An Analysis from
The Economic Policy Institute
By Andrew Fieldhouse and Rebecca Thiess
Republican House Minority Leader John Boehner recently proposed a two-step job creation plan consisting of a full extension of Bush-era tax changes and cuts to domestic spending. His plan calls on Congress to cut non-security related spending back to fiscal year 2008 levels and to enact a two-year freeze on all current
tax rates.
Rep. Boehner claims these two policies will drive job growth more than any proposal of President Obama’s. However,we find that this proposal would have a devastating impact on the struggling U.S. labor market while negligibly improving the fiscal outlook. Specifically, we find:
• Relative to the president’s budget request, the plan would reduce funding for domestic programs—which include investments in infrastructure, education, and research—by 22.7%, while extending the Bush tax cuts for top earners.
• The Boehner plan would reduce the deficit by less than 5.5% in 2011.
• Because reductions in spending are larger than the tax cuts, and because tax cuts for upper-income taxpayers are poor stimulus, the net job impact of the Boehner plan would be an estimated employment reduction of over 1 million jobs.
The Boehner Plan, Step 1:
Cutting Funding by 22.7% The Boehner plan calls on Congress to cut non-security related spending back to 2008 levels. This would require a spending reduction in this category of $105 billion in 2011. Maintaining Department of Defense, Department of Veterans Affairs, and Department of Homeland Security at the funding levels requested in the president’s budget would exempt $673 billion from these cuts. Thus, to achieve the overall reductions, non-security funding would have to be cut to $356 billion—an across the board cut of 22.7% relative to the president’s budget request and 6.9% lower than 2010 levels, adjusted for inflation.
How to Lose Over A Million Jobs
Proposed savings on the scale of $100 billion suggest fiscal responsibility, however limiting reductions to a very narrow portion of the budget wou d result in drastic and politically unrealistic cuts to many human needs and investment programs. Savings of $105 billion would only close 7.8% of the projected 2011 deficit, based on the Congressional Budget Office’s (CBO) estimate of the president’s budget, and the reduction does not take into consideration the proposed tax cuts for the wealthy (CBO 2010b).
The Boehner Plan, Step 2:
Tax Cuts for the Richest Americans
The next segment of Rep. Boehner’s plan would freeze all current tax rates, meaning that the 2001 and 2003 Bush tax cuts would be extended for all taxpayers, regardless of income. The proposal would also freeze the estate tax at its current rate of zero percent. President Obama has proposed to permanently cut taxes for 97% of Americans and allow rates to rise for joint filers making over $250,000 annually (TPC 2010). If the two-year tax freeze were made a permanent tax cut for high-income individuals—as Rep. Boehner has advocated—it would cost $629 billion more than President Obama’s proposal over the next decade. In 2011 alone, Rep. Boehner’s proposed individual income tax cuts would cost $30 billion more than the Obama approach (OMB 2010b).
Impact on Deficits and Jobs
Rep. Boehner’s proposal would save $105 billion by cutting non-security discretionary programs; however, it would simultaneously increase the deficit by $30 billion to extend tax cuts for the 3% of the population with the highest incomes. Combining these two policies, his proposal saves on net $74 billion in 2011, which would reduce the deficit by only 5.5%.
The individual income tax cuts for the rich and the cuts to spending will have different impacts on overall employment, both because of their overall size and their per dollar effect on near-term spending. Using fiscal multipliers from the CBO to measure the separate impacts of the tax cuts and the spending cuts on gross domestic product (GDP), we found that GDP would shrink by 1.1%—or about $171 billion—due to this proposal (CBO 2010c). The tax cuts themselves would modestly expand GDP, but permanent tax cuts demonstrate one of the lowest bang-for-the-buck options of any stimulus policies. The adverse impact of the spending cuts, meanwhile, would overwhelm the limited growth impact associated with the tax cuts, substantially decreasing output on net. Using a rule of thumb for the impact of government spending on employment, we estimate that this loss of GDP will correspond to a loss of roughly 1.1 million jobs, relative to a fiscal path that maintains spending at the president’s proposed 2011 levels and a tax policy that did not extend tax cuts for upper-income taxpayers.
Plan Slashes Investments in Education, Research,
and Infrastructure
Besides costing the economy jobs today, the Boehner economic plan would be detrimental to our investment deficit and longer-term growth. The nation’s schools, roads, railroads, sewers, and energy grid need repair, not funding cuts. If the 22.7% non-security discretionary cut were enacted across the board, it would undermine opportunities for our children and hurt American competitiveness in the 21st century. For example, spending on education would drop nearly $10 billion in one year alone. Funding for research at the National Institutes of Health would fall more than $7 billion. And spending on ground transportation and infrastructure investments would decrease nearly $8 billion—all in one year. It is these cuts to investment that would account for much of the expected job losses and decrease in output. Rep. Boehner’s plan to drive job growth would actually slow economic growth for years to come.
About The Economic Policy Institute
The Economic Policy Institute, a nonprofit Washington D.C. think tank, was created in 1986 to broaden the discussion about economic policy to include the interests of low- and middle-income workers. Today, with global competition expanding, wage inequality rising, and the methods and nature of work changing in fundamental ways, it is as crucial as ever that people who work for a living have a voice in the economic discourse.
EPI was the first — and remains the premier — organization to focus on the economic condition of low- and middle-income Americans and their families. Its careful research on the status of American workers has become the gold standard in that field.
Its founders include Jeff Faux, EPI's first president; economist Barry Bluestone of Northeastern University; Robert Kuttner, columnist for Business Week and Newsweek and editor of The American Prospect; Ray Marshall, former U.S. secretary of labor and professor at the LBJ School of Public Affairs, University of Texas-Austin; Robert Reich, former U.S. secretary of labor and professor at UC Berkeley; and economist Lester Thurow of the MIT Sloan School of Management.
Tuesday, September 28, 2010
Sunday, September 26, 2010
BOOK REVIEW--ANTHILL by E. O. WILSON
Reviewed by Bill Breakstone, September 26, 2010
Here’s proof, once again, that there’s wonderful literature to be found off the New York Times Bestseller List!
E. O. Wilson is the Pulitzer Price-winning author of The Ants and The Naturalist. Regarded as one of the world’s preeminent biologists and naturalists, Wilson grew up in South Alabama and the Florida Panhandle, and is currently Professor Emeritus of Biology and Entomology at Harvard University. The present title is his first novel, and, of course, thoroughly auto-biographical.
It is the story of a young man, Raphael Semmes, from rural Alabama, some 60 miles northeast of Mobile, who from his earliest days was in love with nature and the environment. Though his parents were of limited means, his mother’s family was “Old South” all the way, highly educated, well-bred, with family history going back to generals and admirals in the pre-Civil War South, and with modern-day well-placed connections in the business community and government.
Not far from his home was a tract of virgin longleaf pine forest surrounding a medium size lake. Raff began studying the plants and wildlife of this tract when he was but five years old. He pursued environmental and biological studies at Florida State University, and thereafter at Harvard University, where he earned a law degree specializing in environmental protection legal issues.
When residential developers planned to level the forest and build a massive housing complex, Raff began a five-year fight to save the tract, a process involving conciliation and compromise that would satisfy both sides, the developers and the environmentalists.
The novel is beautifully written, with a luxuriant pace in keeping with the wonders of nature and the growth and maturation of a remarkable young man. The author’s extensive studies of ant colonies comes into play, through a remarkable 72-page chapter that depicts the society, life and fate of four ant colonies in that forest, told from the perspective of the ants themselves. This “ant history” or chronicle is really a parable that draws a fascinating parallel between ant and human societal development, one that stresses the natural balances that must be maintained in order for both societies to survive and thrive.
Far from a book about pure science, here is a wonderful story about Southern families, their loves, frustrations, ambitions, and prejudices. To quote the jacket liner: “In a shattering ending that no reader will forget, Raff suddenly encounters the angry and corrupt ghosts of an old South he thought had all but disappeared, and he learns that ‘war is a genetic imperative,’ not just for ants but for men as well.
Here’s proof, once again, that there’s wonderful literature to be found off the New York Times Bestseller List!
E. O. Wilson is the Pulitzer Price-winning author of The Ants and The Naturalist. Regarded as one of the world’s preeminent biologists and naturalists, Wilson grew up in South Alabama and the Florida Panhandle, and is currently Professor Emeritus of Biology and Entomology at Harvard University. The present title is his first novel, and, of course, thoroughly auto-biographical.
It is the story of a young man, Raphael Semmes, from rural Alabama, some 60 miles northeast of Mobile, who from his earliest days was in love with nature and the environment. Though his parents were of limited means, his mother’s family was “Old South” all the way, highly educated, well-bred, with family history going back to generals and admirals in the pre-Civil War South, and with modern-day well-placed connections in the business community and government.
Not far from his home was a tract of virgin longleaf pine forest surrounding a medium size lake. Raff began studying the plants and wildlife of this tract when he was but five years old. He pursued environmental and biological studies at Florida State University, and thereafter at Harvard University, where he earned a law degree specializing in environmental protection legal issues.
When residential developers planned to level the forest and build a massive housing complex, Raff began a five-year fight to save the tract, a process involving conciliation and compromise that would satisfy both sides, the developers and the environmentalists.
The novel is beautifully written, with a luxuriant pace in keeping with the wonders of nature and the growth and maturation of a remarkable young man. The author’s extensive studies of ant colonies comes into play, through a remarkable 72-page chapter that depicts the society, life and fate of four ant colonies in that forest, told from the perspective of the ants themselves. This “ant history” or chronicle is really a parable that draws a fascinating parallel between ant and human societal development, one that stresses the natural balances that must be maintained in order for both societies to survive and thrive.
Far from a book about pure science, here is a wonderful story about Southern families, their loves, frustrations, ambitions, and prejudices. To quote the jacket liner: “In a shattering ending that no reader will forget, Raff suddenly encounters the angry and corrupt ghosts of an old South he thought had all but disappeared, and he learns that ‘war is a genetic imperative,’ not just for ants but for men as well.
Tuesday, September 21, 2010
BOOK REVIEW--"WAR" BY SEBASTIAN JUNGER
Reviewed by Bill Breakstone, September 20, 2010
Sebastian Junger is a journalist who writes for Vanity Fair and is the New York Times bestselling author of The Perfect Storm and A Death in Belmont. His current book, War, was published in July of 2010, and a film, Restrepo, which was shot while Junger and his associate, photojournalist Tim Hetherington, as a companion piece to the book, was awarded the Grand Jury Prize Documentary at the 2010 Sundance Film Festival.
War is an account of the 15-month tour of duty that Battle Company, 173rd Airborne Brigade, U.S. Army spent in the Korengal Valley in the foothills of the Hindu Kush of eastern Afghanistan. It is a riveting tale of men at war and the truths of combat: the fear, the honor, and the trust among fighting men. The reader gets an intimate picture of the life of a professional soldier—how they live; how they feel about combat and the ever- threatening risk of mortal warfare; the physical demands placed upon them by the harsh environment—the heat of summer and the freezing cold of winter in the mountains; the sounds of gunfire; and the agony of loss.
Junger avoids for the most part a politicalzation of the conflict, but he does give a first-hand glimpse of what our military leaders, in this case the Company and Battalion Commanders, objectives were and also an insight into the methods employed by the Taliban and the attitudes of both the village elders and their subjects, which are often in conflict with each other.
THE ENVIRONMENT
The Korengal River Valley runs to the southwest from its confluence with the Pech River and its valley in the north. It is an extremely rugged, mountainous terrain, sparsely inhabited with only a few primitive roads. The southern parts of the valley are almost totally controlled by the Taliban; the central valley was contested by U.S. forces and was the scene of perhaps the most brutal combat engagements in all of Afghanistan; the northern valley and the Pech River Valley were far safer and the scene of only intermittent skirmishes, with one exception. In the summer of 2008, 9 American soldiers were killed and 27 wounded when the Taliban overran an outpost near Camp Blessing on the Pech, in what to this date was the single costliest firefight of the war. The more southerly contested area of the Korengal was a two-day convoy trip from the nearest re-supply base in Asadabad, which in turn was 50 miles from the largest nearby city, Jalalabad. From there, it was another 75 miles to the Bagram Airbase near Kabul. Thus re-supplying the various outposts and firebases in the Korengal Valley was a complicated affair.
