not a "Foe"

Someone please fill Mitt in on a fact of diplomacy: Word choice matters, Mr. Romney ... especially when running for or being President.

While this forum seeks to avoid specific endorsements to vote for a particular candidate, it's fair to say that there are certain statements that should clearly rule out the election of a candidate. It's the sort of thing that leaves one wondering, "what was he thinking?"

Not for the first time, having previously said similar things, in the third 2012 Presidential debate Mr. Romney said,

"First of all, Russia, I indicated, is a geopolitical foe ..."

Presuming he's not confused as to what "is" means, perhaps Mr. Romney is unclear on the meaning of "foe". Merriam-Webster defines foe as

1. one who has personal enmity for another
2. an enemy in war
3. one who opposes in principle
4. something prejudicial or injurious

That's very harsh language. As he's repeatedly stated that they're our foe, the only way it could have been an accident is if he just doesn't understand the meaning of the term. Assuming that he has some idea what he's saying then according to Mr. Romney's choice of term, he essentially claims that either there's hatred between our nations, that we're at war, that we're directly opposed as a matter of principle, or that they're actively hurting us. Mr. Romney is, of course, wrong. Quite thoroughly wrong. Un-Presidentially, ineptly, dangerously wrong.

Granted, relations with Russia are sometimes tense. Granted, our nations historically were foes of each other at certain points in our history. But the same could be said for many of our modern allies, such as Germany and the United Kingdom. That would be no excuse for calling them foes today.

Russia today is our geopolitical rival in many ways. In other ways it our geopolitical partner. We compete with Russia for influence over various nations that are important to both nations in trade. That makes us rivals, not foes. Russia recently allowed us to pass supplies through their territory and worked with us on joint counter-terrorism and counter-piracy efforts. That makes us sometimes partners, not foes.

Romney attempts to excuse his declaration by saying, 

"Russia does continue to battle us in the U.N. time and time again. I have clear eyes on this. I'm not going to wear rose-colored glasses when it comes to Russia or Mr. Putin ..."

If one wishes to avoid wearing rose-colored glasses about a village facing a harsh winter, one does not set fire to the village. That Russia doesn't agree with us about everything in the United Nation just makes them a different nation with interests that don't always match our own. One can't improve our chances of cooperation in the U.N. by declaring them our foe. We may, however, make them more willing to side with us on issues where there's potential for compromise by engaging in joint efforts against our real, mutual foes: terrorists and pirates ... as we have done recently.

One builds an ally through efforts to work together. One builds foes through setting oneself against potential foes. Mitt Romney told us loud and clear what he would do for the United States. He would build us an array of foes. That would hurt us in trade. That would hurt us in treaties. Mitt Romney clearly represents the wrong direction for America in the world.

Shall We Restore our Cavalry Numbers?

President Obama during the final 2012 Presidential debate:

"You mention the Navy, for example, and the fact that we have fewer ships than we did in 1916. Well governor, we also have fewer horses and bayonets ... because the nature of our military has changed. We have these things called aircraft carriers where planes land on them. We have ships that go underwater, nuclear submarines."

Government and Job Creation: Where Both Candidates Got It Wrong (Although One More So), Government Does Create Jobs

No binders involved in this jobs question, not even Mitt's "binders full of women" for filling state cabinet positions. In the Presidential debate last night neither of the Presidential candidates got it right on government and job creation. One, of course, was more wrong than the other ... but neither got it right.

Mr. Romney:

"Government does not create jobs. Government does not create jobs. (Chuckles.)"

 President Obama (in response to "What do you believe is the biggest misperception that the American people have about you as a man and a candidate?"):

"... a lot of this campaign, maybe over the last four years, has been devoted to this notion that I think government creates jobs, that that somehow is the answer. That's not what I believe. 

I believe that the free enterprise system is the greatest engine of prosperity the world's ever known. I believe in self-reliance and individual initiative and risk-takers being rewarded. But I also believe that everybody should have a fair shot and everybody should do their fair share and everybody should play by the same rules, because that's how our economy is grown. That's how we built the world's greatest middle class."

