Housing Market Update

Overall, the housing market might recently have improved slightly from horribly dismal to only moderately dismal.  The Case-Shiller indexes declined dramatically from 2007 through 2009, and have been essentially flat since.  However, the most recent several months show possible  signs of renewed weakness.

Delinquencies are down from the peak, but -

–There are three times the number of loans deteriorating greater than 90+ days delinquent as compared to foreclosure starts.
–There are also three times the number foreclosure starts vs. foreclosure sales.
–Foreclosure inventory levels are over 30 times monthly foreclosure sale volume.

Mixed message, at best.

Based on fundamentals:

• Nominal prices will probably fall some more and my forecast is for a decline of 5% to 10% from the October 2010 levels for the national price indexes.

Here is a view of housing price fundamentals:

The finance paradigm holds that an asset has a fundamental value that equals the sum of its future payoffs, each discounted back to the present by investors using rates that reflect their preferences. For stocks, the payoffs requiring discounting are the expected dividends. This approach can extend to housing by recognizing that a house yields a dividend in the form of the roof over the head of the occupant. The fundamental value of a house is the present value of the future housing service flows that it provides to the marginal buyer. In a well-functioning market, the value of the housing service flow should be approximated by the rental value of the house.

The point is that pricing still needs to adjust downward a bit, based on rental expectations.

Here's a look at home ownership since 1965, through the end of 2010.

Update:  Source:  Census Dept.  Table 14 at the link.

Despite the regional differences across time, ownership in all regions peaked in 2005-6.  It's declined since, with no signs of recovery.

Here it is again with long range trend lines for U.S and West region.  Both have been below trend for about a year.  Of course, without the camel hump in '05, the trend lines would look quite different.

To complicate matters, as Delong points out on Pg 25 here, cumulative underbuilding during the bust is greater than overbuilding during the boom.  So, what we have now is a likely housing shortage.  Karl Smith makes the same point in a different way.   Here, Karl points out the long decline in multi-family dwelling construction.  My take-away is the obvious American preference for single the ownership of one's own home, which is not typical always and everywhere.

A further complication Delong points out is that during the boom we built too many of the wrong homes in the wrong locations.  There is a glut of McMansions, and a deficiency of affordable homes and multiple-family dwellings that the hard-pressed middle class will be able to afford in the foreseeable future.

This is both a gargantuan market failure and a grotesque misallocation of resources.

Even if prices sink to rent-justified fundamental levels, there will still be a structural mismatch between existing homes and locations, as compared to affordable homes and reasonable locations.

Sorting this all out will be long and painful.
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Deep Stupid # 20.1 - Senator Ron Johnson on Obamacare

As a follow-up to this post, I urge you to go read the source.  The comment stream there is quite fascinating, and illuminating.

Also, Krugman weighs in, with a somewhat different slant.
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Economics is Bunk

In this interview with the New Yorker, Eugene Fama laughs a lot and admits he doesn't know anything, while insisting that there is no credit crisis and that markets are efficient.   I could not make this up.

Yes. It is exactly how you would expect the market to work.

I can tell a story very easily in which the financial markets were a casualty of the recession, not a cause of it.

I wonder how many economists would argue that the world wasn’t made a much better place by the financial development that occurred from 1980 onwards. The expansion of worldwide wealth—in developed countries, in emerging countries—all of that was facilitated, in my view, to a large extent, by the development of international markets and the way they allow saving to flow to investments, in its most productive uses.

Holy shit!  All of them? Fama thinks the Great Stagnation was/is an improvement on the previous decades!?!.  Even Scott Sumner wouldn't go that far.  (I hope.)  "Most productive uses" is particularly stunning when what we have seen is the misallocation of resources an an absolutely astounding scale.

Krugman wants to be the czar of the world. There are no economists that he likes. (Laughs)

NY:So you still think that the market is highly efficient at the overall level too?

Fama: Yes. And if it isn’t, it’s going to be impossible to tell.

WTF?!?   That sure makes your pet theory safe.

(Laughs) My attitude is this: if you are getting attacked by Krugman, you must be doing something right.

There really could not be a better concluding sentence to this interview.

Update:  I just read the comments following the interview.  19 of 20 think Fama has his head up his ass.
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Food and Energy Costs

From Daniel Carroll, via Mark Thoma, via James Hamilton, a deep insight into how headline inflation affects the life styles of the poor and obscure.

Food at Home as a share of Income:

Bottom quintile -- 23.5%
Top quintile      --  3.9%

Energy Expenditures as a share of Income:

Bottom quintile -- 20.6%
Top quintile      --  3.9%

The bottom quitile spends 44.1% of income on subsistence.  And this doesn't include housing.  Or clothing. 

Sucks to be them, doesn't it.
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How to Lose an Argument On Line

Or anywhere else, for that matter.

Words of wisdom from Seth Godin.

This presupposes a couple of things:

-- That you are interested in being taken seriously

-- That you are interested in influencing another person's opinion and/or thought processes.

Lacking those qualities - hey, go ahead and be a troll.

H/T to the Site Policies at The Incidental Economist
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Deep Stupid # 20 - Senator Ron Johnson on Obamacare

Not by me, by Aaron Carroll, via Mark Thoma.

This takedown of Johnson's moronic WSJ op-ed is far, far less disrespectful than anything I would have done, but it's what you have to settle for when you outsource.

