The ECB and the Test of Moral Hazard

It just occurred to me to think about the European Debt Crisis in this way: the European Central Bank is acting very differently from the way the US Federal Reserve acted in somewhat similar circumstances.

In 2008 the Fed, like everyone else, was terrified that the entire US banking system was going to come crashing down in the wake of the mortgage crisis.  So they did really extraordinary stuff to make sure that the banks could not fail.  Along with the Stimulus, this managed to keep the US out of a Depression, even if it wasn't really enough to get us booming again.

Europe now faces a different kind of debt problem: sovereign debt of the European Union member states. We're in a slow-motion run on the debt of the European countries with weaker economies.  This could be stopped by the ECB, but much to the chagrin of the liberal economists I read, they just won't do it.  German people, who control the ECB, just can't stomach the thought of bailing out lazy southern Europe.  Germans are terrified not of default by bond-issuing countries, but of inflation in Germany.

The ECB argument stresses a familiar topic in the US- Moral Hazard.  Some conservatives say that the US system should not have been bailed out in 2008, and that the investment banks should have been allowed to fail.  Yes, the argument goes, this would have created a much worse economic situation, maybe even a second Great Depression, but the alternative is to teach the banking sector that government will bail them out if they get in trouble.  Knowing that they have this safety net means they don't have to fear risk, and will continue to gamble recklessly.  Many of us would respond by noting that the Moral Hazard problem is real, but the harm in this area was worth it to avoid such a huge economic catastrophy, which would affect millions of people who hadn't done anything wrong.

But in Europe, the ECB is fixated on the Moral Hazard of allowing Greece, Spain, Italy, etc to escape their debt woes through bailout, write-downs, or even through deliberate inflationary policy.  They have to Feel the Pain so they learn their lesson!

So here we go: the ECB seems bent on demanding severe austerity for the debtor nations, which looks fated to fail since countries that slash and tax to balance budgets in a recession tend not to grow, which is what is ultimately needed to increase tax revenue and cover their debts.  This seems to be heading for another severe recession in Europe, which ought to teach Greece a lesson or two.  That must feel good to the Germans!

Except..... it's affecting lots of countries, even those which have been more responsible in their budgeting over the years.  And the recession will probably be worldwide.  And German bankers will probably lose their shirts too, since the loans aren't repayable and there will eventually be a default.  Lessons in Moral Hazard all around!

False Equivalency Watch

It's always good to wake up in the morning with some politics to really get the blood boiling.  Today I was watching Up With Chris Hayes on MSNBC, and there was a woman on the show from one of these "budget responsibility" centers (I didn't catch the name of the woman or the organization, and it's not up on the web yet).  They were talking about the Affordable Care Act, often referred to as ObamaCare.

The "responsible" woman made the point that when Republicans took over Congress they passed their tax cuts first and did nothing about the deficit, so Democrats were understandably uninterested in tackling the deficit under their watch.  And she said that the Democrats went ahead and passed health care without concern about the deficit, so Republicans understandably "didn't want to play".

At this point I was screaming at the television.  Fortunately, MSNBC has liberals on its panels to guard against these mushy centrist arguments that become Common Wisdom.  So a man named Starr, who had worked in the Clinton administration, pointed out that the ACA is fully paid for and does not increase the deficit.  He even called the previous statement "false equivalence".

So at least this morning justice was served.  But in how many other forums do these mealy-mouthed and lazy "centrists" do this?

Look, if you want to be honest and still argue from a centrist perspective, I guess you can say that the Republican party has been a terrible steward of responsible budgeting in the past, but that there is real indication that things have changed with the advent of the Tea Party.  I'm not sure I buy it, but it's really the only way to be honest and still give conservatives the benefit of the doubt.  Then, when we look at the 2008 Democratic congress and administration, one can certainly criticize the Keynesian deficit spending they initiated in the form of the Stimulus package.  But when we look at the signature big accomplishment, the ACA, it should be acknowledged that it is paid for.  Criticize the taxes that pay for it, that's fair game, but to call it "fiscally irresponsible" is dishonest.

This is the area in which the Mainstream Media fails us so badly.  And it's where "centrists" fail us too. 

