Compare US to the EU: Stimulus vs. Austerity

Last Sunday, Fareed Zakaria (above) did an instructive comparison between the economies of the US and the EU in the aftermath of the Subprime Mortgage Crisis. The histories of the two economies are different: the US followed an expansionary fiscal and monetary policy while the EU embraced austerity. Expansionary economic policy involves decreasing interest rates, increasing government spending and increasing the deficit. Austerity involves fighting (imaginary) inflation, reducing government spending and decreasing deficits. As far as historical experiments go, the results are pretty clear. The US is forecast to grow modestly next year while the EU is forecast to contract.

These lessons of history are hard for the right wing to understand: expansion means growth and austerity means contraction. The presumptive Republican presidential candidate, Mitt Romney, has been preaching austerity for the US as the correct response to the Financial Crisis (here). The Tea Party movement is also preaching austerity (for example, Rick Santelli of CNBC and Senator Ron Johnson, R-WI). Their arguments are based on Rick Santorum's Old Time Religion: when you've been profligate, you need to repent. Their arguments are just not based on history as it is unfolding or did unfold during the Great Depression of the 1930's.

Medicaid, The ACA and the Mandate

Two recent articles in the New England Journal of Medicine brought up a new perspective on the US Health Care debate. The first article (here) suggested that the 26 Republican Governors challenging Medicare may be up to more than simply squirming under new Federal mandates. The second article (here) also suggested that the challenge to the Affordable Care Act (ACA) involving the mandate reveal how little the right-wing justices understand about insurance and how much they really wish to limit the power of the Federal government. I would go even further and say that the 26 Republican Governors and the four right-wing Supreme Court Justices might really be intent on destroying the Federal government.

I'm not sure what makes a mandate to purchase health insurance different when it comes from the State of Massachusetts or the Federal government. From a citizen's perspective, it's still a government mandate. The argument that there is some benefit in keeping government closer to the people in the States is, for me, also a little weird. Living in a State (Wisconsin) that has been hi-jacked by the extreme right wing is hardly more inclusive government. Somehow in Wisconsin it is more important that people carry concealed weapons rather than carry health insurance.

Basically, the 26 Republican Governors and the four right-wing Supreme Court justices might seem to be arguing that the Federal government cannot mandate anything. That would be a radical idea about government. Actually, I don't think that is what they are doing. The Federal government can mandate things the right-wing likes (military conscription, invasions of privacy in the name of Homeland security, concealed-carry shootouts at the OK Corral, etc.) and cannot mandate things the right-wing doesn't like (health care, spending for the poor, spending for the elderly, etc.).

It is interesting how the edifice of obscure constitutional arguments is being erected around such a simple, naked, political agenda. A nation with a corrupt legal and political system does not have a great future.

Walker Campaign Wins Prestigious Bimbo Bakery Award

HORSHAM, PA. The recall campaign of Governor Scott Walker (R-WI) was awarded the prestigious Bimbo Bakery award for "Best Campaign Spokesperson, Republican Woman." The award went to Ciara Matthews who is Gov. Walkers spokesperson for the recall campaign.

Some controversy was attached to the award when the Wisconsin Capital Times (here) reported that Ms. Matthews had worked as a Hooter Girl (pictured above) while attending college at the University of Nevada--Las Vegas. In response to the controversy, Ms. Matthews commented that "It was no big deal having right-wing loser guys drooling all over my skimpy tank top, in fact its was king-of fun."

Gov. Walker was at the NRA Convention in St. Louis and commented that he was "excited to have Ms. Matthews as his spokesgirl and thought she would make it a stimulating campaign." To the NRA audience he said the controversy reminded him of Mae West's comment about concealed carry in the 1933 film She Done Him Wrong. Walker also received the NRA's Harlon B. Carter award for Extreme Right Wing Legislative Achievement. Mr. Carter was, from 1977 to 1985, the executive vice president of the NRA and was known as Mr. NRA. He died in Green Valley, Az in 1991 at the age of 78 from lung cancer.

What Caused The Financial Crisis? 21 Different Views!

In the video above, CNBC analyst Steve Leisman interviews Andre W. Lo who recently wrote Reading About the Financial Crisis: A 21-Book Review, available on Prof. Lo's website (here). You might know Andrew Lo from another book he wrote A Non-Random Walk Down Wall Street which argues that the random-walk view of financial markets is not quite accurate (for more on this, see my other blog piece here).

In the interview above, Prof. Lo argues that two of the myths surrounding the Financial Crisis of 2007 are probably wrong: (1) the argument that there was excessive risk taking (investment banks taking risks with other people's money) ignores the fact that many investment bankers lost large amounts of their own personal fortunes during the crisis and (2) the argument that mortgage lenders engaged in predatory borrowing seems contradicted by the sophisticated attempts of average home owners to purchase and "flip" house to make quick profits.

One might quibble with the quick points Prof. Lo made during the interview, but his lengthier paper reviewing the 21 books about the Financial Crisis is worth reading. The bottom line is that we still do not understand the financial crisis and well-intentioned policy attempts to prevent future crises, such as the 2010 Dodd-Frank Act, may or may not be trying to solve problems that either don't exist or are the symptoms of deeper, poorly understood, more fundamental factors.