Do You Trust Washington With Your Family's Well-Being?

Nabilah Islam, pictured above, is the most progressive candidate running for the open seat in the GA-07 seat in the suburbs and small towns north of Atlanta. This morning she shared an observation with us: "The House and Senate have had four opportunities to do what is right by the American people. At this point, I have faith in very few members in either chamber to put the American people first. We are on the brink of another great depression. We have 33 million Americans out of work. 90 million Americans uninsured or underinsured and those in the halls of Congress are debating on whether or not to expand COBRA. I've been saying for some time now that we need to be looking at policy proposals like FDR's New Deal. More immediately, we need emergency UBI, rent and mortgage cancellation, student debt cancellation, etc. Long term this is a great opportunity to implement a Green New Deal. It would create jobs with a federal jobs guarantee. Allow us to invest in ourselves and create an opportunity for working people to thrive not just survive. My biggest fear is ushering in the 117th Congress with people who would rather make austerity cuts that take on corporate special interests. That is why we need to fight to elect people like myself and other progressive candidates around the country who are committed to putting Americans first."

If he was a reader, I bet Catherine Rampell would trigger Trump every time the Washington Post published one of her columns. I'm sure that's already the case with Mitch McConnell. Yesterday's, Washington Shows Just Why The Country Shouldn’t Depend On It For Stimulus would have sent him into a screaming tirade. "Washington’s very Washingtonian behavior," she wrote, "has just underscored why a stimulus should not depend on Washington." Like many members of Congress, she thinks automatic economic triggers should determine aid to citizens, not DC finagling.

Last week, on the day the unemployment rate hot 14.7%, Don Beyer (D-VA), vice chair of Congress' Joint Economic Committee, issued a statement:

We have not seen horrible, history-making numbers like these since the Great Depression.

“In two months, almost a decade’s worth of job growth has been wiped out, the unemployment rate has more than quadrupled, and more than 75,000 Americans have died because President Trump did not take seriously multiple early warnings about the global threat of the coronavirus and failed to lead a competent fight against it. This is President Trump’s economic legacy-- cracks in the economy as a result of his trade wars and tax cuts have now split wide open as a result of his ignorance and incompetence.

It could be months before the tens of millions of Americans who have lost their jobs are able to return to work. If we expect them to stay home to stop the spread of the virus, then we need to make sure they can take care of themselves and their loved ones for as long as the public health and economic crises last.

A legislative proposal I introduced this week with Senators Reed and Bennet would extend unemployment benefits until states’ unemployment rates drop to acceptable levels. We should not penalize people for not having a job when there are no jobs to be had. I hope the legislation is included in the next coronavirus relief package.


In her column, Rampell went right to another statement on that same day, one from the White House-- "that those hoping for more help from the feds shouldn’t hold their breath. 'We're in no rush, we're in no rush,' President Trump said Friday. His economic advisers and Senate Majority Leader Mitch McConnell (R-KY) echoed this message. In other words, don’t plan on more aid to states, which are already so strapped for cash that they’re cutting Medicaid during a pandemic. Don’t expect extensions of financial lifelines for jobless workers."



She's speculated that "this is a negotiating ploy to extract concessions from Democrats-- even though red states would suffer from delaying federal aid, too. Whatever the reason, GOP dawdling is the latest reminder that Congress should stop leaving the fate of the economy to the whims of callous, dithering, dilettantish, hostage-taking charlatans, who see every crisis as an opportunity for a shakedown. Instead, build a stimulus system that triggers on (and off) automatically-- based on whatever the economy actually needs, using metrics agreed to in advance."



Economists are generally fans of policies known as “automatic stabilizers,” or programs that ramp up automatically when the economy tanks. For example, as people lose jobs, they become eligible for food stamps or unemployment benefits.



These forms of stimulus kick in without politicians having to debate, and they have huge bang for their buck. Both are useful features in a dysfunctional political system, especially when the country is struck by an unusually bad shock in which a speedy fiscal response is critical.



Unfortunately, our automatic stabilizers were never robust enough. Worse, the Trump administration and state governments have made automatic stabilizers much less automatic and stabilizing by adding red tape and reducing programs’ generosity in recent years.



This has left the country unusually reliant on Washington to devise a rescue program ad hoc during the worst economic crisis in nearly a century.



Congress has passed several rounds of relief, but more is undoubtedly necessary. The Congressional Budget Office predicts that without further stimulus, unemployment will be 9.5 percent at the end of 2021. Goldman Sachs estimates that even with another half-trillion dollars in yet-to-be-proposed fiscal stimulus, unemployment will average “only” 7.2 percent next year.



For now, most of Congress's existing measures are poised to sunset based on somewhat arbitrary deadlines unrelated to economic conditions. Enhanced unemployment benefits, for example, are set to expire July 31, even though the CBO expects the unemployment rate to average 16 percent that quarter.



Of course, nothing would stop Congress from renewing these emergency programs-- except, that is, Congress.

Each time measures come up for renewal, prolonged negotiation is more likely, with politicians exploiting “must-pass” legislation to make crazy, controversial demands. This already happens during debt-ceiling showdowns, the more common congressionally created opportunity for unnecessary crises.



If Trump’s “no rush” comments weren’t sufficient evidence of this risk now, recall that in the aftermath of the Great Recession, authorization for extended unemployment benefits lapsed five times. More recently, the small-business loan program ran out of funds for more than a week. And that was for a program virtually everyone supports, almost immediately after it began.



The next round of stimulus negotiations will be difficult and high-stakes. But it must include relief measures automatically linking stimulus to economic conditions, so that further rounds of negotiations can have lower stakes. Some Democratic lawmakers have proposed plans that would do this. Rep. Don Beyer (VA) and Senators Michael Bennet (CO) and Jack Reed (RI) recently offered a framework for linking enhanced jobless benefits to (duh) the joblessness rate. So did Sen. Ron Wyden (OR).

