The Things People Write When They Don't Understand Economics and Don't Want to Blame Obama For Anything

God I love her. I love Arianna Huffington. Why? Because she's an idiot with a platform. How did she get her? She married rich. Then she made friends with some people in Hollywood and BANG she had a website. And from this website that is loved by people whom I hope to never meet she gives us her opinion about politics and economics! And guess what? She's a complete idiot! So when Arianna speaks, I type.

On February 10th, the New York Times reported that there had been a "spirited" battle within the Obama administration over restrictions on executive pay and bonuses, and over attaching stringent conditions to any bailout money given to banks.

The clash pitted Tim Geithner, who opposed the restrictions and conditions, against David Axelrod, who favored them. According to the Times, Geithner had "largely prevailed."

Nice use of quotations, Arianna. Sweet back handed compliment, Arianna.

In light of what has happened since then, that outcome must now be viewed as a tragic surrender to Geithner, Summers, and the political/Wall Street class -- a "victory" that could lead to the unraveling of the president's entire economic policy.

Yeah. No. But sure. In political movie thrillers, then sure something like the A.I.G. bonuses could bring down the entire country. But in this little thing I like to call reality, I don't think so. In fact, the chances that the A.I.G. bonuses bullshit brings down the Obama economic policy (more on that in a second) are zero.

And speaking of the Obama economic policy... what is it? Yeah yeah, I know, stimulus and more TARP funds and toxic assets off the book, blah blah blah... but it doesn't have a name. It isn't a New New Deal or a New Fair Deal or a Gerater Society. In other words, Obama, like everyone including the FED is flying by the seat of their pants. So to say that the Obama economic policy may fail... well... the problem is there really isn't an economic policy. But it's Arianna's reality and we're just reading it.

Maintaining the public trust is always important for a leader, but especially so during hard times.

I fucking wish I had used this to open my three page paper on FDR in 8th grade history. Fucking fuck. That is an AMAZING opening sentence to an 8th grade paper. Seriously. Read that again. It's 14 year-old gold.

There is a fascinating chapter on Nelson Mandela in Stan Greenberg's new book, Dispatches from the War Room, in which Greenberg writes about how even the revered Mandela suffered a loss of public confidence when change did not come fast enough after he took office. "Don't assume the current euphoria, even with your high approval rating will carry you through," Greenberg counsels Obama, stressing the need to try to build up enough trust so that the public will stay with the president until they can actually experience change.

What? Nelson Mandela? Stan Greenberg counseling Obama? Where is this going? What is happening?

Geithner's feigned surprise at AIG has been a body blow to public confidence in the president. According to Sunday's Rassmussen poll, just 12 percent of those Rassmussen defines as "Populists" have a favorable opinion of Geithner while those Rassmussen identifies as "America's Political Class" have a 76 percent favorable opinion of him.

What is she talking about? Who calls one's self a populist? Where are these people? And secondly, what is her point? What is she trying to say to us? So 76% of the people who follow this stuff think Geithner is doing a good job. Is that her point? Or is Arianna attempting to tell us that she too is a populist? I'm confused. But I love her.

It was painful to watch Obama, just hours after Geithner had admitted his role in the Dodd/bonus loophole affair, go on Jay Leno and say that Geithner is doing an "outstanding job." Even before Frank Rich's Sunday column was titled "Has a 'Katrina Moment' Arrived?," Obama's assessment had more than a whiff of Bush telling Brownie he was "doing a heck of a job."

Wow. Just wow. Look, let's cool it with the Katrina stuff for starters. But I love how everyone is missing the point with the A.I.G. mess. Why is it that only David Brooks understands this? What is wrong with America? Has the 24 hour news really destroyed our intellectual ability? But wait, this is only going to get better.

My dictionary defines outstanding as "excellent, exceptional, superior to others in the same category."

My dictionary defines condsending as "Arianna Huffington".

So how could Obama say that and then, not a minute later, tell Leno that his administration plans to "open up separate credit lines outside of banks for small businesses" and "set up a securitized market for student loans and auto loans outside of the banking system" in order to "get credit flowing again"?

I don't know Arianna, I don't know how he could say such things. Did she cry when she wrote this sentence? Is it fair to picture Arianna, hair messy, mascarra streaking down her cheeks, saying out loud "How could you Barack! HOW COULD YOU???"

Back in January, after the Senate voted to release the second $350 billion tranche of TARP money, Obama had told the nation that he was "gratified" he'd been given the authority to "maintain the flow of credit to families and businesses."

