Has Anyone Ever Won A Trade War?

This morning the NY Times reported that Señor Trumpanzee seems somehow consoled that in a trade war the Chinese will lose more than we will. His "threat to impose tariffs on almost every Chinese product that comes into the United States intensified the possibility of a damaging trade war, sending stock markets tumbling on Tuesday and drawing a rebuke from retailers, tech companies and manufacturers" He and those around him "remained unmoved by those concerns, with a top trade adviser, Peter Navarro, insisting that China has more to lose from a trade fight than the United States. He also declared that Mr. Trump would not allow Beijing to simply buy its way out of an economic dispute by promising to import more American goods."

For whatever reason-- personal greed? stupidity?-- Señor T. threatened an all-out trade war against China on Monday. His latest is to babble more bullshit about levying tariffs on everything China exports to the U.S. "unless," reported the Washington Post "Beijing agrees to a host of sweeping trade concessions, a dramatic escalation that would enlist American consumers in the brewing U.S.-China commercial conflict." (China is more keenly aware of how the demands of the two Opium Wars-- 1839-1843 and 1856-1860-- impinged on its sovereignty and sent the country into a catastrophic downward spiral that took them over a century to come out of.

In a statement, Trump said he had ordered his chief negotiator, U.S. Trade Representative Robert E. Lighthizer, to draw up a list of $200 billion in Chinese products that will be hit with tariffs of 10 percent if China refuses his demands to narrow the yawning U.S. trade deficit and change its industrial policies.

When Trump started his tirades about trade wars there was a lot of talk about where they had led historically-- depressions and shooting wars. Let's start by taking a look at the Financial Times' Gideon Rachman's look at how trade wars turn into real wars. "The foundations of America's relationship with China crumbled last week," he wrote. The key developments were a lurch by the US towards protectionism and a swing by China towards one-man rule. For the past 40 years, the world's two largest economies have both embraced globalization, based on understandings about how the other would behave. The Chinese assumed that the US would continue to support free trade. The Americans believed that economic liberalization in China would eventually lead to political liberalization. Both of these assumptions are now shattered. On Sunday, China's National People's Congress rubber-stamped a constitutional change that would allow President Xi Jinping to rule for life. Three days earlier, President Donald Trump announced tariffs on steel and aluminium and tweeted that 'trade wars are good and easy to win'. But Mr Trump's breezy confidence ignores the dangers involved in unleashing a trade war. Those risks are not simply economic: a trade war makes it more likely that, one day, the US and China could slide into a real war."

As the two countries slide towards confrontation over trade, territory and ideology, so the sense of grievance on both sides is likely to increase. The Chinese and American presidents are both nationalists who frequently stoke feelings of wounded national pride. Mr Trump has claimed the world is laughing at America and that China has raped the US. Mr Xi has promised to preside over a "great rejuvenation" of the Chinese people-- that will finally bury the "century of humiliation" that began in 1839, when the country was invaded and partially colonized.

The emergence of leaders such as Mr Trump and Mr Xi is a reflection of broader ideological shifts in both countries. Thirty years of stagnant or declining real wages for most American workers have comprehensively undermined the belief in globalization and free trade in the US. Mr Trump was the loudest protectionist voice in the 2016 presidential field. But even his opponent, Hillary Clinton, was forced to repudiate the Trans-Pacific Partnership free trade agreement that she had once promoted.

This new combination of a protectionist and nationalist America, and an assertive and nationalist China, is potentially explosive. But there are also aspects of Mr Trump's ideology that may make conflict less likely. Unlike all his recent predecessors, the US president has little interest in promoting democracy abroad. He is likely to be unconcerned by Mr Xi's move towards one-man rule. Indeed, he may even envy it.

So what about a reprise of the Great Depression? Will that be the retribution Americans get for allowing Trump into the White House? CNN pointed out that no matter what you do for a living, a trade war Trump seems determined to start should scare you. "In a trade war, countries impose tariffs and other barriers on imported products, often in retaliation for actions taken by a trading partner." Trump-- filled with the ignorance of the uneducated-- claimed a trade war would be easy to win. As with most things, he's wrong. Trade wars "slow down business activity around the globe by crimping international trade." Had Trump ever gotten an actual education-- he didn't-- he would have learned that "in a worst case scenario, trade wars can lead to a global depression. Protectionist trade polices are one of the primary factors economists cite for deepening the Great Depression. So if there's one thing that most economists agree upon, it's no one wins a trade war."