Given his relatively conservative budget policy and restraint -- arguably ambivalence -- on fiscal stimulus, it seems plausible that the President really doesn't get that government can create jobs. Sure, he could have just been playing to conservatives, but his actual record suggests he really meant it. He may see more of a role for government in helping free enterprise than his opponent. But that just makes him less wrong. He apparently doesn't particularly believe in fiscal stimulus as a major tool to raise actual GDP towards potential GDP, which shouldn't be surprising to all of the Keynesian economists who called for a much larger, better stimulus and who read the accounts of how we came to get what stimulus we got, mostly without the President seriously pushing for any more. Sure, it might not have been politically feasible to get more, but that was partially because the President wasn't using the bully pulpit to push hard for more. Why? Apparently because he believes the widespread conservative myth that "government does not create jobs".

Despite what the candidates appear to believe, the fact of the matter is clear. Government most certainly can create jobs when actual GDP is significantly below potential GDP. Such as now.

As Dean Baker put it in summing up a different debate, "the Baker-Rowe-DeLong-Krugman Deficit Debate",

"First, we all seem to agree that in a situation where the economy is clearly operating well below its potential, governments can run deficits to boost employment and output. I believe we all agree that in principle the government can also use these deficits to increase future output through productive investment in either physical or human capital. This would make future generations better off on net as a result of deficits today, since the economy will be larger than it would be without the deficits."

When the economy is running at capacity, deficit spending generally won't stably boost us above potential. At that point, extra government spending risks crowding out private enterprise and in some cases certainly will do so. We're not at that point. Heck, we're nowhere near that point. The economy is gradually improving, but we've got a long way to go. While we're still plugging an output gap, deficit spending most certainly can and does create jobs whereas government cuts directly reduce overall employment.

Yet deficit spending during a downturn just illustrates one of many ways that government can create jobs. Progressive tax rates combined with social safety-net programs mitigate inequality and -- by getting money to those who have more want than means to fulfill it -- increase commerce, both effective and potential. Then there's research and development, for which various estimates show it's just a matter of exactly how many dollars are added to the economy for each dollar we've spent on NASA research that we've patented and licensed out to domestic firms. The only question is the exact multiplier; it's certain that NASA spending (not to mention DARPA and others) has created some number of private enterprise jobs beyond those that would have existed without the space program.

Private enterprise certainly excels at many things and government would be the wrong choice for a number of tasks, especially producing most kinds of manufactured products from MP3s to ice cream. So please don't misconstrue this as suggesting that more government is always better; there's a limit to what government reasonably can be expected to do or should do. President Obama is correct to believe that a major part of government's role consists of working towards creating a level playing field for private enterprise. But like Mr. Romney, he's wrong to fall for the conservative delusion on government and job creation. Government most certainly can create jobs. And right now, even more than usual, we very much need government to stop cutting back and do all that it can to create jobs.

But how do we get these politicians and the general public they serve to understand that?

How Famous People Become Associated With Phrases In Searches: Romney and "Completely Wrong"

Today's lesson in how things happen on the Internet: just because a picture comes up in a Google search for some embarrassing phrase doesn't mean that folks are manipulating search algorithms to make that person look bad.

Could it be because he said the phrase?

In fact, it might just mean that the person's famous and in a recent statement said that phrase. Like, oh, maybe admitting to being "completely wrong" about something. And the media thought that was a big deal and put the phrase in a bunch of headlines of stories that included the person's image. And a large number of web sites linked to those stories about the use of the phrase by that person.

Voila! Suddenly an image search for the phrase brings up the images of a famous person whose saying of that phrase became very, very public. That's how it works. No manipulation; just fame.

But then for bonus points, articles written by various reporters who've been tasked with churning out something about the phenomenon but don't have much time to research or understanding of how it works will swoop in. It sounds all technical and they're not sure how it happened, so they'll write up stories talking about manipulation of search algorithms figuring surely that would explain it ... after all, they don't know how it happened. Never mind Occam's razor and that there's a more simple explanation that comes up in the non-image search results, at least before reporters start writing about the phenomenon of the search results.

