Thursday, May 31, 2012

Coming for the Summer of 2012 – The Great Economic Slowdown of the Summer of 2011

The Economic Problems in the U. S. were not Cured and a Relapse is Coming

Last summer was a bummer.  After a strong late winter and spring, the U. S. economy slowed substantially in the summer and fall of 2011.  Now it looks like history is about to repeat itself, and not in a good way.

The U.S. economy slowed more than initially thought in the first quarter amid smaller gains in consumption and inventories, while corporate profits picked up. Separately, two measures of the labor market indicated continued sluggish job growth.

The Labor Market did not do well in April and May is not likely to be encouraging.

Initial jobless claims rose by 10,000 to seasonally adjusted 383,000 in the week ended May 26, the Labor Department said Thursday. It was the biggest jump in claims since the first week of April.

The slowdown in hiring is already evident.

In fact, there is nothing encouraging on the horizon and every indication that things will get worse.

  1. There is huge uncertainty in the tax area.  A nation can thrive on high taxes and a nation can thrive on low taxes.  What it cannot do is thrive on uncertainty in taxes.  A large number of temporary tax provision expire at the end of the year.  Mr. Obama has made clear what he wants to do, but no one believes he will have the political power or will to do it.  Mr. Romney has not made clear what he would do, and nobody know what will happen if he is elected.  In situations like that business does not invest.

  1. The dark clouds of Europe blow over the United States.  As Europe heads towards economic calamity the U.S. benefits from funds coming into this country, and the result is low interest rates.  But interest rates are already low, going lower will not help.  Unrest and economic recession in Europe will surely spill over to the United States.

  1. The fall election will serve to further divide rather than unify the country.  A nation divided against itself cannot have economic growth.

  1. Much of the recovery in the winter was due to a mild temperature which reduced heating bills.  Winter is over, along with its positive impact.

  1. International issues in Syria and Iran threaten world stability.

Yes, there is a lot more and yes, there are always negatives in the horizon.    But there doesn’t seem to be a lot of positives, and slower growth will almost certainly produce a Republican sweep in the fall.  And if that happens, well things really get bad.

Have a nice day!

Department of the Obvious Studies – Brookings Institution Finds That Two Parent Homes Are Better For Children

So Let’s Deal with Reality – And Help Single Parents Be Better Parents

No Dan Quayle Was Not Right

George H. W. Bush’s choice for Vice President was a non-descript Indiana Senator, a not too bright fellow named Dan Quayle.  Mr. Quayle made headlines during his single term for criticizing a TV program, Murphy Brown whose main character decided to have a child as a single parent.  Because of his lack of intellect, Mr. Quayle was accused of confusing a fictional TV character with real life and for acting in a judgmental and prejudicial manner.

Quayle’s argument — that Brown was sending the wrong message, that single parenthood should not be encouraged — erupted into a major campaign controversy. And just a few weeks before the ’92 vote, the show aired portions of his speech and had characters react to it.

“Perhaps it’s time for the vice president to expand his definition and recognize that, whether by choice or circumstance, families come in all shapes and sizes,” Bergen’s character said.

Her fictional colleague Frank, meanwhile, echoed some of the national reaction: “It’s Dan Quayle — forget about it!”

Now a researcher for Brookings argues that Mr. Quayle was ‘right.

Twenty years later, Quayle’s words seem less controversial than prophetic. The number of single parents in America has increased dramatically: The proportion of children born outside marriage has risen from roughly 30 percent in 1992 to 41 percent in 2009. For women under age 30, more than half of babies are born out of wedlock. A lifestyle once associated with poverty has become mainstream. 

 He was not.  The study by the folks at Brookings only reached the obvious conclusion.  Children are better off with two married parents instead of one

It isn’t clear why children who live with their unmarried biological parents don’t do as well as kids who live with married ones. Adults who marry may be different from those who cohabit, divorce or become unwed mothers. Although studies try to adjust for these differences, researchers can’t measure all of them. People in stable marriages may have better relationship skills, for instance, or a greater philosophical or religious commitment to union that improves parenting. Still, raising children is a daunting responsibility. Two committed parents typically have more time and resources to do it well.  

But the point is not to compel couples to marry or to punish single parents and their children.  The point is, people are free to have children if they are not married and people are free to have children as a single parent.  Government should be involved, but not to interfere with people’s choices but to support their decisions.  A study like the Brookings work should determine why children of unmarried couples or single couples do not do as well as children of married couples, and then propose policies to help those families do better.   

Such an attitude is an anathema to Conservatives who want government to enforce their values on an unwilling population.  Which is why they get no respect as Conservatives, or as proponents of family values.