THE COUNTERINSURGENCY STRATEGY
The Allied Forces success in Iraq was keyed when the local population started cooperating with our forces and “turned tail” on the insurgents. [That success is tentative and only time will tell how secure the Country will be in the long term.]
What our strategy in Afghanistan is trying to accomplish is similar, but the two countries are far different in many ways. For one, the terrain is far more demanding, in many cases, almost impossible to secure. The Korengal Valley is situated no more than 15 miles from the Pakistani border. Taliban fighters and supplies filter back and forth from neighboring sanctuaries across the border with near immunity. Without the cooperation of the local populace, rooting out the Taliban involves bloody fighting. The enemy recruits local boys and young men, paying them $5.00 a day, to ambush and kill the Americans.
One American operation described by the author sought to move troops into villages where Taliban arm caches were suspected to be, thus depriving the enemy of its hidden supplies. One of those villages was Yaka Chine, the southernmost village in the valley before one enters territory totally dominated by the insurgents. Air strikes were called in on a house where insurgents were observed by a surveillance drone taking cover. In the process, five civilians were killed. American commanders knew that apologies were due the village elders and their subjects if any further cooperation would be possible. They were offered by Bravo Company commander Captain Dan Kearney, to little effect. Here’s an excerpt from the book that illustrates how difficult a task we face; the speaker is the Brigade Commander, Lt. Col. Bill Ostlund, addressing the elders after Captain Kearney’s speech:
“We came here with a charter from the U.S. government with direction from the Afghan government and the Afghan national security forces,” he says. The translator delivers the sentence in Pashto and then stops and looks over. “And we were asked to bring progress to every corner of Afghanistan. Somehow miscreants have convinced some of your population that we want to come here and challenge Islam and desecrate mosques and oppress Afghan people. All of those are lies. Our country supports all religions.
The translator catches up. None of the expressions [on the faces of the elders and villagers] changes.
All of my officers are trained and educated enough that they could teach at a university,” Ostlund goes on. “I challenge you elders to put them to work; put them to work building your country, fixing your valley. That’s what they’re supposed to do—that’s what I want them to do—but they can’t until you help us with security.
The translator is good; he delivers Ostlund’s points with nuance and feeling and looks around at the old men like he’s delivering a sermon. They stare back unmoved. They’ve seen the Soviets and they’ve seen the Taliban, and no one has made it in Yaka Chine [a small village up Valley] more than a day or two. The name means “cool waterfall,” and it’s truly a lovely place where you’re never far from the gurgle of water or the quiet shade of the oak trees, but it’s no place for empires.
You can be poisoned by miscreants and they can tell you that America is bad, that the government’s bad, but I ask you this: what have the people who run around with this stuff”—Ostlund waves a hand at the weapons—done for your families? Have they provided you with an education? Have they provided you with a hospital? I don’t think so. I would say, shame on you, if you follow foreign leaders that leave their beautiful homes in Pakistan and come here and talk you into fighting against your own country, and they do nothing for you.
The ACM [Anti-Coalition Militia—essentially the Taliban] that comes in and gives you five dollars to carry this stuff around the mountains and tells you you’re doing a jihad, is doin’ nothing for you except making you a slave for five dollars. These foreigners won’t fight my soldiers; they hide on a mountain in a cave under a rock and talk on the radio and pay your sons a small amount of money to go ahead and shoot at my soldiers. And my soldiers end up killing your sons.
It’s a good speech and delivered with the force of conviction. That night a dozen or so fighters are spotted moving toward Captain Kearney’s position on Divpat, and an unmanned drone fires a Hellfire missile at them. They scatter, but the Apaches won’t finish them off because they can’t determine with certainty that the men are carrying weapons. The Americans fly out of Yaka Chine, and the valley elders meet among themselves to decide what to do. Five people are dead in Yaka Chine, along with ten wounded, and the elders declare jihad against every American in the valley.”
That’s what our forces and their commanders are up against. But they keep trying. They keep building those schools and hospitals and improving village services, in hope that sooner or later the population will realize who are their friends and who are their real enemies.
During Battle Company’s deployment to the Korengal Valley, the spring, summer and fall of 2007 saw the most intense period of combat. Insurgent attacks occurred on almost a daily basis. With the onset of winter in late 2007, the frequency of contacts with the enemy abated, eventually slowing in the spring of 2008 to a period when weeks would go by without any engagements. This lack of activity was not unusual in the harsh winter environment, but something else was going on, as Junger relates:
“In January [2008], Prophet [Army monitor of enemy communications traffic] overheard two Taliban commanders discussing the American presence in the valley by radio. One of them was making the point that if the Americans were willing to build roads and clinics in the valley, maybe they shouldn’t be attacked. The other guy didn’t quite agree, but at least someone was asking the question. The number of firefights in the battalion area of operation had dropped from five a day to one a day, the number of shuras with local leaders had quadrupled, and the Americans hadn’t been shot at from inside a village in the Kornegal since the end of October. That was an important gauge of local sentiment because it meant that the villagers were telling the fighters to take their insurgency elsewhere. There was even a story going around that one of the valley elders had slapped a Taliban commander across the face for refusing to leave the area, and the commander didn’t dare retaliate. The human terrain in the Pech and the Kornegal was changing so fast that Colonel Ostlund felt confident a little more development money would allow NATO forces and the Afghan government to absolutely ‘overrun’ the area. ‘The arguments I’ve heard against the American presence here are all economically based,’ he told me. ‘Which is good news, because economic arguments are arguments we can win.’ “
SOCIETAL OBLIGATIONS—SENDING MEN TO WAR
As stated at the beginning of this review, “War” is not only about the battles that took place in the Korengal and Pech Valleys. More interestingly, it is about the combat infantrymen who participated, often at great human costs, and about what makes them what they are.
Before delving into these assessments, Junger makes a crucial point about their utilization:
“Combat was a game that the United States had asked Second Platoon to become very good at, and once they had, the United States had put them on a hilltop without women, hot food, running water, communications with the outside world, or any kind of entertainment for over a year. Not that the men were complaining, but that sort of thing has consequences. Society can give its young men almost any job and they’ll figure out how to do it. They’ll suffer for it and die for it and watch their friends die for it, but in the end, it will get done. That only means that society should be careful about what it asks for. In a very crude sense the job of young men is to undertake the work that their fathers are too old for, and the current generation of American fathers has decided that a certain six-mile-long valley in Kunar Province needs to be brought under military control. Nearly fifty American soldiers have died carrying out those orders. I’m not saying that’s a lot or a little, but the cost does need to be acknowledged. Soldiers themselves are reluctant to evaluate the costs of war (for some reason, the closer you are to combat the less inclined you are to question it), but someone must. That evaluation, ongoing and unadulterated by politics, may be the one thing a country owes the soldiers who defend its borders.”
THE COMBAT SOLDIER’S MOTIVATION
The final part of Junger’s book looks in detail into the minds of effective combat infantrymen. Why do they do what they do? What is courage? What bands these brothers together? This is the most emotional part of the tale. A few excerpts are illustrative:
“Civilians balk at recognizing that one of the most traumatic things about combat is having to give it up. War is so obviously evil and wrong that the idea there could be anything good to it almost feels like profanity. And yet throughout history, men like Mac and Rice and O’Byrne [three members of Second Platoon and close friends with the author] have come home to find themselves desperately missing what should have been the worst experience of their lives. To a combat vet, the civilian world can seem frivolous and dull, with very little at stake and all the wrong people in power. These men come home and quickly find themselves getting berated by a rear-base major who’s never seen combat or arguing with their girlfriend about some domestic issue they don’t even understand. When men say they miss combat, it’s not that they actually miss getting shot at—you’d have to be deranged—it’s that they miss being in a world where everything is important and nothing is taken for granted. They miss being in a world where human relations are entirely governed by whether you can trust the other person with your life.
It’s such a pure, clean standard that men can completely remake themselves in war. You could be anything back home—shy, ugly, rich, poor, unpopular—and it won’t matter because it’s of no consequence in a firefight, and therefore, of no consequence, period. The only thing that matters is your level of dedication to the group, and that is almost impossible to fake. . . . . . For some reason there is a profound and mysterious gratification to the reciprocal agreement to protect another person with your life, and combat is virtually the only situation in which that happens regularly.”
Further on, Junger writes:
“Combat fog obscures your fate—obscures when and where you might die—and from that unknown is born a desperate bond between the men. That bond is the core experience of combat and the only thing you can absolutely count on. The Army might screw you and your girlfriend might dump you and the enemy might kill you, but the shared commitment to safeguard one another’s lives is unnegotiable and only deepens with time. The willingness to die for another person is a form of love that even religions fail to inspire, and the experience of it changes a person profoundly.”
SUMMING UP
Any intelligent reader can tell from the above excerpts that Sebastian Junger is a terrific writer—insightful, concise, frank, to the point, all with a wonderful way with words. War is a riveting story, but one which has profound meaning as well for what war is all about, what a deadly serious affair it is. It’s one thing to read newspaper accounts of conflicts, or to glance at the casualty reports that appear regularly. One shakes the head and says “how tragic.” But here are the real people, up close and personal. In their own words, feelings unmasked, the daily drudgery of life in a forward operating base or remote outpost, where even a twenty yard trip to the latrine may result in being shot or killed. It makes the reader damn proud of what these you men are doing, and as quoted above, how important it is that our leaders and our citizens think hard before committing them to battle.
Sebastian Junger is a journalist who writes for Vanity Fair and is the New York Times bestselling author of The Perfect Storm and A Death in Belmont. His current book, War, was published in July of 2010, and a film, Restrepo, which was shot while Junger and his associate, photojournalist Tim Hetherington, as a companion piece to the book, was awarded the Grand Jury Prize Documentary at the 2010 Sundance Film Festival.
War is an account of the 15-month tour of duty that Battle Company, 173rd Airborne Brigade, U.S. Army spent in the Korengal Valley in the foothills of the Hindu Kush of eastern Afghanistan. It is a riveting tale of men at war and the truths of combat: the fear, the honor, and the trust among fighting men. The reader gets an intimate picture of the life of a professional soldier—how they live; how they feel about combat and the ever- threatening risk of mortal warfare; the physical demands placed upon them by the harsh environment—the heat of summer and the freezing cold of winter in the mountains; the sounds of gunfire; and the agony of loss.
Junger avoids for the most part a politicalzation of the conflict, but he does give a first-hand glimpse of what our military leaders, in this case the Company and Battalion Commanders, objectives were and also an insight into the methods employed by the Taliban and the attitudes of both the village elders and their subjects, which are often in conflict with each other.
THE ENVIRONMENT
The Korengal River Valley runs to the southwest from its confluence with the Pech River and its valley in the north. It is an extremely rugged, mountainous terrain, sparsely inhabited with only a few primitive roads. The southern parts of the valley are almost totally controlled by the Taliban; the central valley was contested by U.S. forces and was the scene of perhaps the most brutal combat engagements in all of Afghanistan; the northern valley and the Pech River Valley were far safer and the scene of only intermittent skirmishes, with one exception. In the summer of 2008, 9 American soldiers were killed and 27 wounded when the Taliban overran an outpost near Camp Blessing on the Pech, in what to this date was the single costliest firefight of the war. The more southerly contested area of the Korengal was a two-day convoy trip from the nearest re-supply base in Asadabad, which in turn was 50 miles from the largest nearby city, Jalalabad. From there, it was another 75 miles to the Bagram Airbase near Kabul. Thus re-supplying the various outposts and firebases in the Korengal Valley was a complicated affair.
THE COUNTERINSURGENCY STRATEGY
The Allied Forces success in Iraq was keyed when the local population started cooperating with our forces and “turned tail” on the insurgents. [That success is tentative and only time will tell how secure the Country will be in the long term.]