Here's how US businesses and consumers stand to lose if President Trump gets his wish for a trade war:

Prices will go up

This much is certain. In a trade war, US consumers and businesses will be left with the bill.

President Trump says he's planning to impose a 25% tariff on imported steel and a 10% tariff on imported aluminum. That means the price of cars, appliances, packaged food and everything else that uses steel or aluminum is bound to go up.

Even the aluminum industry's trade group admits the smelters remaining in this country cannot make enough additional aluminum to replace the supply coming from overseas. When the tariffs are put in place, imported products will continue to come in-- at higher prices.

Since foreign steel and aluminum prices will be higher, domestic producers are likely to raise their prices as well.

American businesses will lose sales

Yes, America buys more from other countries than it sells to its trading partners. But don't discount the amount of goods and services the United States does export-- $2.3 trillion worth.

A trade war by definition means that other countries are going to slap tariffs and restrictions on those US goods and services, making them more expensive, and less competitive-- if they're allowed into those countries at all.

And once an American business loses a contract to sell its products overseas, it can take a long time to win that business back. Their customers will find other, perhaps more dependable suppliers while the trade war is waged.

Many well-paying jobs are at risk in a trade war. In 2017, the United States exported $60 billion worth of auto parts, $56 billion of civilian aircraft, $52 billion of new cars and trucks, and $51 billion of pharmaceuticals.

That's only goods. The United States has been primarily a service economy for decades now. Today about five times as many jobs are in the service sector, such as finance, media, transportation and retail, than are in goods producing sectors, such as manufacturing and mining.

The good news is that the United States had a $243 billion services trade surplus.

American trading partners are also among its biggest lenders

The federal deficit is big and getting bigger. The Committee for a Responsible Federal Budget estimates the deficit could swell to $1 trillion by next year.

Wall Street worries that the rising amount of debt could drive up the interest rates on the government debt, since the Treasury Department will have to offer higher rates to borrow more money. That would increase the cost of borrowing for consumers and businesses, since many types of loans-- including mortgages-- track government bond rates.

One thing keeping rates in check so far is the demand for U.S. debt from overseas. America's foreign trading partners, including China, are among the largest buyers of that debt. It added $127 billion to its holdings last year and now owns more than $1 trillion in U.S. debt, making it the largest foreign holder of our debt.

The trade deficit that President Trump decries is one of the reasons for those holdings. It gives foreign countries a powerful incentive to buy that debt, since they have to do something with the dollars they get back on those sales.

If the trade gap shrinks, for whatever reason, China won't have as much incentive to buy U.S. debt, and interest rates could rise significantly.

We're not watching a TV show that will end for the season and start up again in a few months or next year. Trump is an existential danger to our country in the profoundest of ways-- and in ways that the next administration isn't going to wave a magic wand and fix. No one in their right mind or with a modicum of good sense thinks this is funny.

A Modern Dust Bowl Would Be Just as Devastating as the Original One

Not sure why I'm featuring Obama's climate failure here? Maybe you can figure it out. (If the video above doesn't play, click here.)

by Gaius Publius

I'm presenting this for a different reason than the obvious one. It's not actually a shock-people-into-climate-awareness piece. That's just the set-up. What's my actual point? Read on (or click here to jump to it).

A recent study at the University of Chicago took a look at the drought (actually, droughtsplural) during the legendary and destructive Dust Bowl of the 1930s and applied those conditions to U.S. agriculture today. They expected to find U.S. farming systems to be much more resilient.

They didn't. A modern Dust Bowl would have the same destructive force on U.S. food production (and the economy) as the original one did.

From Phys.org (my emphasis):

Dust Bowl would devastate today's crops, study finds

A drought on the scale of the legendary Dust Bowl crisis of the 1930s would have similarly destructive effects on U.S. agriculture today, despite technological and agricultural advances, a new study finds. Additionally, warming temperatures could lead to crop losses at the scale of the Dust Bowl, even in normal precipitation years by the mid-21st century, UChicago scientists conclude.