Commentary in the Daily Telegraph Slams Paul Krugman for Daring to Criticize Britain’s Fiscal Policy – Policy That Has Produced A New Recession

And In a Moment of Candor An Admission British Policy Won’t Work – But It’s Not Their Fault

Paul Krugman, the Nobel Winning Economist is traveling the world selling books.  Well actually not just any books, he is selling his own book.  Like any good economist, he wants the money, but he already has a lot, so his motivation is also to sell wisdom.  Unfortunately not everyone who should be buying is buying.

There is a snarky commentary in Britain’s Daily Telegraph, and this Forum always likes snarky commentary even when it is testimony with which we do not agree.

Krugman is an economist with attitude, and he thinks Britain is in the midst of a “massive blunder” in economic policy. The UK is the very worst example of austerity economics, he believes, for unlike the poor beleaguered nations of the eurozone periphery, we’ve not had this misery forced on us by the ghastly euro, but have opted for it as an unnecessary penance for the sins of the boom.

First of all the commentator admits austerity is a losing policy.

The fiscal consolidation chosen by the Coalition was always likely to have a negative impact on output, at least in the short term.

In this case the author though first of all claims Britain’s policy hasn’t been implemented yet, since government spending was a positive factor on GDP even though there has been massive loss of jobs by government workers.

In any case, the picture Krugman presents of wrong-headed British austerity is a caricature of the reality, though one admittedly encouraged by the Coalition’s rhetoric. Yesterday’s revised GDP figures, showing that the country is even deeper in recession than we thought, would appear to support the mocking tone in which Krugman condemns the idea of “expansionary austerity”. But where is this austerity? In fact, one of the few positive contributors to output in the last quarter was government spending, which grew by 1.6 per cent. Krugman seems to have forgotten the automatic stabilisers, which because of our welfare state are considerably bigger than in the US.

But the fault is not Britain’s any way, it is the fault of the rest of the world because their weak economies mean weakness in Britain.

To make it work, the Government needed the following wind of decent growth elsewhere in the world economy. Instead, it’s facing a hurricane. We look set to be broken by the storm.

To interpret, Britain was supposed to have austerity, but then be rescued by demand for British products in the rest of Europe, all of whom were implementing austerity also because it is such a good policy.  This works in Germany with its huge export sector, but apparently the author is not aware that every country cannot run a trade surplus.

Finally, if more austerity is yet to come the prospects for Britain are not good, as can be seen in the numbers that reflect a total lack of business confidence, which is the exact opposite of what was supposed to happen.

To have a nice snarky commentary one must have facts and logic on one’s side.  Here is what this commentator has on his side.

He is Prof Paul Krugman, a superstar polemicist who has been described by The Economist as “the most celebrated economist of his generation”. Actually, “celebrated” is not exactly the right word, for Krugman divides opinion like no other. To his followers, he’s a saint; to his detractors, he’s a false prophet with satanic intent.

Sorry folks, name calling is not a substitute for an intelligent refutation of an argument, it is instead an admission that there is no intelligent refutation.

Defined Benefit Pension Plans Are Not in Terrible Shape – They are in Worst Than Terrible Shape

How to Solve a Problem – Assume It Away

Everyone has to engage in retirement planning and this largely consists of determining how much money they must save in order to have an investment total at the end of their working life.  A big part of that determination is what will be the rate of return on investments as a person saves and invests every year.  The more one can earn on their savings/investments, the less has to be saved.

State and local governments are the last vestiges of what is called ‘defined benefit pension plans’.  These plan set aside a certain amount of money each year into a pension plan.  The plan then promises to pay a certain level of benefits to the retired state and local investors, regardless of how much money the plan has in it, regardless of how much was contributed to the plan and regardless of the rate of return the plan earns on investing the money.  Sounds like a terrible idea and it is.  But it is what state and local governments have gone out and done.

How much of a rate of return should pension plans assume they are going to make?  Well, let’s see.  Government bonds currently pay about 1.5% to 3.5%.  Corporate bonds maybe a little more, but not much more.  The stock market, possible good long term returns but a lot of risk of zero or negative return.  So what do most state and local pension plans do?

While Americans are typically earning less than 1 percent interest on their savings accounts and watching their401(k) balances yo-yo along with the stock market, most public pension funds are still betting they will earn annual returns of 7 to 8 percent over the long haue. 

Given that part of the portfolio is invested in bonds earning about 3 to 5%, this means the non-bond portfolio must earn 10% or more.  The reaction of Michael Bloomberg, Mayor and financial expert is this.

But to many observers, even 7 percent is too high in today’s market conditions.