Here's a good quote:

So much wrong here. First of all, maybe you can make an argument that the free market system of drugs or devices helped here. But the “free market” insurance system? Name me a single procedure developed by an insurance system. We’ve had a single payer system covering everyone over 65 for decades and there have been plenty of improvements in care for the elderly.

Another:

Senator Johnson has this completely backwards.

And another:

Yes, we do better than a lot of countries in preventing mortality from those cancers. But we’re not the best, and the differences don’t appear to be nearly as large as Senator Johnson says. Moreover, he’s cherry-picking. 

Here's my favorite (at least there is the suggestion of some mild, understated snark):

Senator Johnson makes a classic mistake here.  Who needs the most hip replacements and cataract surgeries in the US? The elderly. How do the elderly get their care financed? Medicare. What is Medicare? A single-payer system. Surely Senator Johnson is not advocating that we should give everyone Medicare because it outperforms Canada and the UK, is he?

So - is Sen. Johnson a god-damned liar, of just a typical butt-ignorant, talking-point-bullshit-spouting right-wing idiot?

The question is imponderable.
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The Great Recession

Brad Delong dicusses a proper understanding of the Great Recession, it's causes and  cures, as well seven types of incorrect zombie analysis.

Read it all here.  It's 9500 words, and well worth your while.
  
Major theme:  It's Milton Friedman's fault for allowing people to believe that complex problems have simple solutions.

His social libertarianism prevented him from acknowledging that attempting to keep money growth constant was a (valid) example of government intervention.   "He sold the Chicago school an interventionist, technocratic managerial optimal monetary policy under the pretense that it was something -- laissez faire -- that it was not."  In doing so, he denied the Keynesian approach of more complicated interventions.   Since about 1980, his approach has failed, and in 2008 even extraordinary money growth could not prevent extraordinary levels of unemployment.  This left many economists with no foundation for understanding, and they simply started to either make stuff up on the fly or fall back on ideas that were discredited 80 years ago.

Wrong Models and Stuff They Made Up  (See Delong at the link for details and refutations)


Low Marginal Product Workers - We have 10.5 million unskilled workers who cannot be hired because their value is below minimum wage.   (Niall Ferguson, Tyler Cowan)

Structural Unemployment -  We have 12 million workers with the wrong skill sets (or locations) who need to be retrained (or relocated.)   (Narayana Kotcherlakota)

Overaccumulation of Capital - The problem is not a shortfall in aggregate demand, but a surplus of aggregate supply.  Thus, the economy needs to "liquidate" via unemployment, bankruptcy and obsolescence.  (Marx, Hayek, Mellon, Hoover)  BTW This is the Marxian argument of capitalism consuming itself and collapsing - thus, the logical solution, via Marx and rejected by the others is socialism.  The others took the collapse to be temporary, and when the dust cleared the whole cycle could start all over again.  So, take your lumps and shut the hell up.

Uncertainty - The election of Commie-socialist-Muslim-anti-imperialist-foreign-born dictator B. Hussein Obama and the specter of deficits and burdensome regulations he is oh-so-likely-to-impose has scared the wrinkled green shit out of capitalism; and so it is paralyzed like a deer in the headlights. (Alan Greenspan, Rethug Politicians, Rethug Sycophants, Idiots)

The Need to Control Inflation and Avoid Crowding Out - Further stimulative policies will cause a burst of inflation, raise interest rates, crowd out private investment and stifle economic growth long term. (John Cochran)   The inflation premium today on  10 Yr TIPS is 2.283%, on 30 Yr TIPS it's 2.355% (difference from non-indexed bond.)  Draw your own conclusions about inflation expectations.
 
Banking and Fiscal Policy Unnecessary -  Per Friedman, Fed open market operations are sufficient.  We can certainly see how well that is working.  (Nobel Prize winner Robert Lucas, who in his own words admits, "I really don't get it.")  Lovely.  Say and Mill got it back in 1829.

Banking and Fiscal Policy are Ineffective - This is a crowding out/future tax increase argument that simply bears no relationship to the real wold.  (Eugene Fama, Nobel Prize winner Myron Scholes)

As I've stated before, thinking like an economist means that zombie ideas eat your brain.

So - are we screwed, or what?
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Two Degrees of Steve, and Why Dinosaurs Vote Repugnicant

My friend Steve chides his conservative friend, another Steve: "who is evidently claiming that wisdom and common sense (he seems to be implying that they’re the same thing) and likelihood of voting Republican all increase together with age."

Well, this is some deeply muddled - and from the conservative POV, highly self-serving - thinking.

Two degree Steve cites this rather interesting post at OKTrends - which has some good points, but is pretty badly flawed.

If you're going to read further in this post, I suggest you first read the links to one degree Steve, two degree Steve, and the source, in that order (same links as above.)  Because this is my reply to one degree Steve, and stands better on a foundation of context.  (Typos corrected, slight editing for clarity)

I'm shocked – shocked I tell you – to see a conservative cherry-picking information to confirm his pre-conceived notions. While some people gain wisdom with age, the majority of people simply don’t spend enough time thinking about anything more important than March Madness to develop even the most rudimentary level of sagacity. 