Now, here he was, just over two months later, basically admitting that we have to find other ways to "maintain the flow of credit to families and businesses" -- completely contradicting a central tenet of the bank bailout, expressed by Axelrod in January when he told George Stephanopoulos that the president was "going to have a strong message for the bankers. We want to see credit flowing again. We don't want them to sit on any money that they get from taxpayers... And we have to make sure that the money doesn't go to excessive CEO pay and dividends when it should be going to lending."

Then Geithner happened. According to the Times, during the internal debate the Treasury Secretary "resisted those who wanted to dictate how banks would spend their rescue money." And we see how well that turned out.

Wait, Geithner was the only guy saying that the government shouldn't tell the banks how to spend their money? Isn't this the real story here? But that aside, let me say this, and I'm only going to say it once: life is not a fairy tail. I'm sure Obama, like everyone else in this country, hoped that the banks would lend out the TARP money. But then a little thing I like to call reality set in (and yes, I know I said that already, but the ObamaHeads need to hear that word a lot). Reality said this: The Banks are Screwed and need to balance out their sheets. When banks don't have a balanced bank sheet, they can't lend money. And yeah, it sucks. It stinks. It's too bad that we can't go into a bank and say, "Hey banker, don't you think I need $50,000 bucks to buy flat screen TVs and new jackets and a vacation to Disney World?" But those days are Ovar. Because banks don't have money. And this might actually be a good thing since the United States as a whole was completely and totally out of it's collective mind from 2003-2008. Cheap money is gone. That's okay. That's good.

The AIG bonus backlash is the first serious threat to the Obama administration. It has created an opening that allows conservatives to storm the populist barricades, suddenly acting like the second coming of Huey Long or Upton Sinclair.

Don't you love it when populists, conservatives, and Huey Long are all used in the same sentence? Should we tell Arianna that Huey Long was more leftist and less conservative? Should we tell her that the conservative moment is lost in the woods? Should we tell her the last conservative populist was George W. Bush?

Shameless opportunists like Mitch McConnell, Richard Shelby, and Eric Cantor, who have all argued against limiting executive pay and bonuses, are now positioning themselves in front of the populist parade, railing against AIG and pointing the finger at Obama for allowing this to happen on his watch.

Notice the non-ironic tone she's using with "shameless opportunists".

But the issue isn't Geithner's delivery, it's what he's delivering: an approach to the crisis that is as toxic as the assets that have hamstrung the economy. Geithner, brilliant and hardworking though he is, is trapped within a Wall Street-centric view of the world and seems incapable of escaping.

She does know that at this point this is a banking and financial crisis and having a guy who is stuck in Wall Street mode isn't a bad thing right?

That's why every proposal he comes up with is déjà vu all over again -- a remixed variation on the same tried-and-failed let-the-bankers-work-it-out approach championed by his predecessor, Hank Paulson. For Paul Krugman, this "insistence on offering the same plan over and over again, with only cosmetic changes, is itself deeply disturbing. Does Treasury not realize that all these proposals amount to the same thing? Or does it realize that, but hope that the rest of us won't notice? That is, are they stupid, or do they think we're stupid?"

It's official, we are in Blame anyone but Obama mode! Anyone but Obama! Tim Geithner is from Wall Street! Blame him! Anyone but Obama! Chris Dodd, you're an idiot asshole! Anyone but Obama!

I don't believe Geithner thinks we're stupid (although he almost certainly doesn't think we're as smart as he is). He just can't change who he is: a creature of Wall Street, habitually sympathetic to the people at the top of the financial system, who he clearly thinks were born to run the world.

Geithner's actions throughout his career are proof that the toxic thinking that got us into this mess is part of his DNA.

Okay, seriously. What. The. Fuck. Tim Geighner was the head of the Fed of New York. He worked for a consulting firm in DC. He worked for the Treasury Department. He worked for the IMF. He did not work for a Wall Street bank or firm.

While President of the New York Fed, he eliminated two key regulatory measures -- a quarterly risk report and a ban on major acquisitions -- that may have prevented (or at least lessened the impact of) the unraveling of Citigroup, which his office was responsible for supervising. Then, together with Hank Paulson, he was instrumental in the original bailout of AIG and the creation of the TARP plan. And he was a key player in the decision to let Lehman Brothers fail.

Look, Arianna knows nothing about what's going on. I don't know all that much. But I can tell you one thing: We need banks. These guys are a lot smarter than you or me when it comes to this stuff. So to have Arianna Huffington second guess the moves by these guys is sort of like any of us second guessing the placement of the bridge in a Beatles song. It's stupid.