“The actuary is supposedly going to lower the assumed reinvestment rate from an absolutely hysterical, laughable 8 percent to a totally indefensible 7 or 7.5 percent,” Mr. Bloomberg said during a trip to Albany in late February. “If I can give you one piece of financial advice: If somebody offers you a guaranteed 7 percent on your money for the rest of your life, you take it and just make sure the guy’s name is not Madoff.”

So why won’t managers use a more realistic number? 

In New York, the city’s chief actuary, Robert North, has proposed lowering the assumed rate of return for the city’s five pension funds to 7 percent from 8 percent, which would be one of the sharpest reductions by a public pension fund in the United States. But that change would mean finding an additional $1.9 billion for the pension system every year, a huge amount for a city already depositing more than a tenth of its budget — $7.3 billion a year — into the funds.

So let’s all play pretend, that the investment fairy will somehow find the return on investment so taxpayers don’t have to make good on all those promises made decades ago.

Wednesday, May 30, 2012

Pilar Mateo (Who?) Shows That Not All Corporate Founders are Greedy – Turns Down Offer for Patents that Provide Low Cost Weapon in War on Malaria in Africa

A Real Role Model – Not a Hedge Fund Role Model

The story of Mark Zuckerberg is a story that for many people sets out their goals and ambitions.  Mr. Zuckerberg invented Facebook and is now a real billionaire, one of the richest people in the world.  For many Americans this is what business is all about, accumulating far more wealth than one could ever need to lead of life of unlimited luxury.

Pilar Mateo is unknown to almost all Americans, yet when the history of this period is written she more than Mr. Zuckerberg will be the person for whom accolades are given.  Ms. Mateo, like Mr. Zuckerberg is an innovator.  But her innovation is not a products that wastes people’s time with useless information, her innovations saves lives, possibly millions of lives.

"It's not just the insects that are the problem," says Spanish entrepreneur Pilar Mateo. "It's the poverty."
Hopefully There are Other Colors

For decades, nets and sprays have been the only effective methods for controlling the mosquitoes that cause malaria and dengue. Pilar Mateo thinks she can do better. The Spanish chemist has invented a way to embed pesticides in microcapsules stirred into house paints at her Valencia company, Inesfly. The insecticides are released from the paint slowly, remaining effective for two to four years, while sprays typically need to be reapplied at least every six months. “The paint acts like a vaccine for houses and buildings,” she says.

Wow, such technology must be worth millions, maybe even billions.  Here is Ms. Mateo’s response.

Mateo says she’s received offers to buy her patent but refuses to sell out. Instead, her new venture, Inesfly Africa, will produce it commercially at a €10 million ($13 million) factory in Ghana. After years of donating paint to poor people in Latin America and Africa, Mateo wants the venture to fund her broader humanitarian efforts. “It’s not just the insects that are the problem,” she says. “It’s the poverty.”

And no Ms. Mateo is not building a house in California that is so large she needs elevators to bring her fleet of luxury cars from the basement garage.

She divides her time living with indigenous peoples in Bolivia’s forests, building and painting houses, and conducting research in her lab in Valencia. “We spend all this time talking about medicines and diseases when the primary problem for half the planet is that their homes are sick,” she says.

And while many children use the family money to live a life of quiet indolence, Ms Mateo used her family money differently.

Using roughly $6 million of her family’s money and $12 million in grants from nonprofits, Mateo has done research, created educational programs about hygiene, and helped paint more than 8,000 homes in Latin America and Africa. After the former Bolivian health minister tried to rescind the country’s approval of the paint, locals protested. President Evo Morales in November invited Mateo to his office, and the Andean nation again allowed the paint.

It is very certain that none of America’s “get rich by inventing complex financial instruments that create nothing to benefit people” have ever thought about doing what Ms. Mateo has done, and the few that might have probably responded with incredulity that someone would not use the technology to make billions. 

One can imagine them saying “Just like a woman, doesn’t know how to make huge profits off of a critical health care product”.  

Prosperity of the U. S. Auto Industry A Source of Major Economic Concern

What – That Goes Against Conventional Wisdom, and Every Other Kind of Wisdom

The great business success story of the second decade of this century is the rebound and strength of the U. S. auto industry.  General Motors has been resurrected from the dead, Chrysler from beyond the dead and Ford Motor Company has now reclaimed its logo out of hock and its investment grade bond rating out of junk bond status.  The industry is doing very well, even if the first quarter was not all that great for GM.

GM's North American operating profit rose 31% to $1.7 billion, with margins improving to 7%, from 5.6% a year ago. That is better than the 5% figure that U.S. auto makers once considered acceptable, but far from GM's goal of 10% globally.

