Crisis puts nails back in Keynesian coffin
Comment from Australia
LAST year's global financial crisis heralded the stunning return of Keynesian fiscal policy as governments pumped up their budgets to stave off a feared global depression. This year's European sovereign-debt crisis signals its spectacular fall as governments are suddenly forced to cut their budgets even when their economies are weak.
The discrediting of activist fiscal policy also dashes Kevin Rudd's wild talk that the GFC marked the end of unregulated extreme capitalism and its overthrow by a new epoch of "social democracy". As the PM's essay in The Monthly approvingly quoted French President Nicolas Sarkozy: "Le laissez-faire, c'est fini."
Of course, the neo-liberal minimalist state doesn't exist, particularly in Europe. Yet the Europeans continued to blame unregulated financial markets as their sovereign-debt crisis spread from Greece across the world in April and May. The Swedish Finance Minister likened the markets to "a pack of wolves".
Only after the EU's emergency $US1 trillion ($1.17 trillion) financial stabilisation fund failed to stabilise the situation did the euro finally drop. The recession and the huge budget stimulus and bank bailout packages had pushed Europe's budgets over the brink. Investors demanded much higher risk premiums before they would be prepared to buy bonds issued by the most profligate governments, such as Greece, Portugal and Spain. This threatened to club their economies even harder, make their budget positions worse and risk feeding back through sovereign defaults into a new European banking crisis.
After championing last year's huge budget stimulus packages, the International Monetary Fund now says the euro area crisis primarily results from "fiscally unsustainable policies". Advanced economies will have to contract their budgets nearly nine percentage points of gross domestic product to reduce their gross government debt from post-war highs of over 100 per cent to 60 per cent of GDP by 2030. The World Bank says a severe loss of confidence in the budget positions of high-income economies is now the biggest risk to the global economy. "Demand stimulus in high-income countries is increasingly part of the problem instead of the solution," it says.
One of the world's leading macro-economists, Columbia University's Jeffrey Sachs, argues that Europe's enforced switch from budget stimulus to fiscal austerity reveals the folly of last year's Keynesian revival.
"Keynesian stimulus was premised on four dubious propositions," Sachs wrote last week in the Financial Times. "That it was needed to prevent a global depression; that a short-run fiscal boost would jump-start the economy; that 'shovel-ready projects' could combine short-term cyclical and long-term structural agendas; and, last, that the rapid rise of public debt occasioned by stimulus need not be a concern. That these ideas were so widely accepted was a testament to the perennial political attractiveness of tax cuts and spending increases."
Sachs dismisses last year's ubiquitous references to another Depression as glib. Politicians panicked when they should have left the financial crisis to central bankers. Many of the budget stimulus programs were "dispiriting wastes of scarce time and money". And they ignored a key rationalist insight of modern macro-economics: that the effectiveness of such stimulus packages depends not only on current taxes and spending but also on their likely future trajectories.
The irony is striking. Rudd claimed that the GFC revealed the neo-liberal fallacy that financial markets naturally self-corrected. But it has taken the markets to finally discipline the political tendency for the modern welfare state to repeatedly ratchet up spending and taxes as a share of national income. EU president Herman Van Rompuy now even blames financial markets for being too "soft" on European fiscal irresponsibility for too long after the euro was born in 1999.
And the battle to save the euro will not be waged through Rudd's seismic social-democratic overthrow of neo-liberalism. Along with austerity, it will require more pro-market reforms - particular to Europe's over-regulated labour markets - to provide the internal economic flexibility required by a single-currency area.
Time to Stop Funding Luxuries, Like Public Broadcasting
As a taxpayer, it is a good idea to take a step back and evaluate the government-run programs you are financially supporting.
Most likely you will be appalled. As American families have to adjust their spending budgets due to the depressed economy, the federal government continues to plunge the nation into unprecedented debt levels. The only way out of this mess is for the government to start cutting non-essential programs.
One such program, the Corporation for Public Broadcasting (CPB), is a good place to start.
Networks such as Public Broadcasting Service (PBS) and National Public Radio (NPR) feed off federal funding from CPB. This year alone, American taxpayers are spending $420 million to fund CPB. That’s $420 million too much.
Congressman Doug Lamborn (R-CO) is proposing legislation this week that will put an end to taxpayer subsidies of public broadcasting. CPB is a non-profit that receives about 13 percent of its funding from the federal government — meaning taxpayers.
“The Corporation for Public Broadcasting puts out some programs that I enjoy and a lot of people enjoy, but they can stand on their own two feet,” Lamborn says in an exclusive interview with Americans for Limited Government (ALG). “In fact, 87 percent of their money comes from sources other than the U.S. taxpayer. So why should we, in days of $1 trillion annual deficits, give money to a corporation or any company that can fund itself.”
African-American Ethics Judge Accused of being bribed by a trip Overseas
In an ironic revelations concerning a California judge, details of a suit accusing the judge of accepting a trip oversees as a form bribery were publicized recently by a faith-based watchdog group. The suit accuses Patrice Elizabeth McElroy (aka Pat McElroy), a judge with the State Bar Court of California, of accepting bribery as part of a scheme and as a valuable consideration in exchange for favorable rulings from a private attorney who appeared before her in a case in which he was involved.
The suit also alleges that McElroy never made any disclosures to the other litigants appearing before her concerning her participation in the trip which she had had secretly accepted from the private attorney.
Patrice McElroy is the supervising judge of the State Bar Court Hearing Department, which is part of the State Bar of California. The work of Patrice McElroy involves judging others in matters relating to ethics.
Press release here. Details here.
Big Labor Is Humbled by Blanche Lincoln's Win
How bad a defeat did labor unions suffer when Sen. Blanche Lincoln defeated their candidate and won the Arkansas Democratic runoff last week? That's like asking how Custer fared at Little Big Horn.