More typically, what happens with age is ossification. The OKtrends article has a lot of good and insightful stuff in it. But it also suggests that people in their 40′s will wander for a time back into the Democratic fold before reaching final fossil status as born again Rethugs. Only anecdotal, but I have never seen even a single individual go through that kind of double-back transformation.

Further, the economic “permissiveness” scale is incorrectly constructed. I’m not even sure there is a single scalar economic concept that could give you a meaningful dimension. How do you accommodate regulation, intervention, transfer payments, tax policy, corporate bailouts, etc. into a scalable entity?

While I recognize that Rethugs are more cohesive in their views than Dems, I contend that is because ossification, and its associated simplistic black-white world view is the common characteristic, irrespective of age. Dems are more diverse because the absence of ossification can manifest itself in an infinite variety of ways, and they populate the gray areas.

The idea that anyone over age 50 in the lower right quadrant would vote Democratic is actually laughable. The authoritarians are in almost 100% overlap with the religious right. Their neighbors in that quadrant are teabaggers. I think the conceptual flaw is in the graph that indicates economic beliefs trumping social beliefs as one ages. It is social beliefs that ossify more (think racism, anti-gay prejudice) with age. 

The other more fundamental flaw is in imagining that peoples’ belief systems are the result of some – indeed, any – rational thought process. I contend that not one person in 10 – or 100, or maybe 1000 – has political beliefs that are derived from thinking hard about policy, the underlying principles, and the results. Most people don’t think any deeper than a sound bite with a simple message. Again, this is an area where the Rethugs excel – not limited by truth, logic, or anything else. 

People vote their comfort zone, and as one ages, that typically becomes more conservative and entrenched. Wisdom and common sense are, at best, orthogonal to these developments.

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Et Tu, Mr. Destructo?

The above title is the name of a web site I sometimes read.  It is usually brilliant, frequently foul-mouthed in a way that even I find gratuitous, and occasionally grotesque.

This makes it a tough go for someone of my delicate sensibilities, but most of the time, it's worth it.

This article on Unions in America is most specifically and especially worth it.  At over 3400 words, it is an exceptionally long post, that also has five graphs and a couple of pictures in the mix.  But there is a lot to be said, and it is said here on a way that is lucid, cogent, and only grotesque for a moment or two.

Take a few minutes to read what it says, and a few hours ponder the complicity of the corporate-owned media in distorting the reality of what has gone down in America over the last 30 years, most particularly the last 30 months, and even more so in the last 30 days.
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Sunday Music Blogging

A labor of Love --- and Love of Labor.

YouTube link

H/T to The LW.

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What the Hell?!? Friday, Pt 2 - Best Headline EVAH! Edition

Seriously.

Truth is SO MUCH better than fiction.

Deputy: Strip Search Finds Crack Between Buttocks

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What the Hell?!? Friday - "Sign of the Times" Edition

This musical interlude, signed for us by the lovely Anna, is dedicated to reptile-brained union-busting job killer Scott Walker; venture capitalist union-busting job killer Rick Snyder; their weird (in many ways) namesake Medicaid-fraud purveying millionaire job killer Rick Scott; Wall Street bonus millionaire cum former Faux Noise commentating  union-busting job killer John Kasich; low-income health program eliminating job killer (and space cadet) Tom Corbett; and union-busting job killer Mitch Daniels.

By some strange coincidence, this band of liars, brigands and thieves are also Rethug governors of (mostly) Midwestern States.  How does shit like this happen?





Anna's YouTube link.
 H/T to Al at The Corner.
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Darn . . .

. . . my sock puppet.

If I'm even real at all.

Seriously - how could you tell?

My ostensibly consistent online persona means NOTHING.

Using hashtags and gaming some location based check-in services we can make it appear as if a persona was actually at a conference and introduce himself/herself to key individuals as part of the exercise, as one example. There are a variety of social media tricks we can use to add a level of realness to all fictitious personas

Then again, maybe my total inability to use social media tricks is some sort of a give-away.
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Richest 400

I just heard Representative Yarmuth say on the radio that the average effective tax rate for the richest 400 taxpayers is 16.6%.  They make over $365 million per year.   Think about that.  More than a million dollars a day, seven days a week.

Not sure who they are or how to verify, but it's pretty striking.

And it's a big part of why we are so screwed.
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Is There A Democrat in the House?

I'm talking about real Democrats, not blue dogs, DINOs and corporate shills like B. Hoover Obama.

You might be able to count them on only a few fingers, but by god, at least there's one.

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Tsunami and Enlightenment

Goethe was six when the earthquake and tsunami devastated Lisbon . . .

In his memoirs Goethe wrote:

“By treating the just and the unjust in the same way, God had not behaved in the fatherly manner that I had been attributing to him in my catechism…. The wise and learned people around me seemed to be unable to agree on the way in which the phenomenon should be described….”

Personally, I get a rather large kick out of philosphers struggling with their perceptions of god's behavior.

And Voltaire referred to the Lisbon earthquake when he made fun of Leipniz’s optimism. He wrote these verses:

And can you then impute a sinful deed
To babes who on their mothers’ bosoms bleed?
Was then more vice in fallen Lisbon found,
Than Paris, where voluptuous joys abound?
Was less debauchery to London known,
Where opulence luxurious holds the throne?