The ECB Destroys the World

Here's something from Matt Yglesias I read this morning:

UK Can Now Borrow Cheaper Than Germany

By Matthew Yglesias

| Posted Thursday, Nov. 24, 2011, at 11:00 AM ET

If you want proof that the Eurozone's sovereign debt woes are fundamentally about the governance of the single currency and the odd behavior of the European Central Bank, then look no further than the fact that Germany's 10-year borrowing costs are now higher than the UK's. It's very difficult to explain this in terms of the kind of scolding moralism that the Germans have been deploying this fall to explain borrowing problems in the Mediterannean countries. The British aren't out-exporting the Germans. The Germans don't have a bad work ethic or a corrupt political system. The German government hasn't been more profligate than the British government in running up debt over the past 10-15 years. The Bank of England has been much less focused on fighting unemployment than has the Bundesbank/ECB. And over the past year the growth performance of the UK has been terrible as austerity budgeting crushes domestic demand and the economy continues to lack appropriate structure for export-led growth.

And yet financial markets would rather lend to the UK. Because the UK's not in the Eurozone, and because everyone knows the UK's central bank isn't going to let anything crazy happen or get into any wild games of chicken.

I didn't know anything about the European Central Bank a few months ago, and my critics would argue that I still don't know anything about it, but reading Yglesias and Krugman lately has me really depressed about what's going on there.

We keep getting forecasts of doom about European budget problems from the Right, warning that the US is going to be like Greece, just as Spain/Italy/Portugal are following Greece into debt crisis.  They keep saying that this is all because those countries spend too much, because, well, I guess because if they have a debt problem then spending too much is the only reason that can be considered.

But now that Germany is starting to have borrowing problems, even though they're the ultimate savers, running responsible budget surpluses since forever, how can we fit that into the Right's morality play?

Answer: it doesn't fit. Because the problem isn't spending- in other words, spending isn't the reason that European debt problems are spreading all over. The problem is that the European Central Bank is refusing to solve the problem because they're locked into their own morality play and want to scold the southern countries and don't want to bail them out. So now a problem that should be just in Greece (which is the one country that deserves the morality play) is leaking out everywhere, even to Germany.

The good news for American conservatives, though, is that their like-minded European friends are going to drive that whole continent into the ditch, which is going to lead to a huge recession here too, which will get blamed on Obama since he's president, which will get us President Romney. Good times!

Good links on Republican Radicalization

Some of my web-surfing this morning is relevant to my last post about the radicalization of the Republican party.  Rather than rehash yesterday's post, here are some links that bolster the point:

Here's one from David Frum about how the Republican party has changed since 2000, written by a conservative former speechwriter for George W. Bush.

Here are a couple of posts from Jon Chait making the point that Republicans aren't really interested in deficit reduction, only tax cuts, and defending President Obama's leadership around budget issues (basically making the point that he has tried being very involved, tried staying out entirely, and tried negotiating behind the scenes all at different times, and found that none of those approaches work.  In order to lead, the other party has to be willing to follow).

Radicalization of the Parties

I am so sick of the Common Wisdom that both parties in the US have become radicalized.  It's basically an article of faith among the "Third Way" crowd.  But it's a classic example of false equivalence.

Sarah Pailin, Michelle Bachman, and  Herman Cain are extremely radical- much more so than anyone I can think of in the Democratic party mainstream.  The equivalent to those politicians on the Left would be Noam Chomsky and Michael Moore- but those guys have no pull at all in the Democratic party. The list of crazy stuff said by Bachman, for example, could fill a book, and she won the Iowa Straw Poll!

Let me put it this way: think about both parties and their mainstream platforms in, say, 2000. I can name a half dozen major issues on which the Republican party has moved way Right (torture, religious diversity for Muslims, cap & trade/ environment, health care, progressive taxation, etc). Now think about areas in which the Democrats have moved Left- I can come up with one- Gay Rights/marriage/civil unions. That's it.  (Some people jump in with Health Care, in which Democrats passed a bill much less liberal than that proposed by the Clintons, with ideas drawn originally from Right Wing think tanks in response to ClintonCare. The only thing that makes it seem more liberal is that it succeeded in passing).

Obama has tried mightily to work from the Center, but every time he turns that direction the Republicans have responded by running 10 steps toward the Right.

