Last Thursday, The Daily Show did a segment on the trillion dollar coin. It wasn’t very good. Saturday, Paul Krugman—a big booster for the idea—wrote an article, Lazy Jon Stewart. I was glad. The truth is that Stewart usually does a good job of explaining what is going on in the world of politics while still managing to be anywhere from slightly amusing to hilarious. But in that sequence, there was no actual content. The joke was just, “Trillion dollar coin! Te he!”

Krugman wasn’t the only person to complain. Jonathan Chait wrote, Jon Stewart Flunks Econ. He said, “It’s hard to say exactly what Jon Stewart and his writers think about economic policy, but there is some odd vein of Hooverism that pops up from time to time.” This is correct. The one area where The Daily Show really falls down is economic and especially monetary policy. And this is really sad, because this is the area that people are most confused about. This is the area where people naturally fall into the thinking of Herbert Hoover, and all the incorrect thinking that made the Great Crash into the Great Depression.

Similarly, Ryan Cooper of Washington Monthly put it really bluntly, “Jon Stewart took a look at the platinum coin option on his show last night, and it really sucked.” Forgive me for doing this, but I think an extended quote from Cooper’s excellent article is called for:

Last night, Stewart was back and he did not fail to take the bait. He referenced Krugman’s article. And then did something else that I find annoying: Stewart gives the “I’m just a clown!” defense. Well he isn’t just a clown. And what’s worse Stewart knows this. He expects to be taken seriously. He held a political rally for God’s sake! And given everything we know about the show, we reasonably expect that Stewart will at least get the facts right. But when he doesn’t—like now—we get this tired refrain, “I’m just a clown! Pay no attention to me!” This isn’t right.

What’s worse is that The Daily Show is usually at its best putting news items into context. This can be serious or funny as hell, as when they show the total hypocrisy of Fox News. But in the case of the trillion dollar coin, there was no context. Indeed, both The Daily Show and Colbert Report have been strangely silent on what I think is the most important national story: the debt ceiling. And I have no doubt that these two shows could make the issue clear and humorous.

Update (15 January 2012 2:06 pm)

Jonathan Chait is always stealing my ideas:

Also, I’m out all day. I’ll have some things up this evening.

Earlier today, I wrote, Optimism on the Debt Ceiling? I noted that some people who I admire and generally agree with were trying to be at least a little optimistic about the upcoming Debt Ceiling crisis—people like Greg Sargent, Jonathan Cohn, and to a lesser extent Jonathan Chait. By this afternoon, I started reading push back.

Matt Yglesias is blunt, Why Nobody Believes Obama on the Debt Ceiling. His point is that this goes back to the Fiscal Cliff negotiations. Obama said he would only accept raising taxes on incomes over a quarter of a million. Obama said he would only accept a deal that raised the debt ceiling. Obama caved.

This is all “boy who cried wolf” stuff. If you bluff all the time, people will believe you are always bluffing. And really, even Obama supporters think that there is a very good chance that he is bluffing. Obama doesn’t really have red lines—more very weathered pink ones.

Ezra Klein couldn’t miss out on the pile on. He wrote:

Klein goes on to document the many times over the last month and a half (including today) when Obama said he absolutely, positively would not negotiate over the debt ceiling. But then he quotes Obama at today’s news conference. Klein doesn’t mention it, but the statement is effectively a public negotiation with Boehner:

Basically, Obama is telling Boehner, “Here’s a way we can meet your demands!”

We’re doomed.

About a year and a half ago, Dean Baker posted an article about national income accounting. It sounds boring, but it isn’t. It’s a little bit mathematical, however, so if you want, just skip down to What This Means.

Let’s look at the nation’s total income, which we will represent as Y. It is equal to all of the money that is spent on consumption (C), on investment (I), by the government (G), and on net exports: total exports (X) minus total imports (M). Thus, the following equation is true by definition:

Note: investment means something different in economics than it generally means to people. Investment is spending on infrastructure. So if a construction company buys hammers, that’s investment. If it purchases nails, that is consumption.

Now total income (Y) is equal is disposable income (D) plus taxes (T): Y = D + T. And disposable income is equal to savings (S) plus consumption (C): D = S + C. We can combine these two equations and get: Y = S + C + T. We can substitute this equation into equation (1) above:

Consumption is on both sides of the equation, so it cancels out:

This equation doesn’t clarify anything. So we need to arrange the terms. First, we want to combine government spending (G) and taxes (T). Second, we combine non-governmental savings (S) and investment (I). Once we do this, we get:

What this says is: net exports equals net (non-governmental) savings plus the government’s budget surplus.