OTOH, I get no kick at all from the hateful pseudo-Christians of the Westboro Baptist Church.  If god were to behave in the fatherly manner Goethe had come to expect, he would  . . . I dunno -- send them to bed without any supper?  Take away their cell phone?   Ground them for two weeks?  Spank "their naked bottoms until the imprint of the rugged cross is plainly visible on both cheeks" and their righty-tighty, starchy asses glowed bright Repugnicant red?   (Do not follow that link.  It is genuinely psychotic.  You have been warned.)

That last image is just too precious.  Never saw it in any catechism, but I do kinda like it.

H/T to The Sandwich Man.

Republicans - All Wrong, All The Time, Pt . 25 -- Another Look at Federal Budgets and GDP

In comments, Jerry asked about showing debt and revenue together.  Here it is, and more, as percentages of GDP.

Federal Receipts are shown in green, expenditures in yellow.  The line with blue and red segments is the net, with Red indicating the terms of Rethug Presidents, and blue indicating Dems.  The choppy brown line is year over year nominal GDP growth, also as a percentage.  Note how it trends generally upward to the maximum of 13.5% in 1977, and downward after.  The only pause in the decline is during the Clinton administration.

During the Post-WW II Golden Age deficits were small and transitory.  Since hitting a minimum of 0.4% of GDP in 1974, it's been (almost) all deficits all the time.  And this despite the fact that expenses/GDP were generally shrinking - albeit slowly at first - after the 1983 maximum of 23.5%.   Nominal GDP growth was exceptional in those days - 6.7% in 1983 and 11.7% in 1984.  Of course that was coming out of the nasty 80-81 recession, and boosted by the greatest defects ever (until now), outside of a World War.

And look what Clinton did - by reducing spending and raising revenues, he restored consistent GDP growth and balanced the budget.

I'm a long way from being a deficit hawk, and I believe some of Clinton's cuts were highly questionable.  But the all-too-temporary restoration of fiscal sanity and level of economic success during his administration are both remarkable and unique.

Even Carter - who made a lot of mistakes - was able to slightly narrow the deficit gap.

In stark contrast - every Rethug administration, even Eisenhower's, caused a net decrease in revenues/GDP.

Meanwhile, every Rethug administration after Eisenhower either raised or held expenses above 20% of GDP.

To quote Jerry:  " . . . while republicans reduce government revenue, they do not reduce government spending and thus grow larger deficits.    I call that fiscal irresponsibility."

And he's right.  

While this paints a picture of grotesque Rethug fiscal irresponsibility - to a point that I would call traitorous - it's important to not get too hung up on raw budget numbers.  Not all spending is created equally, nor is all revenue.  My assessment is domestic social program spending = good, imperialist expansion spending = bad. I've already shown how the spending pattern changed post 1980-ish. 

Someday I guess I'll have to take a closer look at revenue sources.
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Shared Sacrifice in Wisconsin

This is from March 3rd, but meanwhile -- nothing has changed.

At least not for the better.

The Daily Show - Crisis in Dairyland - For Richer and Poorer
Tags: Daily Show Full Episodes,Political Humor & Satire Blog,The Daily Show on Facebook

The Daily Show - Crisis in Dairyland - For Richer and Poorer - Teachers and Wall Street
Tags: Daily Show Full Episodes,Political Humor & Satire Blog,The Daily Show on Facebook

The Daily Show - Moment of Zen - Public Employee Union vs. Wall Street Bonus Contracts
Tags: Daily Show Full Episodes,Political Humor & Satire Blog,The Daily Show on Facebook

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Another look at Federal Revenues

In comments here, Tux makes an interesting point about taxation.  In 1950, and again now, Fed Revenues/GDP was/is under 15%.  His point is that the population now expects a lot of government services that weren't expected 60 years ago, but, alas, is unwilling to pay for them.  Good point.  In the 50's and 60's we built most of the interstate highway system.  In the 60's we had the space program.  In the 80's, FWIW, we had Star Wars.  Now, we can barely fix a pot hole, and want to fire teachers and policemen.

Let's put it in economic perspective.  Here is a look at Revenues/GDP since 1930.  (Click image to enlarge.)

The green diamond is 1950.  In the era since 1950, a Rev/GDP value below 15% is atypical.  The 1955 to 2005 average (green line) is 18.0%.  For context, in 1950, revenues were an increasing percentage of a rapidly growing GDP.  Now, revs. are a declining percentage of stagnating GDP.  Big difference.

The brown line traces a 13 year average.  From about 1970 on, it overlays the long average - until now.  Henceforth, it will drop for years, due to an ongoing lousy economy and inadequate taxation.

I've commented before on the differences in economic performance under Dems and Rethugs.  If you need a reminder, it's always better with a Dem in the white house.  Here, I've traced D and R administrations in Red (Rethug) and Blue (Dem.)   The pattern of revenues increasing under Dems and decreasing under Rethugs is striking and consistent.  Until now, of course, with B. Hoover Obama continuing the disastrous tax cut policies of the Shrub regime.  (This is actually quite unfair to the real Hoover, who raised the top tax rate from 25% to 63% in 1932, thus ending the horrible slide of the great Depression and paving the way for the New Deal.)

Here's another look at GDP growth around 1950.

From 1950 to 1960 (one decade) GDP increased by a factor of 1.9, a compounded annual growth rate of 6.625%.

Here is now.