In these proposals, benefit extensions would automatically turn on while the economy is bad, and-- perhaps as important, at least to budget hawks-- automatically trigger “off” as the economy heals. Lawmakers, of course, can override their “autopilot” settings if they later change their minds.



Fair warning: Trigger-based programs are likely to have big up-front price tags. But they are no more expensive than the cumulative cost of multiple program extensions, such as those enacted after the Great Recession.


They could actually be less expensive, because they’d prevent costly program lapses and restarts. And they’d give states greater certainty around budgeting, and households greater confidence in their ability to pay bills. (Remember when Republicans used to complain about policy uncertainty?)



Most important, we need to minimize the number of desperate American families either party might take hostage. Especially when at least one party appears more than willing to actually destroy those hostages.

One senior Democratic congressman told me that he thinks Rampell's got it wrong. "If the GOP is going to act like callous jackasses," he said, "then you make them pay the price for it, just as Trump/McConnell tried to do with the Payroll Protection Program funding. Also, the trigger concept doesn’t really work here, because this may well be a once-in-a-century depression, not an unpleasant point in the business cycle. It also assumes that the Government has a limitless supply of funds, and in fact it doesn’t. Last month’s federal deficit is more than the annual GDP of Switzerland. Triggers make sense when you have only a demand problem; this is both a demand and a supply problem. Wendy’s is not running out of hamburgers because of a lack of demand, I assure you. At this point, even Keynes would not be a Keynesian. I’m not saying that I would vote against it, but I certainly don’t think that it’s a great idea."

Tom Guild is running for the Oklahoma City district, currently held by GOP-lite Blue Dog Kendra Horn. "No rush is the operative phrase with too many members of the permanent political class in Washington, DC. It took a month for me to receive my stimulus check. If my rent or house payment or my need to buy food had been dependent on receipt of that money, I would have been a prime candidate for eviction or foreclosure and a casualty of nutrition deprivation syndrome. Many people I visit with on social media and otherwise are still waiting for their stimulus payment. They needed their money to survive and keep their financial heads above water. No rush. How asinine. Oklahoma’s unemployment compensation system has been fairly roasted for having an unduly complicated filing system and many intentional roadblocks to delay or deny claims for desperate Sooners. They may soon seek shelter with other homeless Okies or stand on the side of the road pleading for money to help themselves and their desperate loved ones. As Marie Antoinette coldly proclaimed before being beheaded by French revolutionaries, 'Let them (the hungry and desperate if bread was unavailable to them) eat cake!' No hurry. How barbaric. The national government has been an epic failure in addressing the desperation in America during these terrible dark days. The Reed/Bennet/Beyer proposal to extend unemployment benefits until states’ unemployment rates drop to acceptable levels is a sensible idea. As they indicate, 'We should not penalize people for not having a job when there are no jobs to be had.' This practical idea should be considered and included in the next coronavirus relief package. The Trump tax cuts for the wealthy, Wall Street, and big corporations moved through Congress and was signed into law in short order. Bailing out the wealthy and the big corporations among the political ruling class always takes priority over the lives of ordinary hard working and beautiful yet beleaguered Americans. The greed of some very BIG small businesses in snapping up forgivable loans authorized and funded by Congress, before the real small businesses, who lacked connections with the well-heeled and the big banks, had a chance to participate before the money set aside for them was gone, is despicable. When I taught a course called Contemporary Workplace Issues that I pioneered at the University of Central Oklahoma, I used a book to enhance discussion of white collar crime in the business world. The book is entitled The Rich Get Richer and the Poor Get Prison. Graft, corporate welfare, and grifting has become a way of life for some privileged and entitled corporate citizens here in our country. Wealth and income inequality have reached critical mass and become one of the most serious systemic problems facing our country. The failure of the national government and many state governments to put the least among us first makes a tragic situation that much more horrific and intractable. No rush indeed. We better start addressing issues of poverty, privilege, inequality, and government incompetence now. The future viability and health of our republic hang in the balance."

Eva Putzova is the progressive running in AZ-01. The incumbent, a lifelong conservative Republican pretending to be an equally conservative Blue Dog, guarantees that voters have to real choice. Eva is ending that. "The failure of Congress and the White House to address the deteriorating conditions faced by American families," she told us this morning, "is disgraceful. I agree that there should be automatic triggers that guarantee increased unemployment benefits, food stamps and healthcoverage, until the economy recovers to full employment. However, that is not enough. With or without this current economic/public health crisis, we need universal healthcare, i.e, Medicare for All, a Green New Deal to completely retool the economy and invest in underserved areas, strong labor law reform and protections for workers rights to organize unions, a jobs guarantee, and much, much more. The Republican Party and its President are criminally negligent in failing to address the Covid-19 crisis as well the coming economic depression. But too many Democrats are willing to accept half-measures that don't address the social and economic problems that have gotten worse over the past 50 years-- well before Donald Trump became President."

Robin Wilt is a fully dedicated progressive running against a garden variety New Dem in Rochester, New York. She'll make a much better representative of Monroe County's working families, although not as much of a fighter to put corporate interests first, the way her opponent is! "Throughout March and April 2020, the U.S. government passed three main relief packages, and one supplemental one, totaling nearly $2.8 trillion. The overwhelming majority of that money-- over $2 trillion-- went directly to Wall Street. I want that to sink in. In the middle of a pandemic, the main spending priority of the Federal government was not to ramp up infectious disease testing, increase manufacturing of needed medical goods and PPE, or to provide health care coverage or a basic income for the tens of millions of people who would eventually be unemployed as a result of the health crisis. Once again, the first priority of those in Washington was to bail out Wall Street, not Main Street.

"The first COVID-19 relief bill passed on March 6, 2020, and rightfully went to response efforts to fund research for a vaccine and provide money to help with efforts to fight the spread of the virus. It totaled only $8.3 billion. On March 12, 2020, however, the Fed enormously expanded its repo operations to banks by a whopping $1.5 trillion dollars, then adding another $500 billion on March 16, 'to ensure there was enough liquidity in the money markets.' Yes, you read that correctly. That’s $2 trillion to banks within ten days of the initial response to the COVID-19 pandemic, while only some $8 billion went to fighting the health crisis.