[GM]Ford's operating profit rose 16% to $2.1 billion, giving it a profit margin of 11.5% for the region. However, Ford said it is unlikely to maintain retain that margin level for the rest of 2012.

So why isn’t this good news for the U. S. economy?

The problem is in the explanation.  The auto industry is going through what might be called a technical recovery.  A large part of the rise in sales in the past  2 years has been the result of the drastic decline in sales in the previous years.  That decline in sales resulted in an above average age of the U. S. installed base of light trucks and passenger cars.  The average age of the car on the road can only rise so much before that car is no longer going to be on the road.  Sooner or later the public must replace an aging auto or light truck, and that time has now come.

So the prosperity of the auto industry is not really about the prosperity of the economy as a whole.  Sales of autos and light trucks are not responding to a better economy, they are responding to a purely technical aspect of the economy.  Autos and light trucks are the main type of private transportation and commercial transport.  When the car or truck breaks down, or becomes unsafe or become too expensive to repair, people buy new ones.  And each year a car gets older, it is more likely to break down, become unsafe or become too expensive to repair.

Take away the growth in employment in the auto industry and you get a very weak set of economic data.  So the fact that the auto industry’s recovery is so dominant a part of the overall recovery is bad news. Want even worse news, the technical recovery of the auto industry may be nearing an end.

Would that it be otherwise. 

It’s Too Early to Tell Definitively, But The Performance of Republican Meg Whitman in the California Governor’s Race in 2010 May Have Been an Indication of How She Would Perform as CEO of Hewlett Packard

We Are Willing to Give Her More Time, Even if Shareholder Investors Are Not

Meg Whitman was a very successful private sector CEO (meaning she made zillions of dollars and cashed out) and so she decided that she would be a very successful Governor of California, despite lacking in any previous public policy or government employment experience.  She ran a pretty miserable campaign, wasted tens of millions of her own money and lost to a former Governor in a year in which Republicans dominated the elections.

Hewlett Packard thought they saw a good thing in all of this, and now that Ms. Whitman was not employed they snatched her up as CEO of the giant tech conglomerate.  Things have not yet worked out all that well.

Over the quarter, H-P's personal computer group, the world's largest, was the only major business that grew, and it was effectively flat with revenue of $9.5 billion.

H-P's printer revenue declined 10% from a year ago to $6.1 billion, and revenue in its services group fell 1% to $8.8 billion. H-P's group that makes products for businesses such as servers and storage systems saw revenue fall 6% to $5.2 billion.

Revenue in H-P's small-by-comparison software group grew 22% to $970 million, largely because of a $10.3 billion acquisition of Autonomy Corp. last year. But Ms. Whitman said Autonomy's revenue was down from a year earlier when it was a standalone entity, and that she was replacing the head of that business.

Investors are not happy.

So far, H-P hasn't fared much better under her watch. H-P shares hit a new 52-week low Wednesday before ending down 3.2% at $21.08 in 4 p.m. trading on the New York Stock Exchange.

Of course none of this is senior management’s fault, it’s the fault of the workers.  So thousands of them will lose their jobs.

 Co. HPQ -3.21% said it will lay off 27,000 workers as part of a massive restructuring plan to stem its declining profits and revenues, underlining the growing gulf between the technology industry's old guard and new generation.

Now HP is a big company, and 27,000 workers is not even 10% of its workforce but one has to wonder how 27,000 useless employees got hired in the first place.  Of course maybe they are not useless, maybe they are performing critical tasks and may they will be re-hired as consultants, thus obliterating the savings.

Ms. Whitman has been on the job for less than one year, and maybe she will get the job done.  But it seems she was hired more for her reputation then her performance, and in the business world, like in political races reputation does take one very far. 

Tuesday, May 29, 2012

Private Schools Using Tax Dollars to Fund Scholarships Intended for Low Income Student to Offset Tuition Costs of High Income Students

But The Schools Are Sponsored by Religious Organization, So By Definition What They Are Doing is Not Wrong

Thanks to Jared Bernstein’s excellent Forum on Economics we are directed to a New York Times story that exposes how private, mostly religious affiliated schools are distorting a program designed to help poor student attend private schools.  Basically the deal is this.

States have enacted programs that provide for tax credits for individuals and/or corporations to donate money for a scholarship for children of low income families attending public schools to attend private schools.  Even though much of the scholarship money and diversion of public funds goes to schools that actively promote a religion, the Supreme Court has blessed this practice.