Mitt and Manufacturing

Rather bold of a guy who made a lot of money closing down (among other things) American manufacturing plants to speak on manufacturing jobs ... too bad it was boldly striding into error.

But When Did Those Jobs Disappear, Mitt?

The state of industry speaks for itself better than some candidates do. When Mitt Romney in Toledo on the 26th of September, 2012 said, "we see manufacturing jobs disappear", he neglected to mention that most of that disappearing happened during the tenure of a President who implemented the same policies that Romney himself is pushing. He also neglected to mention that under the current President they're not disappearing anymore. Under the current President, we've seen manufacturing jobs grow again.

In manufacturing in specific, manufacturing jobs moved mostly sideways through the first quarter of 2006, creeping to a peak in April of that year. From the April 2006 peak, 1.844 million manufacturing jobs were lost under the Bush II administration by the first full month of President Obama's term. From the floor in January 2010, we've recovered 512 thousand manufacturing jobs as of August 2012. There's still a long way to go, but adding half a million manufacturing jobs since January 2010 is growth, not "disappearing".

Where Have Those Mittens Been?

From Matt Taibbi's "Greed and Debt: The True Story of Mitt Romney and Bain Capital":

"And this is where we get to the hypocrisy at the heart of Mitt Romney. Everyone knows that he is fantastically rich, having scored great success, the legend goes, as a "turnaround specialist," a shrewd financial operator who revived moribund companies as a high-priced consultant for a storied Wall Street private equity firm. But what most voters don't know is the way Mitt Romney actually made his fortune: by borrowing vast sums of money that other people were forced to pay back. This is the plain, stark reality that has somehow eluded America's top political journalists for two consecutive presidential campaigns: Mitt Romney is one of the greatest and most irresponsible debt creators of all time. In the past few decades, in fact, Romney has piled more debt onto more unsuspecting companies, written more gigantic checks that other people have to cover, than perhaps all but a handful of people on planet Earth."

LIBOR Ought to Nail Deregulation's Coffin Shut

If our world were ruled by rational, informed decisions, the LIBOR scandal would serve as the final nail that would forever end the plague of deregulation fervor and the pestilence of laissez-faire myopia. It won't be. Most true believers will never give up that push towards more and more laissez-faire, no matter how clearly it's shown to destabilize our systems of commerce. Wave ream after ream of documented business and finance train-wrecks under their under their noses and it they'll be unconvinced. They'll still rant and rave that we need less govt just as they've been doing for decades.

"In the early 1990s, the Fed suspended its surveillance of primary dealers, another example of Alan Greenspan's laissez-faire approach to regulation. Since then, there has been "failure after failure" among their ranks, Kotok notes, citing Lehman Brothers, Bear Stearns, Merrill Lynch, MF Global, Countrywide, and now Barclays."
- Aaron Task in "Why the LIBOR Scandal Matters: ‘Destruction of Confidence to the Nth Degree’"

Even now in the wake of LIBOR, candidate Romney's "Day One, Job One" summary lists elimination of regulations as one of the five executive orders he wants to carry out on day one of a Romney term.

Our markets have proven time and again that we need a mix of market choices with government oversight. The ideal balance may vary from market to market, but in any significant market -- one on which much of the economy depends -- we need stabilizers to improve predictability of returns on investment. And we need oversight in order to not only protect the consumer but to protect the honest businessman from dishonest competitors. In an arena of sensible regulation, the honest businessman can proudly say "my company holds to good business practices and I proudly work with government regulators to confirm that to the public." And he can rest more soundly at night knowing that his competitors won't undercut his otherwise stable business with shady, risky moves that a long-term outlook would abhor. Or at least that they'll have significant risk of being caught and called out if they do. And that businessman's potential investors can better expect a reliable, predictable return year after year rather than a sudden flop into insolvency from cutting corners. Business thrives under sensible regulation that keeps it lined up with good business practices.

Yet this is a truth that runs contrary to laissez-faire dogma. And we can not expect them to give up their notions. The best we can hope for is that maybe these scandals might help to show enough of the public that deregulationists hold to a debunked economic faith and that their doctrines should be no less a subject of mockery than Branch Davidians or Flat Earthers.