The study, published Dec. 12 in Nature Plants, simulated the effect of extreme weather from the Dust Bowl era on today's maize, soy and wheat crops. Authors Michael Glotter and Joshua Elliott of the Center for Robust Decision Making on Climate and Energy Policy at the Computation Institute, examined whether modern agricultural innovations would protect against history repeating itself under similar conditions.

"We expected to find the system much more resilient because 30 percent of production is now irrigated in the United States, and because we've abandoned corn production in more severely drought-stricken places such as Oklahoma and west Texas," said Elliott, a fellow and research scientist at the center and the Computation Institute. "But we found the opposite: The system was just as sensitive to drought and heat as it was in the 1930s."

The severe damage of the Dust Bowl was actually caused by three distinct droughts in quick succession, occurring in 1930-31, 1933-34 and 1936. From 1933 to 1939, wheat yields declined by double-digit percentages, reaching a peak loss of 32 percent in 1933. The economic and societal consequences were vast, eroding land value throughout the Great Plains states and displacing millions of people.

In the eight decades since that crisis, agricultural practices have changed dramatically. But many technological and geographical shifts were intended to optimize average yield instead of resilience to severe weather, leaving many staple crops vulnerable to seasons of unusually low precipitation and/or high temperatures.

As a result, when the researchers simulated the effects of the 1936 drought upon today's agriculture, they still observed roughly 40 percent losses in maize and soy yield, while wheat crops declined by 30 percent. The harm would be 50 percent worse than the 2012 drought, which caused nearly $100 billion of damage to the U.S. economy.

There's more in the piece, but you get the point. Note the idea above that these effects won't be felt until "the mid-21st century" — in other words, after the current crop of citizens is dead. Don't believe it. Everything's happening way faster than anyone is willing to predict. If this tragedy is allowed to occur, most of us will see it.

But Is It the Right Kind of Emergency?

At this point, I usually ask, "Is it an emergency yet?" (That's still a valid question, since it doesn't look like we're stopping our carbon emissions any time soon, and under President Trump, we'll accelerate the already deadly pace.)

This time, though, I'd like to offer a different thought, something related to the "Easter Island solution" I sometimes propose. That solution goes like this:

You're a villager on Easter Island. People are cutting down trees right and left, and many are getting worried.

At some point, the number of worried villagers reaches critical mass, and they go as a group to the island chief and say, "Look, we have to stop cutting trees, like now." The chief, who's also the CEO of a wood products company, checks his bottom line and orders the cutting to continue.

Do the villagers walk away? Or do they depose the chief?

There's always a choice ...

What would it take for enough of our nation's "villagers" to get upset enough to "depose the chief" this time, just like they did during the Great Depression? Would regional devastation (with, of course, no lives lost; we always stipulate that) — something like a Haiyan-style hurricane sweeping through Florida, for example — wake people up nationally... get us to react as a nation? Or would we treat a Florida storm, no matter how severe, as a Florida problem with a Beltway (FEMA) solution?

In other words, what would actually wake up (freak out) this nation as a nation, to create a national mandate for radical change and radical solutions to the climate problem? What would it take for the nation to rise up and, yes, "depose the chief" — in the earlier case, President Hoover; in the latter case, President Trump? Because it will certainly take a national mandate to create the national Congress and a committed-to-an-emergency-solution the situation requires.

(And yes, I'm ignoring for now the timing, though that's important. If you're going to freak out effectively, best to freak out before there's nothing but air beneath you.)

When it comes to panic, timing counts. His came a little too late.

I've pondered this question for a while, and I offer it as an exercise to you as well. What kind of emergency will do the job nationally?

In the 1930s, of course, it was the Dust Bowl, more so perhaps than the factory closures, bank closures and the mortgage foreclosures, though those were national events as well. It's now the 21st century. Factory closures and the mortgage foreclosures have panicked the nation into trying Donald Trump on for size — but not with respect to climate. We're still at ground zero, implementing "business as usual" policies on the climate issue, just as President Hoover did during the economic crisis of the 30s.

