The Priorities of the Catholic Church

So I see that the Catholic church and other Catholic groups are going to step up their protests about immoral and unChristian things being proposed or perpetrated by the US federal government.

"Some unjust laws impose such injustices on individuals and organizations that disobeying the laws may be justified," the bishops state in a document developed to be inserted into church bulletins in Catholic parishes around the country in June…

I am really psyched to see the Catholic church really putting itself on the line to defend Christian values.  I wonder what they're protesting in such an unprecedented way?  Could it be the recent proposed shredding of the safety net for the poor?  The use of unmanned drones to assassinate people in foreign countries without due process or trial?  Worry about the Supreme Court striking down the Affordable Care Act, thus denying health insurance for 30 million people?

Nope.  The most important concern for the Catholic Church is apparently that ObamaCare will require that all health insurance cover contraception.  Contraception! Which is used by 95% of Catholics.

Look, I'm not Catholic, and maybe it's not politically correct for me to criticize such a holy institution.  But I'm just outraged by the insistence of the church in focusing all their moral energy on contraception and abortion, while the plight of the poor is being so threatened in today's America and while our military is killing so many people in questionable circumstances abroad.  Didn't Jesus have lots to say about helping the poor and about non-violence?

The Pro-Austerity Argument Evolves

A friend pointed me to this example by someone named Russ Roberts of the evolving argument of pro-austerity forces in the face of the obvious failure of their policies in Europe.

if you’re going to claim that the virtue of “slashing government spending” has been “overwhelmingly refuted by the experience of the last two years” you ought to at least provide some evidence that there have been spending cuts in the last two years.

He goes on to point out that in fact spending has not really been "slashed" as Krugman and others keep saying it has.  Krugman himself has a short answer to this argument relating to the UK, and another relating to Ireland here.

So the argument of the Austerians now is that we never really tried Austerity, just like the Keynesians in the US complaining that we never really tried stimulus. The political world is full of half-measures of course. One point that is lost here is that austerity in Europe has meant higher taxes as well as cuts in spending, whereas in the US the anti-tax jihad of the GOP makes that impossible. In that sense it's apples and oranges a bit.

...which is why the only way to look at it fairly is to talk about relative austerity and relative stimulus, i.e. those policies in relation to other places, comparing results. Since virtually everyone is doing badly, all we can do is look at who is doing worse and try to discern why. The US didn't really do stimulus, since federal spending was largely offset by state/local cuts, but there was still relatively more stimulus than was seen in Europe at the time. And I'm willing to accept that austerity hasn't been fully and enthusiastically followed to the nth degree in Europe, and yet Europe has been relatively more austere than the US. And within Europe, some places were really austere, and some places weren't. My understanding is that the places that really cut hard did worse than those that cut less. The poster children for austerity- Spain, Ireland, Latvia- have had disastrous results.

What will it take for the Austerians to admit that their policies aren't working?

Outrage

So the news lately is that Wall Streeters are mad about how President Obama criticizing private equity.  Mitt Romney shoots back that Obama is hating on success.  I guess Romney has to come back with something when he's being directly criticized, and of course we've learned to expect him to lie about what's being said- after all he is running the most mendacious campaign of all time.  But I would have hoped that the smart guys on Wall Street would be able to understand what the President is trying to say.

The message is a little nuanced- I thought these smart guys were able to handle nuance! Private Equity is all well and good, but its goal is to make money for investors. Mitt Romney was good at that. Its goal is not to creat jobs, and in fact Bain often made money by cutting jobs. That's not a criticism of Bain or private equity- it's just a fact. Bain should keep on making the economy more efficient- more power to 'em! But if the issue is creating jobs in a large country, a private equity manager just has no relevant experience at all to do so. Saying that isn't disrespecting private equity or banking- it's just pointing out that running a business and stewarding a huge economy is apples and oranges, and we should beware what happens when we mix them.