Hey, maybe the radicals are right: maybe we need to ditch the entire modern welfare state and return to 1929 America. I'm not buying it, but that's what a huge chunk of the GOP is selling.

By the way, I recommend browsing through the Third Way website.  It's staggering- the position papers criticize the stale thinking of Left and Right, contrasting the Michael Moore position with the mainstream Republican position on every issue. In the economics paper, the authors quote Brad DeLong and Paul Krugman from the Left- two voices totally marginalized by actual policy-makers in Washington.  Then they go on to propose.... basically the exact position of the Obama administration.  Unbelievable- they want so badly to believe in their narrative that they miss what's right in front of them.

Defenseless!

I was talking with a family member about the SuperCommittee and the looming automatic cuts to the Defense budget.  Am I worried about America's security? 

No.  Why not?  The Pentagon budget will be cut 10% starting in 2013!  How can the US remain a superpower?

OK, here's my answer:

I think the US can survive a 10% cut in spending on the military, considering we currently spend six times as much as our next closest competitor.

The SuperCommittee Fails- The Sky is Not Falling

The SuperCommittee has failed to come to an agreement.  It's been pretty obvious the last few days that this would be the case.  For me it comes as a relief, since I was concerned that Senator Kerry and other Democrats were going to give away the store in the face of Republican intransigence. 

As I look at Politico's front page, I can't even bear to read the stories about who is to blame.  I expect the "pox on both your houses" view to be the overriding narrative in the Mainstream Media.  The Dow dropped 250 points today, which is apparently due to the lack of a deal.  Let me make a few points:

• This isn't really a big deal.  The law that created the SuperCommittee also mandated automatic cuts to go into effect in the case of failure to agree.  These cuts hit the Defense budget worst of all, which is OK with me, although they hit domestic discretionary spending too, which is not so great.  But they don't touch Social Security or Medicare, which is very important.
• The Bush tax cuts are still set to expire at the end of 2012.  When that happens, the medium-term budget problems will be nearly solved, if the Democrats can just hold firm- which is a big if.
• If you want to blame someone, it's really not hard to parse the whole thing out.  Democrats insisted on a mixture of spending cuts and revenue increases to solve the budget gap.  Republicans insisted that there could not be one dime of tax hikes.  They pretended to offer some revenue increases, but said that they would only do so if the Bush tax cuts were also extended permanently, which would be a huge tax cut compared to the status quo law.  Now again, this is all OK with me- I think the Democrats would have taken a deal with token tax hikes in exchange for wholesale slashing of Social Security and Medicare, which would have been a policy and political disaster for them.  Thank God the Republicans can't take yes for an answer. 
• The MainStream Media's portrayal of the blame pie was summed up nicely by Paul Krugman a few days ago.  I can't find the passage, but it was something like: Media: The parties can't get together because Republicans won't raise taxes and Democrats won't touch entitlements. Obama: I am willing to reform entitlements in exchange for tax increases. Media:  Democrats are not willing to touch entitlements and Republicans won't accept tax increases. It's just that simple; Democrats are willing to cut spending, and seem willing even to slash social programs to get a deal, but they aren't going to do those things because they want to, they do them in exchange for something else.  Since Republicans have nothing they're willing to offer, there's not going to be a deal.

An Ayn Rand Diversion

OK, a little break from the nws of the day, and a point that's been rattling around in my brain for a few days:

Ayn Rand is a mid-20th century novelist and philosopher, much revered by many on the Right.  She was the leader of a movement at that time called Objectivism, which as I understand it posited that morality should not be based on traditional religion, but rather people should do what benefits themselves without regard to others.  From the Ayn Rand Institute:

1. Reality exists as an objective absolute—facts are facts, independent of man’s feelings, wishes, hopes or fears.
2. Reason (the faculty which identifies and integrates the material provided by man’s senses) is man’s only means of perceiving reality, his only source of knowledge, his only guide to action, and his basic means of survival.
3. Man—every man—is an end in himself, not the means to the ends of others. He must exist for his own sake, neither sacrificing himself to others nor sacrificing others to himself. The pursuit of his own rational self-interest and of his own happiness is the highest moral purpose of his life.
4. The ideal political-economic system is laissez-faire capitalism. It is a system where men deal with one another, not as victims and executioners, nor as masters and slaves, but as traders, by free, voluntary exchange to mutual benefit. It is a system where no man may obtain any values from others by resorting to physical force, and no man may initiate the use of physical force against others. The government acts only as a policeman that protects man’s rights; it uses physical force only in retaliation and only against those who initiate its use, such as criminals or foreign invaders. In a system of full capitalism, there should be (but, historically, has not yet been) a complete separation of state and economics, in the same way and for the same reasons as the separation of state and church.