But a permanent 30-to-40 percent drop in U.S. crop yield — what would that do? Would it get the nation's attention? It would certainly get mine, no matter where in the U.S. I lived. After all, we're all the market for food, more or less daily.

Consider the Alternative

Before you ask, "But hey, isn't that cruel, that kind of thinking?" please consider the alternative. On the one hand, this generation wakes up — admittedly in a panic, but that's not bad — and suddenly does the most it can do as fast as it can do it to fix the climate problem. Which means the climate problem has a chance to more or less stay fixed — admittedly with some loss in global livability, but not a total loss — for a thousand years.

Or ... this generation lives in relative comfort (it hopes) for another ten years or so, and then the long, crushing, angry, deadly march back to the Stone Age begins, in full view of everyone in the world.

The making of stone tools began more than three million years ago. Before that our ancestors, those in our species line, hunted and lived using found objects only.

The Stone Age ended with the smelting of ore, about 6000 years ago at the earliest. That's the span of time — more than three million years — our ancestors lived using stone tools only. Three million years in the Stone Age. It's so long that it's divided into parts, and its parts are divided into parts.

If human civilization devolves to the Stone Age again — and we survive without an extinction event — we  could be there, chipping stone, having forgotten everything we think we call "knowledge" today, for a very long time.

So when we're weighing our preferred event sequences — a timely, uncomfortable-but-head-clearing "climate event" today ... vs. at most ten years of comfort (meaning, no one acts in any effective way), then a rapid, deadly collapse and millions of years living as stone-tool, skin-wearing animals, hunters and scavengers, smelling like the great unwashed, for millennia ... let's consider what we're actually choosing, which outcome we'd actually find preferable.

Me, I'd much prefer that people figure it out today (not tomorrow, today) and act like it's already urgent, with no painful nudging needed. If I had to guess, though, I don't think that's in the cards. Yet we do need a wake-up moment, relatively soon. Do you have a better pick for what would do it?

Just a thought.

GP
 

Say, Dean Baker, what do we really need to know about the fiscal-cliff deal?

by Ken

When CNN asked economist Dean Baker to sum up in one pithy piece what folks needed to know about the then-merely-proposed (but soon to be enacted) "fiscal-cliff compromise deal," they probably weren't expecting what they got, which would have been more along the line of some swift crunching of numbers (extra credit if the numbers are mostly imaginary) showing that as a result of the "deal" most people will be (a) better off, (b) worse off, or (c) the same.

Something along the lines of, say, the jackassery puked up by WaPo's Robert "No Relation to Paul" Samuelson, better known as the Village Idiot of Economics Reporting, who summed up the deal as "Obama's leadership failure." Hmm, you say, that could be interesting? Come on, be serious. We're talking about "No Relation to Paul" Samuelson, the Dumbest Slug on the Finance Beat. The presidential failure, you see, was his refusal to persuade the country to understand that what's bringing the country to its knees is extravagant Social Security and Medicare payments!

But no, Dean didn't get sucked down that blind alley. Instead he suggested ("Look beyond the fiscal cliff") that the one possibly truly useful thing about the fiscal-cliff deal is that just possibly it may put "the distractions created by the debate over the fiscal cliff behind us." That debate, he says, "has been part of a larger distraction -- the concern over budget deficits at a time when by far the country's most important problem remains the economic downturn caused by the collapse of the housing bubble."

The obsession with budget deficits is especially absurd because the enormous deficits of recent years are entirely the result of the economic downturn. In spite of this, the leadership of both parties has elevated the budget deficit to be the top and virtually only issue in national economic policy. This means ignoring the downturn that continues to cause enormous amount of unnecessary suffering for tens of millions of people.

"Fears of big deficits," Dean says, "are preventing us from giving the same sort of boost to the economy that got us out of the Great Depression." And why is this?

The explanation is simple: profits have returned to prerecession levels. . . . [F]rom the standpoint of the people who own and run American businesses, everything is pretty much fine. Moreover, they see the deficits created by the downturn as providing an opportunity to go after Social Security and Medicare.

Enter the Campaign to Fix the Debt, which DWT readers have heard quite a lot about. It's basically the cocktail-party chatter of high-powered CEOs translated into a "nonpartisan" crusade, bankrolled by those same "Wall Street types and other wealthy interests . . . to push their agenda."