"Meanwhile, the second relief package for people-- the Families First Coronavirus Response Act (which, ironically, came after the Wall Street bail out packages)-- passed on March 18, and again, in comparison to the spending on the financial sector, allocated a paltry $3.4 Billion to: 1) provide money for families who rely on free school lunches in light of widespread school closures; 2) mandate companies with fewer than 500 employees provide paid sick leave for these suffering from COVID-19, as well as providing a tax credit to help employers cover those costs; 3) nearly $1 billion in additional unemployment insurance money for states, as well as loans to states to fund unemployment insurance; 4) Funding and cost waivers to make COVID-19 testing free for all.

"It was not until almost a month later, on April 9, 2020, that the Federal government got around to passing any direct aid to families in the form of cash payments through the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

"I am fond of the saying: Don’t tell me what your priorities are. Show me your budget. Our representatives who demonstrate that their priorities and loyalties are first and foremost to the financial sector-- as opposed to the people who are the engines of it-- should be voted out. We need new, bold, representatives who are not afraid to truly put people first in their spending priorities."

Midnight Meme Of The Day!

by Noah

I'm sure my suggestion (above) could be paid for by restoring the tax code to its pre-Ronnie Raygun parameters. It could be paid for even faster if we went back to something resembling the tax rates of the 1950s, and we all know how much Republicans wish they could turn the country back to the way things were back then. So, hey Republicans, whadaya say? You can do it! I know you can! Besides I know how you're always saying that any expenditures should be offset by sacrifices made elsewhere. Surely, you were sincere about that, no? Dig deep!

Killing a Parasite, Part 2 — How to Implement Student Debt Cancellation

The other side of student debt: Salaries of some private college presidents according to the Chronicle of Higher Education (source). These numbers are deceptive. According to the Huffington Post, the president of the University of Chicago, for example, was paid $3.3 million in 2011 if you include deferred compensation.

The other side of student debt: Salaries of presidents of some public (taxpayer-funded) colleges and universities according to the Chronicle of Higher Education (source), These numbers do not appear to include deferred compensation.

by Gaius Publius

This is the second part in a short series, "Killing a Parasite — Canceling Student Debt."

In Part 1, we made the case that the institutionalized and growing student debt crisis is not fed by predatory activity on creditors, but by parasitic activity. Predators kill, eat, and move on. Parasites disable, then live off the energy system of the disabled host for as long as they can keep the host alive. The argument there was simple: "Viruses are a form of parasite. So are credit card companies."

A non-human parasite: The "tongue-eating louse" is a parasitic crustacean of the family Cymothoidae. The parasite enters fish through the gills and then attaches itself to the fish's tongue, strangling and replacing it. Then it feeds on the fish as the fish feeds itself (source).

An especially pernicious form of "loan parasite" includes institutions preying financially on students, who incur their debt without current income to pay it, yet need a college degree to effectively compete in the post-graduation job market. Because at one point the federal government guaranteed many or most student loans in the U.S., private lenders eagerly extended credit to anyone who asked for it. No-risk lending is a no-brainer in the financial world.

These practices put a flood of money into the higher education system, money which continually drives up the price of higher education, even in public colleges and universities. Institutions charge what students can afford to pay, and since students were paying with government-backed loans — and today are paying with government-originated loans (see below) — they become a mere pass-through from lenders to college and university administrations.

Thus the more money this "program" makes available, the higher the tuitions charged by the receiving institutions. (It's really a racket in the classic sense, since students are coerced by the ever-increasing need for "credentialization" in an ever-deteriorating full-time labor market. Again, see below.)

A great deal of the new money that colleges and universities acquire ends up in the hands of the administrators themselves via growth in their number and growth in their salaries. At the top, many college presidents are paid like corporate CEOs, whom they consider themselves to resemble.

Paul Campos, writing in the New York Times, first identifies the "cover story," the comfortable myth, that's used to explain the booming cost of college (my emphasis throughout):

Once upon a time in America, baby boomers paid for college with the money they made from their summer jobs. Then, over the course of the next few decades, public funding for higher education was slashed. These radical cuts forced universities to raise tuition year after year, which in turn forced the millennial generation to take on crushing educational debt loads, and everyone lived unhappily ever after.

This is the story college administrators like to tell when they’re asked to explain why, over the past 35 years, college tuition at public universities has nearly quadrupled, to $9,139 in 2014 dollars. It is a fairy tale in the worst sense, in that it is not merely false, but rather almost the inverse of the truth.

He then shows that the truth is almost exactly opposite:

In fact, public investment in higher education in America is vastly larger today, in inflation-adjusted dollars, than it was during the supposed golden age of public funding in the 1960s. Such spending has increased at a much faster rate than government spending in general. For example, the military’s budget is about 1.8 times higher today than it was in 1960, while legislative appropriations to higher education are more than 10 times higher.

In other words, far from being caused by funding cuts, the astonishing rise in college tuition correlates closely with a huge increase in public subsidies for higher education.

If car prices had gone up as fast as tuition over the same period, he writes, "the average new car would cost more than $80,000."

Where is this money going? Among other places, into the pockets of the administrator class. Campos notes that "an analysis by a professor at California Polytechnic University, Pomona, found that, while the total number of full-time faculty members in the C.S.U. system grew from 11,614 to 12,019 between 1975 and 2008, the total number of administrators grew from 3,800 to 12,183 — a 221 percent increase."

To see the effect on the salaries of college presidents, the industry's CEO class, see the charts at the top.

Part 1 in this series looked at the Why question — Why should all student loans be canceled? — and answered it in economic terms, since ending student loan debt would benefit not just the students affected, but the economy as a whole. It also answered the Why question in moral terms: Ending the practice of parasitism, humans preying on humans, is a good thing in itself.

This piece looks at the How question — How should ending student loans be implemented? A future installment, the last, will address the What Next and What If We Don't questions. (Hint: Extreme parasitism is not a stable system, and the social consequences of extreme human suffering aren't limited to the ballot box.)

