The popular narrative in Washington, DC these days among the MSM pundits is that the Congress is “dysfunctional” in the sense that it is very difficult for it to pass a budget and rise above periodic “fiscal” “debt” and “deficit” crises. This difficulty is attributed to the failure of our representatives to rise above their party interests and to accept compromises proposed by “adults” such as the President, which would, it’s claimed, resolve our long term “fiscal sustainability”/”fiscal responsibility” problem through a “balanced” long-term $4 Trillion deficit reduction plan.
The lamentable state of American political parties has become common sport amongst the chattering classes in DC and beyond. Although, one wonders whether this dysfunction has really been such a bad thing, when considering how united bipartisan “responsible” action always seems to result in yet more budget cuts.
By virtue of the fact that Congress and the Obama Administration couldn’t agree on much for the past few years, America’s deficits got large enough to put a floor on demand. The transfer payments via the automatic stabilisers worked to stabilise private sector incomes and allowed a general, albeit tepid, recovery in the economy.
Many years ago, I had occasion to spend a long weekend at Ramuda Ranch in Arizona—a rehab facility where young women are helped to learn how to want to eat food again. Anyone who has had a personal encounter with Anorexia Nervosa knows what a mystifying and frightening experience it is. The young women I saw there—all of them well above average intelligence-wise, many of them stunningly beautiful in a physical sense—all suffered from the same delusion: they had convinced themselves that eating, taking nourishment into their bodies, was pathological. The delusion had variations: some of the adolescent girls looked into the mirror and—in spite of the fact they were five feet eight inches tall and weighed only 75 pounds—SAW a body that was grotesquely over-weight and fat. Others seemed to have a disconnected relationship with their bodies, as if they personally were one thing and their body another—and the “other” was something that, for complex, obscure, and compelling reasons, deserved punishment and starvation. For those of us who were visitors, observing this irrational and self-destructing behavior in young women, who otherwise seemed perfectly normal and healthy, was perplexing and painful.
I was reminded of Ramuda Ranch last Friday as I watched our nation’s leaders explain to the American people why America must now impose a new austerity upon itself. By what process, I wondered, have we convinced ourselves that we do not have enough U.S. Dollars to pay ourselves to create the goods and services we need to prosper as a society? What exactly is the “fiscal crisis” that we see when we look in the mirror? How is it that we view our national community with such detachment that we can knowingly impose upon it a painful—and unnecessary—deprivation? How can it be that we view the spending of our OWN sovereign currency to create public goods and services—the essential nourishment of our private economy—as creating a “deficit” that we must somehow repay to someone in the future? How have we bought into this massive delusion? And where is the rehab center, the clinical psychologists and counselors, who will help us overcome it?
REAL NEWS NETWORK — “Welcome back to the Real News Network. I’m Paul Jay in Baltimore. And welcome to this week’s edition of The Bill Black Financial and Fraud Report. [Professor] Black now joins us from Kansas City, Missouri. Bill’s an Associate Professor of Economics & Law at the University of Missouri-Kansas City. He’s a white-collar criminologist, a former financial regulator. He is the author of the book, The Best Way to Rob a Bank Is to Own One.
The latest effort to blame the Community Reinvestment Act (CRA) for the epidemic of accounting control fraud that drove the crisis is an econometric study by Sumit Agarwal, Efraim Benmelech, Nittai Bergman, and Amit Seru (“the authors”) (“ABBS 2012”). The study does not prove its thesis. The fact that the authors claim it proves causality makes obvious their controlling biases. Their title is “Did the Community Reinvestment Act (CRA) Lead to Risky Lending?” Their abstract answers: “Yes, it did.” They claim that their econometric study proves causality – which is impossible given their methodology. The authors were taught from their freshman years that an econometric study of this nature could not prove causality. Errors this basic and embarrassing demonstrate the crippling grip of the authors’ biases.
L. Randall Wray recently presented at the Steinhardt Lecture at Lewis & Clark College in Oregon. The title of his presentation was: “Fiscal Cliffs, Debt Limits, and Unsustainable Deficits: Can the US Really Run Out of Dollars?”
The video and matching slide presentation are provided below. Media Roots created a transcript of the presentation. You can access it via this link. Continue reading →
We have been strangling the economic recovery through economic incompetence – and worse is in store because President Obama continues to embrace (1) the self-inflicted wound of austerity, (2) austerity primarily through cuts in vital social programs that are already under-funded, and (3) attacking the safety net by reducing Social Security and Medicare benefits. The latest insanity is the Sequester – the fourth act of austerity in the last 20 months. The August 2011 budget deal caused large cuts to social spending. The January 2013 “fiscal cliff” deal increased taxes on the wealthy and ended the moratorium on collecting the full payroll tax. The Sequester will be the fourth assault on our already weak economic recovery. We have a jobs crisis in America – not a government spending crisis and the cumulative effect of these four acts of austerity has caused a certainty of weak growth and a serious risk that we will throw our economy back into recession. The Eurozone’s recession – caused by austerity – greatly adds to the risk to our economy because Europe remains our leading trading partner.