The Campaign to Fix the Debt involves the CEOs themselves directly stepping up to the plate and pushing the case for cutting Social Security and Medicare as well as lowering the corporate income tax rate.

It's clear what's going on here. We don't need any conspiracy theories.

CEOs from both political parties have openly come together to demand cuts in Social Security and Medicare, two programs that enjoy massive political support across the political spectrum. The wealthy are joining hands without regard to political affiliation to cut benefits that enjoy broad bipartisan support among everyone who is not rich.

Dean has one thing in common with "No Relation to Paul" Samuelson: He sees in the present economic crisis an opportunity for the president "to show real leadership." Not surprisingly, though, Dean has a very different idea of what form that leadership would take.

He should explain to the public the basic facts that all budget experts know: We do not have a chronic deficit problem. The big deficits are the result of collapsed economy. The priority of the president and Congress must be to put people back to work and bring the economy back up to speed.

When the housing bubble burst, annual spending on residential construction fell back by more than 4% of GDP, which is $600 billion in today's economy. Similarly, consumption plunged as people drastically curtailed their spending in response to the loss of $8 trillion in housing bubble generated equity.

There is no easy way for the private sector to replace this demand. Businesses don't invest unless they see demand for their products, regardless of how much love we might shower on the "job creators." In fact, if anything, investment is surprisingly strong give the large amount of excess capacity in the economy. Measured as a share of GDP, investment in equipment and software is almost back to its prerecession level. It is hard to envision investment getting much higher, absent a major boost in demand from some other sector.

This is why it is necessary for the government to run large deficits. Ideally, the money would be spent in areas that will make us richer in the future: Education, infrastructure, research and development in clean energy, etc. There is just no way around a large role for the government given the economy's current weakness.

Obama needs to explain this simple story to the country. The rich of both parties will hate him for going down this route. They will use their powers to denounce him. But the American people support Social Security and Medicare, and they support an economy that creates jobs for ordinary workers.

Obama needs the courage to tell the truth.

"Tell the truth," for cripes' sake? Is it any wonder that Dean Baker is regarded as an uncouth ruffian in the polite Village circles, not to mention the drawing rooms of the 1% -- in other words, the very people who make it possible for a pathetic whore like Robert "No Relation to Paul" Samuelson to draw a paycheck for systematically obfuscating and unclarifying fiscal realities for the benefit of readers who say they want the truth but in truth can't handle it.

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Bankster Plundering Doesn't End With Bush's Banishment

Earlier today we used the collapse of prices on the high end of the blue chip international art market as a metaphor of (and harbinger of) bad economic times ahead. Since then the Commerce Department released another economic bombshell that doesn't deal with Francis Bacon's edgy paintings or Damien Hirst's even edgier... concoctions. Alcoa lost $1.19 billion in the 4th quarter as demand for aluminum plunged as fast as demand for Hirst's stuffed cows and pricey shark sculptures. "Alcoa is a harbinger of things to come,'' said Jeff Buetow, senior portfolio manager at Portfolio Management Consultants. ''It was a horrible report.''

And the stock market headed down... again. The trade deficit falling to its lowest levels in 5 years isn't a good thing for people who worry about corporate profits. And it goes beyond a drop in the demand for oil. That's just one of many symptoms of a slowing world economy. Before you start celebrating that demand for imports has dropped-- and start dreaming of the end of WalMart-- keep in mind that trade is a two-way street. "[I]nvestors are more concerned by the waning appeal of American products overseas, as economies around the world suffer. The fear is that as companies struggle with falling global demand, it will be more difficult for the economy to rebound."

And wouldn't you know-- up pops the chief of the banksters' protection racket, Ben Bernanke, to whine that Obama's plans to put money into the hands of average Americans through his stimulus package won't do the trick. More money for the greedy, crooked banksters who dragged the economy into the toilet is just what the doctor ordered. How much of the billions the government doled out to CitiGroup and criminal gang that runs Morgan Stanley will go into "restructuring costs" (fat fees for fat lawyers and consultants and bankster executives) as those two companies merge their brokerage operations. [Note: CitiGroup CEO Charles Prince managed to make off with $100 million as he was thrown overboard for ruining that company, just as Merrill Lynch CEO Stanley O'Neill got away with $161 million in his bulging pockets after causing his company to lose $8.4 billion.] Since virtually none of the taxpayer dollars the Bush Regime has doled out to these crooks has gone to ease up the credit market-- the banksters refuse to lend to even the most creditworthy home buyers, for example-- it has to be going somewhere. And that somewhere, unregulated and badly monitored-- with no fear of accountability-- will always find its way into the pockets of the fattest and greediest and most criminally-minded.