Oh, So You Noticed That Too, Ezra?

Back in January and February of 2011, I wrote a couple posts about the lack of evidence for the right-wing assertion that cutting top marginal tax rates would somehow help our job growth. (See "Tax Rates and GDP Growth" and "Chained to Real: Tax Rates, Inflation-adjusted GDP Measures, and the Difference")

I know it's a bit trivial to revel in my little soap-box covering something before one of the Big Names, but c'est la vie. Where's the fun in never letting loose with frivolity? I just noticed that in June of 2011, Ezra Klein covered the ground that I'd staked out earlier in that year with his post "Tax rates and job creation in one graph". I don't begrudge him that ground at all, of course. I have to admit the graph he posted shows a more compelling visual representation than mine did of why we shouldn't listen to that old excuse for cutting the top rates. Mine merely showed that the right-wing has no grounds for the claim, whereas the one Mr. Klein posted goes further and makes a somewhat persuasive argument in the other direction from the right-wing claims.

Mr. Klein got the chart he'd posted by way of the folks over at American Progress. As they point out about Speaker Boehner, candidate Romney, and their ilk regarding jobs and taxes,

"In fact, they are just as wrong about this as they are about the relationship between marginal tax rates and overall economic growth. In the past 60 years, job growth has actually been greater in years when the top income tax rate was much higher than it is now."

In this case, I'll follow in Mr. Klein's footsteps and post American Progress's chart as a follow up to my own.

from http://www.americanprogress.org/issues/2011/06/marginal_tax_employment_charticle.html 

They also have an article that -- like mine from earlier in that year -- focuses on GDP growth rather than job growth. And as they say there about top marginal tax rates and GDP growth,

"These numbers do not mean that higher rates necessarily lead to higher growth. But the central tenet of modern conservative economics is that a lower top marginal tax rate will result in more growth, and these numbers do show conclusively that history has not been kind to that theory."

It's good to see others using their larger platforms for refuting those conservative claims with the facts.

The Sprint Towards Insanity

Wow. And we thought things were getting a bit nutty in the 2010 elections. One has to wonder, since the Democrats have adopted so many of the Republican ideas (e.g., cap-n-trade, etc.) years after the Republicans brought them up: For 2016 will the Democrats also embrace something like what's going on in the Republican party today?

Michael Tomasky said it well, in "The Lies and Lunacy in Tim Pawlenty's Economic Plan", "The Republicans have lost any connection to earth, and the Democrats are afraid (with a few noble exceptions) to tell the American public the truth."

It is in this context, that perhaps we shouldn't be entirely surprised that among the notable celebrated likely serious contenders for the GOP Presidential nomination are Santorum, Romney, and Gingrich. Santorum is so far right-wing that he's been known to make other conservatives nervous. Romney is best known for a plan from which he's desperately trying to disassociate himself and claim it wouldn't be good for the country. And Gingrich has that remarkable contradiction of championing the "Defense of Marriage" while himself going through wives like tissue during cold-n-flu season.

In a nutshell, the GOP is running a bowl of mixed nuts.

Ah, but there's Pawlenty, right? For quite some time, most of what we heard about Pawlenty was that he might be a bit boring ... that he lacked charisma. Perhaps he's not so boring after all. He's put forward a "plan" that's more or less total fiscal insanity. That's some exciting stuff. You can't be entirely boring when you put forward a plan that ridiculous. Then again, it does rather come across as the natural extension of the direction in which Republican policy has been heading.

As Tomasky put it,

"The lie, which one hears from Republicans on cable television on a daily basis, is that “we spent our way into this crisis.” Yes, federal spending has gone up significantly in the last decade. But increased spending wasn’t as decisive as decreased revenue. The truth can’t be said often enough: We did not spend our way into this crisis; we de-taxed our way into it."

If folks take that lie and base their world around it -- around the madness that cutting taxes would always be good and couldn't possibly be the real cause of deficits -- then they're going to come up with some really absurd plans.