From 1990 to 2010 (two decades) GDP increased by a factor of 2.5, a compounded annual growth rate of 4.75%.   Note, this is almost 2 full percentage points lower than in the post WW II Golden Age.  And to see how badly this is trending, the compounded annual growth rates for the most recent periods are 3.95% since 2000, and 3.125% for the most recent 5 years.

Here's a slightly different way of looking at it.

The five year rate of change for real GDP is expressed as a percent.  The only two bright spots are the Kennedy-Johnson administration, and to a lesser extent, the Clinton administraton.  Reagan's second trm numbers only look good because of the deep dive in the early 80's.  Eyeball a trend line through the whole series, and we are clearly slouching toward zero growth.  Make it per capital, and we'll go negative, and stay there.  Data from http://www.multpl.com/us-gdp-inflation-adjusted/table
I've said before that the American Economy is dying.  This is just one more way to look at the decline and fall of a once great nation - killed by decades of  grotesque fiscal irresponsibly and deliberately anti-Keynesian policy decisions.
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Pictures of Destruction

Satellite Photos of Japan, Before and After the Quake and Tsunami.

Awesome and terrible.

 

Sunday Music Blogging

The Law -- according to Republicans.

Is it my imagination, or is THIS the same song?

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Best Wisconsin Sign

Check it out here

Update:

This one is my new favorite.

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Federal Budget and the Great Stagnation

I've already posted on Government spending and the great stagnation.  Here's a deeper look at both sides of the ledger.

This is important because one of the current BIG LIES is that we have runaway - or a least unsustainable - spending, causing a serious budget problem for the country.  As I have previously concluded - and Karl Smith also states (my emphasis): "I want to make the more general point that spending is pretty much never the cause of budget deficits. Or, to be a bit more formal, variations in spending do not predict variations in the deficit. Variations in tax revenue, however, do predict variations in the deficit."

Here's a look at revenues and expenses, on a log scale, from 1950 on.

I've added a couple trend lines, for the post-1980 period.  They are essentially parallel, (log scale slopes are 0.0526 for revenues and 0.520 for expenses) but as we will see, this is misleading.  Also note, these slopes are lower than those for the pre-1980 period.

By my calculations, the compounded annual growth rates are:

1950-1980                                1980-2010
Revenues   8.9567%            4.885%
Expenses   9.1652%             6.065%

Pre-1980 growth on the order of 9% is pretty hefty; but note how revenues and expenses grew together at similar rates over a period of thirty years, and for most of that time, the two lines were tightly packed.  Since then - in the era of all deficits, all the time - spending growth has reduced substantially - and revenue growth even more so.  This is the set of domestic twin fallacies of small government and inadequate taxation, coupled with the foreign policy fallacy of imperialist expansion.

Digging deeper, these numbers suggest something mysterious.  How can the two substantially different growth rates for the post-1980 era yield data sets with parallel trend lines?  Well, I'm only an amateur mathematician, but here's my guess.  The parallel trend lines are an accidental data artifact.  The two lines are quite different at the detail level, often proceeding in contrary motion from one year to the next. Plus, the best fit considers the entire data set, while the compounded growth is based only on the end points.  The 2009 and -10 data points are pretty far off the trend lines.  Let's zoom in on the latest couple of decades.

At this scale, the shorter period trend lines are no longer parallel.  Spending growth, though less than that for the entire post-1980 period, is far greater than revenue growth.  Notice in particular that during the Clinton administration, spending moved slightly below trend, while revenues moved far above.  Of course, the opposite has been true since.  And, to revisit Karl's point, spending growth has been close to steady, while revenue growth is quite erratic. 

Here's the same picture with Clinton broken out from the Shrubs.  Trend lines are for Clinton and Dubya + his economic clone B. Hoover Obama.  Clinton had much higher and more consistent revenue growth, as well as much lower and more consistent spending growth.

But again, a trend line can be misleading when the underlying data is erratic - as in the case of revenues post-Clinton, which have slumped badly over the last three years.

Just for the sake of completion, here is a look at 1950 to 1980.

For most of this period, revenues and expenses matched very well.  At some time we went from responsible fiscal management to all deficits, all the time.   You can pick any of several starting points: 1971, 1975, and 1982 are all reasonable.

I'm not going to say that expenses aren't relevant.  However, it's clear that revenue shortfall is the big contributor to budget problems - now, and always.  It's also clear that this problem has been foisted on us by decades of Rethug mis-governance.

But nobody is willing to face these facts and address the issue with the only sensible solution - raising taxes on the rich.

So -- we are very badly screwed.
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NEWS FLASH - -

New Jersey Governor Chis Christie is a god-damned liar.

Statements like those are at the core of Gov. Chris Christie’s campaign to cut state spending by getting tougher on unions. They are not, however, accurate. 

In fact, on the occasions when the Legislature granted the unions new benefits, it was for pensions, which were not subject to collective bargaining — and it has not happened in eight years. In reality, state employees have paid 1.5 percent of their salaries toward health insurance since 2007, in addition to co-payments and deductibles, and since last spring, many local government workers, including teachers, do as well. The few dozen school districts where employees agreed to concessions last year still saw layoffs and cuts in academic programs. 

“Clearly there has been a pattern of the governor playing fast and loose with the details,” said Brigid Harrison, a political science professor at Montclair State University. “But so far, he’s been adept at getting the public to believe what he says.” 