It turns out that in some, but not all instances both the schools and the parents have devised ways to divert the money so that the parents of children already in these private schools receive the benefit, even though that was not the intention or the desire of the program.  Georgia, with it strong base of religious voters is one of the prime perpetrators of the misuse of the program.

The program would be supported by donations to nonprofit scholarship groups, and Georgians who contributed would receive dollar-for-dollar tax credits, up to $2,500 a couple. The intent was that money otherwise due to the Georgia treasury — about $50 million a year — would be used instead to help needy students escape struggling public schools.

That was the idea, at least. But parents meeting at Gwinnett Christian Academy got a completely different story last year.

“A very small percentage of that money will be set aside for a needs-based scholarship fund,” Wyatt Bozeman, an administrator at the school near Atlanta, said during an informational session. “The rest of the money will be channeled to the family that raised it.”

And it is not just parents and students who were not intended as beneficiaries of the program that are benefiting.  Organizations have sprung up which take large sums of money just to administer the program.

A cottage industry of these groups has sprung up, in some cases collecting hundreds of thousands of dollars in administrative fees, according to tax filings. The groups often work in concert with private schools like Gwinnett Christian Academy to solicit donations and determine who will get the scholarships — in effect limiting school choice for the students themselves. In most states, students who withdraw from the schools cannot take the scholarship money with them.

What is going on of course is that supporters of using tax dollars to support religious education have found a clever way to exploit a program aimed at helping low income families and use the money for promoting religion.

Most of the private schools are religious. Nearly a quarter of the participating schools in Georgia require families to make a profession of religious faith, according to their Web sites. Many of those schools adhere to a fundamentalist brand of Christianity. A commonly used sixth-grade science text retells the creation story contained in Genesis, omitting any other explanation. An economics book used in some high schools holds that the Antichrist — a world ruler predicted in the New Testament — will one day control what is bought and sold.

And regardless of what the Supreme Court has said in his support of using tax dollars to support religion, this is clearly diverting public tax dollars to preach.

Surprisingly, Florida is a state where strict controls may have prevented much of the abuse.

In Florida, where the scholarships are strictly controlled to make sure they go to poor families, only corporations are eligible for the tax credits, eliminating the chance of parents donating for their own benefit. Also, all scholarships are handled by one nonprofit organization, and its fees are limited to 3 percent of donations. Florida also permits the scholarships to move with the students if they elect to change schools.

Far from being ashamed at ripping off the system, those doing it in the name of ‘religion’ are proud of what they are doing.  One part of the scam is for a parent with a child already in private school to ‘enroll’ the child in public school with no intention of actually sending the child to public school, but technically qualifying for the program.

The idea, based on a technical interpretation of the word “enroll,” was promoted by State Representative David Casas, a Republican and co-sponsor of the scholarship legislation in Georgia. In meetings with parents, he had explained that the bill’s wording was intentional — using the word “enrolled” rather than “attending” — to enable the scholarships’ use by students already in private schools.

Parents questioned the idea. “Aren’t people going to say that’s a scam?” asked one father during a presentation by Mr. Casas that was posted on YouTube. “ ‘You’ve been going here for nine years. Now you’re enrolling in public school? You’re enrolled in two schools?’ ”

Mr. Casas, the president of a seminary, assured him it was not a scam. “Feel fine about it,” Mr. Casas said.

As noted, Mr. Casas is head of a seminary and probably considers himself a very righteous person.  The rest of us think that if there is some truth to the story that the “anti-Christ will someday control what is bought and sold’ as cited above from an Econ textbook, then maybe what it was talking about was Mr. Casas.  Isn’t diverting money from low income families that was designed to give their kids a better education and using it for middle and high income families to support their kids who are already in private schools something an “anti-Christ’ might do?  Really, it’s probably right there in the “Handbook for the anti-Christ”.

German Interest Rates Reach an Effective Level of Zero for Two Year Notes

The Last Gasp of Monetary Policy Takes Place

One of the reasons that Conservatives argue against fiscal stimulus in the form of more government spending is that they say that monetary policy consisting of easing credit and lowering interest rates will do the job.  The fact that in the U. S. and Europe extremely low interest rates have not been effective doesn’t mean their logic is flawed, because the position is not based on logic.

In Europe the flight of funds to safety has now resulted in two year debt issued by the German government reaching an interest rate of just about zero.

Germany sold €4.5bn of two-year government bonds at a record low yield of 0.07 per cent, underscoring the strong demand for safer assets amid fears that Greece could be forced out of the eurozone.

The German Bundesbank said the two-year “Schatz”, which was sold with a zero-coupon for the first time, received bids for €7.7bn, compared to a maximum sales target of €5bn.