And maybe Arianna missed the whole "HOLY FUCKING SHIT THE SKY IS FALLING" moment back in late September and early October when the credit markets totally stopped, the commercial paper market froze and the financial world was at DEFCON 5. But do you know why that is? Because Lehman failed. People got scared and they freaked. Well guess what? A.I.G. is bigger and even more important. If they fail it's gonna be Medieval Times for everyone (hyperbole).

Arianna writes some more stupid shit, but honestly... I can't do this any more. It's over. I can't take the bashing of anyone but Obama. I can't take the Obama can do no wrong BS. I can't take blaming Tim Geithner when he's dealing with half a deck of cards. I can't take Arianna talking about economics when it's clear that she has no clue what's she is talking about. I can't do this any more.

I'm breaking up with Arianna.

McCain's Economic Plan

I covered Obama's play the other day, check it out here.

No intro today—reread the Obama one if you're dying for an intro—here is McCain's economic policy in his own words. I'll try to make it easy.

-- McCain will keep Bush's tax cuts on wages, capital gains, and dividends all of which are supposed to expire in 2010 (the top tax rate will stay at 35% and capital gain and dividend income will be taxed at 15%). This plan, while it would not discourage saving, would increase the gap between the rich and poor. The Tax Policy Center believes that the top 1% would see their incomes rise 2.2%. As I wrote while disusing Obama's plan, the Gini Index in the U.S. has continued to grow at a fairly quick pace over the last twenty years; slowing this down isn't the worst policy idea.

McCain would also cut the corporate tax rate from 35% to 25%, but would also get rid of some deductions. Corporate taxes are always somewhat miss leading... there are so many loopholes and deductions for corporations that it's hard to know what rate companies turely do pay.

Finally, McCain would allow companies to immediately write off the cost of new equipment. This would incourage investment and theoretically lead to higher producvity and thus growth.

Overall, McCain's tax policy is a pretty good plan for long term growth. But with the U.S. government already in debt and then involved in a costly war and now handing out over a trillion dollars to save Wall Street on top of this, McCain's plan does or says little about slowing down this debt. McCain has hinted at reducing spending (even talking about cutting defense spending in the second debate), but he hasn't provided any proposals to reduce spending. The Tax Policy Center estimates that McCain's policies would increase the debt by $758 billion in the next ten years.

-- McCain would increase the exemption for dependants from $3,500 to $7,000.

-- McCain has promised to balance the budget in his first term, but I'm not sure how he would do it with this policy and hasn't offered a credible means of doing so either. Plus, the Federal government doesn't really need to balace the budget for a bunch of macro reasons that I won't go into right now.

-- McCain has been a supporter of free trade while in the Senate and there is little reason to believe that he would stop being a supporter as President.

-- McCain's economic advisors are not as highly reguarded as Obama's team (here is some harsh treatment or if you have time here is a debate between advisors for both candidates). McCain's advisors, unlike Obama's team, does not feagure as many economists from academia. His team is headed by Carly Fiorina the former head of HP and Nancy Pfotenhauer who was a former director at Americans for Prosperity Foundation and has worked for Koch Industries, which does a little bit of everything but oil and energy are the biggest areas of focus in the past.

-- Like Obama, McCain has yet to say much about Medicare or Social Security.

Sadly, neither McCain or Obama has said too much about simplifing the tax code, which is currently a mess. Personally, I think tearing up the current tax code and rewriting it (like Congress did in 1986) would be a wonderful undertaking and something I would get behind.

-- Quick editorial note on McCain and his economic policy. McCain's economic proposals haven't hit home with the American voter. Obama's policies have a more populist tone them—but the reality is that they aren't all that poulist. McCain needs to do the same. If I were him or on his campagin, I would have been working hard over the weekend to roll out a new set of idea and proposals. Maybe concede to raising taxes on the rich, keep corporate taxes low, and find a deduction or two for the American worker. Oh and maybe get Micheal Phelps to pitch the plan for you.

Obama's Economic Plan

A Presidential candidate with an economic plans in a free market liberal democracy would seem like an oxymoron. After all, a free market has limited government intervention so how exactly could the President—or any politician—affect the economy?

If the last month has taught us anything it's that the United States is not a totally free market. Sure we aren't like the former Soviet Union or Cuba with a central planner who decided how many shoes to make, but government intervention in private corporations does exist. So while the President does not have as much control over the economy as voters may believe, he certainly does have tools that he can use that have some sort of influence over the economy.

To make this easy, I'll do each candidate's policies/proposals separately starting with Obama.