Mr. Christie, a Republican who took office in January 2010, would hardly be the first politician to indulge in hyperbole or gloss over facts. But his misstatements, exaggerations and carefully constructed claims belie the national image he has built as a blunt talker who gives straight answers to hard questions, especially about budgets and labor relations. Candor is central to Mr. Christie’s appeal, and a review of his public statements over the past year shows some of them do not hold up to scrutiny. 

The governor declined to be interviewed for this article. His aides dismissed the notion that he had a problem with accuracy, and noted his unusual willingness to face interrogation — if he is not at a town-hall-style forum, it seems, he is on a television chat show. 

Mr. Christie’s communications director, Maria Comella, said, “If a result of him being engaged directly with the people of New Jersey is a story that splits hairs, we’re happy to take that trade-off any day.” 

Misstatements have been central to Mr. Christie’s worst public stumbles — about how the state managed to miss out on a $400 million education grant last year, for example, and whether he was in touch enough while he was in Florida during the blizzard in December — and his rare admissions that he was wrong. But Peter J. Woolley, a politics professor and polling director at Fairleigh Dickinson University, said there had been no sign, so far, that these issues had much effect on the governor’s political standing. 

“People prefer directness to detail,” Professor Woolley said. “People know it’s not unusual for politicians to take the shortcut in public debate, that they’re not academics who are going to qualify everything.”

But he's direct, so it's all good.

H/T to Krugman.

Now, I must go hug a squid.
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David Beckworth Explains . . .

. . . Money Supply, Velocity, Multiplier, resulting GDP and the current Weakness in Nominal Spending.

And, at no extra charge, shows why QE has not worked.

Good stuff.  Here's  a meaty morsel.  But don't settle for a snack when a banquet is available.    Check it out here.

The monetary base is simply the stock of money assets directly created by the Fed.   The money multiplier shows to what extent the monetary base is supporting expansion of  other  more commonly used money assets like checking, saving, and money market accounts.  If the monetary base is not supporting an  expansion of these other money assets it is because there is an elevated demand for the monetary base and vice versa.  The money multiplier, therefore, is an indicator of the demand for the monetary base. Velocity shows how often the more commonly used money assets like checking, saving, and money accounts are used in transactions.  The lower the velocity the less these money assets are being used for spending and vice versa. Velocity, then, is an indicator of the demand for these broader measures of money assets which we call the money supply. 

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One More Big Difference

Here's Krugman:

Some have asked if there aren’t conservative sites I read regularly. Well, no. I will read anything I’ve been informed about that’s either interesting or revealing; but I don’t know of any economics or politics sites on that side that regularly provide analysis or information I need to take seriously. I know we’re supposed to pretend that both sides always have a point; but the truth is that most of the time they don’t. The parties are not equally irresponsible; Rachel Maddow isn’t Glenn Beck; and a conservative blog, almost by definition, is a blog written by someone who chooses not to notice that asymmetry. And life is short.

Well said, Professor.

But the rational progressive vs irresponsible right is not the difference I mean.

Click Krugman's embedded link on you'll find a graph of federal debt as a fraction of GDP.  This is striking.  From the end of WW II until about the beginning of the Ford admin, debt/GDP shrank from almost 1.1 to about 0.25.  It essentially doubled to about 0.49 under Reagan and Bush 1.  Clinton brought it down to about 0.33.  I'm surprised to see it didn't grown much through most of the Shrub admin. Then it went vertical through the Great Recession.

The Rethugs have been guilty of grotesque fiscal irresponsibility since Reagan.  Clinton, for all his imperfections, was a far better steward of the nation's wealth and resources than any president since Johnson.

But we all knew that, didn't we. 

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I (Almost) Love it When Karl Smith (Almost) Agrees With Me

I've had my differences with Karl, and haven't been shy about letting him know about them.

Not this time.  (Well, not at first, anyway.) Karl dug up a WSJ op-ed piece by Charles G. Koch - of Koch Industries infamy.

Karl's takedown references and belies this Koch quote.

Years of tremendous overspending by federal, state and local governments have brought us face-to-face with an economic crisis. Federal spending will total at least $3.8 trillion this year—double what it was 10 years ago. And unlike in 2001, when there was a small federal surplus, this year’s projected budget deficit is more than $1.6 trillion.

Here's Karl:

The clear implication is that our budget deficit is the result of overspending. Now there are a lot of reasons people will point to as to why that’s not the case this time, the economy, the Bush Tax cuts, etc.

However, I want to make the more general point that spending is pretty much never the cause of budget deficits. Or, to be a bit more formal, variations in spending do not predict variations in the deficit. Variations in tax revenue, however, do predict variations in the deficit.
.   .   .
Now of course the deficit is mechanically related to spending and revenues, so what does it really mean to say that revenues are “more predicative.”  It simply means that revenues bounce around more than spending and where revenues bounce so does the deficit. Spending is more or less smooth. Its only real changes are associated with war and peace.

He then shows his version of this graph, which I first posted here.

 In a nutshell, federal deficits are caused mainly by revenue shortfalls.  The only problem on the expense side is military spending.

Alas, Karl goes badly wrong before he finishes, but - hey - half an agreement is better than none.

I guess. 

After rereading his post in prep for this one, I had to go back and kick him in the ass.
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Sunday Music Blogging

Work all night on a drink of rum . . .

