Economic Recovery Predictions

Here I go with another round of predictions for the economy.  I've been accused by one correspondent of confirmation bias when I predict that if Romney wins the election there will still be a recovery, implying that Obama will get the credit even if he's voted out of office.  So here goes:

My prediction is that the economy will indeed improve in a Romney administration, but the deficit situation will get worse. Under Obama the economy will also improve, but we'll have universal health care so I'm rooting for that. I think an Obama administration would be better for the deficit because it won't allow the crazy tax cuts being proposed by GOP.

To further muddy the waters, I'd predict that if Romney is elected and somehow does indeed follow through with a Ryan-type budget, successfully cutting spending as much as he says he will, then the economy will not improve and we'll have a double dip.

Obama doesn't get the credit from me for a Romney-led recovery, by the way. Improvement in the economy always happens eventually. If Obama loses the election, liberals like me are going to say he should have pushed for more stimulus early on when he had the chance- lost opportunity in 2009 is his own fault.

But then there's this: if Romney wins, and does the following:

• Cuts taxes below even Bush rates
• Increases defense spending
• Cuts programs to the poor, the only deficit-reducing thing on this list (and not enough to make up for the first two items)
• Repeals the ACA, increasing the deficit according to the CBO

...and thereby increases the deficit in the short term by a large amount,

Then isn't that a Keynesian policy by Romney?  Lowering taxes and increasing spending in an economic downturn is textbook Keynes.

Romney has already made statements on the stump and in his convention speech indicating that he buys into Keynes when the subject is military spending and tax cuts. He complained that the Sequestration military cuts would cost jobs, a strange statement if he really believes in smaller government as the most important way to create jobs.

We need to understand that the president is not King, and is highly constricted by Congress and events out of his control. That's why I think it's silly to completely blame Obama for failing to create jobs over the past two years when he's had a Congress that will never pass his Jobs Bill. And President Romney, if he has a Democratic Senate, will have the same problem. That's why I give no slack to GWB- he had 6 years of total control of Congress with no such excuses.

Past predictions are here and here.  I've been pretty consistent about 2012 results and the economy so far, but the Moment of Truth comes in the following years.



The Jobs Reality Nobody Seems to Know

Two charts from Krugman today:

Does anyone realize this?  Let's look at it this way: our policy makers can only directly control public spending, whereas private spending they can only affect indirectly.  So on the direct side, our elected officials have responded to the Great Recession by cutting government jobs.  Either because of that, or for reasons unrelated, private sector job growth has been just fine, in fact better than it was following the last recession. 

I want to stay away from giving President Obama all the credit or all the blame for any of this; one of the big problems we have in analyzing what's happening is that the House has been Republican since early 2011.  And they've gotten what they've demanded: fewer government jobs.

And one can make an argument that it's working- private sector growth is continuing, albeit at a slow pace.  So if we want to increase the pace of private sector growth, does that mean we need to keep cutting government jobs?  Or will hiring back some teachers and cops help more?  I guess that's open to debate, but I'm betting on the latter.

But what you can't really do is blame liberals for failing to return us to full employment when we've had conservative policies in place.

Deval Patrick Rocks the DNC

I didn't watch the Republican National Convention much; just caught the highlights.  While not watching it I told myself that I don't really like any political speeches, and wasn't planning to watch the Democratic National Convention either.  But last night there was nothing else on TV, and I was trolling the internet reading my favorite bloggers comment on the DNC, so I figured I'd put it on and see what was up.

 

Generally it was what I expected- boring speeches filled with empty rhetoric.  I was only half-Ilistening.  But then Deval Patrick came on, and boy did he make me look up and sit up:

"It's time for Democrats to grow a backbone and stand up for what we believe".  AMEN!!!

 

Readers of this blog know how much Republicans anger me, but I don't emphasize often enough what Democrats do that makes me want to vomit.  Mealy mouthed whimps have no place in politics, and Democrats too often seem totally unwilling to fight for what they believe in.  Thankfully, last night they weren't running away from the Affordable Care Act but were embracing it.  I'm hoping for more of that.  Republicans certainly know how to fight, and if Democrats can't match it then the center left has no chance in America.

