Paul Krugman, "Why We Regulate": More to the Point, Why Didn't Obama Regulate?

Those who read this blog know that I often ask what is absent from the opinion piece of a well-known pundit writing for a leading newspaper. Today is no exception. Read Paul Krugman's latest New York Times op-ed, "Why We Regulate" (http://www.nytimes.com/2012/05/14/opinion/krugman-why-we-regulate.html), in which he chastizes JPMorgan Chase for their most recent $2 billion trading loss, and tell me what is missing.

Answer: Not a single mention of Obama.

More than three years into his presidency, the messiah who, promising change, was swept into office following a financial crisis that almost sent the West into an economic stone age, apparently has no responsibility for JPMorgan Chase's most recent devastating loss.

Of course, Krugman is quick to blame Romney:

"It’s clear, then, that we need to restore the sorts of safeguards that gave us a couple of generations without major banking panics. It’s clear, that is, to everyone except bankers and the politicians they bankroll — for now that they have been bailed out, the bankers would of course like to go back to business as usual. Did I mention that Wall Street is giving vast sums to Mitt Romney, who has promised to repeal recent financial reforms?"

Krugman does not mention that among the top contributors to Obama's 2008 campaign were employees from Goldman Sachs, JPMorgan Chase, Citigroup, UBS and Morgan Stanley (see: http://www.opensecrets.org/pres08/contrib.php?cid=N00009638).

Krugman also pointedly refuses to acknowledge that the so-called banking "reforms" enacted since Obama was inaugurated have not prevented yet another financial disaster.

Will salvation come from the Volcker Rule? I doubt it. Both Bank of America and JPMorgan Chase have indicated that the Volcker Rule will not affect their trading revenues (see: http://www.thestreet.com/story/10860335/1/bofa-ceo-says-volcker-rule-wont-be-too-tough.html?cm_ven=GOOGLEFI).

Instead of the Volcker Rule, why not reenact the Glass–Steagall Act of 1933 and take trading activity away from the banks altogether? Yeah, I know, the banks claim that this would make them "uncompetitive" with foreign banks, but I believe JPMorgan Chase's most recent loss evidences the need for strong medicine.

Moreover, reenactment of the Uptick Rule, which went into effect in 1938, would provide an immediate boost to the American economy, while admittedly harming the bottom line of predatory hedge funds engaged in sowing panic among shareholders of innovative small-cap companies (see: http://jgcaesarea.blogspot.com/2011/08/paul-krugman-hijacked-crisis-paul-heres.html).

Those of us who have worked in the financial industry are familiar with persistent concerns among bankers regarding where their institutions stand relative to other organizations in terms of balance sheet and profitability.

Wouldn't it be a pleasure if, instead, banks were to vie to be the safest financial institution for their customers, and the financial journals were to list organizations in terms of safety?

Dream on, Jeffrey.

Maureen Dowd, "Seeking Original Bliss": Heterosexuality, Homosexuality and Narcissism

In her New York Times op-ed entitled "Seeking Original Bliss" (http://www.nytimes.com/2012/05/13/opinion/sunday/dowd-seeking-original-bliss.html), Maureen Dowd quotes diary entries of a young teacher who had a romance with Obama, which will appear in a new biography of the president by David Maraniss, entitled "Barack Obama: The Story." When the assistant teacher told Obama she loved him, he replied, "Thank you," and Dowd would have us believe that Obama is a "cool customer," given to calculation, and teasingly refers to him as "President Spock."

A cool, calculating customer? Sorry, Maureen, but Obama is a dyed-in-the-wool narcissist, concerned only with his own personal gratification, and don't expect principle to get in the way of his drive to pleasure himself.

After touching upon the affair with the assistant teacher, Dowd proceeds to describe the annoyance of Obama with his vice president, who, in a move uncoordinated with the West Wing, came out in favor of gay marriage, forcing Obama to release a similar declaration, but not in accordance with the timetable set for the president's announcement. Dowd declares, "His embrace of gay marriage was not a profile in courage," and further observes:

"In the end, Obama had to rip off the Band-Aid and take a stand, because if his campaign depends on painting Romney as a bundle of ambiguous beliefs, the first black president can’t be ambiguous himself on a civil rights issue."