As you can see, religion, Christianity or otherwise, doesn't get any emphasis here.  In fact, this philosophy seems completely antithetical to Christianity with its emphasis on charity to the poor and loving one's enemies.  Which makes it so puzzling that the Randian philosophy has taken hold so strongly with politicians from the Republican party.  Paul Ryan is said to be a strong devotee, as is Newt Gingrich.  Both also claim to be Christians, espousing strong pro-Life abortion views based on their beliefs in God.

There's just no way to square this circle.  Ayn Rand was an atheist.  She was actively hostile to the ideas of Jesus and pretty much any other religion.

I'm not a Christian either, so I'm not offended by any of this.  But the extent to which the Evangelical Christian Right has been sullied by support in the churches for government policies that are the exact opposite of the teachings of Jesus is just staggering.  By their strong support for two pieces of their agenda (abortion and gay rights), Republicans have pulled this whole community over to an economic philosophy that a Christian theologian would never countenance.

The Party of the Rich

Great piece from Rolling Stone detailing the Republican party's shift to become the "party of the rich".  The conclusion:

...equating taxation with theft – is exactly the kind of talk that dismays old-line Republicans. Many of those who fought for years at the side of Ronald Reagan say they no longer recognize traditional GOP values in the new Republican Party. Fighting for the rich, after all, is not the same as championing the right.
"You can look up my record: On conservatism and taxes I was better than Jesse Helms," says Simpson, the former senator. "But whatever happened to common sense? People are going to look around in five or 10 years and say, 'Whatever happened to the things that made me comfortable? That made our streets and schools good things?' And they'll look, hopefully, at Grover Norquist. I can say to you with deepest sincerity: If this country and this legislature are in thrall to Grover Norquist, we haven't got a prayer."

Superthoughts on the SuperCommittee

Lots of sturm and drang about the SuperCommittee, which has a deadline of Wednesday to come to agreement or face the prospect of automatic cuts to domestic programs and the defense budget.

It's become pretty clear that Republicans on that committee (and just as importantly, in the House) are not going to allow a deal that raises revenues to any significant degree.  The proposals that do manage to cut out some loopholes also include making the Bush tax cuts permanent, even though they are due to expire after 2012.  So essentially the GOP offer in the SC is to raise some taxes, while extending much more in permanent tax cuts, all in exchange for drastic cuts to domestic programs, Social Security, and Medicare.  As you can imagine, I don't see this as much of a deal.

Liberals now have all the leverage- the Debt Ceiling deal that led to the SuperCommittee looks like a well- negotiated one for Democrats at this juncture.  If Congress does absolutely nothing, taxes go up in 2013 and the medium-term budget problems are practically solved.  And Democrats control the Senate and the Presidency.  They're holding four aces.

So naturally they'll fold.  Senator Kerry has been rumored to be considering the GOP deal in the SuperCommittee.  President Obama could still veto of course, but his history of compromise doesn't exactly fill me with confidence.

Don't get me wrong- like the Democrats, I am willing to accept big cuts to domestic programs as well as the military.  But I would accept those not because I believe we should cut, but because in politics one has to compromise and I realize that many don't share my values.  But Democrats seem to have confused compromising with caving in.  Democrats need to be firm in refusing to consider cuts that aren't accompanied by significant revenue increases- that's what compromise is.  Let's see if they can stick to it.

What if the Fed is Playing for Team Republican?

So here's what I've been thinking about with regard to macroeconomics recently:

What if the Republicans win in '12 and start austerity policies, but at the same time the Fed finally starts getting really active and floods the money supply, announces 4% inflation targets, etc? As I've predicted before, Republican fiscal policies will throw the country back into severe recession (if the European debt crisis hasn't already done the trick, that is). But the more I read about the role of central banks, the more I wonder if, even with interest rates already at rock-bottom, they could do more to improve the economy.