What our strategy in Afghanistan is trying to accomplish is similar, but the two countries are far different in many ways. For one, the terrain is far more demanding, in many cases, almost impossible to secure. The Korengal Valley is situated no more than 15 miles from the Pakistani border. Taliban fighters and supplies filter back and forth from neighboring sanctuaries across the border with near immunity. Without the cooperation of the local populace, rooting out the Taliban involves bloody fighting. The enemy recruits local boys and young men, paying them $5.00 a day, to ambush and kill the Americans.
One American operation described by the author sought to move troops into villages where Taliban arm caches were suspected to be, thus depriving the enemy of its hidden supplies. One of those villages was Yaka Chine, the southernmost village in the valley before one enters territory totally dominated by the insurgents. Air strikes were called in on a house where insurgents were observed by a surveillance drone taking cover. In the process, five civilians were killed. American commanders knew that apologies were due the village elders and their subjects if any further cooperation would be possible. They were offered by Bravo Company commander Captain Dan Kearney, to little effect. Here’s an excerpt from the book that illustrates how difficult a task we face; the speaker is the Brigade Commander, Lt. Col. Bill Ostlund, addressing the elders after Captain Kearney’s speech:
“We came here with a charter from the U.S. government with direction from the Afghan government and the Afghan national security forces,” he says. The translator delivers the sentence in Pashto and then stops and looks over. “And we were asked to bring progress to every corner of Afghanistan. Somehow miscreants have convinced some of your population that we want to come here and challenge Islam and desecrate mosques and oppress Afghan people. All of those are lies. Our country supports all religions.
The translator catches up. None of the expressions [on the faces of the elders and villagers] changes.
All of my officers are trained and educated enough that they could teach at a university,” Ostlund goes on. “I challenge you elders to put them to work; put them to work building your country, fixing your valley. That’s what they’re supposed to do—that’s what I want them to do—but they can’t until you help us with security.
The translator is good; he delivers Ostlund’s points with nuance and feeling and looks around at the old men like he’s delivering a sermon. They stare back unmoved. They’ve seen the Soviets and they’ve seen the Taliban, and no one has made it in Yaka Chine [a small village up Valley] more than a day or two. The name means “cool waterfall,” and it’s truly a lovely place where you’re never far from the gurgle of water or the quiet shade of the oak trees, but it’s no place for empires.
You can be poisoned by miscreants and they can tell you that America is bad, that the government’s bad, but I ask you this: what have the people who run around with this stuff”—Ostlund waves a hand at the weapons—done for your families? Have they provided you with an education? Have they provided you with a hospital? I don’t think so. I would say, shame on you, if you follow foreign leaders that leave their beautiful homes in Pakistan and come here and talk you into fighting against your own country, and they do nothing for you.
The ACM [Anti-Coalition Militia—essentially the Taliban] that comes in and gives you five dollars to carry this stuff around the mountains and tells you you’re doing a jihad, is doin’ nothing for you except making you a slave for five dollars. These foreigners won’t fight my soldiers; they hide on a mountain in a cave under a rock and talk on the radio and pay your sons a small amount of money to go ahead and shoot at my soldiers. And my soldiers end up killing your sons.
It’s a good speech and delivered with the force of conviction. That night a dozen or so fighters are spotted moving toward Captain Kearney’s position on Divpat, and an unmanned drone fires a Hellfire missile at them. They scatter, but the Apaches won’t finish them off because they can’t determine with certainty that the men are carrying weapons. The Americans fly out of Yaka Chine, and the valley elders meet among themselves to decide what to do. Five people are dead in Yaka Chine, along with ten wounded, and the elders declare jihad against every American in the valley.”
That’s what our forces and their commanders are up against. But they keep trying. They keep building those schools and hospitals and improving village services, in hope that sooner or later the population will realize who are their friends and who are their real enemies.
During Battle Company’s deployment to the Korengal Valley, the spring, summer and fall of 2007 saw the most intense period of combat. Insurgent attacks occurred on almost a daily basis. With the onset of winter in late 2007, the frequency of contacts with the enemy abated, eventually slowing in the spring of 2008 to a period when weeks would go by without any engagements. This lack of activity was not unusual in the harsh winter environment, but something else was going on, as Junger relates:
“In January [2008], Prophet [Army monitor of enemy communications traffic] overheard two Taliban commanders discussing the American presence in the valley by radio. One of them was making the point that if the Americans were willing to build roads and clinics in the valley, maybe they shouldn’t be attacked. The other guy didn’t quite agree, but at least someone was asking the question. The number of firefights in the battalion area of operation had dropped from five a day to one a day, the number of shuras with local leaders had quadrupled, and the Americans hadn’t been shot at from inside a village in the Kornegal since the end of October. That was an important gauge of local sentiment because it meant that the villagers were telling the fighters to take their insurgency elsewhere. There was even a story going around that one of the valley elders had slapped a Taliban commander across the face for refusing to leave the area, and the commander didn’t dare retaliate. The human terrain in the Pech and the Kornegal was changing so fast that Colonel Ostlund felt confident a little more development money would allow NATO forces and the Afghan government to absolutely ‘overrun’ the area. ‘The arguments I’ve heard against the American presence here are all economically based,’ he told me. ‘Which is good news, because economic arguments are arguments we can win.’ “
SOCIETAL OBLIGATIONS—SENDING MEN TO WAR
As stated at the beginning of this review, “War” is not only about the battles that took place in the Korengal and Pech Valleys. More interestingly, it is about the combat infantrymen who participated, often at great human costs, and about what makes them what they are.
Before delving into these assessments, Junger makes a crucial point about their utilization:
“Combat was a game that the United States had asked Second Platoon to become very good at, and once they had, the United States had put them on a hilltop without women, hot food, running water, communications with the outside world, or any kind of entertainment for over a year. Not that the men were complaining, but that sort of thing has consequences. Society can give its young men almost any job and they’ll figure out how to do it. They’ll suffer for it and die for it and watch their friends die for it, but in the end, it will get done. That only means that society should be careful about what it asks for. In a very crude sense the job of young men is to undertake the work that their fathers are too old for, and the current generation of American fathers has decided that a certain six-mile-long valley in Kunar Province needs to be brought under military control. Nearly fifty American soldiers have died carrying out those orders. I’m not saying that’s a lot or a little, but the cost does need to be acknowledged. Soldiers themselves are reluctant to evaluate the costs of war (for some reason, the closer you are to combat the less inclined you are to question it), but someone must. That evaluation, ongoing and unadulterated by politics, may be the one thing a country owes the soldiers who defend its borders.”
THE COMBAT SOLDIER’S MOTIVATION
The final part of Junger’s book looks in detail into the minds of effective combat infantrymen. Why do they do what they do? What is courage? What bands these brothers together? This is the most emotional part of the tale. A few excerpts are illustrative:
“Civilians balk at recognizing that one of the most traumatic things about combat is having to give it up. War is so obviously evil and wrong that the idea there could be anything good to it almost feels like profanity. And yet throughout history, men like Mac and Rice and O’Byrne [three members of Second Platoon and close friends with the author] have come home to find themselves desperately missing what should have been the worst experience of their lives. To a combat vet, the civilian world can seem frivolous and dull, with very little at stake and all the wrong people in power. These men come home and quickly find themselves getting berated by a rear-base major who’s never seen combat or arguing with their girlfriend about some domestic issue they don’t even understand. When men say they miss combat, it’s not that they actually miss getting shot at—you’d have to be deranged—it’s that they miss being in a world where everything is important and nothing is taken for granted. They miss being in a world where human relations are entirely governed by whether you can trust the other person with your life.
It’s such a pure, clean standard that men can completely remake themselves in war. You could be anything back home—shy, ugly, rich, poor, unpopular—and it won’t matter because it’s of no consequence in a firefight, and therefore, of no consequence, period. The only thing that matters is your level of dedication to the group, and that is almost impossible to fake. . . . . . For some reason there is a profound and mysterious gratification to the reciprocal agreement to protect another person with your life, and combat is virtually the only situation in which that happens regularly.”
Further on, Junger writes:
“Combat fog obscures your fate—obscures when and where you might die—and from that unknown is born a desperate bond between the men. That bond is the core experience of combat and the only thing you can absolutely count on. The Army might screw you and your girlfriend might dump you and the enemy might kill you, but the shared commitment to safeguard one another’s lives is unnegotiable and only deepens with time. The willingness to die for another person is a form of love that even religions fail to inspire, and the experience of it changes a person profoundly.”
SUMMING UP
Any intelligent reader can tell from the above excerpts that Sebastian Junger is a terrific writer—insightful, concise, frank, to the point, all with a wonderful way with words. War is a riveting story, but one which has profound meaning as well for what war is all about, what a deadly serious affair it is. It’s one thing to read newspaper accounts of conflicts, or to glance at the casualty reports that appear regularly. One shakes the head and says “how tragic.” But here are the real people, up close and personal. In their own words, feelings unmasked, the daily drudgery of life in a forward operating base or remote outpost, where even a twenty yard trip to the latrine may result in being shot or killed. It makes the reader damn proud of what these you men are doing, and as quoted above, how important it is that our leaders and our citizens think hard before committing them to battle.
Sunday, September 19, 2010
BOOKS IN BRIEF--SUMMER 2010
By Bill Breakstone, September 19, 2010
The End of the Free Market: Who Wins the War Between States and Corporations?
By Ian Bremmer
The world’s economy is undergoing profound changes, as economies such as China, India, Russia, Brazil and Mexico have risen to prominence. Understanding the differences between these state capitalist economic systems, and traditional capitalist economies, has become essential for any student of economics and politics. Bremmer’s book is beautifully written, concise, and not at all dry.
Crisis Economics: A Crash Course in the Future of Finance
By Nouriel Roubini
The title says it all. Here is a history of financial crises. Yes, our recent economic catastrophe was not the first, and will not be the last. In addition to past crashes, Roubini details the causes of the current mess, and what can be done to lessen the impact of future downturns. A must read.
The Girl Who Kicked the Hornets Nest
By Stieg Larsson
The third and final installment by the late Swedish author, and another page-turner. What a trio of tales!
A Ticket to the Circus
By Norris Church Mailer
This book is not for everyone, as it borders on the lewd. Mrs. Mailer was the famous author’s fourth or fifth wife, and 30 years his junior. Mailer may have been an award-winning writer, but his character left a whole lot to be desired, at least in this reviewer’s eyes. Several times, I was about to throw the volume in the trash, but I fought off the urge and eventually was fascinated with the story.
The First Tycoon
By T. J. Stiles
The award-winning biography of Cornelius Vanderbilt, a fascinating subject, and a voluminous account of this self-made, uneducated, yet brilliant merchant and empire builder. It is also an account of the industrialization of America and its transportation system. Another must read!
Three Stations
By Martin Cruz Smith
The seventh Arkady Renko novel again set in Moscow. If you are a Renko fan, you’ll love this one. If you’re unfamiliar with this Moscow investigator, you’ll want to go out and read the previous volumes. This one’s a two night read, and you’ll have trouble putting it down.
The Great Decision: Jefferson, Adams, Marshall, and the Battle for the Supreme Court.
By Cliff Sloan and David McKean
Here is a true sleeper. I first came to know of this book when Charlie Rose interviewed the authors two months ago on his PBS show, and immediately marked it down for a read. I was not disappointed! Here is a mix of American history and jurisprudence, describing the events leading up to the famous case, Marbury v. Madison, and the Marshall Court’s surprising and precedent-setting decision. Be sure to read the appendices, which contain the entire decision written by the Chief Justice, as well as the far briefer one written by Associate Justice William Paterson in Stuart v. Laird. Critics of the book have remarked that the authors have not paid sufficient attention to Marshall’s contemporary detractors, and I for one agree with some who argue that since the Court ruled against its own jurisdiction, was it proper to decide on the merits before dismissing the case.