However, Obama has not recognized gay marriage as a civil right. In a 2004 Illinois Senate debate, Obama stated that gay marriage is not a civil right (see: http://www.therightscoop.com/obama-in-2004-on-gay-marriage-marriage-is-not-a-civil-right/), and Obama has not abandoned this position, given that he continues to believes that the states should decide this issue on their own.

Courageous? No. Calculating? Yes. All intended to win re-election.

Dowd concludes:

"As Obama is reminded of what it feels like to generate excitement, what it feels like to lift the spirits of a demoralized country by using the bully pulpit, maybe he can start occasionally blurting out something he feels strongly about."

Sorry, Maureen, but Obama feels most strongly about . . . himself.

Charles Blow, "Mean Boys;" Gail Collins, "The Anatomy of a Jokester": Beating Up on Romney

This has not been a happy week for the Obama administration.

Although America's president was feted at a Hollywood fund raiser at the home of George Clooney and was surrounded by a bevy of adoring millionaire movie stars, elsewhere, in the real world, things were not going according to plan.

In Afghanistan, local commanders are refusing to chase after insurgents (see: http://www.washingtonpost.com/world/asia_pacific/afghan-commanders-show-new-defiance-in-dealings-with-americans/2012/05/11/gIQAMdNTHU_story.html?hpid=z1), calling into question whether Afghan troops will actively engage the Taliban following an intended evacuation of US troops in 2014.

At home, JPMorgan Chase has just announced a $2 billion loss from trading activity, which highlights the fact that the Obama administration has done virtually nothing to curb abuses which threaten the financial welfare of the nation.

Still closer to home, Bill Clinton, according to a soon to be published book entitled "The Amateur," by Edward Klein, a former editor of Newsweek and The New York Times Magazine, is said to have
stated that Obama "doesn’t know how to be president" and is "incompetent" (see: http://www.nypost.com/p/news/national/bill_blockbuster_an_amateur_XJHYdaV5LT1vpr5I39IKrN). I doubt that Bill will be campaigning with Barack in the fall.

Worse yet, in a move uncoordinated with the West Wing, Vice President Biden came out in favor of gay marriage, forcing Obama to release a similar declaration, but not in accordance with the timetable set for the president's announcement (see: http://www.commentarymagazine.com/2012/05/11/end-no-drama-obama-biden-gay-marriage/#more-793548). The ombudsman of The Washington Post (see: http://www.washingtonpost.com/blogs/omblog/post/mitt-romney-bullying-story-holds-up-to-scrutiny/2012/05/11/gIQALLVnIU_blog.html?hpid=z2), believes that WAPO then took advantage of Obama's declaration to publish an article alleging bullying by Romney in high school of an unpopular classmate, who later turned out to be gay. According to WAPO's ombudsman:

"Do I think The Post took advantage of the timing? Yes.

. . . .

If I were an editor I might have sped [the article] up a little, too, to take advantage of the national discussion on gay marriage. Does that mean Post editors are timing stories with the White House? I hope not, and I doubt that is the case."

The ombudsman "hopes not"? That's very reassuring.

Meanwhile, over at "The New York Times," both Charles Blow ("Mean Boys," http://www.nytimes.com/2012/05/12/opinion/blow-mean-boys.html) and Gail Collins ("The Anatomy of a Jokester," http://www.nytimes.com/2012/05/12/opinion/collins-the-anatomy-of-a-jokester.html) have today written op-eds denouncing Romney's response to the incident, which occurred more than 40 years ago.

I'm younger than Romney, but not by much. I remember my public high school as a place where there was violence and racial intolerance, but issues involving homosexuality, prior to the evolution of gay rights, did not preoccupy teen consciousness in my town. My guess is that if Mitt Romney, a rich kid not good at sports, had attended my high school, he would have been on the receiving end of the bullying.