So if the Republicans win and implement austerity starting in 2013, but the Fed comes out with guns blazing and higher inflation targets, then you have a mixed outlook for the economy according to conventional analysis. But Fed action may be enough to fuel growth. And the Republicans in elective office will get the credit. Liberal screeching about the Fed's refusal to do enough when they were in charge will be too obscure to gain any traction. I'll start wondering about the Fed managers' independence, as they would essentially be partisan players under this scenario. (The Federal Reserve Board is appointed by the President and confirmed by the Senate, but politicians have no control over their actions once they're in office).

Then again, my guy Obama reappointed Bernanke and has been slow to fill other vacancies. This might be seen as a huge failure when all is said and done.  Bernanke was always known to be a conservative- here Obama's attempt to show his "new tone in Washington" may bite him in the rear.

Tough to know what to root for when!

Mitt Romney and Flip Flopping (updated)

So Mitt Romney has worked on his answer to the criticim of being a flip-flopper.  Here's something from a recent debate:

Again, it was Harwood who got to the heart of the matter, pivoting from a question about Romney’s seemingly shifting views on an auto industry bailout to a query about whether he lacked a core.
It has been a charge that has dogged him since Romney abandoned his 1994 and 2002 support for abortion rights, his 2003 backing for a regional greenhouse gas pact, and the endorsement of gay rights he expressed during his 1994 Senate campaign and 2002 candidacy for Massachusetts governor.
Romney replied this time: “I have been married to the same woman for 25 - excuse me, I will get in trouble - for 42 years. I have been in the same church my entire life. I worked at one company, Bain, for 25 years. And I left that to go off and help save the Olympic Games.”
Finding his sealegs, he continued, “I think it is outrageous the Obama campaign continues to push this idea, when you have in the Obama administration the most political presidency we have seen in modern history. They are actually deciding when to pull out of Afghanistan based on politics.”
Then, Romney added a red-white-and-blue coda: “Let me tell you this, if I’m president of the United States, I will be true to my family, to my faith, and to our country, and I will never apologize for the United States of America. That’s my belief.”

So that's his explanation for his changed positions on so many key issues over his political career, and it seems that many in the media have lapped it up.  I heard commentators on Morning Joe praising this answer to the skies.

I can't understand what people are talking about.  Noboby's ever questioned Romney's faithfulness to his wife or to the Mormon Church.  It's a totally separate question.  I don't doubt that he has a personal "core". I doubt that he has a political one.  Think about this laundry list:

• He was pro-choice when he was governor of Massachusetts.  Now he's radically pro-life
• He passed universal health care with a personal mandate in Massachusetts.  Now he claims the very similar Affordable Care Act is an assault on liberty
• He believed in Climate Change, along with the scientific consensus, but now is a total denialist
• He supported cap and trade, a market-based solution to pollution controls (along with John McCain), until he decided it was an assault on business
• He's been all over the place on the Auto Bailout, supporting it before it happened, and now criticizing it because Obama took the advice.

I go back again to the amazing conservative media machine's ability to tar any non-conservative with any criticism through constant repetition.  They decided to make John Kerry a "flip flopper", in spite of the fact that he's been a consistent moderate liberal his whole career.  And now comes Romney, with 180 degree turns in policy constantly- I wonder if this issue will gain any traction during the general election.

As I've said before, the moderate "Wall Street Journal Conservatives" I know are ready to vote for Romney, believing that he's just lying about his extreme Tea Party positions to get the nomination.  They assure me that he'll pivot to sanity in time for the general election and as president.  Of course that same belief is held by Tea Party types, who don't want to vote for him for the same reason.  But the moderates ready to vote for him need to remember that he'll be working on re-election once he's elected, and it sure looks like the path to re-election for Republicans is to govern hard right.  It worked for Bush II, and Reagan, and the moderate path failed for Bush I. 

One thing I know is in Romney's "core"- winning.

UPDATE: Here's another great post from TNR on Romney's meta-flip flopping.