The Federal Government Is the Largest Originator of Student Loans

A little background before we get to the implementation. The largest originator and owner of student loans is now the U.S. government:

The Federal Student Aid (FSA) loan portfolio balances were $896 billion at the end of 2012. The FSA managed $473 billion under the Federal Direct Student Loan Program at the end of 2012. New loans originated under the program during 2012 totaled $106.7 billion. Loan portfolio balances managed by the FSA for the Federal Family Education Loan Program are slowly and steadily shrinking as new loans offered to students by the U.S. Department of Education originate under the FDSL program. Most of the growth in FDSL loan portfolio balances can be attributed to new loan originations, while being the sole government program for student loans. Another contributor to the rapid escalation in loan balances is due to the cost of higher education increasing rapidly, faster than inflation. Students are spending and borrowing more to finance their higher-priced, higher education.

As of the 2015 GAO audit, the total of the Federal Student Aid loan portfolio was one trillion dollars. [Footnotes removed]

By comparison, note that the aggregate national student loan total, including both public and privately originated loans, is close to $1.5 trillion.

The percentage of private loans is actually much smaller that these numbers imply. According to a new paper by Scott Fullwiler, Stephanie Kelton, Catherine Ruetschlin, and Marshall Steinbaum, "The vast majority of [student] debt originates from federal lending, with the private student loan market accounting for just 7.6 percent ($99.7 million) of all student debt." (More from this paper below.)

Also note that the government-guaranteed loan program, in which private lenders were the source of the money, was eliminated only recently, in 2010:

Following the passage of the Health Care and Education Reconciliation Act of 2010, the Federal Direct Loan Program is the sole government-backed loan program in the United States. Guaranteed loans—loans originated and funded by private lenders but guaranteed by the government—were eliminated because of a perception that they benefited private student loan companies at the expense of taxpayers, but did not help reduce costs for students.

So the loan guarantee program became a loan origination program. This makes the U.S. government today the major parasite driving the student loan crisis, though $100 million in private student debt is still a sizable prize for private lenders.

This also puts the U.S. government in a unique and powerful position — it can, if it wishes, solve this problem by its own action alone.

How to End the Student Loan Crisis

Part 1 of this series argued the benefits of a "debt jubilee" on all student loans in the U.S. The paper cited above also argues those benefits (see the Executive Summary). The mechanics of this cancellation, ways it can be implemented, are as follows. Note in the second bulleted paragraph how private loan debt would be handled (emphasis mine):

• The current portfolio of student loans held by the ED would be cancelled or, equivalently, borrowers would simply be allowed to stop making payments and any principal due on a given date would be cancelled at that time (that is, the loan would effectively be cancelled in stages as payments come due). As of the second quarter of 2016, the ED’s outstanding loans totaled $986.19 billion.

• The federal government would either purchase and then cancel, or, equivalently, take over the payments on student debt currently held by the private sector. As with the ED’s loans, if the government purchases the privately held loans it can choose to cancel them immediately or as borrowers’ payments come due. The government-guaranteed loans are $266.69 billion, while nonguaranteed privately issued loans are $101.58 billion, both as of the second quarter of 2016. Having the government assume these payments or purchase and cancel the loans is preferable to cancellation by private investors. The latter would require the private sector to write down nearly $370 billion in both assets and equity, which could be highly destabilizing (or worse) for the affected sectors.

Section II of the paper works out the effects of the various choices presented above. Note again that the effect on the national debt derives solely from the loan servicing amounts (interest payments), which are either lost to the government in the case of canceled government loans, or paid by the government in the case of privately issued loans. Canceling the outstanding loans balances themselves has no effect at all on the amount of federal debt.

But Wouldn't This Disproportionately Benefit the Rich?

One of the chief objections to this proposal is that it's regressive, that it would disproportionately benefit the rich. The authors address this concern:

The Distributional Consequences of Student Debt, Student Debt Cancellation, and Debt-Free College

...[T]he main controversy over student debt generally and debt cancellation in particular has not been its macroeconomic impact, but rather the implications for people in different income and wealth quantiles and the impact on inequality. The controversy arises from the factual observation that among borrowers, those with the largest amount of debt outstanding tend to have the highest incomes, and those who spend the most on college (and who therefore—so the story goes—have the most to gain from the option of free college) come from the highest-earning families....

This objection, overly simple and therefore easy to "sell," fails to take into account the wholesale changes that have occurred in both the student loan population and the U.S. labor market.

The widespread criticism of ambitious policies to address the student debt crisis, based on their supposedly regressive impact, is overdrawn. In some cases, it misinterprets the evidence about who is most burdened by student debt and who would benefit most from relief. In this section, we consider the evidence about the distribution of debt and debt burdens in the population and the evolution of those distributions over time. Our main point is that, while the largest loan balances are indeed held by comparatively high-earning households, the extent to which student debt is held by the rich has diminished significantly. Moreover, the argument that the distribution of the burden of student debt has not, in fact, changed very much, even as the total amount of debt outstanding has increased dramatically, fails to consider the significant changes in the population of people with any student debt at all. These issues of interpretation extend beyond accurately assessing the distributional impact of the policies we model—they point to larger problems with the assumptions behind existing higher education, student debt, and labor market policies. The student debt crisis is one of several linked manifestations of those problems. Others are wage stagnation, underemployment, and increasing inequality of household wealth.