War
By Sebastian Junger
The final read of the summer. A brutal account of an Army platoon’s [2nd Platoon of Battle Company, 173rd Airborne Brigade] fifteen-month tour of duty in Afghanistan’s Korangal Valley in 2007 and 2008. The Barnes & Noble Reviews writes: “As a narrative of combat in Afghanistan from the U. S. ground perspective, the book has no rivals. It makes one wonder how any army could hold ground in Kornegal, and indeed why it would even want to.” Forty-seven American soldiers died in the Valley before leadership determined the effort was not worth the cost, and withdrew later in 2008. This is a powerful read, written by one of our best journalists. Not for the faint of heart!
The End of the Free Market: Who Wins the War Between States and Corporations?
By Ian Bremmer
The world’s economy is undergoing profound changes, as economies such as China, India, Russia, Brazil and Mexico have risen to prominence. Understanding the differences between these state capitalist economic systems, and traditional capitalist economies, has become essential for any student of economics and politics. Bremmer’s book is beautifully written, concise, and not at all dry.
Crisis Economics: A Crash Course in the Future of Finance
By Nouriel Roubini
The title says it all. Here is a history of financial crises. Yes, our recent economic catastrophe was not the first, and will not be the last. In addition to past crashes, Roubini details the causes of the current mess, and what can be done to lessen the impact of future downturns. A must read.
The Girl Who Kicked the Hornets Nest
By Stieg Larsson
The third and final installment by the late Swedish author, and another page-turner. What a trio of tales!
A Ticket to the Circus
By Norris Church Mailer
This book is not for everyone, as it borders on the lewd. Mrs. Mailer was the famous author’s fourth or fifth wife, and 30 years his junior. Mailer may have been an award-winning writer, but his character left a whole lot to be desired, at least in this reviewer’s eyes. Several times, I was about to throw the volume in the trash, but I fought off the urge and eventually was fascinated with the story.
The First Tycoon
By T. J. Stiles
The award-winning biography of Cornelius Vanderbilt, a fascinating subject, and a voluminous account of this self-made, uneducated, yet brilliant merchant and empire builder. It is also an account of the industrialization of America and its transportation system. Another must read!
Three Stations
By Martin Cruz Smith
The seventh Arkady Renko novel again set in Moscow. If you are a Renko fan, you’ll love this one. If you’re unfamiliar with this Moscow investigator, you’ll want to go out and read the previous volumes. This one’s a two night read, and you’ll have trouble putting it down.
The Great Decision: Jefferson, Adams, Marshall, and the Battle for the Supreme Court.
By Cliff Sloan and David McKean
Here is a true sleeper. I first came to know of this book when Charlie Rose interviewed the authors two months ago on his PBS show, and immediately marked it down for a read. I was not disappointed! Here is a mix of American history and jurisprudence, describing the events leading up to the famous case, Marbury v. Madison, and the Marshall Court’s surprising and precedent-setting decision. Be sure to read the appendices, which contain the entire decision written by the Chief Justice, as well as the far briefer one written by Associate Justice William Paterson in Stuart v. Laird. Critics of the book have remarked that the authors have not paid sufficient attention to Marshall’s contemporary detractors, and I for one agree with some who argue that since the Court ruled against its own jurisdiction, was it proper to decide on the merits before dismissing the case.
War
By Sebastian Junger
The final read of the summer. A brutal account of an Army platoon’s [2nd Platoon of Battle Company, 173rd Airborne Brigade] fifteen-month tour of duty in Afghanistan’s Korangal Valley in 2007 and 2008. The Barnes & Noble Reviews writes: “As a narrative of combat in Afghanistan from the U. S. ground perspective, the book has no rivals. It makes one wonder how any army could hold ground in Kornegal, and indeed why it would even want to.” Forty-seven American soldiers died in the Valley before leadership determined the effort was not worth the cost, and withdrew later in 2008. This is a powerful read, written by one of our best journalists. Not for the faint of heart!
Thursday, September 16, 2010
THE 2010 U.S.OPEN--FINAL THOUGHTS
By Bill Breakstone, September 16, 2010
What a great three weeks of tennis! And almost perfect weather, though the heat and wind were really something for both the players and spectators to deal with at times. It was really a shame that rain had to interfere with the men’s and women’s doubles championship matches those last two days.
The crowds during the first week of the tournament proper were huge, and the waiting lines interminable. I’d love to see the outside court layouts expanded to include baseline bleacher seating on those courts that lack them now.
The Heineken Lounge was a welcome respite during the terribly hot weather of the first week. It was wonderfully air conditioned, offered eight large flat TV screens with live coverage of matches, and also offered food and drink.
Prior to the Tournament, several articles appeared in local papers bemoaning the state of U.S. tennis. Gone were the days of Sampras, Agassi, Courrier, Martin, Chang, Evert, Navratilova, Austin, Capriatti, Davenport, and along with them, the dominance of American players.
Examining Tournament results, however, the Americans did not fare so badly. The major disappointment was Andy Roddick’s loss to Janko Tipseravic in the second round. Otherwise, U.S. players had a most respectable tournament. On the men’s side, Sam Querry made it to the fourth round; Mardy Fish lost to the eventual finalist, Novak Djokovic, also in the fourth round; young Ryan Harrison turned many heads with his excellent play, barely losing in a fifth set tie-breaker 8-6 to Sergiy Stakovsky in the second round, and Mike and Bob Bryan won the men’s doubles.
Their opponents in the finals presented an interesting sidelight throughout the tournament, one which was picked up by all the papers and the TV channels. Rohan Bopana and Aisam-ul-Haq Qureshi were ranked 16th in the mens' doubles. Bopana is from India; Qureshi from Pakistan. These two countries have been at each other's throads since the Partition, over 60 years. Yet here were two citizens of each country, friends for years, competing together as a team. They called themselves the "Indo-Pak Express," and stressed the diplomatic meaning behind their pairing. Addressing the animosity between the two nations, Bopana said "If we can both get along, why can't they, as well." Their motto is "Stop War, Start Tennis." Picking up on their cue, Hardeeep Singh Puri, the U.N. Ambassador from India, and Abdullah Hussain, his counterpart from Pakistan, attended both the semifinals and championship matches, and were full of praise for the tennis duo and their efforts at political reconcilliation.
On the women’s side, Venus Williams made it to the semifinals, where she lost in three sets to eventual champion Kim Clijster; young American wildcard Bea Capra was a first week hit with excellent play that took her past a far more experienced and 18th ranked Arvane Rezai of France before falling to Maria Sharapova love and love in the third round; and Vania King, teaming with Yaroslva Shedova, won the women’s doubles, defeating fellow American Lisa Huber and Russian Nadia Petrova in a third set tiebreaker.
In the Junior Tournament, American boys Andrea Collarni, Denis Kudla, Daniel Kosakowski, Jack Sock and Dennis Novikov all advanced to the round of 16 or better, with Sock defeating Kudla in the championship match in three sets. On the girl’s side, Robin Anderson made it to the quarterfinals, and Sloane Stephens lost in the semis to eventual champion Daria Gavrilova of Russia, the number one seed. Sloane then teamed with Timea Babos of Hungary to win the girls doubles championship. Thus it looks like we have some bright young American prospects in tennis’ future.
As for our two main champions, both Rafael Nadal and Kim Clijsters were crowd favorites and gracious champions. Nadal’s play throughout the Tournament was astounding; no better player exists today. Roger Federer is still a great, but his serve finally let him down in his semifinal against Djokovic, and his ratio of unforced errors to winners was abominable. No better example of sportsmen, in the true sense of the word, could be found than these three superb athletes and gentlemen. They are true ambassadors of the Sport.
Clijsters carried off the champion’s trophy for the third time, winning her 21st consecutive match in the process, and proving again she is the consummate professional. The other disappointments were Andy Murray and Thomas Berdych. Everyone was looking at the fourth ranked Brit to make it to the final eight, thus his third round loss to Stan Warinka came as a shock. Even more surprising was Berdych’s first round loss to Frenchman Michael Llodra, in three straight sets.
For the fourth straight year, attendance topped 700,000. In all, 712,976 fans visited the competition, not including the five days of qualifying matches, and new records were set in both merchandise and food and beverage sales. All in all, it was a great event, perhaps the premiere tennis venue in the world. One would not find too many New Yorkers or Americans that would refute that statement.
What a great three weeks of tennis! And almost perfect weather, though the heat and wind were really something for both the players and spectators to deal with at times. It was really a shame that rain had to interfere with the men’s and women’s doubles championship matches those last two days.
The crowds during the first week of the tournament proper were huge, and the waiting lines interminable. I’d love to see the outside court layouts expanded to include baseline bleacher seating on those courts that lack them now.
The Heineken Lounge was a welcome respite during the terribly hot weather of the first week. It was wonderfully air conditioned, offered eight large flat TV screens with live coverage of matches, and also offered food and drink.
Prior to the Tournament, several articles appeared in local papers bemoaning the state of U.S. tennis. Gone were the days of Sampras, Agassi, Courrier, Martin, Chang, Evert, Navratilova, Austin, Capriatti, Davenport, and along with them, the dominance of American players.
Examining Tournament results, however, the Americans did not fare so badly. The major disappointment was Andy Roddick’s loss to Janko Tipseravic in the second round. Otherwise, U.S. players had a most respectable tournament. On the men’s side, Sam Querry made it to the fourth round; Mardy Fish lost to the eventual finalist, Novak Djokovic, also in the fourth round; young Ryan Harrison turned many heads with his excellent play, barely losing in a fifth set tie-breaker 8-6 to Sergiy Stakovsky in the second round, and Mike and Bob Bryan won the men’s doubles.
Their opponents in the finals presented an interesting sidelight throughout the tournament, one which was picked up by all the papers and the TV channels. Rohan Bopana and Aisam-ul-Haq Qureshi were ranked 16th in the mens' doubles. Bopana is from India; Qureshi from Pakistan. These two countries have been at each other's throads since the Partition, over 60 years. Yet here were two citizens of each country, friends for years, competing together as a team. They called themselves the "Indo-Pak Express," and stressed the diplomatic meaning behind their pairing. Addressing the animosity between the two nations, Bopana said "If we can both get along, why can't they, as well." Their motto is "Stop War, Start Tennis." Picking up on their cue, Hardeeep Singh Puri, the U.N. Ambassador from India, and Abdullah Hussain, his counterpart from Pakistan, attended both the semifinals and championship matches, and were full of praise for the tennis duo and their efforts at political reconcilliation.
On the women’s side, Venus Williams made it to the semifinals, where she lost in three sets to eventual champion Kim Clijster; young American wildcard Bea Capra was a first week hit with excellent play that took her past a far more experienced and 18th ranked Arvane Rezai of France before falling to Maria Sharapova love and love in the third round; and Vania King, teaming with Yaroslva Shedova, won the women’s doubles, defeating fellow American Lisa Huber and Russian Nadia Petrova in a third set tiebreaker.
In the Junior Tournament, American boys Andrea Collarni, Denis Kudla, Daniel Kosakowski, Jack Sock and Dennis Novikov all advanced to the round of 16 or better, with Sock defeating Kudla in the championship match in three sets. On the girl’s side, Robin Anderson made it to the quarterfinals, and Sloane Stephens lost in the semis to eventual champion Daria Gavrilova of Russia, the number one seed. Sloane then teamed with Timea Babos of Hungary to win the girls doubles championship. Thus it looks like we have some bright young American prospects in tennis’ future.
As for our two main champions, both Rafael Nadal and Kim Clijsters were crowd favorites and gracious champions. Nadal’s play throughout the Tournament was astounding; no better player exists today. Roger Federer is still a great, but his serve finally let him down in his semifinal against Djokovic, and his ratio of unforced errors to winners was abominable. No better example of sportsmen, in the true sense of the word, could be found than these three superb athletes and gentlemen. They are true ambassadors of the Sport.