Come, Mr. Tallyman, tally me banana . . .

Daylight come and me wanna go home . . .



Muppets at no extra charge.

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A Clear and Present Danger

The good news on the economic front is that the bad news isn't as bad as it could have been.  Unemployment has dropped to 8.9%  (take that with as many pounds of salt as you think appropriate.)   Even better, U6, a broader measure of unemployment has dropped to 15.9%  This is the first time in almost 2 years that U6 has dipped blow 16%.  How thrilling is that?  The economy added about 192,000  new jobs in February.   Unfortunately, this is not quite enough to actually be helpful.  Meanwhile, new unemployment claims fell to 368,000.

By my reckoning, that still looks like a net loss of 176,000 jobs.

So the bad news is that the good news is somewhere between weak and anemic.  In fact, if you take off your rose colored glasses, it's hard to find any.  The economy needs to net out at about 150,000 new jobs per month just to keep up with population growth.  Further, at last April's rate of 19.6% among 25-year-olds, unemployment is distressingly high among the last three year's worth of college graduates.  Oh, wait - that's the LUMP OF LABOR FALLACY.

Here's Krugman:

The clear and present danger to recovery, however, comes from politics — specifically, the demand from House Republicans that the government immediately slash spending on infant nutrition, disease control, clean water and more. Quite aside from their negative long-run consequences, these cuts would lead, directly and indirectly, to the elimination of hundreds of thousands of jobs — and this could short-circuit the virtuous circle of rising incomes and improving finances. 

Of course, Republicans believe, or at least pretend to believe, that the direct job-destroying effects of their proposals would be more than offset by a rise in business confidence. As I like to put it, they believe that the Confidence Fairy will make everything all right. 

But there’s no reason for the rest of us to share that belief. For one thing, it’s hard to see how such an obviously irresponsible plan — since when does starving the I.R.S. for funds help reduce the deficit? — can improve confidence. 

Beyond that, we have a lot of evidence from other countries about the prospects for “expansionary austerity” — and that evidence is all negative. Last October, a comprehensive study by the International Monetary Fund concluded that “the idea that fiscal austerity stimulates economic activity in the short term finds little support in the data.” 

And do you remember the lavish praise heaped on Britain’s conservative government, which announced harsh austerity measures after it took office last May? How’s that going? Well, business confidence did not, in fact, rise when the plan was announced; it plunged, and has yet to recover. And recent surveys suggest that confidence has fallen even further among both businesses and consumers, indicating, as one report put it, that the private sector is “unprepared to fill the hole left by public sector cuts.”

Fed Chair Bernanke estimates that impending Rethug austerity will cost 200,000 jobs.  Sir Boner of Orange's response is, of course, "So be it."   Meanwhile, the flaming liberals at both Goldman Sachs and Moody's put the job loss number at around 700,000.  Well, I guess that's just more tough shit.

America - this is what you get when you vote for Rethugs.  Let this be a lesson to you.
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The Second Coming of Hedley Lamarr . . .

.  .  .  reincarnated as Governor Wanker.

Here, he sends a posse out to round up the Democratic State Senators.

Resolved, That if any of the named senators fails to appear in the senate chambers on or before the prescribed time, then that member shall be held guilty of contempt and disorderly behavior by the senate, and the majority leader shall immediately issue an order to the sergeant at arms that he take any and all necessary steps, with or without force, and with or without the assistance of law enforcement officers, by warrant or other legal process, as he may deem necessary in order to bring that senator to the senate chambers so that the senate may convene with a quorum of no less than 20 senators; . . . .

 Notwithstanding this:

Historically, constitutional guarantees against the arrest of members of legislative bodies developed as protections against judicial or executive arrests, not against the power of a house of a legislature to seize and discipline its members. Indeed, this was considered a matter of legislative privilege, and when a house of a legislature remained within its privilege, its disciplinary decisions were considered beyond the review of the courts. The Wisconsin constitutional provision on the arrest of members (Art. IV, s. 15) follows this tradition, as suggested by its wording, which is that:

houses shall in all cases, except treason, felony and breach of the peace, be privileged from arrest; nor shall they be subject to any civil process, during the session of the legislature, nor for fifteen days next before the commencement and after the termination of each session.

The EVIL for which he stands:  Hmmmm . . .

Update (and another H/T to the LW): Wisconsin (Bill-O) Palm Trees!
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Rockford Files

Not bad, but I think they missed a detail.



H/T to my favorite James Garner fan.

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Hooray for Alito!

That is not a misprint.

Justice Sam Alito is the JazzBumpa man of the day.

When this buffoon is the lone voice of reason, we are well and truly {expletive deleted}!

H/T to the LW.

Update 3/03:

First Amendment text: 

Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.

Well, that's just ambiguous as hell, isn't it!  Evidently, I'm in a minority here with Alito, with most on the left viewing this as a 1st Amendment issue.   I view it as a privacy issue.  Clearly, in this case the principles conflict.

Though it's not often thought of this way, it's worth questioning if a funeral - or, indeed, any venue for the expression of private grief - ought to be considered free and open to the public.  Further, 1st Amendment rights are intended for the expression of political speech - such that dissent may not be squelched.