“Fiscal actions are unlikely to promote a lasting recovery unless they are accompanied by strong measures to further stabilize and strengthen the financial system,” Bernanke warned today. “A modern economy cannot grow if its financial system is not operating effectively." Reregulation, accountability, long, long, long prison sentences sounds like just the thing to get that house back in order.

The Party of Greed and Selfishness and its hack propagandists may be rushing around trying to claim the New Deal failed, but no one who isn't a Rush Limbaugh/Fox TV addict or a multimillionaire who would rather lose half his investments in an economic collapse than pay a fair share of taxes, believes that nonsense.

On Christmas Eve, the conservative pundit Monica Crowley argued on Fox News that instead of rescuing America from the Great Depression, Franklin Roosevelt’s spending on public works made it worse. She insisted that this bizarre claim was confirmed by “all kinds of studies and academic work.”

The show’s host backed her up. “Yes,” said Gregg Jarrett, “I think historians pretty much agree on that.” In the same vein, a recent Wall Street Journal opinion piece said F.D.R. helped turn “a panic into the worst depression of modern times.” Now, as Congress begins to debate President-elect Barack Obama’s ambitious economic stimulus plan, this anti-New Deal talking point is popping up all over.

Conservatives have railed against the New Deal from the start. In 1934, H. L. Mencken was already decrying it as “a saturnalia of expropriation and waste.” When F.D.R. ran for re-election in 1936, a headline in William Randolph Hearst’s newspapers insisted that “Moscow Backs Roosevelt.”

But Americans were not fooled. They knew F.D.R. was on their side in a way that Herbert Hoover and his fellow free-marketers hadn’t been. They could see first-hand the good that Roosevelt’s jobs programs were doing for the Depression’s victims and the slow but unmistakable improvements in the economy.

In the 1934 midterm elections, the voters delivered their first verdict on the New Deal, expanding the Democrats’ margins in Congress. In 1936, F.D.R. won in a bigger landslide than he had four years earlier. By 1940, the Republican nominee, Wendell Willkie, was supporting much of Roosevelt’s social welfare and regulatory regime.

Anti-New Deal rhetoric has never disappeared from American political life. When Barry Goldwater ran for president in 1964, he attacked President Dwight Eisenhower for having presided over a “dime store New Deal.” But in recent years, the attacks have heated up.

At the start of the Bush administration, conservatives talked openly about rolling back the New Deal. They were trying to unravel the regulatory state, including protections for workers, consumers and investors. They were also promoting a favorite cause of Wall Street’s: privatizing Social Security, the crown jewel of the New Deal.

These days the public is in no mood, given the high costs of deregulation in the mortgage industry and the Bernard Madoff scandal, for more talk about dismantling regulations and federal oversight. But today, the new focus is Mr. Obama’s stimulus package. If F.D.R.’s New Deal spending made things worse, it follows that the Obama administration should not make the same mistake.

The anti-New Deal line is wrong as a matter of economics. F.D.R.’s spending programs did help the economy and created millions of new jobs. The problem, we now know, is not that F.D.R. spent too much priming the pump, but rather that he spent too little. It was his decision to cut back on spending on New Deal programs that brought about a nasty recession in 1937-38.

Does Obama Have What It Takes To Rescue America From The Bush Economic Miracle?

Yesterday and again today, Paul Krugman, warns about the dangers of the Bush Economic Miracle actually turning into a full-fledged Great Depression. He thinks Obama is understating how badly the underpinnings of the economy have deteriorated under the Bush Regime.

The fact is that recent economic numbers have been terrifying, not just in the United States but around the world. Manufacturing, in particular, is plunging everywhere. Banks aren’t lending; businesses and consumers aren’t spending. Let’s not mince words: This looks an awful lot like the beginning of a second Great Depression.

