Monday, August 29, 2011

Bachmann the Prophet

"I don't know how much God has to do to get the attention of the politicians. We've had an earthquake; we've had a hurricane. He said, 'Are you going to start listening to me here?' Listen to the American people because the American people are roaring right now. They know government is on a morbid obesity diet and we've got to rein in the spending." -- Michelle Bachmann

Yes. Hurricane Irene, which killed several people and will cause more government spending to repair some of the damages, was God trying to tell Washington to reduce spending.

Because this is how it works: the all-powerful, all-knowing, all-good creator of all things has a message he wants to tell our politicians. But He has severe communication issues. Instead of literally telling the politicians to stop spending, the best He can do to deliver that message is use naturally occurring events to kill random people on the same coast as Washington DC, then tell Michelle Bachmann to explain the secret message to us.

Another possibility: God is using Michelle Bachmann's words as a message to warn us not to vote for her.

Friday, August 26, 2011

Why the economy sucks

I don't know or understand much about macroeconomics. But I have spent a lot of time the past couple of years reading stuff from people who do, and whereas I had no idea what was going on when the Lesser Depression started, I do feel like I understand the basic problem now.

The main reason unemployment is so bad right now is a lack of demand in our economy - there are less people buying things. Businesses will hire more people when they have more customers. There will not be more customers until people spend more money. But a big reason why people are spending less money is because they're unemployed. So it's hard to pull out of a deep recession because you get stuck in this catch-22. How can we increase total spending enough to start upward momentum in a case like this?

In milder recessions, we can get pulled out of that trap by the Fed lowering interest rates. Basically that makes it cheaper to borrow money, and people respond to that incentive by borrowing (and therefore spending) more. But there's a limit to how much you can lower interest rates because you can't make them lower than zero. With a big enough blow to our economy, that extra incentive to borrow isn't enough to counter-act the recession, which is the case we're in now where the Fed has held them as low as possible with no real recovery.

Why is it so hard right now to bring back consumer spending to start a full recovery? The big difference is that people are more in debt now compared to milder recessions we've gone through. Even if interest rates are lower or people get some extra money, they can't spend much until their debts are more manageable. But this isn't because of increased use of credit cards; the increase over time has been in mortgages:

When I was looking into buying a house before the recession, most of the "expert" advice was to buy the most expensive house you could afford. Basically, population is increasing, but the earth is not, so real estate "should" always increase in value. And your mortgage will continually get easier to pay, because you will eventually make more money, and inflation will effectively lower your mortgage payments. And if it worst comes to worst, you can always sell your house for a net profit. Both the people buying houses and the banks financing them were doing what seemed to be the smart long-term decision. But thanks to the housing bubble, up to 28% of homeowners now owe more on their mortgage than the actual value of their homes. With the recession's job losses and pay decreases, people have a harder time paying their mortgage, and because their house now has a lower value, they can't even sell it to get rid of the mortgage that they can no longer afford.

The issue of household debt will resolve itself eventually, but that would take a very long time. We can't start a meaningful recovery any time soon without reducing household debt and increasing consumer spending. The real question is: what are the realistic options for doing so, and what are their downsides?

Monday, August 15, 2011

The Texas Miracle

With Rick Perry now officially running for President, the "Texas Miracle" has been all over the news. The Texas Miracle refers to the supposedly wonderful economy in Texas that doesn't have the unemployment issues found in the rest of the country, all thanks to Rick Perry and conservative politics. The statistic going around is that in the past 2 years, 38% of all new jobs created in the U.S. were in Texas.

So let's look at the unemployment rates per state and see how awesome we are! Link. Holy crap... Texas is #26 at 8.2%... half of the states are doing better than us. And we're losing to some of the most liberal ones like New York, Massachusetts, and Vermont. Vermont even has single-payer health care and Ben & Jerry, but their unemployment rate is 5.5%! Why is nobody talking about the Vermont Miracle? We're just in the middle of the pack. And especially when you consider that we have the highest percentage of minimum wage jobs in the nation, it looks like Texas isn't such a great state for employment after all.

So how can it be true that 38% of all new American jobs in the past 2 years were in Texas?. It is true, but it's clearly not because our employment rate is better. So it must reflect a larger population and faster rate in its growth. The statistic is meant to make you think it represents something it doesn't. But I'm sure it's going to win Perry a lot of votes anyway.

Friday, August 12, 2011

Romney owns hecklers, Dems declare him corporationy

It's crazy to me that this is being referred to as a gaffe, and the DNC is using it for anti-Romney ads. Of course, "corporations are people" by itself sounds bad. But all he seems to be doing here is owning ignorant hecklers. If anything, this should be used in pro-Romney ads. A heckler literally answered that money earned by corporations doesn't go to people because it instead goes to... "their pockets".

Just as there are many conservatives who like to imagine that all government spending is "waste" that can be cut with no negative consequences, there are also many annoying liberals who seem to think corporations are limitless sources of corrupt money we can keep taxing with no negative effects on real people.

Puppet Tim Robbins says it best:

Wednesday, August 10, 2011

Debt Downgrade, Treasuries, & Stocks

Example of the news sucking: On Monday, after S&P downgraded our debt and the stock market took a dive, I saw stories online with headlines like "stocks plunge after S&P debt downgrade" and other wording implying that one led to the other. Why? Is it just because those are 2 big things everyone knows about, and people would like the simplicity of imagining that the causation worked that way?