Mitt Romney does know what government regulation he wants and doesn't want that will unleash the kinds of businesses he knows, and so I don't doubt his administration will be great for Wall Street. But as we saw during the Bush II administration, what's great for Wall Street can be horrible for the rest of us.

How can Wall Streeters deny that their sector caused a disastrous recession? That doesn't make them bad people, unless of course they keep insisting that we should return to the exact same policies that got us there in 2007. I'm not outraged by the finance industry making tons of money without producing much of value for the economy as a whole in the '00s- that's human nature, to take what you can get, and it's capitalism. But I am really outraged by their lack of chagrin in the aftermath.  They're outraged now that the Democrats want to regulate them in order to avoid another banking sector failure leading to another taxpayer-funded bailout.  Surely the Masters of the Universe can see that without any change at all it's just a matter of time before the next bubble and bust happens again, and surely they understand that this means they have an implicit government guarantee against failure that they don't pay for.

 

The lack of insight among this sector of the economy makes me want to throw up.

Too Big to Fail Meta-Post- UPDATED

Watching Up with Chris Hayes this morning on MSNBC, and he has a panel talking about the JP Morgan $2 Billion loss and the Volcker rule, etc.  I love the way Matt Taibbi looks at this, as my readers might suspect:

If you’re wondering why you should care if some idiot trader (who apparently has been making $100 million a year at Chase, a company that has been the recipient of at least $390 billion in emergency Fed loans) loses $2 billion for Jamie Dimon, here’s why: because J.P. Morgan Chase is a federally-insured depository institution that has been and will continue to be the recipient of massive amounts of public assistance. If the bank fails, someone will reach into your pocket to pay for the cleanup. So when they gamble like drunken sailors, it’s everyone’s problem.

Now I've never worked in the Finance industry and I obviously don't understand the intricacies of hedging and credit defaults and the rest.  But I understand the meta story: really big banks have been making risky trades, which often make them and their traders enormous amounts of money.  But any business that allows one to make billions of dollars can also cause one to lose billions of dollars.  In the case of the finance industry, these large institutions are so important to the economy and their failures so catastrophic to the rest of us, that our government can't allow them to go under.  That's why the bailout of 2008 was necessary- the recession would have been much worse if the bailout hadn't been initiated.  So we have a system in which upside risk is privatized in the form of huge salaries and bonuses for traders and bank executives, and downside risk is all on the taxpayer, who can't afford to let the banks fail.

So we have to regulate somehow, but it's really hard because these businesses and trades are really complex.  And bankers are really smart people.  And regulators make about 1% of what bankers and traders make, so the smartest people are obviously going to become the bankers, while the less smart people are going to have to settle for being government regulators.  They can't keep up.

So here's the meta-answer: Banks have to be less profitable.  That's what they're fighting of course, as they lobby against the Volcker rule and other regulations of Dodd-Frank.  They keep making the argument that we're making it much less profitable to be a banker- and they're right!  That's the whole freaking idea!  But they're trying to convince the public that gargantuan profits can keep emanating from the finance sector while risk is controlled.  But as all my friends in Finance keep telling me, you can't make a lot if you don't risk a lot.  We have to force TBTF banks to risk less, make less, and be more stable.  I don't know the industry well enough to figure out how to do that, but I know that if we're successful, it should piss off the bankers.  That means we're doing it right.

UPDATE: A correspondent emails me to say that it would be foolish to mandate that banks become less profitable. Of course he's right- that's not what I'm trying to suggest. Rather, my point is that any effective regulation will necessarily lead to banks being less profitable, as their profitability is inextricably linked to their riskiness. But I didn't mean that the government should do something so leadfooted as to mandate a limit on profit. Just that the regulations we need will lead to less profitability.

Deficit Causes (Again)

Found this update of that well-known old chart on causes of the federal deficit.

I know, I know- stop whining about Bush and go fix the problem, you say.  Sounds good to me- I propose solving the problem: by reversing the Bush Tax Cuts and winding down the military wars overseas.  Or we could listen to Mitt Romney and just make the deficit much worse.