So will we “act swiftly and boldly” enough to stop that from happening? We’ll soon find out.

...[P]olitical posturing has already started, with Republican leaders setting up roadblocks to stimulus legislation while posing as the champions of careful Congressional deliberation-- which is pretty rich considering their party’s behavior over the past eight years.

More broadly, after decades of declaring that government is the problem, not the solution, not to mention reviling both Keynesian economics and the New Deal, most Republicans aren’t going to accept the need for a big-spending, F.D.R.-type solution to the economic crisis.

The biggest problem facing the Obama plan, however, is likely to be the demand of many politicians for proof that the benefits of the proposed public spending justify its costs-- a burden of proof never imposed on proposals for tax cuts.

So far Obama has shown himself to be a wimpy compromiser who is absolutely unwilling to stand his ground on anything. The Republicans and the reactionary Democrats allied with them are certainly planning to take advantage of it-- in the most brazen partisan fashion-- and slow down and shred his plans for an adequate stimulus package. He's offering them a mammoth tax cut program, all $300 billion of which they're reluctantly willing to accept. The ideological mania that dragged the country into the mess we're in says more tax cuts are the key to get us out of that mess. That's wrong-- and Obama should fulfill his promise to act boldly and swiftly to bring real change to America-- not play footsie with American's domestic enemies. Again, Krugman:

Let’s lay out the basics here. Other things equal, public investment is a much better way to provide economic stimulus than tax cuts, for two reasons. First, if the government spends money, that money is spent, helping support demand, whereas tax cuts may be largely saved. So public investment offers more bang for the buck. Second, public investment leaves something of value behind when the stimulus is over.

Today Obama is meeting with congressional leaders, Pelosi and Reid for sure, maybe with the disloyal opposition-- obstructionists all-- as well. He's probably be better off figuring out how to ram through the economic proposals of the Congressional Progressive Caucus, which is thoroughly explained by Katrina Vanden Heuvel in the new Nation. They make it clear that Bush's mess doesn't need tinkering around the edges, it needs a major recovery program, one that will cost at least a trillion dollars "to kick start the economy, invest in sustainable, long term growth and target individuals and communities that are most desperate for resources."

In addition to much needed investments which have already been laid out-- like the extension of unemployment insurance while joblessness soars, increasing food stamps, and assisting cash-strapped states with Medicaid-- the CPC plan goes a step further. It takes a holistic approach to economic recovery and the needs of ordinary Americans by addressing infrastructure, human capital, keeping people in their homes, job creation, fiscal relief for state, local and tribal governments, education and job training and tax relief for lower-income families.

There are smart commitments in the CPC plan that deserve real attention, such as:

• A percentage of the infrastructure work would be performed by veterans, low-income and homeless individuals, out-of-school youth, and others facing multiple barriers to employment.

• Green technologies to weatherize the nation's homes and small businesses.

• Grants to neediest schools for modernization, renovation, energy efficiency, and investing in educational technology.

• Construction of libraries in rural communities in order to expand broadband access

• Capital improvements and short-term operating funds for federally-qualified health centers.

• Boost funding for National Health Service Corps to produce more doctors, dentists and nurses to provide health care in underserved area.

• Expand sustainable food systems at local community level.

• A moratorium on home foreclosures.

• At least $100 billion allocated to "green jobs creation," including at community level and in Indian Country.

• Creation of a new energy block grant to transition to green energy sources

• Re-establish Youth Conservation Corps to eliminate backlog of work projects in national, state, and local parks.

• Federal Arts and Writers Project to create jobs for American artists, writers, editors, researchers, photographers, and others.

• Triple funding for Community Development Block Grant Program

• Make the child tax credit fully refundable, lifting 2.7 million people--including 1.7 million children--above the poverty line.

• Expand the earned income tax credit for families with three or more children.

"The Progressive Caucus is determined to bring justice and prosperity to the American economy, and this proposal does both," CPC Co-Chair, Representative Raul Grijalva of Arizona, said in a released statement.

Is it fear of a new New Deal that has the Right feverishly rewriting the history of the old one?