What This Means

Baker notes that most people who fret about budget deficits want something that is impossible. We currently import more than we export. This means that we either have to save less than we export or the government must spend more than it taxes or both. But look at what we hear all the time: we must balance the budget so that consumers will feel more confident and start spending! For that to happen, we would need to to export more than we import. Okay, we could do that. But the only way we can is by weakening the dollar compared to other currencies. And the same people who want a balanced budget generally want a strong dollar. We simply cannot have both.

I’ve write before that the balanced budget people are just liars. What they want is what they think is good for their class—the rentier class. They want a strong dollar with no inflation because that’s great if you already have piles of cash. They want to destroy entitlement programs because they fear their taxes might someday go up, but also because more desperate poor makes finding cheap labor easier.

But notice how if we really want to fix the federal deficit, we should be working on weakening the dollar. This would necessarily improve the budget deficit. But we don’t talk about this because the rentier class doesn’t want a weak dollar and their media lapdogs aren’t going to contradict them. In fact, the media by and large don’t even seem to understand that there is an issue. Strong dollar, fuck yeah! We’re number one!

Aaron Swartz killed himself on Friday. For those of you who don’t know, he was a good guy: a technology savant who co-developed RSS when he was still a teenager. But most of all, he was an activist against our broken and evil intellectual property system. At 26, he was facing up to 35 years in jail for “intending” to release copyrighted documents to the public. That’s right: our federal government was threatening him with over twice the maximum federal punishment for rape using a drug.

Certainly, this had something to do with his suicide.

Chris Hayes discussed him on Up today. Check out the video below. But I thought that Dean Baker summed up what I think about all of this:

That’s the liberal administration. Remember that.

Here’s Chris Hayes:

I like what Hayes read from Swartz’s article on depression. I only want to add that Hayes is wrong: there really isn’t any help, as far as I’ve ever been able to tell. But certainly, great stress (like having the entire federal prosecution machine attack you) only makes it worse. Sometimes, tragically, unbearably worse.

Yesterday, Reuters reported the next California budget will be in surplus. The article goes out of its way to make Jerry Brown into a hero. Not only has he balanced the budget, but he is fighting those spendthrifts in the legislature who want to to bring spending back up as much as possible. Now, the obvious reaction to this is to applaud him. But not so fast!

I have been a big supporter of Brown over the years. But he isn’t perfect. What’s more, he suffers from what I am coming to think of as “Democrat’s Disease”: the desire to be remembered as a politician who was “above politics” and “responsible.” But is running a budget surplus in the middle of the worst economic recession since the Great Depression really the responsible thing to do? Now is the time when the California government should be doing all it can to stimulate the economy. Normally, state governments don’t have that much power in this way. When they do, they should use it.

Digby has a slightly different take than I do, but it is equally valid:

She goes on to point out that in the end, the Republicans will still tar Brown as a “tax and spend liberal” because he did, after all, raise taxes. It is amazing that Democrats do this kind of thing over and over and over again. But I think this comes from the fact that Democrats who make it to high office aren’t all that liberal when it comes to economics. And this is why I think more and more that we liberals really need a new party. Because I for one, care first and foremost about economic issues. The social issues can sort themselves out after we get a slightly more egalitarian society.

So overall, I’m pleased with Brown’s management of California. And after Schwarzenegger’s governorship, it should be clear to all that governing really is a skill and we really do want professional politicians. One would think this would be obvious. You would never prefer to hire a plumber who has neither experience nor education. But now that Brown has shown that he is a great governor, maybe its time to brandish his liberal bona fides.

James C. Capretta wrote in the National Review on Monday, The Budget Battles Ahead. He said that the Republicans are not going to do any negotiating with President Obama. Instead, they are just going to let the budget deficit get completely out of control and then blame it on Obama.

“Future generations of Americans will live less prosperously because of the massive debt and deficits of these years,” he says. “And President Obama will rightly shoulder most of the blame for this colossal failure of leadership.”

This is interesting in a few ways. First, it is wrong. The budget deficit is not going to be a problem for quite a while. What’s more, it is already going down. It will become a problem as the economy gets better, but that will happen as the government gets more tax revenue. So this is just more conservative hysteria over invisible bond vigilantes.

Second, this is just the newest iteration of McConnell’s plan to make Obama a one-term president. As I’ve written about a lot around here, Republicans don’t have any ideas about how they want to govern outside of savaging the social safety net and cutting taxes on the wealthy. Given they aren’t going to get either of those opportunities for the next four years, their plan is to make Obama look bad.

This is a stupid plan. People will not be voting on the budget deficit in 2016. People will not be voting on the budget deficit ever. They will be voting on what they always vote on: how the economy is doing in the period from August to November 2016. But the plan is also the height of immaturity. This is playground bullshit. This is what one of the great American political parties has been reduced to.

