National Security

Law Enforcement

Immigration

Constituent Concerns

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ECONOMY IN TURMOIL

Rise in markets shows ˜Obamanomics is working (Business Week, April 9, 2010) — Despite public opinion polls to the contrary, markets say the economy is back on track. How did the president’s economic plan help turn things around? … Full story

“If Obama was a Republican, we would hear a never-ending drumbeat of news stories about markets voting in favor of the President,” says one economic strategist. (Photo credit: Saul Loeb / AFP – Getty Images)

Dow tops 11,000 before closing slightly lower (AP, April 9, 2010) — The stock market closed at a new 18-month high Friday, with the Dow Jones industrial average briefly touching 11,000 before retreating slightly. … Full story

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My colleague, Richard Wielkiewicz, Ph.D., published a book review of Nobel laureate Joseph E. Stiglitz’s new book, Freefall: America, Free Markets, and the Sinking of the World Economy (W. W. Norton, 2010) as a diary on DailyKos. The book describes the factors leading to the current Great Recession.

Freefall: A Stiglitz Primer

By Richard M. Wielkiewicz
February 23, 2010

Excerpts

Chicago School (Neoclassical, neoliberal, free market) Economics

The story begins with the Chicago school of economics. The essential belief of the Chicago School, “free market,” theory is that only a completely “free” market will reach full employment equilibrium and efficient resource allocation. It is the modern version of Adam Smiths invisible hand. The invisible hand of supply and demand creates a perfect balance and every asset is fairly priced including labor. This means that restraints on the “free” market such as unions and government intervention must be eliminated in order for the “free” markets to work. …

Stiglitz Schools the Chicago School

In order for the free market theory of the Chicago School to function as predicted, it must be assumed that information in the economic system is perfect. Stiglitz showed that the Chicago School models did not work with even slight deviations from the assumption of perfect information. … Under these universal conditions, “market failures are pervasive” … which is exactly what we have just experienced with Chicago school economists in charge of the economy. …

Stiglitzs “Five Failure Facts” that Account for the Freefall

Stiglitz describes five reasons why the financial system has failed so badly. … These reasons explain what happened and, for me at least, establish the progressive creds of an economist who should have a major role in Obamas administration. …

Read the full review 

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The Recession is Over: Now what we need is a new kind of recovery

By Daniel Gross | NEWSWEEK
July 25, 2009 (from the magazine issue dated Aug. 3, 2009)

Excerpt: New Flyer, a Canada-based company that makes hybrid buses in St. Cloud, Minn., has received $213 million in orders for new hybrid buses from agencies in Philadelphia, Chicago, Milwaukee, and Rochester, N.Y., and that are funded wholly or in part by the stimulus bill – a sum equal to roughly one quarter of its annual revenue.

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Buffett’s Gloomy Economic Predictions

The Oracle of Omaha says worst is yet to come

By Kim Peterson and Catherine Holahan 
MSN Money
June 25, 2009 

Warren Buffett doesn’t see the “green shoots” Ben Bernanke and other bullish investors have spoken of in recent months. In fact, the billionaire investor believes the economic picture will grow darker before things improve.

“Everything I see about the economy is that we have had no bounce,” Buffett told CNBC anchor Becky Quick in a televised interview Wednesday. “There were a lot of excesses to be wrung out and that process is still under way, and it looks to me that it will be under way for quite awhile. In the annual report, I said that the economy would be in shambles this year and probably well beyond, and I think that is true.”

Unemployment, said Buffett, will continue to drag the economy down. He told Bloomberg news that unemployment is “very likely to go above 10%.” About 9.4% of the population — about 14.5 million people — was unemployed in May, the last month for which statistics are available. High unemployment will continue to depress consumer demand for everything from energy to cars and homes, Buffett said.

Wednesday’s news about new-home sales supported Buffett’s argument. New-home sales fell 0.6% in May, dashing the hopes of many bullish investors who believed the economy and credit markets had turned around enough to fuel big ticket purchases. …

Before things get better for investors, Buffett believes the government will need to continue to take steps to reduce unemployment.

“It looks like we’re going to need more medicine, not less,” he said in an interview with Bloomberg News, adding that the country may need a second stimulus package to pull out of the current spiral. “The recovery really hasn’t gotten going.”

Buffett cautioned that some of the “medicine,” though crucial, may have adverse side effects down the road. Inflation, he believes, could become a big problem.  But, it will also likely push investors to buy stocks since rising prices would erode the value of cash.

“We have done things that raise the probability of high rates of inflation at some point,” he told CNBC.

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Minnesota Budget Deficit: A Solution to States Budget Crisis

April 6, 2009

Five months ago, a number of conservative activist groups and legislators came together to look at the Minnesota budget, not only with the purpose to cut spending, but to consider ways to reform and restructure it for long-term spending restraint and private section growth. Here’s the group’s press release.

Lasting Reforms and Tax Breaks Instead of Hikes

ST. PAUL – A group of nine non-partisan, non-profit organizations that formed an informal coalition earlier this year to solve the states $6.4 billion state budget deficit has produced a plan that closes the funding gap without raising taxes – in fact, it actually eliminates some taxes. The groups proposal was introduced at a press conference at the Capitol today.

The coalition gathered proposals from policy experts and ordinary taxpayers to help identify opportunities to restructure state spending, and then collaborated to put the ideas into practical solutions. The result is a 16-page document that solves the budget deficit using existing resources and doesnt require federal “bailout money or new taxes.

The budget solution document, titled “Real State Budget Reform [PDF] includes recommendations to save the state $6.6 billion through restructuring and greater efficiencies. It also suggests “revenue-neutral reforms that the group believe will improve Minnesotas overall economic situation, resulting in more revenue for the state in coming biennia. 