Clijsters carried off the champion’s trophy for the third time, winning her 21st consecutive match in the process, and proving again she is the consummate professional. The other disappointments were Andy Murray and Thomas Berdych. Everyone was looking at the fourth ranked Brit to make it to the final eight, thus his third round loss to Stan Warinka came as a shock. Even more surprising was Berdych’s first round loss to Frenchman Michael Llodra, in three straight sets.
For the fourth straight year, attendance topped 700,000. In all, 712,976 fans visited the competition, not including the five days of qualifying matches, and new records were set in both merchandise and food and beverage sales. All in all, it was a great event, perhaps the premiere tennis venue in the world. One would not find too many New Yorkers or Americans that would refute that statement.
Wednesday, September 15, 2010
IS ANYONE HAPPY?
By Bill Breakstone, September 15, 2010
The campaigns for the 2010 Mid-Term Elections are well under way. There are still a few very minor primaries to be held, but with last evening’s results now in, it’s all over but the shouting until the election takes place on November 2nd.
The results thus far reflect a significant dissatisfaction on the part of voters with establishment candidates. There is little reason to doubt that this will carry over to the general election, and negatively affect both Republicans and Democratic incumbents.
The bottom line is that the American people are extremely unhappy. They are unhappy about their present economic condition; they are unhappy with their elected officials; they are unhappy about the diminished values of their homes; they are, in general, unhappy with their lot.
On Monday of this week, two Op-Ed columns appeared in The New York Times, the first by Bob Herbert, the second by David Brooks. These two writers come from different points in the political spectrum. Herbert is a Progressive Liberal writer, whereas Brooks is a moderate Republican. It is interesting to examine excerpts from these two columns, as they point to the unhappiness mentioned in the above paragraph.
First, Bob Herbert, commenting on Robert Reich’s new book “Aftershock:”
“The middle class is finally on its knees. Jobs are scarce and good jobs even scarcer. Government and corporate policies have been whacking working Americans every which way for the past three or four decades. While globalization and technological wizardry were wreaking employment havoc, the movers and shakers in government and in the board rooms of the great corporations were embracing privatization and deregulation with the fervor of fanatics. The safety net was shredded, unions were brutally attacked and demonized, employment training and jobs programs were eliminated, higher education costs skyrocketed, and the nation’s infrastructure, a key to long-term industrial and economic health, deteriorated.”
“While all this was happening, working people, including those in the vast middle class, coped as best they could. Women went into the paid work force in droves. Many workers increased their hours or took on second and third jobs. Savings were drained and debt of every imaginable kind — from credit cards to mortgages to student loans —exploded.”
“With those coping mechanisms now exhausted, it’s painfully obvious that the economy has failed working Americans.”
“Analysts have tracked the increasing share of national income that has gone to the top 1 percent of earners since the 1970s, when their share was 8 percent to 9 percent. In the 1980s, it rose to 10 percent to 14 percent. In the late-’90s, it was 15 percent to 19 percent. In 2005, it passed 21 percent. By 2007, the last year for which complete data are available, the richest 1 percent were taking more than 23 percent of all income.”
“The richest one-tenth of 1 percent, representing just 13,000 households, took in more than 11 percent of total income in 2007.”
“That does not leave enough spending power with the rest of the population to sustain a flourishing economy. The wages of the typical American hardly increased in the three decades leading up to the Crash of 2008, considering inflation. In the 2000s, they actually dropped.”
“A male worker earning the median wage in 2007 earned less than the median wage, adjusted for inflation, of a male worker 30 years earlier. A typical son, in other words, is earning less than his dad did at the same age.”
“This is what has happened with ordinary workers as the wealth at the top has soared into the stratosphere.”
“With so much of the middle class and the rest of working America tapped out, there is not enough consumer demand for the goods and services that the U.S. economy is capable of producing. Without that demand, there are precious few prospects for a robust recovery.”
As most other economists now predict, it will be a long time before our economy will grow at an adequate pace in terms of GDP growth, to absorb new entrants into the work force, let alone bring the rate of joblessness down to a historically acceptable level. Thus, this “middle-class malaise” will continue. It is being reflected politically by the rejection of incumbents and the rise of fringe movements, or shall we call them alternative parties, such as the Tea Party.
The question is: what’s next? If the Nation has to suffer through a five- to ten-year period of inadequate growth, and conditions do not improve for average Americans, will we suffer increased political unrest, or, worse, the emergence of civil unrest? The voting public’s dissatisfaction can be viewed as a much deeper and more worrisome sense of frustration with the direction in which our Country is heading. And they are placing the blame on everyone in power: a politically polarized and ineffective legislature; a President whose popularity decreases every week; local legislators who are finding it increasing difficult, if not impossible, to balance their state’s income with the social responsibilities they have heretofore undertaken; and on and on.
Looking at the results of yesterday’s primary elections, the New York Times reports that “Carl P. Paladino, a Buffalo multimillionaire who jolted the Republican Party with his bluster and belligerence, rode a wave of disgust with Albany to the nomination for governor of New York on Tuesday, toppling Rick A. Lazio, a former congressman who earned establishment support but inspired little popular enthusiasm.”
“Mr. Paladino became one of the first Tea Party candidates to win a Republican primary for governor, in a state where the Republican Party has historically succeeded by choosing moderates.”
“We are mad as hell,” Mr. Paladino said in a halting but exuberant victory speech in Buffalo shortly after 11 p.m. “New Yorkers are fed up. Tonight the ruling class knows. They have seen it now. There is a people’s revolution. The people have had enough.”
“Referring to criticism from what he said were liberal elites, he added: “They say I am too blunt. Well, I am, and I don’t apologize for it. They say I am an angry man, and that’s true. We are all angry.”
“The Tea Party movement scored another victory on Tuesday, helping to propel a dissident Republican, Christine O’Donnell, to an upset win over Representative Michael N. Castle in the race for the United States Senate nomination in Delaware.”
“Ms. O’Donnell, a former abstinence counselor who had failed in previous attempts to run for office in Delaware, won the endorsement of Sarah Palin, Senator Jim DeMint of South Carolina and other leaders of the party’s conservative wing.”
“The results on the last big night of primaries highlighted the extent to which the Tea Party movement has upended the Republican Party and underscored the volatility of the electorate seven weeks from Election Day.”
But they also are a signal of the voter dissatisfaction that will affect not only Republicans, but Democrats as well in November.
In yesterday’s Times, David Brooks, commenting on the state of the Republican opposition, wrote:
“Throughout American history, there have been leaders who regarded government like fire — a useful tool when used judiciously and a dangerous menace when it gets out of control. They didn’t build their political philosophy on whether government was big or not. Government is a means, not an end. They built their philosophy on making America virtuous, dynamic and great. They supported government action when it furthered those ends and opposed it when it didn’t.”
“If the current Republican Party regards every new bit of government action as a step on the road to serfdom, then the party will be taking this long, mainstream American tradition and exiling it from the G.O.P.”
“Republicans are right to oppose the current concentration of power in Washington. But once that is halted, America faces a series of problems that can’t be addressed simply by getting government out of the way.”
“The social fabric is fraying. Human capital is being squandered. Society is segmenting. The labor markets are ill. Wages are lagging. Inequality is increasing. The nation is overconsuming and underinnovating. China and India are surging. Not all of these challenges can be addressed by the spontaneous healing powers of the market.”
“Conservatism is supposed to be nonideological and context-driven. If all government action is automatically dismissed as quasi socialist, then there is no need to think. A pall of dogmatism will settle over the right.”
“Republicans are riding a wave of revulsion about what is happening in Washington. But it is also time to start talking about the day after tomorrow, after the centralizing forces are thwarted. I hope that as Arthur Brooks and Paul Ryan lead a resurgent conservatism, they’ll think about the limited-but-energetic government tradition, which stands between Barry Goldwater and François Mitterrand, but at the heart of the American experience.”
What Brooks points out in his piece is exemplified in stark relief by the positions taken by the two Republican congressional leaders over the past few days. On Sunday, John Boehner, the House Minority Leader, stated that it was possible that he could eventually support Obama’s proposal to extend the Bush-era middle class tax cut while allowing the cut on upper income individuals to expire. But on Monday, Senate Minority Leader Mitch McConnell ruled out any such support in the Senate.
In an interview with The Caucus this morning, New York Senator Charles E. Schumer, the head of the Democratic Senatorial Campaign Committee, said Ms. O’Donnell’s victory in Delaware was indicative of a primary pattern that will help his party.
“Republicans have basically chosen extremists to be their nominees and that has changed the map for the cycle,” the senator said.
“Republicans make the same mistake over and over again,” Mr. Schumer added. “The wounds are not healing, and I believe that demonstrates just how extreme these candidates are.”
What Schumer is saying is what Brooks was pointing out in his piece: that the Republican Party has been captured by its own extreme wing, and that in doing so, it has abandoned its traditional role of a politically reasoned counterbalance to the more liberal elements on the left.
Although John Boehner has the presence of mind to realize a political trap when he sees one, the intransigent McConnell does not, and he is aiming his Party into what looks like an abyss over the issue of middle class tax relief. And the Democrats will be smiling right up to November 2nd.
The campaigns for the 2010 Mid-Term Elections are well under way. There are still a few very minor primaries to be held, but with last evening’s results now in, it’s all over but the shouting until the election takes place on November 2nd.
The results thus far reflect a significant dissatisfaction on the part of voters with establishment candidates. There is little reason to doubt that this will carry over to the general election, and negatively affect both Republicans and Democratic incumbents.
The bottom line is that the American people are extremely unhappy. They are unhappy about their present economic condition; they are unhappy with their elected officials; they are unhappy about the diminished values of their homes; they are, in general, unhappy with their lot.
On Monday of this week, two Op-Ed columns appeared in The New York Times, the first by Bob Herbert, the second by David Brooks. These two writers come from different points in the political spectrum. Herbert is a Progressive Liberal writer, whereas Brooks is a moderate Republican. It is interesting to examine excerpts from these two columns, as they point to the unhappiness mentioned in the above paragraph.
First, Bob Herbert, commenting on Robert Reich’s new book “Aftershock:”
“The middle class is finally on its knees. Jobs are scarce and good jobs even scarcer. Government and corporate policies have been whacking working Americans every which way for the past three or four decades. While globalization and technological wizardry were wreaking employment havoc, the movers and shakers in government and in the board rooms of the great corporations were embracing privatization and deregulation with the fervor of fanatics. The safety net was shredded, unions were brutally attacked and demonized, employment training and jobs programs were eliminated, higher education costs skyrocketed, and the nation’s infrastructure, a key to long-term industrial and economic health, deteriorated.”
“While all this was happening, working people, including those in the vast middle class, coped as best they could. Women went into the paid work force in droves. Many workers increased their hours or took on second and third jobs. Savings were drained and debt of every imaginable kind — from credit cards to mortgages to student loans —exploded.”
“With those coping mechanisms now exhausted, it’s painfully obvious that the economy has failed working Americans.”
“Analysts have tracked the increasing share of national income that has gone to the top 1 percent of earners since the 1970s, when their share was 8 percent to 9 percent. In the 1980s, it rose to 10 percent to 14 percent. In the late-’90s, it was 15 percent to 19 percent. In 2005, it passed 21 percent. By 2007, the last year for which complete data are available, the richest 1 percent were taking more than 23 percent of all income.”
“The richest one-tenth of 1 percent, representing just 13,000 households, took in more than 11 percent of total income in 2007.”
“That does not leave enough spending power with the rest of the population to sustain a flourishing economy. The wages of the typical American hardly increased in the three decades leading up to the Crash of 2008, considering inflation. In the 2000s, they actually dropped.”
“A male worker earning the median wage in 2007 earned less than the median wage, adjusted for inflation, of a male worker 30 years earlier. A typical son, in other words, is earning less than his dad did at the same age.”
“This is what has happened with ordinary workers as the wealth at the top has soared into the stratosphere.”
“With so much of the middle class and the rest of working America tapped out, there is not enough consumer demand for the goods and services that the U.S. economy is capable of producing. Without that demand, there are precious few prospects for a robust recovery.”