I’m reminded of an old saying, “You’re an all or nothing kind of guy, and since you can’t have it all, you get nothing.” I think the Republican Party should meditate on this. Being the petulant party is only going make the Tea Party crazies happy in the long term. And that’s only about a quarter of the electorate. That’s not good government, nor is it good politics.

H/T Jonathan Chait

I really value optimistic people. But I don’t pay much attention to them. Two of my favorite political writers are Dean Baker and Eric Alterman, or as I think of them, the Depressing Duo. Or “Pessimistic Pair” if you prefer. Alterman perpetually looks like his first girlfriend just dumped him. Baker has transcended that and is on to that period when you are sarcastic about everything. But I read them because (1) they are brilliant and (2) they are right to be depressed. But sometimes, rarely, an optimist is right. So you have to pay attention.

There is an old Far Side cartoon I remember. It takes place in hell. Everyone is working very hard. There are all miserable. Except for one guy. He is pushing an over-filled wheelbarrow and whistling a happy tune. Two demons overlook the scene and one says, “I don’t think we’re getting through to that guy.” That’s how I’m feeling about Robert Reich today.

He posted an article that seems pretty compelling even if it seems on the far side of Pollyanna, TARP is Over, But the Bailouts Will Continue Until the Big Banks are Broken Up—And Washington Knows It. He notes that the chairman of the House Financial Services Committee, Jeb Hensarling—a Republican, of course—wants to break up the banks. And so does the Dallas Fed. So he argues that all we need is one more big bank loss and we will get a better banking system.

He is right that we need to break up the big banks. Reich points out that the system is unfair to the small banks who have to pay more to borrow than the big banks. This is because of the estimated $60 billion per year that the big banks get via implicit insurance from the government because they are “too big to fail.” As a result, there is a lot of power in all those little banks who would like at least a more level playing field.

So Reich is right to think that there may be some hope. But I find it hard to be too optimistic. As he points out, the five biggest banks control almost 44% of all bank deposits. This is up from 28% just ten years ago. These numbers indicate the need for reform. But they also indicate just how powerful these banks are. And once the country starts talking about all this stuff, these banks will start the full court press of their lobbying. Politicians like Hensarling will suddenly see that big banks are a good idea, and in 2023, the top five banks will control 75% of all banking.

But remember, “Oh, yes; the game was to just find something about everything to be glad about—no matter what ’twas!”

I’ve had this photo on my wall since September. There are hundreds of other pictures with other Libyans holding up the exact same message. These people probably do not speak English, but they know what they want to say. I assume they are all copying the same text because of the repetition of the same grammar error: “Islam and profit.”

Seeing an English error like this is very sweet. It is only an ogre who can’t identify. English is a really annoying language! And homophones are the worst. “Profit” and “Prophet” have exactly the same pronunciation. If you only speak English (and don’t write it), there is absolutely no way you would know that these are anything but the same word. You might even speculate: was it once considered profitable to be a prophet?

There is another prophet-oriented problem in the English language that I dare say most Americans are unaware of. “Prophecy” is a noun meaning a prediction of what will happen in the future. It is pronounced the way you think it is: praw-fe-see. But there is another word: “prophesy.” It is a verb and it means to make a prophecy. But it is pronounced differently: praw-fe-sigh.

Why is the language this way? Who knows. I think as good a guess as any is that the English were dicks in more than one way. It was not enough to create a global empire, they had to push one of the most dysfunctional languages ever invented. Just to show you how totally ridiculous it is, the plural of “prophecy” is “prophecies” or “prophesies.” That’s right! Even if you get this distinction right, writers can still confuse you with the plural.

So now you know. I wish I had some good advice, as I normally do. (I enjoy simplifying the language when possible.) I’m afraid we will all have to learn the different spellings and pronunciations. But we can say one thing for sure: anyone who writes “prophesies” is either an ignorant fool or a total dick.

This is a copy of Gover Norquist’s Taxpayer Protection Pledge. I had never looked at it until today when it was mentioned on Up with Chris Hayes. Check out the text: this is all about income taxes.

The reason this is interesting is that poor people don’t pay much in the way of income taxes. Poor people pay lots of payroll taxes and lots of state and local taxes. What’s the difference? Well, federal income taxes are about the only taxes in our country that are progressive. State and local taxes are generally pretty flat and payroll taxes are extremely regressive. In total, the American tax system is barely progressive. Here is the data of how much each quintile pays in total taxes from the Center for Tax Justice. One thing you won’t see on this graph is that as you go up in the top quintile, your taxes go down. So the people in the top 1% pay less in taxes than the people in the top 10%. And it goes on like that, as we saw with Mitt Romney’s taxes during the campaign.