Not many of us see Obama as a new FDR, but the
possibility seems to give the Far Right nightmares.

by Ken

The domestic political world has changed a lot since the Clinton administration, and even since the first term of the Bush regime. We are no longer surprised by the wholesale lies and rewriting of history, and the campaigns of manufactured smears, that Republicans, especially of the extreme right persuasion, by now do so casually. Of course over time they've become ever more brazen and utterly lacking in shame about lying all the time, but again, it's no longer a surprise.

A colleague suggested recently that the incoming administration needs to organize a response team to be as ever-ready as the campaign was during the election period, and this seems to me an excellent idea, bearing in mind how well the opposition succeeded in crippling the Clinton White House by forcing it to devote such massive resources to defending all the legal and propaganda initiatives launched against it. I really hope the Obama people aren't so deluded about the coming era of postpartisanship as to assume that anybody on the other side has signed on.

It also seems to me important to stay on top of the "story lines" being manufactured by the fantasists on the Right, and our friend David Sirota has just called attention to one that he got caught up in during a journey into the belly of the beast, aka an appearance on Fox Noise. Clearly the Righties, watching the economy sink in ways that increasngly conjure images of the Great Depression, and recognizing that this is not apt to be a happy position for them (even they seem to have grasped that it was no help, during the 2008 presidential election, having both Chimpy the Prez and Young Johnny McCranky identified with the Republican president, Herbert Hoover, whose response to the great stock-market crash of 1929 and the ensuing economic chaos and panic was to sit tight and wait for it to turn into a full-fledged depression.

Apparently the Righties have also come to recognize the danger in allowing the Democrats to be associated with the New Deal that President Franklin D. Roosevelt ushered in after voters sent President Hoover back where he came from. The solution, apparently, is to rewrite the history of the New Deal:

Fox News: "Historians Pretty Much Agree"
That FDR Prolonged the Great Depression

By David Sirota
Campaign for America's Future

I appeared on Fox News to discuss both the Blagojevich flap and the imminent economic recovery package from the Obama administration. You can watch the clip here. As you'll see, on that latter issue, Fox News is starting its campaign to stop Obama's big spending plan by stating - as assumed fact - that "historians pretty much agree" that Franklin Roosevelt prolonged the Great Depression, and that therefore, Obama shouldn't try another New Deal.

When I say Fox News' assertion about historians is patently false, they literally laugh at me as if I've said something so clearly untrue, something Americans supposedly assume is so obviously stupid, that it's worthy of ridicule.

The Depression issue was brought up by conservative pundit Monica Crowley - not surprising since this is the conservative talking point du jour ever since the "center-right nation" meme started looking idiotic and ever since fringe-right-wing bloviator Amity Shlaes published her since-discredited book claiming FDR essentially created the Great Depression. Crowley supported her the "FDR ruined the country" meme with the very authoritative-sounding statement that "based on all kinds of studies and academic work done on the great depression" she knows that the New Deal's "massive government intervention prolonged the Great Depression."

Of course, she doesn't offer up a single study or "academic work" as any kind of proof, and yet, when I say her assertion is absurd, Fox News anchor Greg Jarrett starts laughing at me - as if my assertion that FDR's New Deal helped end the Great Depression is so fantastical as to prompt guffawing. Jarrett proceeds to state that historians "pretty much agree" that FDR prolonged the Great Depression, and resorts to insisting that he knows that's true because "it's in the books" - whatever the hell that means. Indeed, Fox wants us to believe that what was only very recently the deranged propaganda of a handful of conservative political pundits is now such a consensus opinion among historians that to say otherwise is to evoke laughter.

David goes on to detail the slight evidence the R's can bring to bear, and then marshall the broad historical rejoinder.

Even I know that in the later 1930s President Roosevelt actually retreated from a lot of the New Deal policies he had instituted in his first term, and there is a lot of feeling that that did indeed prolong the depression. But far from repudiating the New Deal, that reflected a lack of will to stick to the principles that had been set out.

In particular those of you who frequently dialogue with right-leaning folk, be prepared for this wholesale rewriting of history. If you want to be ready with a response, David can guide you.


TOMORROW THROUGH SUNDAY: Noah takes a three-part look at "2008: A YEAR ON STEROIDS"

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