As most other economists now predict, it will be a long time before our economy will grow at an adequate pace in terms of GDP growth, to absorb new entrants into the work force, let alone bring the rate of joblessness down to a historically acceptable level. Thus, this “middle-class malaise” will continue. It is being reflected politically by the rejection of incumbents and the rise of fringe movements, or shall we call them alternative parties, such as the Tea Party.
The question is: what’s next? If the Nation has to suffer through a five- to ten-year period of inadequate growth, and conditions do not improve for average Americans, will we suffer increased political unrest, or, worse, the emergence of civil unrest? The voting public’s dissatisfaction can be viewed as a much deeper and more worrisome sense of frustration with the direction in which our Country is heading. And they are placing the blame on everyone in power: a politically polarized and ineffective legislature; a President whose popularity decreases every week; local legislators who are finding it increasing difficult, if not impossible, to balance their state’s income with the social responsibilities they have heretofore undertaken; and on and on.
Looking at the results of yesterday’s primary elections, the New York Times reports that “Carl P. Paladino, a Buffalo multimillionaire who jolted the Republican Party with his bluster and belligerence, rode a wave of disgust with Albany to the nomination for governor of New York on Tuesday, toppling Rick A. Lazio, a former congressman who earned establishment support but inspired little popular enthusiasm.”
“Mr. Paladino became one of the first Tea Party candidates to win a Republican primary for governor, in a state where the Republican Party has historically succeeded by choosing moderates.”
“We are mad as hell,” Mr. Paladino said in a halting but exuberant victory speech in Buffalo shortly after 11 p.m. “New Yorkers are fed up. Tonight the ruling class knows. They have seen it now. There is a people’s revolution. The people have had enough.”
“Referring to criticism from what he said were liberal elites, he added: “They say I am too blunt. Well, I am, and I don’t apologize for it. They say I am an angry man, and that’s true. We are all angry.”
“The Tea Party movement scored another victory on Tuesday, helping to propel a dissident Republican, Christine O’Donnell, to an upset win over Representative Michael N. Castle in the race for the United States Senate nomination in Delaware.”
“Ms. O’Donnell, a former abstinence counselor who had failed in previous attempts to run for office in Delaware, won the endorsement of Sarah Palin, Senator Jim DeMint of South Carolina and other leaders of the party’s conservative wing.”
“The results on the last big night of primaries highlighted the extent to which the Tea Party movement has upended the Republican Party and underscored the volatility of the electorate seven weeks from Election Day.”
But they also are a signal of the voter dissatisfaction that will affect not only Republicans, but Democrats as well in November.
In yesterday’s Times, David Brooks, commenting on the state of the Republican opposition, wrote:
“Throughout American history, there have been leaders who regarded government like fire — a useful tool when used judiciously and a dangerous menace when it gets out of control. They didn’t build their political philosophy on whether government was big or not. Government is a means, not an end. They built their philosophy on making America virtuous, dynamic and great. They supported government action when it furthered those ends and opposed it when it didn’t.”
“If the current Republican Party regards every new bit of government action as a step on the road to serfdom, then the party will be taking this long, mainstream American tradition and exiling it from the G.O.P.”
“Republicans are right to oppose the current concentration of power in Washington. But once that is halted, America faces a series of problems that can’t be addressed simply by getting government out of the way.”
“The social fabric is fraying. Human capital is being squandered. Society is segmenting. The labor markets are ill. Wages are lagging. Inequality is increasing. The nation is overconsuming and underinnovating. China and India are surging. Not all of these challenges can be addressed by the spontaneous healing powers of the market.”
“Conservatism is supposed to be nonideological and context-driven. If all government action is automatically dismissed as quasi socialist, then there is no need to think. A pall of dogmatism will settle over the right.”
“Republicans are riding a wave of revulsion about what is happening in Washington. But it is also time to start talking about the day after tomorrow, after the centralizing forces are thwarted. I hope that as Arthur Brooks and Paul Ryan lead a resurgent conservatism, they’ll think about the limited-but-energetic government tradition, which stands between Barry Goldwater and François Mitterrand, but at the heart of the American experience.”
What Brooks points out in his piece is exemplified in stark relief by the positions taken by the two Republican congressional leaders over the past few days. On Sunday, John Boehner, the House Minority Leader, stated that it was possible that he could eventually support Obama’s proposal to extend the Bush-era middle class tax cut while allowing the cut on upper income individuals to expire. But on Monday, Senate Minority Leader Mitch McConnell ruled out any such support in the Senate.
In an interview with The Caucus this morning, New York Senator Charles E. Schumer, the head of the Democratic Senatorial Campaign Committee, said Ms. O’Donnell’s victory in Delaware was indicative of a primary pattern that will help his party.
“Republicans have basically chosen extremists to be their nominees and that has changed the map for the cycle,” the senator said.
“Republicans make the same mistake over and over again,” Mr. Schumer added. “The wounds are not healing, and I believe that demonstrates just how extreme these candidates are.”
What Schumer is saying is what Brooks was pointing out in his piece: that the Republican Party has been captured by its own extreme wing, and that in doing so, it has abandoned its traditional role of a politically reasoned counterbalance to the more liberal elements on the left.
Although John Boehner has the presence of mind to realize a political trap when he sees one, the intransigent McConnell does not, and he is aiming his Party into what looks like an abyss over the issue of middle class tax relief. And the Democrats will be smiling right up to November 2nd.
Sunday, August 29, 2010
ECONOMIC HEADWINDS STRENGTHEN AS CALLS FOR ACTION INCREASE
By Bill Breakstone, August 29, 2010
This morning’s New York Times lead editorial is a call for action on the economic front, and it is addressed to President Obama. It is worth quoting in its entirety:
“If President Obama has a big economic initiative up his sleeve, as he hinted recently, now would be a good time to let the rest of us in on it.
News on Friday confirmed that the economy was far weaker in the second quarter than originally believed, growing at 1.6 percent versus an initial reading of 2.4 percent. Grim reports on housing sales indicate that the slowdown has continued. In a normal recession, housing would lead the way up from the depths. Today, it appears to be leading the way back down.
Which brings us back to Mr. Obama. The fiscal stimulus of 2009, coupled with low interest rates and other Federal Reserve interventions, kept the recession from being much worse. But it has not been enough to revive hiring, without which a real recovery is impossible. In the meantime and even more ominously, economic policy making has all but ground to a halt.
Congress is gridlocked. For nearly two months, Republicans blocked an extension of unemployment benefits, a basic recovery measure. They are still holding up a bill to spur more lending to small businesses.
In a much-anticipated speech on Friday, Ben Bernanke, the Federal Reserve chairman, reiterated his vow to do more to boost the economy if conditions worsened. He did not seem particularly convinced that anything the Fed could do would be enough.
The question then is whether Mr. Obama will lead. He cannot force Congress to act, but he could pre-empt Republicans’ diatribes — on the deficit, on small business, on taxes — with tough truths and a big mission that would tie together the strategies and the sacrifices that will be needed to put the economy right.
First, he needs to keep driving home that he is committed to addressing the deficit, and that he will call for widespread sacrifice to do so — starting with letting the Bush tax cuts for the richest Americans expire at year end. Mr. Obama must tell Americans that claims from Republican leaders that the country can both cut taxes and tackle the deficit are absurd and cynical.
Next, he needs to explain why too much sacrifice, too soon, especially from the middle class, would do more harm than good while the economy is weak. More government support is needed until conditions improve.
Mr. Obama also needs to inspire Americans who have been ground down by the economic crisis and Washington’s small-bore sniping. He needs to rally the nation around a big idea — a project that is worth sacrificing for, worth paying for, worth working for. One that lets them know that there is more ahead than just a return to a status quo of lopsided growth in which corporate profits surge while jobs and incomes lag.
That mission could be the “21st century infrastructure,” that Mr. Obama mentioned on a multi-city trip this month, “not just roads and bridges, but faster Internet access and high-speed rail.” It could be energy independence, with high-tech green jobs and a real chance for addressing global warming. Either of the above would make sense, economically and politically.
Mr. Obama and his economic team had clearly hoped for an economic rebound in time for the midterm elections. They are not going to get it. The economic damage they inherited was too deep, and the economic stimulus they pushed through Congress, for all of the fight, was too small. Standing back is not doing the country or his party any good. We believe Americans are ready for hard truths and big ideas.”
What follows below are comments made by several economists at the Jackson Hole Conference:
Paul Krugman
“What will Ben Bernanke, the Fed chairman, say in his big speech Friday in Jackson Hole, Wyo.? Will he hint at new steps to boost the economy? Stay tuned.
But we can safely predict what he and other officials will say about where we are right now: that the economy is continuing to recover, albeit more slowly than they would like. Unfortunately, that’s not true: this isn’t a recovery, in any sense that matters. And policy makers should be doing everything they can to change that fact.
The small sliver of truth in claims of continuing recovery is the fact that G.D.P. is still rising: we’re not in a classic recession, in which everything goes down. But so what?
The important question is whether growth is fast enough to bring down sky-high unemployment. We need about 2.5 percent growth just to keep unemployment from rising, and much faster growth to bring it significantly down. Yet growth is currently running somewhere between 1 and 2 percent, with a good chance that it will slow even further in the months ahead. Will the economy actually enter a double dip, with G.D.P. shrinking? Who cares? If unemployment rises for the rest of this year, which seems likely, it won’t matter whether the G.D.P. numbers are slightly positive or slightly negative.
All of this is obvious. Yet policy makers are in denial.
After its last monetary policy meeting, the Fed released a statement declaring that it “anticipates a gradual return to higher levels of resource utilization” — Fedspeak for falling unemployment. Nothing in the data supports that kind of optimism. Meanwhile, Tim Geithner, the Treasury secretary, says that “we’re on the road to recovery.” No, we aren’t.
Why are people who know better sugar-coating economic reality? The answer, I’m sorry to say, is that it’s all about evading responsibility.
In the case of the Fed, admitting that the economy isn’t recovering would put the institution under pressure to do more. And so far, at least, the Fed seems more afraid of the possible loss of face if it tries to help the economy and fails than it is of the costs to the American people if it does nothing, and settles for a recovery that isn’t.
In the case of the Obama administration, officials seem loath to admit that the original stimulus was too small. True, it was enough to limit the depth of the slump — a recent analysis by the Congressional Budget Office says unemployment would probably be well into double digits now without the stimulus — but it wasn’t big enough to bring unemployment down significantly.
Now, it’s arguable that even in early 2009, when President Obama was at the peak of his popularity, he couldn’t have gotten a bigger plan through the Senate. And he certainly couldn’t pass a supplemental stimulus now. So officials could, with considerable justification, place the onus for the non-recovery on Republican obstructionism. But they’ve chosen, instead, to draw smiley faces on a grim picture, convincing nobody. And the likely result in November — big gains for the obstructionists — will paralyze policy for years to come.
So what should officials be doing, aside from telling the truth about the economy?
The Fed has a number of options. It can buy more long-term and private debt; it can push down long-term interest rates by announcing its intention to keep short-term rates low; it can raise its medium-term target for inflation, making it less attractive for businesses to simply sit on their cash. Nobody can be sure how well these measures would work, but it’s better to try something that might not work than to make excuses while workers suffer.
The administration has less freedom of action, since it can’t get legislation past the Republican blockade. But it still has options. It can revamp its deeply unsuccessful attempt to aid troubled homeowners. It can use Fannie Mae and Freddie Mac, the government-sponsored lenders, to engineer mortgage refinancing that puts money in the hands of American families — yes, Republicans will howl, but they’re doing that anyway. It can finally get serious about confronting China over its currency manipulation: how many times do the Chinese have to promise to change their policies, then renege, before the administration decides that it’s time to act?
Which of these options should policy makers pursue? If I had my way, all of them.
I know what some players both at the Fed and in the administration will say: they’ll warn about the risks of doing anything unconventional. But we’ve already seen the consequences of playing it safe, and waiting for recovery to happen all by itself: it’s landed us in what looks increasingly like a permanent state of stagnation and high unemployment. It’s time to admit that what we have now isn’t a recovery, and do whatever we can to change that situation.”