Somewhat lost amid the tizzy over Rick Perry's “oops” moment this week was that the former Massachusetts governor flip-flopped on whether or not he flip-flops. Observe Romney justify his many shifting views to a New Hampshire town hall audience in late September:

“In the private sector, if you don’t change your view when the facts change, well, you’ll get fired for being stubborn and stupid,” Romney said. “Winston Churchill said, ‘When the facts change, I change too, Madam.’”

The Churchill quotation, as many noted gleefully, is in fact properly attributed to John Maynard Keynes. But that doesn’t matter anymore, because since then Romney has changed his mind. He’s actually not a flip-flopper! During Wednesday night’s GOP candidate debate, when confronted with accusations of flip-floppery, Romney readily counted himself among the stubborn and stupid: “I think people understand that I’m a man of steadiness and constancy.”
Someone call Jorge Luis Borges, because Mitt’s flips and flops are getting downright meta.

Rick Perry's Brain Fart

Well, it's fun for us liberals watching conservatives have uncomfortable moments while campaigning, particularly a candidate as arrogant and undeserving as Rick Perry. 

At the same time, his inability to remember the third department he'd cut if he were president is understandable.  I've drawn a blank under pressure like that, and I suspect most of us have.  Unfortunately for Perry though, it fits the narrative that's already hurting him, that he's not very bright and he's too lazy to prepare for debates.

But to build on the point I posted about a few days ago, the gaffe isn't the reason Perry should be finished as a candidate.  The more we get to know about this guy, the more clear it is that he's a lot like George W. Bush- not too bright, and more importantly a man with no intellectual curiosity or sense of seriousness.  We can't picture him soberly sitting down and studying an issue.  Like Bush, I'm sure he'd make decisions "from the gut", and we saw how that went in the 2000s.

As an aside, I'm reminded again of the puzzling Republican talking point that Obama can't speak without a teleprompter.  Obama is remarkably articulate and good at thinking on his feet- he's actually great at speaking extemporaneously.  Rick Perry is the guy who really needs a teleprompter.  Sometimes I think Republicans have gotten so good at creating negative narratives of their opponents that they just pick issues that don't even have a grain of truth, just to prove to themselves that they can do it.  It's like they get bored 'cause it's so easy for them. 

"Hey, let's start hammering Obama for the way he talks so technocratically and boringly now that he's president!"
"No, that's too easy!  Let's say he's so dumb he needs a teleprompter all the time!"
"No way- that's so obviously untrue that Americans will never buy it"
"Hey, let's try it anyway!  A hundred bucks says I can pull it off"
"Alright, you're on!"

Herman and Clarence

As the Herman Cain sexual harassment scandal continues to percolate, I keep hearing it compared to the Clarence Thomas- Anita Hill brouhaha 20 years ago, and there are lots of similarities.  Black conservatives, with questionable qualifications, dealing with old allegations of sexual improprieties and blaming the liberal media.

Of course the liberal media did spend a little time picking at the various indiscretions of Bill Clinton, but that doesn't seep into the conservative imagination, as it impedes their narrative.

But I find myself saying the same thing about Herman Cain that I said about Clarence Thomas many years ago: don't reject him because of sexual harassment allegations that can't be proven either way; just reject him because he's unqualified for the position for which he's being considered!  We didn't need a sex scandal to know that Thomas's resume was very thin and very undistinguished when he was nominated- a Democratic Senate could have rejected him based on that (Lord knows a Republican Senate now would never allow a Supreme Court nominee who is that radical on the other side to be confirmed these days).  Similarly, Herman Cain is a clown, with no knowledge of most of the things government does.  He's funny and entertaining, but he'd be a terrible president.   That's all we need to know.

Of course Cain is also probably a serial sexual harasser of women.  As was Bill Clinton.  JFK famously demanded a new woman every day to relieve his urges while in office.  These guys are all narcissistic megalomaniacs- I think those traits are probably necessary to put up with everything that politicians have to put up with.  So no surprise to see Herman Cain in the same light, not because he's Black or conservative, but because he loves being the center of attention- just like everyone running for president.