Student debt was once disproportionately associated with graduate school and with relatively well-off households, in part because it was possible to graduate from community college or a four-year public institution with little or no debt, and in even larger part because many people did not need to obtain any higher education credentials in order to access the labor market. What has happened in recent decades, and especially since the mid-2000s, is a vast expansion of student borrowing, such that the preponderant share of younger cohorts newly entering the labor market carry student debt. This expansion is due in part to much higher tuition, mostly thanks to state-level cutbacks in funding for higher education, and in part because it is simply far more difficult to access the labor market now without higher education credentials. And that “credentialization,” in turn, is due to the underperformance of the labor market since 2000 and especially since the financial crisis and the Great Recession that began in 2008. Since 2000, the most important federal labor market policy has been the extension of student debt and the encouragement of a larger share of the population to obtain debt-financed higher education credentials, on the theory that underemployment and stagnant wages were caused by a “skills gap” that could be remedied through debt-financed higher education. The most obvious and acute effect of that policy was the growth of the high-priced for-profit higher education sector, but it was also evident in rising enrollment across all types of institutions, even as tuition rose. The “skills gap” was a false diagnosis of the labor market’s problems, and hence the prescription of more debt-financed credentials not only failed to solve the problem, it also created its own problem in the form of unsustainable debt.

The bottom line is this: Student debt today is killing a generation in a way it didn't before. This is new and not a function of loans to students born of wealthy parents. It's a societal and generational problem, actually a multi-generational one, that hurts us all. The economic harm done to an entire generation of Americans is not captured by the objection that this is somehow a "regressive" proposal.

As the authors note, there's more in that section of the paper in support of these claims.

The Need for Debt-Free Public Higher Education

It's clear that this proposal, in my view necessary, must also be accompanied by the Sanders campaign proposal of debt-free public colleges and universities. The arguments for Sanders' proposal, on its own merits, were well explored during the campaign.

A major objection to Sanders' idea was again that it would mainly benefit the rich — an argument that ignores, disingenuously I think, the fact that the very wealthy do not send their children to public colleges and universities. Harvard University would not become tuition-free under Sanders' proposal.

But in the context of the current proposal for cancellation of all student debt, there's another reason for instituting debt-free public colleges and universities: moral hazard. Briefly, canceling debt without removing the reasons debt is incurred in the first place encourages reckless borrowing in the expectation of future cancellation.

The authors address the problem this way:

The primary theoretical criticism of debt cancellation plans focuses on the reaccumulation of debt following the cancellation, in particular the potential for problems of moral hazard to arise. From this perspective, debt relief today could change the incentives of future student debtors who may increase borrowing with the expectation that the loans will be forgiven, causing an even faster accumulation of debt and increasing the negative consequences at the household, local, and macroeconomic levels. The perverse incentives for unsustainable borrowing in this scenario are the result of inappropriate policy institutions that absolve borrowers of their debts while perpetuating the necessity of increasing debt. In order to avoid problems of moral hazard, any restructuring of student debt—including our debt cancellation proposal—should be accompanied by strong and appropriate policies that enforce the consequences of borrowing and address the market failures that lead to undesirable social costs. In combination with debt cancellation, publicly funded free or debt-free college would provide the institutional reform.

In combination with a program like the one Sanders proposed during the campaign — free public colleges and universities — student debt cancellation would indeed and effectively address the current student debt crisis. The two proposals are a necessary pair and should be implemented together.

Finally, the "Fairness" Question

Which brings us to the last of the objections. In effect, it comes down to this: "I paid for my college degree with my hard work and sacrifice. I paid off all my loans, and believe me it was tough. But I did it. So why should others get a break that I didn't get?"

The problem here is what one writer described as "status quo bias," an emotional preference in which the "current baseline (or status quo) is taken as a reference point, and any change from that baseline is perceived as a loss."

but there's another bias as well, which could be called "retributional bias." This situation is similar to any in which an originally beneficial policy was first rescinded and then reinstated. Public education was largely free prior to the Reagan era, and with the GI Bill, millions paid next to nothing to attend. As the paper's authors point out, the largest loan balances were associated with post-graduate work.

But higher education policies changed under and after Reagan, reaching crisis proportions today. Should people trapped in debt by the blatant injustices of the post-Reagan world be allowed to veto, in the name of "fairness," the repeal of those injustices?

The essence of this objection is, "It's not fair that I was born at the wrong time." This has been described as being "trapped by history." Is it unfair that many be so trapped? Of course it is. But the perp in that unfairness is not the next generation to also be shackled, but the times themselves, the politicians who ruled them, and voters who kept them in power.

To therefore perpetuate that unfairness — to make, in effect, this generation suffer "because I had to" — is more than just unfair to them. It's cruel.

GP
 

Killing a Parasite — Canceling Student Debt, Part 1

For families under age 35, growth of student debt outstrips by far the growth of any other debt source, including mortgage and credit card debt (source).

by Gaius Publius

In America today, 44 million people collectively carry $1.4 trillion in student debt. That giant pile of financial obligations isn’t just a burden on individual borrowers, but on the nation’s entire economy.

In the world of parasites, the job of the parasite is to benefit from the harm it does to the host, but not to kill the host, at least not until the parasite is done with it:

In biology, parasitism is a relationship between species, where one organism, the parasite, lives on or in another organism, the host, causing it some harm, and is adapted structurally to this way of life. The entomologist E. O. Wilson has characterised parasites as "predators that eat prey in units of less than one"....

Unlike predators, parasites, with the exception of parasitoids [examples: wasps that lay eggs in paralyzed spiders, or the beast in Alien], typically do not kill their host, are generally much smaller than their host, and often live in or on their host for an extended period. Parasitism is a type of consumer-resource interaction. [Footnotes removed]

Parasites are not the same as predators. Predators kill, eat, and move on. Parasites disable, then live off the energy system of the disabled host for as long as they can keep the host alive.

Viruses are a form of parasite. So are credit card companies.

Loan Companies as Parasites

The parasite first disables the host's ability to reject the parasite, then derives its own energy (that which sustains it) by robbing the host's energy system. It attempts to do this for as long as possible. Loan companies whose "business plan" — survival strategy — is to prolong the loan, and at the maximum sustainable rate, are by definition parasites.

But there is a scale of parasitism among loan companies. The least parasitic are mortgage companies, in that mortgages typically don't destroy incomes; they just feed off them. When the host goes into bankruptcy (usually for other reasons, such as illness, divorce or job change), the host (the home-owner) is abandoned, but mortgage company parasites don't typically cause these bankruptcies by themselves.