This week stocks have plunged, but U.S. debt has sold better than ever. Today we broke the record for lowest interest rate on 10-year treasury notes. If the events of this week were due to investors' concerns over U.S. debt, the interest on our debt would have gone up, much less down to record lows. If investors are selling tons of stocks and buying up tons of U.S. debt, that means that 1) our debt is still considered the safest investment in the world and 2) the economy sucks and will continue to suck.

So on the one hand, our economy is terrible and showing no signs of meaningful improvement under current circumstances. On the other, investors and foreign governments want to lend our government money more cheaply than ever before - well below inflation... they are basically paying us to hold on to their money. Doesn't that suggest that right now is the best time to borrow a bunch of money to pump into our economy and the wrong time to try to balance our budget? Borrowed money for stimulus would only need to have a slightly positive effect in order to pay for itself. We could just hand out tax rebate checks to everyone the way Bush did.

So why is Washington - Republicans and Democrats - currently spending all their time on our long-run budget issues and doing nothing about our economy?

Monday, August 8, 2011

Moral Dilemmas

I'm currently reading Justice: What's The Right Thing To Do?, and it starts with a couple of hypothetical situations that has really bothered me because it demonstrates a big inconsistency in our conscience.

Scenario #1: You are on a trolley heading down a track, and you notice that there are 5 people tied to the rails ahead. The brakes are out, but you can turn onto a different track where there is only 1 person tied down. So your only choices are to do nothing and let the trolley kill 5 people, or change course and kill 1 person that would have otherwise lived. What's the right thing to do? For most people (including myself), your conscience tells you that the best thing is to change course and save the greatest number of lives.

Scenario #2: Same case, but there's nobody in the trolley. You and a very heavy person are on a bridge overlooking the track. If you do nothing, the 5 people on the track will die. But you happen to know that if you push the heavy person off the bridge and onto the track, he will die when the train hits him, but it will cause the train to stop. It would do no good for you to jump down. What is the right thing to do? For most people (including myself), your conscience tells you that you should not push the innocent bystander off the bridge.

The problem is that these 2 scenarios are effectively the same moral dilemma. In both cases you can do nothing and let 5 people die, or make a choice where the trolley hits and kills only 1 person that would have lived otherwise. So what really is the right thing to do, and why does our conscience contradict itself? I don't know. But I assume our different gut reactions have a lot to do with how directly responsible we'd feel for the 1 person that died in each case. Pushing someone off a bridge feels like you're directly killing someone whereas you feel more removed from the situation if you just turn a train. Like how people can be complete jerks when driving but you know they'd be nice to your face.

Sunday, August 7, 2011

Debt Deals

Starting over this blog... seems like a good idea to keep my political rants in its own separate thing instead of just facebook (/google+) posts.

Anyway, this recent debt ceiling/deal/downgrade is a perfect example of how depressing politics can be. The Tea Party largely gained political power in the '10 midterms by campaigning about how bad our national debt is. Yet if it weren't for the far-right wing of the Republican party, our debt situation would now be in much better shape and the S&P downgrade wouldn't have happened. The S&P downgrade in and of itself doesn't really matter, but based on new polls, this seems to have the effect of a much higher disapproval rating of Obama, which can lead to a further rise in power for the Tea Party, which will in turn hurt our debt prospects even more.

First of all, only the far right movement within the Republican party thought it would have been ok to not raise the debt ceiling. S&P said if we would have just done a clean raise of the debt limit, they would not have lowered our rating.

Then, when it turned out that the debt ceiling vote was going to be a point of negotiation for getting our debt situation under better control, Obama and Boehner came to a tentative $4 trillion deal. About $3 trillion was going to come from spending cuts including big changes in Medicare and Social Security (programs Democrats are usually very resistant to changing). The other $1 trillion would be new revenues only by closing tax breaks, not by raising rates. A purely liberal deal would be all revenues, and a purely conservative deal would be all spending cuts. And for market-oriented conservatives, new revenues by closing tax breaks and subsidies should be great because those distort the free market anyway. This deal was *VERY* heavily tilted in favor on conservatives and would have been a huge victory for the Republican party, especially considering Democrats hold the Senate and the White House. The Democrats would have lost the support of a lot of their base if this deal had passed, especially from raising the Medicare eligibility age by a few years, but they were willing to make huge concessions for the sake of accomplishing something big.

Some Republicans (like Boehner) were on board too, but the new wave of more Tea Party-style Republicans wouldn't accept the $4 trillion deal because they won't vote for anything with a single dollar in revenues. Because they are completely uninterested in any sort of compromise, we almost defaulted on our debt, weren't able to come to nearly as big of a deal for reducing the deficit, and now we're down to a AA+ rating. There's no reason to blame this on Obama or Congress in general; it's clear who specifically should get most of the blame.

There are 2 big policy levers for getting our debt under control over time: tax hikes and entitlement cuts (Medicare/Medicaid mostly). Republicans really don't want to raise taxes; Democrats really don't want to cut entitlements. But if they want to actually get something done, just like in all deficit deals of the past, they'll have to do some of both. Obama and the Democrats involved in making a debt deal were willing to give a hell of lot to make a big deal happen. Some of the Republicans were willing to take that deal. But as long as we have a sizable portion of Congress that believes in absolute ideological purity instead of actual results, we're not going to be able to make meaningful progress on our long term debt problems. Based on the facts of what actually happened, I'd like to know how this is, as my mom some people put it, "all Obama's fault".