Predictions (updated 11/5/2011)

I do not look like this

I want to put some stuff on the record, for future "I told you so's" or future "Doh's!":

1. If the economy is really bad in 2012, it doesn't matter who the Republican nominee for president is, he'll win.  If the economy is so-so, like it is now, it's a toss-up
2. If the Republicans sweep in 2012, and implement the austerity policies they are campaigning on, the US economy will do very badly- tax cuts and spending cuts will not revive the economy, and will in fact make it worse.  Plus the deficit will be even worse.
3. It is possible, however, that President Romney, knowing that #2 is true, will somehow find a way to avoid these cuts and will do much of what Obama would do.  I think it's more likely, though, that he'll be forced into self-defeating policies.  After all, the House will be Republican and filled with True Believers, and they won't let him do stimulus.
4. It looks like the European debt crisis might lead to Greek and other default along with the end of the Euro.  If this happens, there will be a terrible worldwide recession no matter what the US does.  In that case, whoever is president of the US at the time will be blamed, even though he will be totally powerless to do anything about it.
5. UPDATE- One more point 11/5/2011: The actions of the Federal Reserve Board have been undercovered in the news.  The Fed announced this week that it expects unemployment to remain high for three years, but intends to do nothing about it in order to keep prices stable.  The Fed could do things- print money essentially, to spur inflation- but won't do that right now.  So on to the prediction: If the Fed takes massive action, such as targeting nominal GDP as many are urging, that would lead to economic growth and lots of good things.  If this happens soon, President Obama will get the credit.  If it happens in 2013, the next president will get the credit for the recovery.  Neither President Obama nor President Romney/Perry/Cain will have any control or deserve any credit for Fed action.  Obama can, however, be credited with the blame for the Fed not doing anything yet, since he re-appointed Bernanke and has not pushed for other Fed governors who would be more inclined to activity.
6. OK Still another point 11/5/2011: While I'm updating my predictions, I want to repeat one I've put down here before: If Republicans take control of the Senate, they will eliminate the filibuster as soon as the Democrats make noises about using it the way Republicans have been using it these past three years.

The Connection Between OWS and Government Employee Union Busting

I was listening to a story on the radio today about the fight in Ohio over the Wisconsin-inspired anti-public union law that was passed by the legislature and led by Governor John Kasich, but which has been put on the ballot and may be repealed by voters.  It got me thinking about the connection between union-busting and income inequality.

Here's what I mean: unions protect the wages of working class and middle class people.  But unions have been on the decline for 30 years, and the only sector left in which they're truly strong is among public employees.  That's where you see working people (road crews, city bus drivers, firemen, police) and lower-pay professionals (teachers, protective service social workers, clerks in government offices) making reasonable wages, while their brethren in the private sector have been falling behind badly.

And what is the topic du jour today, in light of the Occupy Wall Street protest?  Income inequality.  We've all been hearing about the incredible pay increases among the "top 1%", but have thought less about the pay decreases (or more accurately, flat pay) of the middle class.  But this is an important issue too.

From the 1940s to the 1970s, middle class pay increased.  There were lots of good jobs in unionized industry, which probably pushed up pay in non-union shops too.  But with globalization and the departure of lots of textiles and manufacturing elsewhere, the downward pressure on blue collar labor has been intense.  Union shops just closed and the factories moved elsewhere where labor costs were cheaper.

But the result is that now the blue collar jobs that are left don't pay very well.  Our economy has moved to one domintated by the service sector, and retail and fast food industries have effectively blocked unions.  The pay at Walmart and Burger King is terrible compared to the pay at a factory 40 years ago, but that's where the jobs are now.

So Conservatives, in their bid to destroy their opponents in the union world, have turned their eyes to government sector unions.  The Ohio and Wisconsin laws don't just cut benefits, they outlaw union dues being collected from paychecks, effectively destroying the unions entirely.  Of course, there aren't enough Big Business conservatives to support such legislation, so they have to get votes from somewhere else, and they've hit upon a really smart strategy: splitting the middle class.

The voter who works at Walmart has crappy pay and crappier benefits.  He looks at the DPW worker, with similar skills, making a living wage for the government, and he's getting angry about it.  And he should be angry!!!  But the right wing machine has figured out how to get him angry at the DPW worker, instead of getting angry at Walmart.

If Liberals want to win this battle, we have to turn the anger of the middle class away from government workers and toward the elites who are leading these changes.  After all, government workers aren't getting paid any more than they ever were- the change is that private sector workers are getting paid less.  Maybe Occupy Wall Street can help lift that narrative.