I'm not keen on Mitt Romney, but I would observe that back 40 years ago, high school could be a brutal place for anyone who dared not to conform. I think it's wonderful that the issue of bullying is finally receiving the attention it deserves, but frankly the alleged incident involving the vicious forced haircut is timid compared with incidents that I recall from my school days, which sent children to the hospital.

Obama? Let's indeed ignore his past use of drugs and his eating of dogs. Rather, let's focus on his much more recent associations with Jeremiah Wright, Bill Ayers and Rashid Khalidi. I would also draw special attention to Obama's ties to former White House Communications Director Anita ("Mao is one of my favorite political philosophers") Dunn; former Green Czar Van Jones; and current Special Assistant to the President Samantha Power, who advocated sending US troops to protect Palestinians from Israel.

The alleged bullying incident involving Romney more than 40 years ago as reported by The Washington Post was painful to read. Quite frankly, however, I am far more disturbed by the ongoing war in Afghanistan, America's economic malaise that shows no sign of abating, and the president's association with radical leftists, who could well shape a possible second term in office for Obama once he is freed from the constraints of facing reelection.

Paul Krugman, "Easy Useless Economics": In the Twilight Zone

In case you haven't noticed, there is an ongoing war of words between New York Times op-ed writers David Brooks and Paul Krugman. On Tuesday, in "The Structural Revolution" (http://www.nytimes.com/2012/05/08/opinion/brooks-the-structural-revolution.html), Brooks took a swipe at Krugman, and began by citing a passage from an article by Raghuram Rajan of the University of Chicago in Foreign Affairs:

“Since the growth before the crisis was distorted in fundamental ways, it is hard to imagine that governments could restore demand quickly — or that doing so would be enough to get the global economy back on track. The status quo ante is not a good place to return to because bloated finance, residential construction and government sectors need to shrink, and workers need to move to more productive work.”

Brooks went on to say:

"Many people on the left [e.g., Krugman] are having a one-sided debate about how to deal with a cyclical downturn. The main argument you hear from these cyclicalists is that the economy is operating well below capacity. To get it moving at full speed, the government should borrow and spend more. The federal government is now running deficits of about $1 trillion a year. Some of these cyclicalists believe the deficit should be about $1.4 trillion."

Brooks next claimed that these leftists are not addressing the "core issues," which are "structural," including globalization, technological change, and a decline in human capital.

Today, in a New York Times op-ed entitled "Easy Useless Economics" (http://www.nytimes.com/2012/05/11/opinion/krugman-easy-useless-economics.html), Krugman fires back at Brooks. Pointing to the Rajan article, Krugman asserts:

"Actually, government employment per capita has been more or less flat for decades, but never mind — the main point is that contrary to what such stories suggest, job losses since the crisis began haven’t mainly been in industries that arguably got too big in the bubble years. Instead, the economy has bled jobs across the board, in just about every sector and every occupation, just as it did in the 1930s.

. . . .

All of this strongly suggests that we’re suffering not from the teething pains of some kind of structural transition that must gradually run its course but rather from an overall lack of sufficient demand — the kind of lack that could and should be cured quickly with government programs designed to boost spending."

In support of his persistent spending thesis, Krugman observes how the military buildup of World War II provided fiscal stimulus on a scale commensurate with the depth of the slump induced by the Great Depression.

But as noted by FactCheck in an article published in July 2011 (http://www.factcheck.org/2011/07/fiscal-factcheck/):

"Washington's spending has recently been higher as a percentage of the nation's economic output than at any time since World War II. But by the same measure, Washington's revenues are the lowest in more than 60 years."