Nouriel Roubini
Nouriel Roubini, the New York University professor who forecast the U.S. recession more than a year before it began, said the Federal Reserve is running out of effective ways to stimulate the economy. We cannot prevent slow economic growth for a number of years,” Roubini said an interview on Bloomberg Radio. “We are running out of policy bullets.”
“Banks are “sitting on” $1 trillion of excess reserves and cutting the interest rate on excess reserves to zero from 25 basis points isn’t going to make them lend money. Additional quantitative easing through purchases of securities also won’t jumpstart economic growth. The point is monetary policy is becoming ineffective.”
Mohamed El-Erian
U.S. economic data are “alarming,” signaling the recovery is losing momentum, Mohamed A. El-Erian, Pacific Investment Management Co.’s chief executive officer, wrote in an opinion piece in the Washington Post.
Unemployment is high, consumer credit is shrinking and small companies are having trouble obtaining bank lines of credit, wrote El-Erian, who is also co-chief investment officer at Pimco, which runs the world’s largest bond fund. Increased government spending and additional debt purchases from the Federal Reserve are unlikely to spur a rebound, he wrote.
“Throughout the summer, data signals have become more alarming,” wrote El-Erian, who is based in Newport Beach, California. “Current policy approaches here and abroad are unlikely to deliver a durable and robust U.S. recovery.”
Housing is waning and home values are set to fall further as foreclosures increase, El-Erian wrote in the article.
There is a need for tax reform, housing-finance reform, infrastructure investment, support for education, job retraining, removal of barriers to interstate competition and stronger social safety nets, he wrote.
Sovereign bonds are rallying globally as economists trim their growth forecasts and stocks tumble.
“The equity markets are again under pressure while yields on Treasury bonds have collapsed, reflecting that market’s growing concerns about the weak economic outlook,” El-Erian wrote.
Economists who decide when recessions begin and end in the U.S. are divided over the odds of a renewed downturn, underscoring the challenge faced by Federal Reserve Chairman Ben S. Bernanke as he vows the Fed “will do all that it can” to sustain growth.
Martin Feldstein
“There’s still a significant risk, maybe one chance in three, that there will be a double dip,” said Harvard University Professor Martin Feldstein, who sits on the Business Cycle Dating Committee of the National Bureau of Economic Research. Fellow panel member and Princeton University Professor Mark Watson said those odds are “way too high” and puts them instead at “one in 10 or maybe one in 20.”
Such differences over the outlook marked discussions of policy makers and economists gathered in Jackson Hole, Wyoming for the Kansas City Fed’s annual symposium. The tone was set by a reduced estimate of second-quarter growth and then by Bernanke’s speech Friday outlining possible options the Fed could take to ensure the recovery continues.
Henry Kaufman
“There is a searching as to where events are going from here because there has been a slowing in the pace of economic growth,” Henry Kaufman, president of New-York based Henry Kaufman & Co., said in an interview at the conference. “The Fed is at a stage where it is tilting to further accommodation, but it’s not guaranteed.”
Carmen Reinhart
As a seven-year-old in Cuba, Carmen Reinhart memorized the routes of ships carrying silver from Peru and Bolivia to Spain. By 16, she had moved to Miami and got a job at a Sears Holdings Corp. store reviewing credit applications and payment records.
That fascination with history and data has propelled a career at Bear Stearns Cos., the International Monetary Fund and the University of Maryland in College Park. Now Reinhart, 54, is using a paper studying 15 economic crises since World War II to warn Federal Reserve Chairman Ben S. Bernanke and fellow policy makers that sluggish growth and high unemployment in the U.S. might persist through 2017 or longer.
“Whether one looks at advanced economies or a whole sample that includes emerging markets, the picture is one of lower growth during the decade that follows the crisis,” she said in an interview from Washington this week. “We are already three years into this post-crisis window. The clock starts ticking in the summer of 2007.”
Reinhart’s work has made her the female economist most frequently cited by other economists. Her latest paper, “After the Fall,” co-written with husband Vincent Reinhart, is being presented today at the Fed’s annual symposium in Jackson Hole, Wyoming.
An unemployment rate of 8 or 9 percent over the next seven years is not “outside of the experience that we have documented,” she said. Her studies of crises in Finland, Japan, Norway, Spain and Sweden that started between 1977 and 1992 show median per-capita economic growth declined by 1 percentage point in the decade following the shock.
The pessimistic outlook in her paper presented at Jackson Hole contrasts with the view of Treasury Secretary Timothy F. Geithner, who said this month that the U.S. economy is “gradually healing.”
The nation has more than a 50 percent chance of experiencing a lost decade like Japan, when a collapse in land and stock-market prices gave way to economic stagnation and deflation starting in the 1990s, according to Reinhart. To avoid that outcome, policy makers should immediately announce a plan to increase taxes and cut spending in about a year, she said, adding her husband generally shares the same position.
“We have the pretty clear view that you want to not necessarily implement austerity right now, but you certainly want to announce it right now, with plans to deal with the deficit and debt in a realistic time frame,” she says.
“Our recovery still leaves a great deal to be desired,” Carmen Reinhart said. “My concern is that because the U.S. is the world’s reserve currency, we can still borrow in bad times, and that a more Japan-like scenario lies in store. A lot of the forces are already in place.”
With the U.S. government’s gross debt rising to about 90 percent of gross domestic product as tax revenue declined during the recession, “we have to pay future attention to the debt.”
“You don’t want to pull the plug out completely on stimulus,” Reinhart said. Still, “you have to start thinking about what measures are required to curb the deficit, and cap or reduce the debt. You don’t have the luxury to focus on the choice of one or the other. You have to deal with both.”
Alan Blinder
Federal Reserve Chairman Ben S. Bernanke may be reluctant to ease monetary policy further with unconventional steps in the near term, former Fed Vice Chairman Alan Blinder said.
Bernanke’s speech Friday on policy alternatives stressed “if necessary,” Blinder, a Princeton University economist, said in an interview on Bloomberg Radio’s “The Hays Advantage,” with Kathleen Hays. “He is not on the verge of doing anything. I thought he was relatively pessimistic about the efficacy of the actions.”
Bernanke said the U.S. central bank “will do all that it can” to ensure a continuation of the economic recovery and said more securities purchases may be warranted if growth slows.
“If it were just Ben Bernanke acting on his own, some further action might be closer,” Blinder said. “He has some significant resistance from within the FOMC.”
Lowering the interest rate on banks’ deposits at the Fed to below zero may be the “best option” to support growth, Blinder said. Still, “the heavy artillery has already been fired,” he said.
The Fed two weeks ago decided to keep its bond holdings at $2.05 trillion by reinvesting the proceeds from maturing mortgage-backed securities into Treasuries. The Federal Open Market Committee, seeking to spur economic growth, held the main interest rate at zero to 0.25 percent, where it’s been since December 2008, and affirmed a pledge to keep rates low for “an extended period.”
Blinder said he continues to back additional federal spending by Congress to support the recovery, especially directed at jobs programs.
Olli Rehn and Joseph Stiglitz
Those who oppose watering down the various stimulus packages that are keeping the economy alive see warning signs everywhere. Europe is looking anxiously to the East, concerned that China will be too successful at reining in growth. Olli Rehn, the European Union’s economics chief, says that slowing Asian economies would have a “serious negative impact” on his region.
The U.S., meantime, frets that Europe will slide back into a recession, making the dreaded double dip a reality. “Cutting back willy-nilly on high-return investments just to make the picture of the deficit look better is really foolish,” Nobel Prize-winning economist Joseph Stiglitz told Dublin-based RTE Radio in an interview broadcast on Aug. 24.
And almost every supporter of doing more, not less, to resuscitate animal spirits is looking to the recent history of Japan as the chief reason why austerity should not be the new black. “What we’re doing is setting ourselves up for a longer- term Japanese-style malaise of weak growth for an extended period of time,” Stiglitz says.
Conclusions
Although Fed Chairman Bernanke, Treasury Secretary Geithner, and various Administration officials are trying to put a positive spin on economic data and recovery efforts, it flies in the face of all the deteriorating conditions that continue to emerge day after day. The general consensus among economists is that things will only get worse during the third and fourth quarters of this year.
Paul Krugman’s suggestions noted above make perfect sense to this writer. I would add to those by saying that a drastic shake up is needed in the Administration’s economic team. A firm signal needs to be sent that current economic conditions are NOT acceptable. Chief economic advisor Larry Summers should be relieved of his post and replaced with an economist more committed to a pro-active approach towards growth creation. Bernanke should be persuaded to take the Fed in the direction outlined by Krugman. And, finally, taxes on business investment should be cut. This would spur job creation, and is the only politically viable course to take at this point in time.
This morning’s New York Times lead editorial is a call for action on the economic front, and it is addressed to President Obama. It is worth quoting in its entirety:
“If President Obama has a big economic initiative up his sleeve, as he hinted recently, now would be a good time to let the rest of us in on it.
News on Friday confirmed that the economy was far weaker in the second quarter than originally believed, growing at 1.6 percent versus an initial reading of 2.4 percent. Grim reports on housing sales indicate that the slowdown has continued. In a normal recession, housing would lead the way up from the depths. Today, it appears to be leading the way back down.
Which brings us back to Mr. Obama. The fiscal stimulus of 2009, coupled with low interest rates and other Federal Reserve interventions, kept the recession from being much worse. But it has not been enough to revive hiring, without which a real recovery is impossible. In the meantime and even more ominously, economic policy making has all but ground to a halt.
Congress is gridlocked. For nearly two months, Republicans blocked an extension of unemployment benefits, a basic recovery measure. They are still holding up a bill to spur more lending to small businesses.
In a much-anticipated speech on Friday, Ben Bernanke, the Federal Reserve chairman, reiterated his vow to do more to boost the economy if conditions worsened. He did not seem particularly convinced that anything the Fed could do would be enough.
The question then is whether Mr. Obama will lead. He cannot force Congress to act, but he could pre-empt Republicans’ diatribes — on the deficit, on small business, on taxes — with tough truths and a big mission that would tie together the strategies and the sacrifices that will be needed to put the economy right.
First, he needs to keep driving home that he is committed to addressing the deficit, and that he will call for widespread sacrifice to do so — starting with letting the Bush tax cuts for the richest Americans expire at year end. Mr. Obama must tell Americans that claims from Republican leaders that the country can both cut taxes and tackle the deficit are absurd and cynical.
Next, he needs to explain why too much sacrifice, too soon, especially from the middle class, would do more harm than good while the economy is weak. More government support is needed until conditions improve.
Mr. Obama also needs to inspire Americans who have been ground down by the economic crisis and Washington’s small-bore sniping. He needs to rally the nation around a big idea — a project that is worth sacrificing for, worth paying for, worth working for. One that lets them know that there is more ahead than just a return to a status quo of lopsided growth in which corporate profits surge while jobs and incomes lag.
That mission could be the “21st century infrastructure,” that Mr. Obama mentioned on a multi-city trip this month, “not just roads and bridges, but faster Internet access and high-speed rail.” It could be energy independence, with high-tech green jobs and a real chance for addressing global warming. Either of the above would make sense, economically and politically.
Mr. Obama and his economic team had clearly hoped for an economic rebound in time for the midterm elections. They are not going to get it. The economic damage they inherited was too deep, and the economic stimulus they pushed through Congress, for all of the fight, was too small. Standing back is not doing the country or his party any good. We believe Americans are ready for hard truths and big ideas.”
What follows below are comments made by several economists at the Jackson Hole Conference:
Paul Krugman
“What will Ben Bernanke, the Fed chairman, say in his big speech Friday in Jackson Hole, Wyo.? Will he hint at new steps to boost the economy? Stay tuned.
But we can safely predict what he and other officials will say about where we are right now: that the economy is continuing to recover, albeit more slowly than they would like. Unfortunately, that’s not true: this isn’t a recovery, in any sense that matters. And policy makers should be doing everything they can to change that fact.