In addition, if a host wants to repay her debt and free herself from the parasite, she is allowed to do so, though typically, hosts usually seek a new parasite, either by necessity or because of cultural pressure.

At the less gentle end of the parasitic spectrum are payday lenders and loan sharks, who actually disable the host's income capability by extracting so much money that the host almost certainly goes bankrupt, often first drawing on the resources of others and transferring those resources to the parasite as well before they do.

Payday lenders thrive in an environment rich in new hosts, since so many of their former ones become useless. In contrast, most mortgaged homeowners (hosts of mortgage banks) don't go bankrupt — just some of them.

Student Debt Parasites Feed on Especially Vulnerable Hosts

Not far up the parasitic scale from payday lenders and loan sharks are owners and beneficiaries of student debt, i.e. the lending companies.

First, as the chart above shows, there's a large and growing population of prospects in the student loan world. New hosts, it seems, are everywhere.

Second, the loan amounts are extraordinarily large and extraordinarily long-lived (my emphasis throughout):

The average debt load for students who graduated in the class of 2016 was around $30,000, and the average rises every year.

But some students graduate with far more debt than that, especially those who pursue graduate degrees or professional degrees. Nearly 17 percent of those who borrow for education costs will graduate owing more than $50,000, according to the recent study by the Brookings Institution. That is a much higher rate than in 2000, when five percent of new graduates owed that much money.

Today, many of those who graduate with more than $50,000 in debt aren’t the students who are pursuing highly-lucrative careers, such as becoming a doctor or a lawyer, but undergraduate students and their parents. On the other hand, more people who are pursuing a professional degree are graduating with well over $100,000 in student loans.

While a student debt load of $30,000 doesn't sound large compared to mortgage debt, remember that these hosts almost never have a source of income when they incur the debt. In contrast, home loan applicants generally have to prove income prior to acquiring the debt.

For high-debt graduates — greater than $50,000, greater than $100,000 — the situation is much worse. The debt burden can hobble their entire lives. I've met men and women in their thirties whose most common complaint is, "I will never get out of debt, and I will never get a job in my profession." I've met high-tech workers in high-mortgage-cost regions of the country with incomes greater than $150,000 per year, student loan repayments of nearly $2,000 per month, more than one child, and no way to break even on a month-to-month basis.

All of these people are one bad-luck accident away from bankruptcy — which means good-bye to the next good job for more than a decade afterward.

Student Loan Parasites Also Feed on the Economy as a Whole

But student loan parasites don't just eat and diminish the host — they eat and diminish the economy as a whole. It's an axiom in economics that aggregate debt repayment subtracts from GDP, a measure of overall economic production. In practical terms, a dollar spent repaying a debt to a lender is a dollar that doesn't buy bread, purchase services like health care, or build a factory.

As a nation's private debt burden increases, private sector demand and spending falls. In the extreme, if everyone in a country decided or were forced to pay all debts at once, the overall economy would collapse. (The same would happen if everyone in an economy went on a savings spree.)

This is what today's high levels of student debt are doing to our economy. Writes Eric Levitz at New York magazine:

In America today, 44 million people collectively carry $1.4 trillion in student debt. That giant pile of financial obligations isn’t just a burden on individual borrowers, but on the nation’s entire economy. The astronomical rise in the cost of college tuition — combined with the stagnation of entry-level wages for college graduates — has depressed the purchasing power of a broad, and growing, part of the labor force. Many of these workers are struggling to keep their heads above water; 11 percent of aggregate student loan debt is now more than 90 days past due, or delinquent. Others are unable to invest in a home, vehicle, or start a family (and engage in all the myriad acts of consumption that go with that).

Note that number: U.S. aggregate student debt has reached almost $1.5 trillion. 

A Debt Jubilee to Rejuvenate the Economy

The obvious solution to this problem has been practiced since ancient times — a debt jubilee in which all student debts are cancelled. Keep in mind that the U/S. government owns or controls 90% of all student debt in this country:

Thus, if the government were to forgive all the student debt it owns (which makes up more than 90 percent of all outstanding student debt), and bought out all private holders of such debt, a surge in consumer demand — and thus, employment and economic growth — would ensue.

According to the Levy Institute paper [here], authored by economists Scott Fullwiler, Stephanie Kelton, Catherine Ruetschlin, and Marshall Steinbaum, canceling all student debt would increase GDP by between $86 billion and $108 billion per year, over the next decade. This would add between 1.2 and 1.5 million jobs to the economy, and reduce the unemployment rate by between 0.22 and 0.36 percent.

Note that the ancient concept of "debt jubilee" doesn't necessarily apply to all debt, just unproductive debt.

Economist Michael Hudson writes this about debt jubilees in Sumerian and Babylonian times:

The Bronze Age core economies coped with the debt problem simply by canceling society’s unproductive debts when they grew too large. However, the Sumerians and Babylonians only annulled consumer barley-debts; they left commercial silver-debts intact. ... This implicit distinction between productive and unproductive debt represents a third way in which Babylonian economics may be deemed more sophisticated than modern economics (in addition to the afore-mentioned focus on the destabilizing role of debts multiplying at compound interest, and the phenomenon of wealth addiction.)

Note his mention of the socially "destabilizing role of debts multiplying at compound interest," as well as the (similarly destabilizing) role of "wealth addiction." Our society is hobbled by both.

Student loan debt is by definition unproductive debt — a debt owed to parasites, in other words. There is no question that cancelling it would free both hosts — the millions of graduates themselves (and those who failed to graduate), and the larger economy as well.

A Moral Question and an Economic Question

It's certainly true that the economy as a whole would benefit from student debt cancellation. As noted, aggregate student debt is at or near $1.5 trillion, and rising.

We also know that even Repubicans believe that an injection of $1.5 trillion into the economy would do a world of good. According to one Fox News defender of the recent $1.5 trillion tax cut bill, "Democrats have now become born-again deficit hawks, painting an additional $1.5 trillion added to the deficit over the next 10 years from this tax plan as causing certain harm. But they fail to take into account economic growth that would be created by tax cuts".