 

UPDATE: Well, that good feeling lasted about 23 hours, until the Democrats heard some conservatives carping about how God isn't mentioned in the Democratic platform, and about how they made an inconsequential change compared to four years ago in leaving out the plank about Jerusalem being the capital of Israel.  So tonight the Democrats put those things back in, while many delegates shouted their dissent.  The whole thing would have blown over, lost in the noise after Bill Clinton spoke later tonight, but now it's a Story.  Typical spineless Democrats once again.

 

Here's Goldblog on that issue.

Tikkun Olam Doesn't Mean What You Think it Means

I find this article sickening.

So with all due respect to all those Rabbis for Obama, maybe we should try another approach. If our goal is to heal the wounds in the world, maybe the right way to do that doesn’t involve seizing wealth from people who work hard to give it to people who don’t. Maybe it shouldn’t involve the construction of a vast super state of regulatory czars and czarinas, people capable of writing a rule that could, without review from elected legislators, destroy a citizen’s life work. Maybe we should ask ourselves whether tikkun olam means making people even more dependent on the goodwill of the state.

Maybe the best form of tikkun olam is to give people freedom and free markets as opposed to more state-sponsored goodies. Freedom and free markets have worked pretty well in lifting people out of poverty, creating strong middle-class societies, and supporting great voluntary and charitable institutions.

The economic arguments are familiar of course (leave aside the characterization that Obama has "increased the welfare state in all directions" when in fact the ACA is the only expansion of the welfare state and all the increase in Food Stamps etc is due to the economic downturn). But though I find the economics arguments unconvincing, I don't find those immoral or anything- right-wing economists believe everyone will be more prosperous with right-wing policies, and that's fine.

What's sickening is tying it to Tikkun Olam. In Jewish thought since the time of Moses, great emphasis has been placed on caring for the poor. When conservatives talk about gutting Medicaid, raising the social security retirement age to 67 or higher (which is a much greater burden on working class people than on professionals), and keeping taxes on the wealthy at historically low rates, that may be good economics, but it sure aint Tikkun Olam.

Similarly, I'm consistently appalled by how the conservative Christian churches have allowed their alliance with Republicans on social issues (which is understandable) to color their view of the economic world. I'm not that knowledgeable about Jesus, but I think he emphasized care for the poor a lot more than "personal responsibility" and the wonders of creative destruction.

To be clear, the real debate here is about whether a more "selfish" society with less of a safety net unleashes enough prosperity to compensate for the potential misery suffered by the lower classes. Maybe it does, though I don't think so. But the Utopian society of Ayn Rand isn't very consonant with the teachings our great religious sages- that's an argument that can't really be justified.

 

Tikkun Olam- it doesn't mean what Noam Nuesner thinks it means:

 

OK, OK, I Guess it's not Technically Lying

I think I've been inexact in my criticisms of Paul Ryan's mendacious speech at the Republican convention, and realized the tactics that he and the Romney campaign are using to try to maintain plausible deniability while they run the most dishonest campaign in history.  For example:

• Ryan slams Obama for cutting $716 Billion from Medicare in order to fund health care in the Affordable Care Act.  That's not technically a lie- ObamaCare really does extract savings from Medicare that it will put toward the expenses in the law.  But Ryan's budget proposals also cut that same $716 Billion, and use the money to fund upper income tax cuts.  So he can say: "that's not a lie!", but it's not honest either.
• Ryan claims that the Obama administration is giving waivers to states that will allow them to end the work requirement for welfare.  OK, this actually is a lie.  Well, a half-lie- the administration is indeed giving waivers, but the purpose is not to end work requirements.
• Ryan slams Obama for presiding over a huge increase in the deficit. Again, not a lie, in that the deficit is pretty big.  But his plan of tax cuts along with unspecified spending cuts would undoubtedly make the deficit even bigger. 
• Ryan's plans for Medicare would change the program in a major way, eventually forcing Seniors to pay much more out of pocket for health care.  Ryan bizarrely claims that he will be saving Medicare, which Obama will destroy by taking that $716 Billion.  So that's a lie- except that the plan doesn't kick in until later, and no current Seniors will have to suffer this plan.  So I guess it's not technically a lie- only us middle aged suckers are going to lose Medicare, not the current elderly.  But there's a bait and switch- the reason Seniors will be totally fine is because the plan doesn't apply to them, while those of us it will apply to are screwed.
• Ryan told a story about Obama promising an auto plant in his hometown that government support would be able to keep it open.... but it closed.  This was the biggest whopper all night, because that plant closed before Obama's inauguration.  But again, I guess a Clintonian prevaricator could say that it's not technically a lie- just totally misleading.