Obama has called himself a "pro-growth, free-market guy" and judging by his past and economic advisers there is little reason not to believe him. For starters, Obama taught at the University of Chicago Law School, which doesn't sound like a place that has anything to do with economics, but it has given the world a Nobel Prize winner in Economics—Ronald Coase. Obama has also surrounded himself with highly respected economists from academia—Austan Goolsbee, 37, a University of Chicago professor, Jeffrey Liebman, 39, a pension and poverty expert at Harvard University, and David Cutler, 41, a Harvard health economist.

The Economist ran a story last week about an (unscientific) survey of top economists in the U.S. and who they think would handel the economy better. Obama won hands down as most economists feel that "Obama has a superior economic plan, a firmer grasp of economics and will appoint better economic advisors."

So what is Obama's economic plan? You can look it up here, from his website, and I'll break it down bellow.

-- The first thing that jumps out is the $25 billion that Obama wants to spend on improving public infrastructure (think of roads, water pipes, rail roads, even broadband Internet, etc) arguing that doing so will also create jobs. There is a lot of truth to this, federal investment in infrastructure over the last decade has declined to the lowest levels since 1950. Hopefully there are not any more bridge collapses, like the I-35 bridge in Minneapolis last August, on the horizon, and the U.S. cannot afford a crumbling or outdated public infrastructure system. The U.S. economy, in part, runs on a fast, open, safe, and modern infrastructure . Investment in infrastructure to ensure that it continues to be the most efficient and a world class system isn't a bad idea. And yes, it will create jobs also.

-- Obama also wants to offer each family a $1,000 tax rebate (because of high energy costs). Personally, I'm a little more lukewarm on this proposal... but if you compare 2nd quarter spending in the United States to the soon to be released 3rd quarter figures, you'll see a growth in spending in the 2nd quarter and a huge decline in 3rd quarter spending (if August is any indication). Say what you will about those tax rebates back in the late spring, but they did have some effect on the economy—a good effect. Policy like this is not limitless and does stink of populism, but there are worse policy ideas out there.

-- Obama will keep taxes (i.e. the W tax cuts) at there current rate for anyone making less than $250,000 a year. For those making more, the income tax rate will rise from 33/35% to the Clinton Era 36/39.6%. According to economic theory we should see those who make over $250,000 to not work as hard, but there was little evidence of this being true during the 1990s.

I should also mention that the Bush tax cuts of the first half of this decade widened the gap in after-tax income between the rich and poor. The U.S. has seen its Gini Index increase in recent years (the Gini index is a coefficient that measures the gap between the rich and poor). The current gap is probably higher than most policy makers and economists would like to see. I personally would like to see the gap fall to where it was in the 1980s (or even lower) and Obama's tax policy should bring about a decrease in the U.S.'s Gini coefficient.

-- However, despite his claim of being a free market guy, Obama has opposed many of Bush's free trade agreements in the Senate. He has also had a protectionalist platform during the primaries and general election. More on this another day however.

-- Maybe the most interesting proposal is that Obama will keep the current rate of 15% in dividend and capital-gain taxes for anyone making less that $250 thousand. He would raise the rate to 20% for the "rich".

For a second pretend the stock market isn't falling tanking, keeping the tax rate low on investments is a good thing. For far too long the government has not encouraged Americans to save money, and while Obama is not proposing anything that would be an incentive to increase savings, keeping the tax rate at 15% for most Americans also would not be a disincentive.

As for how you feel about the increase on the wealthy, well that's up to how you take your politics. It's a disincentive to the rich to invest, but at the same time spending probably would not increase too much and we would most likely see the rich just shifting their investment patterns. (Also, let's face it, unless you put a ton of time and energy into the stock market, you're pretty much guessing; don't let anyone tell you other wise. So making money in the stock market is a little luck, should you be taxed for being lucky? Again, personal choice...).

-- Any senior citizen who makes less than $50 thousand a year would not pay income taxes under Obama's proposal. I'm not sure what percentage of senior citizens pay income taxes as it is, but this appears to be an obvious political poly to get seniors (who vote) to vote for Obama. I won't call it bad policy, but it's definitely not good policy.

-- Odds and ends... Obama will cut spending but he hasn't told us how... sadly, Obama has not reveled any plan on how to deal with Social Security, and the even bigger problem in the years to come, Medicare.

Over all, Obama's economic policy seems fairly level headed. It leans a bit to the left, but it is light on the side of bad policy and filled with some good ideas. And maybe the best thing about Obama's economic plans are the people he has surrounded himself with—these are economists than even those on the right will have a hard time disliking, let alone disagreeing with.