“This is more than just a band-aid, said Phil Krinkie of the Taxpayers League of Minnesota, “this is budgeting reform that will have a lasting positive impact on the states economics. The budget solution document is being distributed to all state legislators and to the governor.

“Minnesotans are outraged that their elected officials are once again contemplating raising their taxes, said Jeff Davis, president of Minnesota Majority. ”It seems some lawmakers just arent getting the message. The organization announced that it will be delivering an audio CD each week from now until the end of session with voice mail messages from angry taxpayers demanding cuts in government spending.

All state legislators are also being invited to sign a form stating that they will put spending cuts ahead of tax increases in the effort of balancing the states budget. ”We are going to make sure that voters know which lawmakers refuse to make this simple commitment to their constituents, said Davis.

Members of the coalition include: Associated Builders and Contractors, Minnesota Family Council, Minnesota Free Market Institute, Minnesota Majority, Freedom Foundation, the Minnesota chapter of the National Federation of Independent Businesses, Taxpayers League of Minnesota, and Campaign for Liberty.

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Intelligence Czar: Economy is Top Threat to U.S. National Security

Feb. 12, 2009

WASHINGTON – The economic crisis has trumped bullets and bombs in the intelligence agencies’ latest assessment of threats to the United States. …

National Intelligence Director Dennis Blair … said the financial meltdown, which started in the United States and quickly infected other countries, already has eroded confidence in American economic leadership and belief in free markets. …

“The longer it takes for the recovery to begin, the greater the likelihood of serious damage to U.S. strategic interests,” he told the Senate Intelligence Committee, as Congress prepares to vote Friday on a $789 billion stimulus package. …

Full story

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Link to full-size graphic

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Signs of Credit Market Thaw Begin to Emerge

Jan. 13, 2009

NEW YORK – Credit markets are beginning to thaw after months of a deep freeze.

In a promising turn that could bolster the economy, companies are selling bonds at a pace not seen since last spring. At the same time, companies are finding it easier to issue commercial paper, the short-term loans necessary for quick access to cash. …

If the trend continues, it would be the outcome that government officials have been seeking for months, as they pumped hundreds of billions of dollars into the financial system. More could be on the way.

Federal Reserve Chairman Ben Bernanke, in a speech Tuesday at the London School of Economics, indicated additional steps will be taken to stabilize the financial system beyond the $800 billion stimulus package being crafted by President-elect Barack Obama.

“History demonstrates conclusively that a modern economy cannot grow if its financial system is not operating effectively,” Bernanke said. …

To be sure, danger still looms in the credit markets. Bank lending remains at a trickle and it will likely stay that way so long as financial companies contend with massive losses tied to their mortgage-related assets and other bad debt.

Despite a taxpayer-funded bailout and moves by the Federal Reserve to loan more money to financial institutions, banks are still reluctant to lend. …

The Fed has also ratcheted down its key interest to hover between zero and 0.25 percent, a record low. In that move last month, the central bank signaled it would hold rates at such levels for some time to help cushion the blows of a recession that has just entered its second year. …

It’s not just businesses that are benefiting from improving credit conditions. Mortgage rates have also tumbled since the Fed in November announced plans to spend up to $500 million to buy mortgage-backed securities in an effort to bolster the ailing U.S. housing market.

The average rates on the 30-year mortgage fell to 5.01 percent last week, the lowest since Freddie Mac started tracking the data in 1971.

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National Debt Clock Runs Out of Numbers

In a sign of the times, the National Debt Clock, shown on Oct. 9, 2008 in New York, has run out of digits. The “1 has been moved left to the space once occupied solely by the digital dollar sign. A non-digital, improvised dollar sign has been pasted next to the “1.” (Photo credit: Bebeto Matthews / AP file)

Oct. 12, 2008

NEW YORK – A watched clock never moves – unless it’s the National Debt Clock.

In fact, the digital counter has been moving so much that it recently ran out of digits to display the ballooning figure: $10,150,603,734,720, or roughly $10.2 trillion, as of Saturday afternoon.

The clock was put up by the late real estate mogul Seymour Durst in 1989 when the U.S. government’s debt was a mere $2.7 trillion, and was even turned off during the 1990s when the debt decreased.

It will be replaced in 2009 with a new clock, said Jordan Barowitz, a spokesman for the Durst Organization. The new clock will be able to track debt up to a quadrillion dollars, which is a ’1 followed by 15 zeros.

In the meantime, the ’1 from “$10.2 has been moved left to the LCD square once occupied solely by the digital dollar sign. A non-digital, improvised dollar sign has been pasted next to the ’1.’

The current clock had enough digits to measure the amount of money owed by the U.S. government until debt recently hit $10 trillion. Since then, more eyes have been on the fixture near touristy Times Square.

When Nancy Gurzo spotted the sign one recent afternoon, she came to a halt. …

“It’s a shame,” the 60-year-old Manasquan, N.J., restaurant manager said, anger and disbelief in her face. “It’s an absolute outrage. It may be the end of the United States as we know it today. We haven’t seen the worst of it. Everybody should stop and look at this clock. It affects all of us. I’m worried.” …

Svet Stauber paused in front of the sign and held his camera up to snap a picture.

“It’s symbolic,” Stauber, a 40-year-old pilot from Switzerland, said of the counter’s lack of space. “It’s a very big symbol. It’s a complete failure of the system. It’s the most powerful country in the world with a conservative government for the last eight years, and it’s running the biggest debt ever.” …

Kary Perez, an 18-year-old freshman at Rutgers University, said, “I think it’s sad how bad we’ve fallen as a nation,” as she watched the clock, which features images of $1 bills in the background.

Below the amount of the national debt on the clock is another row of figures: “YOUR Family share.” As of Saturday afternoon, the $86,023 fit properly into the respective LCD squares.