In my view, the actions of Westboro Baptist Church not only are NOT protected free speech, they are engaging in hate speech that verges on hate crime.  These people are so vile, that they would eagerly organize a demonstration at the funeral of a child who died under tragic circumstances.   The only thing that separates them from terrorists who bomb mourners at the funerals of their previous victims is the level of their violence - not the evil of their intent.

But that is not the point. The point is that not all speech qualifies as deserving 1st Amendment protection.  Specifically, neither "fighting words" nor defamation are protected.  Neither is criminal solicitation, in this case to commit hate crimes against homosexuals, which can be inferred from their behavior and insistence that god hates fags.  Beyond that, I would argue that the actions of Westboro Baptist Church are tantamount to the crime of extortion - an attempt to get the people and government of the United States to go along with their hatred of gays and their attempts to deny them basic human rights in exchange for their good behavior.  One might just as well apply free speech rights to the tantrum of a two-year-old.

The court case was brought by the father of Marine Lance Cpl. Matthew Snyder, who died in Iraq in 2006. In his lawsuit, Albert Snyder, the Marine's father, said the church group violated his rights when it "intentionally incited emotional distress" by picketing his son's Maryland funeral, even though the protest wasn't visible and couldn't be heard from the church.

In rejecting that argument, Chief Justice John Roberts wrote that vigorous public debate trumps emotional reactions to hateful speech. "Speech is powerful," he said. "As a nation we have chosen a different course – to protect even hurtful speech on public issues to ensure that we do not stifle public debate."

Roberts - quite willfully in my estimation - misses the point.   Whomever you or I or some retard in Topeka considers to be the object of god's hatred is not an issue worthy of public debate. (And to consider it so comes perilously close to respecting an establishment of religion.)   In contrast, it is simply a manifestation of an extremely ugly prejudice.


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Just How Far Beyond the Pale Can Faux Noise Go?

Alright.  We all know they're a bunch of god-damned liars over there, and O'Really? is no better than any of them.

But this stock footage of protesters causing trouble in Wisconsin with FRIGGIN PALM TREES in the back-ground not only confirms the level of their dishonesty, but also that they think their viewers are STOOPID!

Jesus H. Christ in a handcart!

H/T to Beale and Krugman

Now, I must go hug a squid!

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Today's Dan Naddor Crossword Puzzle

Complete blog post on this terrific puzzle can be found at THE CORNER.
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Moron Governor Wanker

Oops -- Unfortunate typo. That should be More On Governor Wanker.

Menzie Chinn has been heroic in staying on top of the situation in Wisconsin.  Here, he totally destroys  Wanker's budget lies.  Be sure to check out the "Running a Tab" graphic.

Here he exposes selling off State assets with no-bid contracts.

There's a whole lot more.  Go there and browse.
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Presimetrics and the Great Stagnation

Presimetrics, by Mike Kimel and Michael Kanel is subtitled: "What the Facts Tell Us About How the Presidents Measure Up On the Issues We Care About."

The two Mikes explore economic changes and social phenomena as they relate to the administrations of presidents, mostly since shortly after WW II - because that is when most of the data sets begin. And this is an exercise in examining the data, and seeing what conclusions they drive.  I've done a lot of the same stuff here on this blog, so I can assure you from my own looks at the data that by almost any metric you can dream up, the country is better off with a Democrat in the White House. This looks like a partisan statement, but it is, in fact, a data-driven conclusion.  By some measures, every Democrat is better than every Republican.  Other measures give more mixed results, but Democrats are always better on average.  The consistent best performers are Kennedy-Johnson, taken collectively, and the worst performers are Bush Sr. and Bush the Lesser, taken individually.   My take away is simply that policy matters, and that Democrats and Republicans have historically followed greatly different policies. 

As I pointed out here, using one of Mike Kimel's graphs, the policy differences can be collected and summed up as the degree to which Keynesian economic principles have been employed. Very simply and generally, this means running government surpluses when the economy is expanding, and deficits when the economy is either flat or contracting.  The surpluses fund the deficits, aid in recovery, and do not lead to an accumulating deficit problem.

Another one of Mike's charts that tells this story is Figure 5-1 in Presimetrics which graphs Real Median Income per capita and Real GDP per capita, in 2008 dollars from 1947 on.  Median Income increased in the period 1947 to 1973, then actually decreased for about a decade. Since then it's gone up by fits and starts, but was dead flat in the first part of this century, and by 2007 was only a bit above where it had been in 1973.  Meanwhile, GDP per capita increased pretty steadily since about 1980  (except during recessions, and at a lower rate than earlier) and at a much faster rate than median income.

Here is a different way of presenting the same data, this time in constant 2009 dollars.

What we see is that median income as a percentage of GDP has decreased from 78% in 1972 to 63% in 2007. What this means is that every penny of economic growth, and then an additional 15% of the total, has gone to the richest Americans.

The Great Stagnation, in a nutshell, is the direct result of the capture of enormous wealth by the already wealthy, at the expense of the poor and the disappearing middle class.

This suggests that some policy changes are in order. I know what I think.

Do you have any suggestions?

Data sources:
Real Median Income per Capita
GDP per Capita (xls file)

Afterthought:  What I've presented in this graph is the infamous ratio of ratios.   However, for both Median  Income and GDP, the denominator is the same - U.S. population.  As I learned back in grade school, these identities cancel what we end up with is Median Income as a Percentage of GDP.
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