There's more- Jon Cohn has a lot here.  The Republicans have really figured out how to run the Post-Truth campaign- yes, all pols have always spun and misled, but this is really a new level.  I wonder if the press can catch up and call them on it- that's the only way to make it stop.

Conversations with the Media

I met a woman who works for CNN yesterday and briefly talked with her about politics and CNN's mission to play it down the middle between the polarized parties.  I told her that I respect that goal, but I think it's hard because Republicans have learned so well how to manipulate the media's emphasis on "even-handedness".  She agreed with me, but took it in another direction, noting that Republicans are much better than Democrats at staying on message and providing people to go on camera when requested.

When I tried to move the conversation onto the Romney "post-truth" campaign (she had never heard the term), I didn't get agreement- she kept insisting that "both sides do it", and proudly pointed out that CNN is careful to take on both sides.  Our conversation was brief, and I did a poor job laying out my side so I thought I'd make one point here that I wish I had said yesterday:

I keep trying to point out that, although liberals certainly obfuscate and mislead at times (the SuperPac ad blaming Romney for killing a man's wife by taking away his health insurance was certainly unfair), conservatives are running a campaign based on baldfaced dishonesty and lies (like the Romney campaign repeating that the Obama administration is ending the work requirement for welfare).  I don't think those two examples above are equivalent- the Democratic one is unfair, while the Republican one is just a flat-out lie.  And the Democratic one is put out by a SuperPac, while the Republican one is repeated regularly by the Romney campaign.

But CNN would call out "both sides" on campaign dishonesty.  So I wish I had asked the following question yesterday:
How far would one of the parties have to go in order for you to concede that it is qualitatively more dishonest than the other?  Can you imagine a scenario in which you would not evenly call out both sides, but would rather say "that party is being really dishonest, way more than the other one"?
My problem with CNN and other centrist media is that I think the answer is that there is no scenario in which they'd call out just one side- "playing it down the middle" means finding fault with both sides, by defnition.

And this is the tough dilemna for media outlets like CNN.  If they call out the Republican campaign for its mendaciousness, they'll no longer be seen as neutral, as if the Truth is now a partisan argument.  It's diabolical.

Hedge Funds Stink

Interesting piece here from Matt Taibbi about Hedge Funds.  It notes that only 11% of hedge funds are outperforming the S & P 500.  I've seen Matt Yglesias make the point before as well, that hedge fund managers are better at making gobs of money for themselves than they are at making money for their investors.

Now I don't know much at all about investing or financial services.  But it does stand to reason that people can't really outperform the market as a whole over time- if they're really successful for a while then everyone starts copying them and the market catches up.  There are tons of really smart people working on Wall Street, and it feels unlikely that many people are really much smarter than the average professional there.

It reminds me again that investing is a game, and a game that's rigged for insiders.  Reading Taibbi regularly makes one realize how the Goldman-Sachs's of the world make a lot of their money by finding suckers to screw over.  They rely on lots of little guys who think they're smarter than everyone else and have a little money to lose.

At base I guess I have to admit that I feel this way because I'm not at heart a risk-taker.  Slow and steady in the market appeals to me.  But the whole scam reminds me of the old line from War Games

"The only way to win is not to play".

But the best sum up comes from Taibbi:

Someday we'll get back to the time when the really smart guys from the best schools went to work for companies that built actual products, engineered more efficient cars, cured diseases, etc. Because it seems like our best minds kind of suck at investing.