The small sliver of truth in claims of continuing recovery is the fact that G.D.P. is still rising: we’re not in a classic recession, in which everything goes down. But so what?
The important question is whether growth is fast enough to bring down sky-high unemployment. We need about 2.5 percent growth just to keep unemployment from rising, and much faster growth to bring it significantly down. Yet growth is currently running somewhere between 1 and 2 percent, with a good chance that it will slow even further in the months ahead. Will the economy actually enter a double dip, with G.D.P. shrinking? Who cares? If unemployment rises for the rest of this year, which seems likely, it won’t matter whether the G.D.P. numbers are slightly positive or slightly negative.
All of this is obvious. Yet policy makers are in denial.
After its last monetary policy meeting, the Fed released a statement declaring that it “anticipates a gradual return to higher levels of resource utilization” — Fedspeak for falling unemployment. Nothing in the data supports that kind of optimism. Meanwhile, Tim Geithner, the Treasury secretary, says that “we’re on the road to recovery.” No, we aren’t.
Why are people who know better sugar-coating economic reality? The answer, I’m sorry to say, is that it’s all about evading responsibility.
In the case of the Fed, admitting that the economy isn’t recovering would put the institution under pressure to do more. And so far, at least, the Fed seems more afraid of the possible loss of face if it tries to help the economy and fails than it is of the costs to the American people if it does nothing, and settles for a recovery that isn’t.
In the case of the Obama administration, officials seem loath to admit that the original stimulus was too small. True, it was enough to limit the depth of the slump — a recent analysis by the Congressional Budget Office says unemployment would probably be well into double digits now without the stimulus — but it wasn’t big enough to bring unemployment down significantly.
Now, it’s arguable that even in early 2009, when President Obama was at the peak of his popularity, he couldn’t have gotten a bigger plan through the Senate. And he certainly couldn’t pass a supplemental stimulus now. So officials could, with considerable justification, place the onus for the non-recovery on Republican obstructionism. But they’ve chosen, instead, to draw smiley faces on a grim picture, convincing nobody. And the likely result in November — big gains for the obstructionists — will paralyze policy for years to come.
So what should officials be doing, aside from telling the truth about the economy?
The Fed has a number of options. It can buy more long-term and private debt; it can push down long-term interest rates by announcing its intention to keep short-term rates low; it can raise its medium-term target for inflation, making it less attractive for businesses to simply sit on their cash. Nobody can be sure how well these measures would work, but it’s better to try something that might not work than to make excuses while workers suffer.
The administration has less freedom of action, since it can’t get legislation past the Republican blockade. But it still has options. It can revamp its deeply unsuccessful attempt to aid troubled homeowners. It can use Fannie Mae and Freddie Mac, the government-sponsored lenders, to engineer mortgage refinancing that puts money in the hands of American families — yes, Republicans will howl, but they’re doing that anyway. It can finally get serious about confronting China over its currency manipulation: how many times do the Chinese have to promise to change their policies, then renege, before the administration decides that it’s time to act?
Which of these options should policy makers pursue? If I had my way, all of them.
I know what some players both at the Fed and in the administration will say: they’ll warn about the risks of doing anything unconventional. But we’ve already seen the consequences of playing it safe, and waiting for recovery to happen all by itself: it’s landed us in what looks increasingly like a permanent state of stagnation and high unemployment. It’s time to admit that what we have now isn’t a recovery, and do whatever we can to change that situation.”
Nouriel Roubini
Nouriel Roubini, the New York University professor who forecast the U.S. recession more than a year before it began, said the Federal Reserve is running out of effective ways to stimulate the economy. We cannot prevent slow economic growth for a number of years,” Roubini said an interview on Bloomberg Radio. “We are running out of policy bullets.”
“Banks are “sitting on” $1 trillion of excess reserves and cutting the interest rate on excess reserves to zero from 25 basis points isn’t going to make them lend money. Additional quantitative easing through purchases of securities also won’t jumpstart economic growth. The point is monetary policy is becoming ineffective.”
Mohamed El-Erian
U.S. economic data are “alarming,” signaling the recovery is losing momentum, Mohamed A. El-Erian, Pacific Investment Management Co.’s chief executive officer, wrote in an opinion piece in the Washington Post.
Unemployment is high, consumer credit is shrinking and small companies are having trouble obtaining bank lines of credit, wrote El-Erian, who is also co-chief investment officer at Pimco, which runs the world’s largest bond fund. Increased government spending and additional debt purchases from the Federal Reserve are unlikely to spur a rebound, he wrote.
“Throughout the summer, data signals have become more alarming,” wrote El-Erian, who is based in Newport Beach, California. “Current policy approaches here and abroad are unlikely to deliver a durable and robust U.S. recovery.”
Housing is waning and home values are set to fall further as foreclosures increase, El-Erian wrote in the article.
There is a need for tax reform, housing-finance reform, infrastructure investment, support for education, job retraining, removal of barriers to interstate competition and stronger social safety nets, he wrote.
Sovereign bonds are rallying globally as economists trim their growth forecasts and stocks tumble.
“The equity markets are again under pressure while yields on Treasury bonds have collapsed, reflecting that market’s growing concerns about the weak economic outlook,” El-Erian wrote.
Economists who decide when recessions begin and end in the U.S. are divided over the odds of a renewed downturn, underscoring the challenge faced by Federal Reserve Chairman Ben S. Bernanke as he vows the Fed “will do all that it can” to sustain growth.
Martin Feldstein
“There’s still a significant risk, maybe one chance in three, that there will be a double dip,” said Harvard University Professor Martin Feldstein, who sits on the Business Cycle Dating Committee of the National Bureau of Economic Research. Fellow panel member and Princeton University Professor Mark Watson said those odds are “way too high” and puts them instead at “one in 10 or maybe one in 20.”
Such differences over the outlook marked discussions of policy makers and economists gathered in Jackson Hole, Wyoming for the Kansas City Fed’s annual symposium. The tone was set by a reduced estimate of second-quarter growth and then by Bernanke’s speech Friday outlining possible options the Fed could take to ensure the recovery continues.
Henry Kaufman
“There is a searching as to where events are going from here because there has been a slowing in the pace of economic growth,” Henry Kaufman, president of New-York based Henry Kaufman & Co., said in an interview at the conference. “The Fed is at a stage where it is tilting to further accommodation, but it’s not guaranteed.”
Carmen Reinhart
As a seven-year-old in Cuba, Carmen Reinhart memorized the routes of ships carrying silver from Peru and Bolivia to Spain. By 16, she had moved to Miami and got a job at a Sears Holdings Corp. store reviewing credit applications and payment records.
That fascination with history and data has propelled a career at Bear Stearns Cos., the International Monetary Fund and the University of Maryland in College Park. Now Reinhart, 54, is using a paper studying 15 economic crises since World War II to warn Federal Reserve Chairman Ben S. Bernanke and fellow policy makers that sluggish growth and high unemployment in the U.S. might persist through 2017 or longer.
“Whether one looks at advanced economies or a whole sample that includes emerging markets, the picture is one of lower growth during the decade that follows the crisis,” she said in an interview from Washington this week. “We are already three years into this post-crisis window. The clock starts ticking in the summer of 2007.”
Reinhart’s work has made her the female economist most frequently cited by other economists. Her latest paper, “After the Fall,” co-written with husband Vincent Reinhart, is being presented today at the Fed’s annual symposium in Jackson Hole, Wyoming.
An unemployment rate of 8 or 9 percent over the next seven years is not “outside of the experience that we have documented,” she said. Her studies of crises in Finland, Japan, Norway, Spain and Sweden that started between 1977 and 1992 show median per-capita economic growth declined by 1 percentage point in the decade following the shock.
The pessimistic outlook in her paper presented at Jackson Hole contrasts with the view of Treasury Secretary Timothy F. Geithner, who said this month that the U.S. economy is “gradually healing.”
The nation has more than a 50 percent chance of experiencing a lost decade like Japan, when a collapse in land and stock-market prices gave way to economic stagnation and deflation starting in the 1990s, according to Reinhart. To avoid that outcome, policy makers should immediately announce a plan to increase taxes and cut spending in about a year, she said, adding her husband generally shares the same position.
“We have the pretty clear view that you want to not necessarily implement austerity right now, but you certainly want to announce it right now, with plans to deal with the deficit and debt in a realistic time frame,” she says.
“Our recovery still leaves a great deal to be desired,” Carmen Reinhart said. “My concern is that because the U.S. is the world’s reserve currency, we can still borrow in bad times, and that a more Japan-like scenario lies in store. A lot of the forces are already in place.”
With the U.S. government’s gross debt rising to about 90 percent of gross domestic product as tax revenue declined during the recession, “we have to pay future attention to the debt.”
“You don’t want to pull the plug out completely on stimulus,” Reinhart said. Still, “you have to start thinking about what measures are required to curb the deficit, and cap or reduce the debt. You don’t have the luxury to focus on the choice of one or the other. You have to deal with both.”
Alan Blinder
Federal Reserve Chairman Ben S. Bernanke may be reluctant to ease monetary policy further with unconventional steps in the near term, former Fed Vice Chairman Alan Blinder said.
Bernanke’s speech Friday on policy alternatives stressed “if necessary,” Blinder, a Princeton University economist, said in an interview on Bloomberg Radio’s “The Hays Advantage,” with Kathleen Hays. “He is not on the verge of doing anything. I thought he was relatively pessimistic about the efficacy of the actions.”
Bernanke said the U.S. central bank “will do all that it can” to ensure a continuation of the economic recovery and said more securities purchases may be warranted if growth slows.
“If it were just Ben Bernanke acting on his own, some further action might be closer,” Blinder said. “He has some significant resistance from within the FOMC.”
Lowering the interest rate on banks’ deposits at the Fed to below zero may be the “best option” to support growth, Blinder said. Still, “the heavy artillery has already been fired,” he said.
The Fed two weeks ago decided to keep its bond holdings at $2.05 trillion by reinvesting the proceeds from maturing mortgage-backed securities into Treasuries. The Federal Open Market Committee, seeking to spur economic growth, held the main interest rate at zero to 0.25 percent, where it’s been since December 2008, and affirmed a pledge to keep rates low for “an extended period.”
Blinder said he continues to back additional federal spending by Congress to support the recovery, especially directed at jobs programs.
Olli Rehn and Joseph Stiglitz
Those who oppose watering down the various stimulus packages that are keeping the economy alive see warning signs everywhere. Europe is looking anxiously to the East, concerned that China will be too successful at reining in growth. Olli Rehn, the European Union’s economics chief, says that slowing Asian economies would have a “serious negative impact” on his region.
The U.S., meantime, frets that Europe will slide back into a recession, making the dreaded double dip a reality. “Cutting back willy-nilly on high-return investments just to make the picture of the deficit look better is really foolish,” Nobel Prize-winning economist Joseph Stiglitz told Dublin-based RTE Radio in an interview broadcast on Aug. 24.
And almost every supporter of doing more, not less, to resuscitate animal spirits is looking to the recent history of Japan as the chief reason why austerity should not be the new black. “What we’re doing is setting ourselves up for a longer- term Japanese-style malaise of weak growth for an extended period of time,” Stiglitz says.
Conclusions
Although Fed Chairman Bernanke, Treasury Secretary Geithner, and various Administration officials are trying to put a positive spin on economic data and recovery efforts, it flies in the face of all the deteriorating conditions that continue to emerge day after day. The general consensus among economists is that things will only get worse during the third and fourth quarters of this year.
Paul Krugman’s suggestions noted above make perfect sense to this writer. I would add to those by saying that a drastic shake up is needed in the Administration’s economic team. A firm signal needs to be sent that current economic conditions are NOT acceptable. Chief economic advisor Larry Summers should be relieved of his post and replaced with an economist more committed to a pro-active approach towards growth creation. Bernanke should be persuaded to take the Fed in the direction outlined by Krugman. And, finally, taxes on business investment should be cut. This would spur job creation, and is the only politically viable course to take at this point in time.
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