Rhode Island's Solyndra

Interesting news here about Curt Schilling's video game business, which appears to be failing after it was lured to Rhode Island two years ago with tax breaks and loan guarantees by that state.  I'm an avid listener of sports radio, and I recall the conservative sports guys Dennis and Callahan on WEEI going on and on about the foolishness of Massachusetts pols for letting such a slam-dunk business get away along with its inevitable tax revenue and hundreds of jobs.

Well now we see the legitimate, oft-heard conservative argument that the government shouldn't be picking winners and losers in the economy.  So here we have the Solyndra of the state of Rhode Island, but since it's a notable conservative athlete rather than solar energy, I doubt we'll hear much criticism from the Right.

By the way, I should note that although Schilling is an outspoken Republican, as an athlete he remains a favorite of mine.  He's a blowhard, but I like that he says what's on his mind.  He may not, however, be much of a businessman- most ex-jocks typically aren't.  It's not like he had years of learning how to run a business after all- he was busy playing baseball.

Then again, maybe he's not such a bad businessman after all by the standards of our day and age.  He used corporate welfare to grow his business at the expense of taxpayers.  He probably didn't lose much of his own money in the venture, and for all I know he may have come out ahead.  Like Mitt Romney a little- not very productive for society, but he made himself plenty of cash.

Still Can't Get Past the Crazy- Budget Deficit Edition

Another futile discussion with my wingnut correspondent today.  I tried to argue with him about the deficit, but I just can't get past the crazy.  Then I come home to read Jon Chait today make my point in reference to Mitt Romney's last speech.

In Romney’s telling, the terms debt and spending are essentially interchangeable. When presented with Obama’s position — that the solution to the debt ought to include both higher taxes and lower spending — he rejects it out of hand.

Just like my debate today.  My correspondent kept pointing out that liberals only want to spend more of our money.  I noted some facts about the federal budget:

1. 1999: budget was in surplus
2. 2001 & 2003: enormous tax cuts were passed by Republicans
3. Republicans started Iraq War without funding it
4. A Republican congress passed Medicare Part D, prescription drug coverage in (I think) 2006, without funding it. A Republican president signed it
5. By 2008 the budget was in a huge deficit, made worse by the financial crisis

Now it seems sort of obvious to me that if we want to get back to a balanced budget, we ought to think about reversing the things we did that took us out of balance. I want to reverse #2. #3 is winding down, fortunately. #4 I like and want to keep, but I think we should fund it with taxes instead of borrowing from our children.

But hey, Republicans have some budget plans:

1. Cut taxes even more (oops that goes the wrong direction)
2. Increase military spending (oops, that does too)
3. Make Medicare into a voucher program, making it unaffordable over time to more and more seniors. But don't start that right away, only for people under 55 (so that won't help at all for 10 years, and even then it just offloads the medical cost problem to individual seniors)
4. Destroy most programs that benefit the poor, all of which have been around since the '60s and '70s and none of which were started by Obama or even by Clinton.
5. End ObamaCare (oops, wrong direction again since ObamaCare includes taxes that make it budget neutral or even better)

So in this Paul Ryan plan, supported by nearly every Republican in Congress, only #4 actually helps the budget, while all the other parts make the deficit worse. And #4 doesn't include enough dollars to make up the difference, so the whole plan relies on what Paul Krugman calls the "magic asterisk" of either undefined (i.e. never gonna happen) cuts or ridiculous economic growth that only the most feverish supply-siders believe will actually happen.

 

To put the whole thing more simply: Republican talking points talk about the deficit only in terms of spending, even though the major change that has caused the deficit is a tax cut.  They won't even talk about raising revenues, but still scream in panic about the deficit.  Of course, there's a simple reason why:

 

Republicans don't really care about the deficit.  It's a sucker's game, always has been.  Here's a prediction: If Republicans sweep in the Fall, the deficit will go up, not down.