It's true that tax cuts have a stimulus effect, but not much of one. Making the Bush tax cuts permanent, for example, had a "fiscal multiplier" (stimulus effect) of 0.26. By contrast, a one-time increase in food stamps would have a multiplier of 1.73.

Quite a difference. A one-time reduction of student loan debt of $1.5 trillion would immediately pour hundreds and in some cases, thousands per month per indebted household into the productive economy — enriching not Wall Street this time, but Main Street.

Everyone in the country would benefit, offering an answer to the economic question "How do we improve the lives of all Americans?"

But a massive student loan cancellation would also help answer a moral question: "How do we free ourselves from the financial parasites who take money for themselves that others have earned?"

Freeing a host from parasites is indeed a moral task, especially when humans are the hosts. If you doubt you have a moral response to parasites, consider the "tongue-eating louse" (pictured below).

Cymothoa exigua, or the tongue-eating louse, is a parasitic crustacean of the family Cymothoidae. The parasite enters fish through the gills and then attaches itself to the fish's tongue, strangling and replacing it (source).

This parasite destroys the tongue of its host, replaces the tongue so the fish thinks nothing is amiss, then slowly drains the fish as the fish feeds itself.

If you owe student debt yourself, especially great amounts of it, something similar is happening to you — a large percentage of your income is going each month to people who do nothing but move money around. The only difference between you and the fish above is — you know something's amiss.

Next Steps: Answering the "How?" and "What Next?" Questions

This answers the Why question of student debt cancellation — the moral job of freeing a host (us and our children) from parasites, the economic job of growing the productive economy so all can have better lives. I'll answer the How question — what does implementation look like? — and the What Next question in another installment.

I'll also answer the What If We Don't question. Here's a hint: Extreme parasitism is not a stable system. When hosts become aware of their parasites, they fight back.

GP
 

Ian Welsh suggests, "Maybe It Is Time To Stop Underestimating Trump?" -- and Steve Bannon too

Andy B. strikes again -- and note especially
the "Carol Foyer" fake-quote at the end

NEW YORK (The Borowitz Report) -- A once-prominent political career came to a shocking end on Friday as New Jersey Governor Chris Christie was arrested for keying the limo of President-elect Donald J. Trump.

The incident, which rocked political circles in Trenton and Washington, happened in full view of the midtown-Manhattan crowds outside of Trump Tower, where the vandalized limo had been parked.

“Suddenly, this guy broke through security, whipped out his keys, and made a gigantic gash along the side of the limo,” said Harland Dorrinson, a tourist from Missouri who witnessed the incident. “Police started wrestling him to the ground, and I was, like, ‘Holy crap, that’s Chris Christie.’ ”

Fellow-Republicans reacted to Christie’s arrest with sadness and sympathy. “This whole transition period has been tough on a lot of folks,” former Massachusetts governor Mitt Romney said.

Across New Jersey, residents like Carol Foyler, of Teaneck, said that they were shocked by their governor’s spectacular fall. “I never would have guessed that this would be the thing he’d go to jail for,” she said.

"Trump’s opposition will continue getting their asses handed to them if they keep assuming that he’s a boob, or that he can’t take good advice. He’s a very savvy operator, and the people he trusts most, Bannon and Kushner, are extraordinarily competent men who have proved their loyalty."

-- Ian Welsh, in "Maybe It Is Time To Stop
Underestimating Trump?" (Wednesday)

"Bannon, for all he is decried as a racist, is the person you want to win most of the Trump White House fights, at least if you care about ordinary people, because he’s the guy who wants ordinary Americans to do well, and he knows he needs Hispanics and Blacks to get jobs too. . . . Bannon is right that if the Trump White House can deliver for enough people, they get to rule DC and America for 50 years. . . .

"This is going to be a very interesting White House and administration, just because Trump does not have decided views on a lot of issues. Who wins the internal fights will determine the entire course of Trump’s presidency, and may well determine America’s (and the world’s) future for decades.

"Place your bets and don’t underestimate these people."

-- Ian, in "Don't Underestimate Steve Bannon" (Thursday)

by Ken

Okay, enough fun with Andy B. Now down to business, in the form of Ian Welsh's posts from the last two days, referenced above. The thing to do, really, would be just to encourage you to read the whole posts at the links, in chronological order -- Trump first, then Bannon. I'm going to blunder ahead anyway, but really Ian deserves to make his case(s) his own way (and while you're on his site, don't forget pondering kicking in some $$$ to help enable him to continue giving us his distinctive perspective on, you know, stuff.)

In recommending these posts, I realize that the first danger is readers assuming that Ian is endorsing whatever it is that President The Donald decides to do, failing to make the fairly obvious distinction between saying that the guy is extremely competent and usually gets what he goes after and saying that he's an agent of goodness. So let's go first to the "qualifier":

Trump just convinced Carrier to keep some manufacturing jobs in the US (by bribing them with tax cuts, it seems).  That sort of high profile personal intervention will be remembered, and has already said to his followers “I’m delivering for you”.

Trump is clearly a very flawed individual, with really questionable morals and ethics, but he isn’t incompetent by any useful definition of the word.  He may well wind up betraying his followers, certainly many of his cabinet picks are of deeply dubious individuals who favor policies which will hurt the working and middle classes.

But that doesn’t make him incompetent, that makes him -- a politician and a sleazy, but very good, salesman.

So what is it that this is qualifying?

I keep seeing people talking about how stupid Trump is.

It is certainly true that Trump is not book-smart.  He probably wouldn’t score well on an IQ test.

But by now, it should be clear, except to functional idiots, that Trump is very good at getting what he wants.

This is a man who shits into a gold toilet.  Who has slept with a succession of models.  Yeah, he’s a sleazy predator, but he gets what he wants.

He won the primary and the election. He won the election spending half as much money as Clinton did. Yes, she won the popular vote total: that’s irrelevant.  He won where he needed to win to get the Presidency.

He played the media like a maestro, getting a ton of coverage, of the subjects he wanted covered when he wanted them covered.