FactCheck proceeds to observe:

■ Federal spending ("outlays" in budget jargon) is expected to equal 24.1 percent of the nation's gross domestic product in the current fiscal year [2011], which ends Sept. 30. The figure was 25 percent in fiscal year 2009, highest since 1945.
■ On the other hand, federal revenues are expected to drop to 14.8 percent of GDP this year, lower even than the 14.9 percent attained in both 2009 and 2010. There has been only one year since World War II when revenues have been as low as in any of these years: 1950, when the figure was 14.4 percent.
■ These historically high rates of spending and low rates of taxation have combined to produce a chain of deficits that are also the highest since WWII. The deficit was 10.0 percent of GDP in fiscal 2009. It declined to 8.9 percent last year as the economy started to recover, but is projected to go up to over 9 percent this year. Each of these deficits is larger than in any year since 1945, measured as a percentage of GDP.

Immediately after World War II, American debt as a percentage of GDP crashed, yet today, even if American involvement in Afghanistan were to suddenly end, there is no relief in sight. As noted by the Congressional Budget Office (http://cbo.gov/publication/41486):

"But the budget outlook, for both the coming decade and beyond, is daunting. The retirement of the baby-boom generation portends a significant and sustained increase in the share of the population receiving benefits from Social Security, Medicare, and Medicaid. Moreover, per capita spending for health care is likely to continue rising faster than spending per person on other goods and services for many years (although the magnitude of that gap is very uncertain). Without significant changes in government policy, those factors will boost federal outlays sharply relative to GDP in coming decades under any plausible assumptions about future trends in the economy, demographics, and health care costs."

Spend wildly, as suggested by Krugman, to drag the US out of its economic morass? The reality is that the US has entered an economic twilight zone, which bears no comparison to the World War II years, and without meaningful fiscal and budgetary reform, no one knows where this will end.

New York Times Editorial, "President Obama’s Moment": Obama Still Doesn't Acknowledge Gay Marriage As a Civil Right

I am often accused of being a neocon, but I have always been pro-choice, opposed the US ground presence in Afghanistan, and supported gay marriage.

An editorial in today's New York Times entitled "President Obama’s Moment" (http://www.nytimes.com/2012/05/10/opinion/president-obamas-moment.html) states:

"It has always taken strong national leadership to expand equal rights in this country, and it has long been obvious that marriage rights are no exception. President Obama offered some of that leadership on Wednesday. 'I think same-sex couples should be able to get married,' Mr. Obama said in an interview with ABC News that the White House arranged for the purpose of giving Mr. Obama a forum to say just that.

With those 10 words, Mr. Obama finally stopped temporizing and 'evolving' his position on same-sex marriage and took the moral high ground on what may be the great civil rights struggle of our time."

But listen to Obama state explicitly in a 2004 Illinois Senate debate that gay marriage is not a civil right (see: http://www.therightscoop.com/obama-in-2004-on-gay-marriage-marriage-is-not-a-civil-right/). Has Obama now actually abandoned this position?

As further observed by the Times editorial:

"We have one major point of disagreement with Mr. Obama: his support for the concept of states deciding this issue on their own. That position effectively restricts the right to marry to the 20 states that have not adopted the kind of constitutional prohibitions North Carolina voters approved on Tuesday."

Hold on! If, as claimed by the Times, "It has always taken strong national leadership to expand equal rights in this country," how is it that a purportedly strong national leader continues to leave this issue to be decided by the states? Obviously, Obama still does not regard gay marriage as a civil right, and while taking a stand calculated to assuage his supporters, he has left himself much wriggle room.

Ah, yes, his "evolution" on the issue continues.

Thomas Friedman, "Jobs@Arabia.com": Jobs for Which Jordanians?

Now in Amman, Jordan, an itinerant Thomas Friedman gushes over a hi-tech incubator in his latest New York Times op-ed entitled "Jobs@Arabia.com" (http://www.nytimes.com/2012/05/09/opinion/friedman-jobsatarabiadotcom.html). Describing the incubator as a place "where Lawrence of Arabia meets Mark Zuckerberg," Tom writes:

"There is no tradition of venture capital in the Arab world, so Oasis500 is a pioneer. It invites any Jordanian or Arab to come with a start-up plan. Any plan that is accepted receives $15,000 in seed capital. Then the starter-uppers have to go through Oasis500 boot camp, an intense five-week course in how to build a company. The survivors are given office space at The Business Park for three to six months. For those who manage to grow after their first stage of incubation, there is more angel funding, legal advice, mentoring and networking opportunities with local business leaders."