Like Custer, the unions bet heavily, putting something like $10 million into Arkansas to support Lincoln's challenger, Lt. Gov. Bill Halter, since he started his campaign in early March. And they did so for good reason.
Union leaders desperately need Congress to pass their card check bill, which would effectively abolish the secret ballot in unionization elections. Card check would allow union thugs -- er, organizers -- to collect signatures on cards of a majority of employees and then, presto, the union would be recognized as a bargaining agent, and dues money would come pouring in.
It isn't now, at least at the rate union leaders would like. Last January, the Bureau of Labor Statistics reported that union membership in 2009 was at an all-time low since the 1930s. Only 12 percent of wage and salary workers were union members, and the number of union members dropped 771,000 between 2008 and 2009.
And, for the first time in history, more union members (7.9 million) work in the public sector than the private sector (7.4 million). Only 7.2 percent of private-sector workers are union members, a huge drop from the peak figure of 28 percent in the mid-1950s.
Moreover, unions aren't picking up many young workers. The BLS reports that 16.6 percent of workers 55 to 64 years old are union members. That's compared to only 4.7 percent of workers 16 to 24.
Union leaders spent some $400 million in the 2008 campaign cycle to elect Barack Obama and Democratic candidates for Senate and House. They got their wish: Obama won, House Democrats gained a solid majority and, once Al Franken was seated last July, there was a 60-vote Democratic supermajority in the Senate. There was speculation in sympathetic blogs about how many Senate Republicans would join the Democrats in passing card check and sending it to the president for his signature.
But politicians don't always stay bought. Every Democratic senator but one (who was out sick) voted for cloture to consider the card check bill in 2007, including Blanche Lincoln. But that was when it was sure to be vetoed by George W. Bush.
After the 2008 elections, Lincoln undoubtedly started to hear constituents in Arkansas -- including, undoubtedly, top management at Wal-Mart and Tysons Food, who don't want unions to do to their firms what the United Auto Workers did to General Motors and Chrysler. Polls showed large majorities of the national electorate opposed to eliminating the secret ballot. By January 2009, Lincoln was saying she didn't think "there is a need for this legislation right now."
She wasn't the only Senate Democrat to take that view. Her Arkansas colleague Mark Pryor, re-elected without opposition in 2008, said he wouldn't co-sponsor card check again. Card check slowly died.
Union leaders are under no illusion that there will be more Democrats in the next Congress than in this one. But they think far ahead, and they decided to oppose Lincoln to teach every Democrat a lesson: If you oppose big labor, we will end your career. Whether they persuaded Halter to run or just hitched a ride on his last-minute candidacy, they went all-in for him.
I don't know that it proves anything much -- other than the usual Leftist hypocrisy -- but there is an article here about Hitler's homosexuality. It is a review of Lothar Machtan's book, "The Hidden Hitler". Homosexual aggression is nothing new. The Pink Swastika by Scott Lively is the best-known book on homosexuality in the Nazi party.
Democrat thug caught out: "In a video released early this morning, a North Carolina congressman gets rowdy with a "college student" who accosted him with questions. Rep. Bob Etheridge has apologized for the incident, captured on YouTube, where he grabs the inquisitive young man a repeatedly asks, "Who are you?" Etheridge, was apparently peeved by the question of whether he fully supports the Obama agenda. The congressman released the following statement regarding the altercation: "I deeply and profoundly regret my reaction and I apologize to all involved," Etheridge said. "Throughout my many years of service to the people of North Carolina, I have always tried to treat people from all viewpoints with respect. No matter how intrusive and partisan our politics can become, this does not justify a poor response." (Video here)
The ambiguity of "equal rights": "Ted Olsen's view, widely shared by supporters of gay marriage, is that current California law fails to provide homosexuals the same right it provides to heterosexuals - the right to be married to the partner of their choice. An opponent could respond, with equal logic, that it is consistent with equal rights. Both homosexuals and heterosexuals have the right to marry a partner of the opposite sex, neither has the right to marry a partner of the same sex. Seen from this standpoint, the difference is not in what rights different people have but in what rights matter to different people."
What’s your plan, Senator Reid?: "It is no secret that Harry Reid sees the road to his Senate re-election as running through Social Security. His opponent, former Assemblywoman Sharron Angle, supports proposals to allow younger workers to privately invest a portion of their Social Security taxes through personal accounts. Reid has been practically salivating at the prospect of portraying her as sentencing seniors to a life of eating cat food. … Social Security is certainly a fair-game issue. It is the largest government program in the world, accounting for 23 percent of the federal budget. … Millions of seniors depend on Social Security for their retirement income. Angle’s position should be scrutinized and debated. But one must also ask Sen. Reid what, exactly, he would do about Social Security’s looming fiscal meltdown.”
Jobs programs: “Job creation, government style, is a splashy, photo-op filled, nice-sounding program that makes politicians sound clever and seem proactive. The Boise Valley Economic Partnership is a taxpayer and private money example of the process. They are now four years into this five-year, $5,000,000 government program. The planned $650,000,000 private/taxpayer investment has fallen short of the goal, but only by $530,000,000. The planned 5,000 new jobs has fallen short by 3,194 jobs. But the Boise area did get 1,806 new jobs (… while losing 10,000 — oops). Those new jobs only cost $66,445 each!”
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The Big Lie of the late 20th century was that Nazism was Rightist. It was in fact typical of the Leftism of its day. It was only to the Right of Stalin's Communism. The very word "Nazi" is a German abbreviation for "National Socialist" (Nationalsozialist) and the full name of Hitler's political party (translated) was "The National Socialist German Workers' Party" (In German: Nationalsozialistische Deutsche Arbeiterpartei)