The demand for German debt is the result of investors drawn by the need for safety above all else.  But the results in Germany also tell a much darker story.  They tell that Germany can borrow money for essentially zero interest, but that the country is unwilling to invest in Europe and to stimulate the European economy away from austerity and towards growth. 

Ultimately the German economy itself will suffer, because it is export driven and when Germany’s customers suffer economic woes they are unable to buy German goods.  Germany will learn this lesson the hard way. 

Some Secret Service Agents to Fight Dismal For Inappropriate Behavior with Prostitution Columbia While Supposedly Protecting the President

No, Their Defense is Not That They Didn’t Do It

One of the ugliest stains on America occurred last month when it was determined that a large number of Secret Service agents consorted with prostitutes in Columbia.  The agents were in that country to protect an American delegation to a conference, and that delegation included the President.  When the activities were made public, the Secret Service quickly moved to dismiss the agents involved.

Now at least four agents are fighting that dismissal

Four Secret Service employees have decided to fight their dismissals for engaging in inappropriate conduct in Colombia last month, a development that could unravel what has been a swift and tidy resolution to an embarrassing scandal over agents’ hiring of prostitutes.

And no, they are not using the normal argument, which is that they are innocent of the charges.  Instead their position is this.

The agents are arguing that the agency is making them scapegoats for behavior that the Secret Service has long tolerated, a charge that Director Mark Sullivan may have to address when he appears before a Senate committee Wednesday. 

The story in the Washington Post describes some of the details here, details that can be published in a general publication.  Here is one of the disgusting details.

One 29-year-old field agent assigned to the Washington office, who is single and who resigned under the threat of being fired, told investigators in a polygraph examination that he did not think at the time that the two women he brought back to his hotel room were prostitutes. He is among those seeking to overturn their dismissals, according to three people familiar with his case.

And here is a more detailed explanation of why that agent and others don’t think they should be terminated.

According to interviews with multiple former and current employees and people briefed on the inquiry, the Secret Service agents involved brought women to their hotel rooms without hesi­ta­tion. The agency says it was clear that employees should not do anything unbecoming of a Secret Service employee. Current and former agency employees say sexual encounters during official travel had been condoned under an unwritten code that allows what happens on the road to stay there.

They also contend that this tolerance is part of the “Secret Circus” — a mocking nickname that some employees use to describe what ensues when large numbers of agents and officers arrive in a city.

Of course, given the fact that agents engaged in the activities that they did justifies that position, since they obviously are clueless as to the fact that the Secret Service is different.  It is an elite group of men and women who are given one of the highest levels of responsibility that can be designated in law enforcement.  They represent America, they are symbolic of the country and the fact that they do not understand that and act accordingly is sufficient justification in and of itself for their dismissal.

And yes, just like you The Dismal Political Economist does feel the need to bathe after just reading and thinking about this story.

Monday, May 28, 2012

Coming in June – The Wisconsin Recall Election and the Potential Disaster for Democrats; The Greek Election and the Potential Disaster for Europe; The Supreme Court Decision on the Obama Health Care Law and the Potential Disaster for President Obama

A New Candidate for the Cruelest Month

After everyone gets past the Memorial Day weekend, and after everyone recognizes the sacrifice that the men and women of the Armed Forces have made for all of us June will begin.  It is not the month it used to be.

Mark Your Clocks and Set Your Calendar\
It's Going to be a Bumpy Month
First up is the recall election of Gov. Scott Walker in Wisconsin.  At this time it looks like a substantial victory for the Gov. over his Democratic opponent.  The Gov. has had unlimited funding and the negative ads have made a huge difference in the favorability rating of his opponent.  The risk in Wisconsin for Democrats is not just losing in June, but providing Republicans with the momentum to take the state in November.  If Mr. Walker wins the decision to waste huge resources in a recall election will go down as one of the great monumental political mistakes.

In mid-June the voters in Greece will once again vote to elect a Parliament that will choose the new government.  If the radical Syriza party wins it will form a government that will repudiate the Greek agreement of austerity with Europe.  Europe is making plans to kick Greece out of the Euro and the Euro Zone, and Europe is publicizing these plans in order to put pressure on Greek voters to vote for a coalition government that will uphold the bargain with Europe.

Europe’s calm face in the planning for a Greek exit belies the reality that a Greek exit will be a disaster for Europe.  By spinning a Greek exit as a possibility Europe is doing the best they can to prevent such a thing.  After the new election everyone will know if Greece has called Europe’s bluff.

