Quoted by the John Birch Society!
Yesterday, Noam Chomsky. Today, the John Birch Society! My post about the SF Fed study on how less than 3% of U.S. consumer spending is on Chinese-made products got picked up by the JBS’s The New American: Everything’s Made in China? Not Quite.
Who knew they still existed? Actually, I did, but it’s kind of easy to forget sometimes.
Chomsky cites LBO
In a recent talk he gave in Canada (Public Education Under Massive Corporate Assault), Noam Chomsky cites my LBO piece on the costs of college, and how easy it would be to make higher ed free in the USA:
Now that’s one important way to implement the policy of indoctrination of the young. People who are in a debt trap have very few options. Now that is true of social control generally; that is also a regular feature of international policy — those of you who study the IMF and the World Bank and others are well aware. As the Mexico-California example illustrates, the reasons for conscious destruction of the greatest public education system in the world are not economic. Economist Doug Henwood points out that it would be quite easy to make higher education completely free. In the U.S., it accounts for less than 2 percent of gross domestic product. The personal share of about 1 percent of gross domestic product is a third of the income of the richest 10,000 households. That’s the same as three months of Pentagon spending. It’s less than four months of wasted administrative costs of the privatized healthcare system, which is an international scandal.
It’s about twice the per capita cost of comparable countries, has some of the worst outcomes, and in fact it’s the basis for the famous deficit. If the U.S. had the same kind of healthcare system as other industrial countries, not only would there be no deficit, but there would be a surplus. However, to introduce these facts into an electoral campaign would be suicidally insane, Henwood points out. Now he’s correct. In a democracy where elections are essentially bought by concentrations of private capital, it doesn’t matter what the public wants. The public has actually been in favor of that for a long of time, but they are irrelevant in a properly run democracy.
Yup. And thanks for the mention, Noam!
Me, interviewing David Graeber
Debt
A Conversation with Doug Henwood and David Graeber
August 23, 7:30pm
Melville House Bookstore
145 Plymouth St, Brooklyn
Debt is now the central issue of our time: With the rise of cheap and unsustainable credit, un-repayable mortgages collapsed the world economy in 2008. In Europe, Greece, Spain, Ireland, Iceland and Portugal have pushed the European economy to a perilous point, threatening the Euro. And we’ve just lived through a debt crisis of our own, with congress nearly forcing U.S. default.
We’ll be joined by two guests to discuss the role of debt in the world economy: author and radio show host Doug Henwood, an expert on bubble economics and Wall Street, and anthropologist David Graeber, who has just published a history of debt from ancient Mesopotamia to the present day, Debt: The First 5,000 Years.
Bernanke the steamroller
Comment on today’s Federal Reserve policy decision today, which among other things, included the extremely unusual statement that they’re likely to leave interest rates close to 0 through mid-2013, from Ricardo Perli of ISI, a very mainstream Wall Street research operation:
For the first time in a long time, there were three dissents – Fisher (Dallas), Kocherlakota (Minneapolis), and Plosser (Philadelphia). Up to now, FOMC chairmen strived to avoid more than two dissents. The fact that this long-standing practice was disregarded means that Bernanke is becoming more determined to push through what in his view are the appropriate policy moves. We would expect the influence of the hawkish minority to diminish as a result.
Bernanke is very concerned about economic weakness and wants the Fed to do everything it can to stimulate a return to growth. The release is full of unusual mentions of their “dual mandate,” meaning boosting employment as well as keeping down inflation. This is not William Greider’s Fed.
Made in China: <3%!
Here’s something that should revise a lot of clichés, though it probably won’t: less than 3% of U.S. consumption expenditures are on goods made in China. Almost 90% are made in the USA. Of course, the domestic total is boosted by services—but even durable goods are 12% China, 67% U.S. And less than half the value of Chinese imports go to China—55% of the money spent on “Chinese” goods represent processing and other services (like distribution and retailing) provided in the U.S.
This info comes from a new paper by Galina Hale and Bart Hobijn of the San Francisco Fed. Their point was to show that Chinese inflation has minimal influence on U.S. price levels, which is persuasive. But it’s also an antidote to the widespread belief that the U.S. is hollowed out and all the action is in China. We’ve got problems, yes, but we’ve also got resources—resources we can do a lot better with than we are now.
Riots and stock values
An interesting comment from Jim Reid of Deutsche Bank in the wake of swooning stock markets and riots in London:
Although not linked to the sell-off we can’t help thinking that we live in socially volatile times generally due to economic hardship. This is something that may eventually have ramifications for Europe’s future in the years ahead. If the person on the street and voters get fed up of the Euro straight [sic] jacket then days like yesterday in financial markets could look mild.
Yup. There’s no doubt that the strength in financial markets over the last 30 years—the long bull market in stocks that ran from 1982–2000, and the bull run in bonds that continues through today—is a reflection of political quiescence, the nearly unchallenged victory of bourgeois power and ideology. If that changes because people have finally had enough, then there will be rioting on trading desks to match that in the streets.
What Reid says may—may—be more applicable to Europe. The U.S. population seems more passive, and our police, more violently repressive (a tradition that goes back to the labor violence of the late 19th century, when cops and Pinkertons killed strikers with far more abandon than their European counterparts). S&P’s opinion aside, that could give fresh meaning to the notion of U.S. Treasury securities as “safe havens” in time of crisis.