Explaining that this business ventures amounts to another Arab Spring "alongside the drama in the streets of Cairo and Damascus,"
Friedman concludes by observing that he is "rooting for this Arab Spring as much as the other one."

Glad to know that Tom is an Arab Spring "fan."

But what isn't Tom bothering to tell us from Amman? More than 70% of Jordan's population of some six million consists of Palestinians; however, Palestinians occupy only six seats of Jordan's 120-member Parliament, and "not a single Palestinian is currently serving as a mayor of any of Jordan’s cities" (see: http://www.jpost.com/Opinion/Op-EdContributors/Article.aspx?id=257541). Discrimination against Palestinians in the job place is also common.

But why should Tom focus on the persecution of Palestinians in Jordan, when it is much more pleasant to regale us with tales about a hi-tech incubator?

David Brooks, "The Structural Revolution": The War of Words Between Brooks and Krugman Continues

The war of words between David Brooks and Paul Krugman on the op-ed page of The New York Times continues.

Yesterday, in "Those Revolting Europeans" (http://www.nytimes.com/2012/05/07/opinion/krugman-those-revolting-europeans.html), Krugman gloated over the victory of François Hollande over Nicolas Sarkozy in France's presidential election, and hailed the end of austerity in that country. However, Krugman failed to mention that Hollande's election was attributable to France's Muslims, who account for approximately 9% of France's population and among whom unemployment is estimated as high as 60%, relative to unemployment of just under 10% for all of France. Sorry, but the end of austerity is not going to make a dent in the unemployment figure for this sector of France's populace.

Today, in "The Structural Revolution" (http://www.nytimes.com/2012/05/08/opinion/brooks-the-structural-revolution.html), Brooks begins by taking a swipe at Krugman:

"Many people on the left are having a one-sided debate about how to deal with a cyclical downturn. The main argument you hear from these cyclicalists is that the economy is operating well below capacity. To get it moving at full speed, the government should borrow and spend more. The federal government is now running deficits of about $1 trillion a year. Some of these cyclicalists believe the deficit should be about $1.4 trillion.

The cyclicalists rail against what they see as American austerity-mongers who resist new borrowing. They really rail against the European ones. They see François Hollande’s victory in France as a sign that, in Europe at least, the pendulum might finally be swinging from austerity to growth."

Brooks claims that these leftists are not addressing the "core issues," which are "structural":

"The recession grew out of and exposed long-term flaws in the economy. Fixing these structural problems should be the order of the day, not papering over them with more debt.

There are several overlapping structural problems. First, there are those surrounding globalization and technological change. Hyperefficient globalized companies need fewer workers. As a result, unemployment rises, superstar salaries surge while lower-skilled wages stagnate, the middle gets hollowed out and inequality grows.

Then there are the structural issues surrounding the decline in human capital. The United States, once the world’s educational leader, is falling back in the pack. Unemployment is high, but companies still have trouble finding skilled workers."

I agree with Brooks that hyperefficient globalized companies require fewer workers. However, I do not believe that a lack of skilled laborers is keeping unemployment high.

I am privileged to work with a very small number of companies in the biotech and medical device fields, and every day I witness how a few geniuses, aided by their computers, are able to do what entire armies of R&D staffers are unable to accomplish.

We live in an era of ever greater efficiency. We also live at a time when there is a shrinking space for mediocracy in the work force, particularly among the most highly skilled laborers. Neither of these trends show signs of abating.

Higher levels of unemployment are not going to disappear overnight, if ever.

Solutions for dealing with this problem? Sure, as I've often said, reinstate the Uptick Rule (see: http://jgcaesarea.blogspot.com/2011/08/paul-krugman-hijacked-crisis-paul-heres.html). Incentives can also be provided to bring manufacturing jobs home to the US from slave labor camps in China, but Americans must be ready to pay more for their iPhones.