What this all means is that the whole conservative movement’s obsession about federal income taxes just comes down to their hatred of the working classes. The federal level is the only place where we can make the tax system equitable, because it is too easy for the rich to move from state to state. Thus conservative attempts to enact a federal income flat tax is just an attempt to make the entire tax system regressive. And that brings us to Grover Norquist.

His tax pledge says nothing about state and local taxes. It says nothing about the terribly unfair payroll tax. In fact, during the Fiscal Cliff negotiations, he was fine with letting the payroll tax holiday end. He claimed that that was because it was intended to be a temporary tax cut. But so too were the Bush tax cuts. What’s more: look at the pledge. I think it says it all. The one place in the tax code that is progressive, Norquist wants to make less so. Look at it this way: if the federal income tax were abolished, the American tax system would be ridiculously regressive instead of just barely progressive.

I fear that most people don’t even know this. They think that the rich pay a great deal more taxes than the poor. They don’t. We need to start talking about it. We need to do something about this.

The Hill reported yesterday that Boehner is angry at that weasel President Obama. The article says that Boehner “spent weeks shuttling between the Capitol and the White House for meetings with the president in hope of striking a grand bargain on the deficit.” Horrors! He must be exhausted! All that shuttling… The solution: all negotiations will be held at a Starbucks equidistant from the White House and the Capitol.

I’m just kidding! Boehner isn’t being that reasonable. Instead, he is all butt-hurt that the president was mean to him. Boehner claims, “Those efforts [for a Grand Bargain] ended in failure, leaving Boehner feeling burned by Obama and, at times, isolated within his conference.” The solution: Boehner’s taking his toys and going home.

Now I’m not kidding! Boehner is not going to negotiate with the president anymore. He’s just going to pass his bills in the house and hope to put pressure on the Senate. Or something. The Hill says that this is going to be hard for Boehner because he is a weak speaker. Also: blah, blah, blah.

What is really going on is this: Boehner is talking tough to save face. If he went back and tried to negotiate with Obama about something else, people would be doing in public what they are largely doing in private: laughing at him. Everyone (other than perhaps president Obama) knows that the negotiations failed primarily because Boehner couldn’t provide the votes. In other words: he was like a union negotiator who represented no workers.

There is another side of this new stance by the speaker. He knows that the Debt Ceiling is coming up. And he knows that Obama has claimed he won’t negotiate. So Boehner is giving Obama the old “I’m rubber and you’re glue” business. “You won’t negotiate with me? Well how do like this: I’m not negotiating with you!”

It’s all so very mature!

Yesterday, Matt Yglesias posted the very ugly graph below from the Tax Policy Center. What it shows is the increase in taxes at different income levels. The main point is that taxes have gone up on everyone because payroll taxes have gone back up to their regular levels. I’m fine with that. However, this certainly goes against all the reporting on this issue by major media, even though many of us have been talking about it.

What’s even more notable here is that the group that got the best deal were those poor people making between $200,000 and $500,000. You know: the people that all the wrangling was over. We couldn’t raise taxes on these “middle class” people. The only group who will see their taxes go up less than this group is people making between $10,000 and $20,000. Without this “compromise” that was so important to the Republicans, this tax increase might have been marginally progressive.

Of course, what this chart really shows is the gross inequity of payroll taxes: this is why this lucky group sees its taxes go up so little. They are being taxed on at most 50% of their income for the payroll tax. It seems to me that if Democrats feel they can only officially raise taxes on the wealthy, then perhaps in the coming years, we could raise the payroll tax cap up a few hundred thousand dollars. Until then, the United States will continue with its long running policies to make sure the rich get even richer.

I’ve been confused about Social Security and how Chained-CPI affects the program in the long term. Starting benefits are calculated by adjusting all of your top 35 years of work into current dollars. For example, the Social Security Administration says that your income in 1951 should be multiplied by 14.89 to get to its current value. This means the CPI over the years doesn’t matter—at least directly. What it does mean is that income inequality is slowly destroying the program, but that’s another (very important) matter.

Chained-CPI is still a really bad idea. I look at it this way: if someone is going to screw me over, the least they can do is admit it. This “technical fix” is just a way to cut benefits in the program without admitting it. And notice, the government has already greatly cut benefits by raising the retirement age up to 67. That too was a way to avoid looking like they were cutting the program. Of course, for the guy who dies one day before his 67th birthday, it is a very big cut indeed.

Josh Barro takes on this issue as directly as anyone I have seen. And he defends Social Security to boot:

This is from a conservative—admittedly, a really smart one. But it goes along with what pretty much everyone agrees with: Social Security is a good program that we should protect. The rest is just a matter of good government. If we are going to cut the program, let’s talk about that. Backdoor means of cutting the Social Security is just wrong.