Rational markets (cont.)
So stock investors around the world panic on the S&P downgrade of the U.S. Treasury. And where do said investors flee for the proverbial “safe haven”? U.S. Treasury bonds, up almost 2 points on the day.
S&P: foreign agents
So the lead analyst on the S&P downgrade of the U.S. Treasury is based in…Toronto! What, they were afraid to have an American do the work?
And you can download the report from S&P’s “BlobServer.” I’m not kidding.
More on all this in the imminently forthcoming LBO #133.
CBC show
Listen to me and a non-frothing right-winger (ah, Canadians, so temperate!):
The Sunday Edition. “To help us unpack all that, I am joined this morning by two seasoned observers of matters fiscal and economic. In Ottawa, Jack Mintz, former chairman and chief executive of the C.D. Howe Institute and currently the Palmer Chair in Public Policy at the University of Calgary. And in New York, Doug Henwood, editor and publisher of the Left Business Observer.”
Me on the CBC, Sunday
I’m scheduled to be on Sunday Edition on CBC Radio One this Sunday, discussing the debt melodrama with Jack Mintz of the C.D. Howe Institute, a right-wing think tank. Recorded it this afternoon. Canadian right-wingers just don’t seem as rabid as ours do.
Wild budget math
In 2000, we spent 3.7% of GDP on the military. The Pentagon didn’t have to hold bake sales. We’re now spending 5.4%. Merely going back to 2000 would save 1.7% of GDP, or $255 billion. If over the next decade we spent 3.7% of GDP instead of 5.4%, we’d save $3.6 trillion. That’s close to what many of the deficit hawks are aiming for. Let the Bush tax cuts expire and bump up the top rate a few points and everyone could have free child care and free college tuition!
Of course to do that would be unAmerican.
Heritage Foundation: severely truth-challenged
I usually shy away from mocking the right—it’s too easy, it’s overdone by liberals, and it’s often a gateway to apologetics for the Democrats. But this is a doozy.
In an effort to prove that Obamacare is responsible for the recent weakening in the economic recovery, James Sherk of the Heritage Foundation presents this graph:
Seems odd, doesn’t it, that the average of the first segment, January 2009–March 2010, is +67,600 a month when the graph is below 0 for almost the whole time? Well, yes it is. The actual average change in private sector employment for that period is a decline of 327,000 a month, almost 400,000 below what Heritage says is the average. The average gain for the second period, from April 2010–June 2011, is 136,000 a month, almost 130,000 above what Heritage says it is.
It looks like what Sherk did was to take the slopes of the two trendlines and compare them. But for the first period, there was only one month of actual job gain—the last month, March 2010. Sherk’s trendlines are telling you we went from deep job losses in early 2009 to modest job gains starting in early 2010, and have more or less stayed there since. Which, if you were a Dem propagandist, you could use to sell Obamacare, not damn it. Of course, Obamacare—a mostly terrible thing—has almost nothing to do with these employment trends, but then again, Heritage seems to have only an accidental relationship to truth.
It will be interesting to do a similar graph in a year or two with the passage of the debt deal as the dividing point. Fiscal tightening in an already slowing economy is not a good idea, but don’t expect the Heritage Foundation to say that.
Varieties of exhaustion
Having become the de facto leader of the Republican party, at least when it comes to fiscal policy, Obama is now turning—again (didn’t he do this before? I recall some nonsense about a “hard pivot”)—to job creation. And he’s going to do what needs to be done: take a bus tour of the Midwest and do a few photo ops at factories. You might think that with a stalling economy and a high unemployment rate that could start drifting higher any month now, that he might want to try something more aggressive than hopping a ’hound. But no: “Mr. Obama is unlikely to unveil any major new stimulus proposals, since he has exhausted most of the obvious policy options.”
A very obvious option would be a jobs program. But no—the de facto leader of the Republican party can’t even mention that. The best he can do is more free trade agreements and patent law reform. This guy makes you nostalgic for Bill Clinton—or at least the late 1990s. The dot.com era was nuts, but it was a helluva lot more fun than this hair shirt epoch.
Austerity = moral renovation
Writing in today’s New York Times, Jennifer Steinhauer explains the politics of the debt melodrama: the parties are “jousting over the moral high ground on imposing austerity, with seemingly none of the political or practical motivations that have historically driven legislation.” Leaving aside the fact that half of one party (the Dems) have happily embraced the premises of the other—and also leaving aside the fact that the “high ground,” moral or otherwise, hasn’t much in evidence during this idiotic fight—Steinhauer is inadvertently onto something.
Over the centuries, the period after the bursting of a bubble has often been time of self-reproach, a time of self-questioning and even self-flagellation. Those have notably been absent in the U.S. during the post-bubble periods of the early 1990s and early 2000s. Now we’re apparently getting some of it, but it’s looking like the austerity party plans to punish people other than those who profited during the bubble. Will Goldman Sachs partners be taxed to repair the damage? Heavens no: the victims of this program of moral renovation through austerity will be such notorious high livers as the poor, the chronically ill, and graduate students. Moral renovation is always more fun when you’re prescribing it for the other guy.
Oh, and apparently this is only the beginning. The austerity party is already pushing for more.
LBO News from Doug Henwood 