At the end of June the Supreme Court will end its 2011-12 session by issuing a ruling on the Obama health care plan.  The smart money is that the Court will strike down most if not all of the plan, not so much on legal grounds which are very iffy, but on political grounds.  The current Supreme Court is one of the most politicized courts in history, and their animosity for Mr. Obama is so great that the Conservatives on the Court really do not care about the legal basis for their ruling.  But then Conservatives have always legislated from the bench, it is why they accuse Liberals of doing so, they need to deflect attention from their own actions.

Britain’s Conservative Government Surrenders on Economic Policy; Admits They Were Wrong and Moves to Change Course

Reality Finally Overtakes Ideology

For two years now Britain has pursued an economic policy, that, to put it as politely as possible is just plain wrong.  The Conservatives who took over Britain in 2010 decided that cutting spending and firing hundreds of thousands of government employees would somehow give business the confidence to invest and hire.  They were dead wrong.

Now the government has announced that it will change course and use its low cost of borrowing tofinance major projects.

The ruling UK coalition is preparing a “massive” increase in state-backed investment in housing and infrastructure, as Nick Clegg signalled a shift from lurid warnings by ministers about the debt crisis to a fresh emphasis on growth.

In an interview with the Financial Times, the deputy prime minister sounded a new tone on economic policy, when he said the government’s “absolute priority” was to use the government’s strong balance sheet to inject credit into the economy.

What Happened?

The IMF, a very conservative organization recognized what everyone else except the denial group of Conservatives in Britain had recognized, that British policy had been abject failure.  The IMF urged Britain to change course.

Lagarde: 'Economic recovery in the UK has not yet taken hold'
Ms. Lagarde -
Telling Britain The Way
It is - Finally Somebody
George Osborne must adopt an economic "Plan B" and slow the pace of public spending cuts if the British economy remains weak, the International Monetary Fund warned the Chancellor yesterday. The managing director of the IMF, Christine Lagarde, came to the Treasury to deliver the sobering news: that the Government should consider slowing spending cuts if recovery stalls.

She also called on the Bank of England to do more to support the economy – presently in the grip of a double-dip recession – by printing more money.

This statement by the head of the IMF swept away the last vestige of credibility from British policy.  And so the government sent its junior coalition partner, Mr. Clegg out to announce the change.  Mr. Clegg was chosen so as to avoid further embarrassment for the Conservative leaders Prime Minister David Cameron and Chancellor George Osborne, both of whom would say up until the last minute that their austerity policy was working and that there would be no changes.

Mr. Clegg dutifully undertook this role, and also made a sincere but failing effort to put the best face forward on things from a political point of view.

The deputy prime minister said the coalition initially had no choice but to set out “in very lurid terms the state of the emergency we were facing”. But he added: “That kind of language over a prolonged period of time can have a dampening effect on mood, which is very important in an economy.”

He denied the new focus on demand was a Plan B, insisting the coalition’s deficit reduction plan had earned Britain market credibility. However, the Treasury could now use its balance sheet to underwrite housing and infrastructure schemes and to tackle youth unemployment.

One important thing in all of this is what we have is a preview should the Republicans take the Presidency and control of the U. S. government in January.  If they do they will embark on a British style program, and they will get the British results.  Of course, being much stronger on ideology than public policy, it will take far more than two years for them to admit they were wrong.  

Worried About a Romney Presidency? – Here’s a Story About his Religious Beliefs That Will Really Scare You

It’s Not Because of His Mormon Religion – It’s Because Mr. Romney is a Religious Authoritarian

Religion and American politics have always had a tortured relationship.  Thomas Jefferson's great contribution was to recognize the corrosive impact that partisan religious beliefs can play in government, and he tried his best to separate out civil governance from religious activities.  He largely failed.

Religion and government is currently in the news because the Republican candidate is a Mormon.  This in itself is not and should not be an issue, the religion of a candidate is irrelevant in his qualifications for office and if an office holder is true to the Constitution it will not be an issue.  The generosity and ethics of Mormons is to be greatly admired.   But many people do not believe this, and because the Republican nominee is a Mormon the issue of his religious beliefs continue to be a factor in the Presidential race.

It is of course possible to be a Mormon and not have one’s religious beliefs intrude in government.  Sen. Harry Reid, (D, Nv) has been the Senate Majority leader and while he is a Mormon that fact is unknown to most voters because he keeps his beliefs separate from his role as a major government official.  With Mr. Romney, no one is sure.  While as Governor of Massachusetts Mr. Romney did lead a non-sectarian policy, the Presidential race has brought his beliefs and practices into question.  Specifically, does Mr. Romney practice of his religion provide insight into the type of President he would be.

In what is clearly another one of those planted stories designed to use the press to boost a candidate, the New York Times discusses Mr. Romney’s  actions with respect to his religion.

But dozens of the candidate’s friends, fellow church members and relatives describe a man whose faith is his design for living. The church is by no means his only influence, and its impact cannot be fully untangled from that of his family, which is also steeped in Mormonism.

But being a Latter-day Saint is “at the center of who he really is, if you scrape everything else off,” said Randy Sorensen, who worshiped with Mr. Romney in church.

A key element in the story is Mr. Romney’s adherence to strict rules.

Mr. Romney’s penchant for rules mirrors that of his church, where he once excommunicated adulterers and sometimes discouraged mothers from working outside the home. He may have many reasons for abhorring debt, wanting to limit federal power, promoting self-reliance and stressing the unique destiny of the United States, but those are all traditionally Mormon traits as well.

And the most disturbing part of the story is this passage.

He often urged adherence even to rules that could seem overly harsh. One fellow worshiper, Justin Brown, recalled in an interview that when he was a young man leaving for his mission abroad, Mr. Romney warned him that some parameters would make no sense, but to follow them anyway and trust that they had unseen value.

Such a position may be entirely appropriate for a religious environment, but the attitude is abhorrent in a governing environment in a democracy.  To blindly follow rules with no regard for their rationale, their impact or their ability to meet the goals of a society is to follow a path to totalitarianism  Flexibility in the rule of law is the hallmark of a successful government, changing daily to meet the changing conditions and needs of the populace.  Mr. Romney could well be the instrument of European style austerity imposed upon the United States.  If he does. millions will suffer for no reason other than ideological bias on the part of government.

Given his well documented shifts in positions over the decades one may be tempted to conclude that Mr. Romney has the flexibility to adapt.  One would be wrong, the shifts by Mr. Romney have been in part calculated to advance his political career and in part towards a more rigid, a more dogmatic and a more authoritarian stance.  That his attitude towards religious dogma supports rather than opposes those more intolerant positions is disturbing. 

The hope here is that in the coming campaign Mr. Romney demonstrates that he would govern as President of all of the people, not just those that either support his view or those upon whom he can impose his views.  That is a hope, not a prediction.

Sunday, May 27, 2012

Exclusive – Electoral College Forecast You Will Not Get Anywhere Else – Romney 283, Obama 255

The Most Comprehensive and Accurate Unscientific Projection of the Fall Results

Unlike professional prognosticators, like the state of the art, the very best and the most reliable Nate Silver of  The Dismal Political Economist believes that he and he alone can provide the best forecast of the outcome of the 2012 Presidential Election.  By analyzing thousands of pieces of information in his own small mind, he can tell with near 100% accuracy which candidate will win the electoral votes of each state. (note:  the definition of 'near' is however close he actually comes to the final result.)

Here are the results that one will take place in November.  Yes, in contradiction to conventional wisdom it shows a Romney victory.  The reasons for this are that by being subjective the projection can take into account events that are yet to happen.  For example, the Obama health care plan is likely to be dealt at least a partial and maybe fatal blow in late June with the Supreme Court decision.  And the gazillions of dollars of negative ads run by billionaires are going to have a big impact, something that no poll or mathematical analysis can take into account.

Another example, this projection has Wisconsin in the Republican column.  This is based on the expectation of a big win for Gov. Scott Walker in his recall election.  That will provide momentum in Wisconsin and prove that massive amounts of money and negative advertising work.  This will produce even more money and negative advertising in the fall. A win for Mr. Romney in Wisconsin is expected here to carry over into Minnesota. 

Momentum and intensity are factors that can never be measured, and so cannot be factored into polls or into a model like Nate Silver uses.  And momentum is moving towards Mr. Romney.  He will be making news soon with a V. P. choice, he has the favorable news reporting on lawsuits filed by Catholic organizations against the requirement to make birth control services available to their employees and he has the news industry lining up in his corner.

So here is the 50 state projection for November 2012, totally valid until it changes.












D. C.
New Jersey
New Hampshire
New York

New Mexico

North Dakota
North Carolina
Rhode Island



South Carolina

South Dakota




West Virginia








The purpose of making a projection this early is twofold.  The first is to show the trends in the voting by electoral vote.  To do that this table will be updated from time to time, and when that happens there will be a measure of the trend in the election.

The second goal is to demonstrate the insight and brilliance of this site.  Yes, that should be obvious but some viewers may not be quite that perspective.

Finally notice that if Wisconsin and New Hampshire fall to Mr. Obama, and everything else stays the same the electoral college is tied.  The movie title, 'Nightmare on Pennsylvania Avenue'.