After making clear his feelings about Trump's principles and beliefs (whatever they are), Ian gets to the point I've already quoted above, which seems worth repeating:

Trump’s opposition will continue getting their asses handed to them if they keep assuming that he’s a boob, or that he can’t take good advice. He’s a very savvy operator, and the people he trusts most, Bannon and Kushner, are extraordinarily competent men who have proved their loyalty.

"What Trump doesn’t have," Ian writes, "is very firm policy opinions,"

and wonkish centrists and lefties think that makes him stupid, and that that type of stupid is the same thing as incompetent.

Trump stands a decent chance of juicing the economy even as he chops away at is remaining underpinnings through his tax cuts. If he does so, he will be re-elected.

I’d be careful betting against him.

AS TO THOSE "EXTRAORDINARILY COMPETENT
MEN WHO HAVE PROVED THEIR LOYALTY" --


Ian cautions: "Don't underestimate these people."

In yesterday's post Ian took a closer look at Steve Bannon, and what he sees there isn't, or isn't just, what most of us have been focusing on.

First I told you not to underestimate Trump (well, I’ve told you repeatedly), now I’m going to tell you not to underestimate Bannon, his chief strategist, rewarded for supporting him thru everything from Breitbart.  Here’s Bannon:

“The globalists gutted the American working class and created a middle class in Asia. The issue now is about Americans looking to not get fucked over. If we deliver we’ll get 60 percent of the white vote, and 40 percent of the black and Hispanic vote and we’ll govern for 50 years. That’s what the Democrats missed. They were talking to these people with companies with a $9 billion market cap employing nine people. It’s not reality. They lost sight of what the world is about.”

Pretty much. Now, it was not necessary to gut the American working class to create a middle class in Asia, there were win/win ways to alleviate poverty outside the developed world without fucking working class Europeans and Americans and so on over. But those ways were not possible under neoliberalism.

"That point is important," Ian says, "but irrelevant to what Bannon is saying."

The way the world economy was run completely fucked a lot of people in America, the EU, Canada, Australia and elsewhere and Bannon is right that if the Trump White House can deliver for enough people, they get to rule DC and America for 50 years, like the Dems did from 1932 to 1980 (yeah, there were Republicans, they governed as Democrats.)

If Ian is right about Bannon's agenda, and if he can persuade the boss to let him do it, there's a lot he can do which will be felt in a good way by voters, especially if he can take advantage of "easy money from the Fed."

Trump will get to replace most Fed governors, fairly soon, so he can certainly have a compliant Federal Reserve. Bear in mind that [following the 2008 economic meltdown] the Fed gave away trillions of dollars, and was giving away tens of billions a month for years.  That money is an available slush fund for anyone smart enough to use it to do more than bail out bankers.

Bannon, I suspect, is smart enough. 80 billion a month can buy a lot of jobs if you use it effectively, which Obama’s Fed never did.

Ian argues that there are other tools President Trump can use which may produce results noticeable in "flyover country," so dangerously undertracked by most of us during the election. "Contrary to what mainstream economists (over 90% of whom, I remind you, did not notice the housing bubble) say," he writes,

Trump can use tariffs to bring a lot of jobs back.  The manufacturer of iPhones (FoxConn) has already said, sure, they’re willing to build them in the US.  They aren’t going to kiss a market like that goodbye.

But there's a crucial "but" here:

But Trump’s tax cutting instincts work against this.  Cutting taxes for corporations isn’t as effective as tariffs, because corporations already pay very low taxes, and multinationals pay damn near none, since they play various jurisdictions off against each other.

So Bannon's economic agenda may run up against his boss's impulses. "If you’re a partisan Democrat first," Ian concludes, "and don’t give a fuck about the working class and middle class, especially in flyover country,"

then Bannon needs to lose his fights, because if he wins them, Trump gets elected again (though, as I note, I don’t think Bannon gets his 50 years, unless he’s far more clever even than he’s so far indicated (not impossible).

#

Barney Frank Drops A Financial Crisis Bombshell; The Press Responds With Silence

by Gaius Publius

I can't take credit for this, though I wish I could. David Dayen, who writes at Salon, has been reading Barney Frank's new book Frank and also its reviews. Dayen is one of the most knowledgeable writers on the mortgage and financial crises — both. (Note to readers: It's not a financial crisis if there's no mortgage crisis. It's the inability to pay mortgage debt that started the avalanche of derivative-caused banking losses.)

Dayen noticed that in his book Frank makes a startling revelation, but since it involves (a) mortgage borrowers, not bankers, and (b) the current Democratic president, it has gotten zero coverage. What's the revelation? Barack Obama could have singlehandedly made sure TARP money, as mandated by Congress, was made available for mortgage relief, and chose not to.

For doomed mortgage-holders, as opposed to protected and bailed-out bankers, that makes Obama the perp. How do we know? Barney Frank said so in print. Here's Dayen's catch (my emphasis):

Barney Frank drops a bombshell: How a shocking anecdote explains the financial crisis

Barney Frank has a new autobiography out. He’s long been one of the nation’s most quotable politicians. And Washington lives in perpetual longing for intra-party conflict.

So why has a critical revelation from Frank’s book, one that implicates the most powerful Democrat in the nation, been entirely expunged from the record? The media has thus far focused on Frank’s wrestling with being a closeted gay congressman, or his comment that Joe Biden “can’t keep his mouth shut or his hands to himself.” But nobody has focused on Frank’s allegation that Barack Obama refused to extract foreclosure relief from the nation’s largest banks, as a condition for their receipt of hundreds of billions of dollars in bailout money.

The anecdote comes on page 295 of “Frank,” a title that the former chair of the House Financial Services Committee holds true to throughout the book. The TARP legislation included specific instructions to use a section of the funds to prevent foreclosures. Without that language, TARP would not have passed; Democratic lawmakers who helped defeat TARP on its first vote cited the foreclosure mitigation piece as key to their eventual reconsideration.

TARP was doled out in two tranches [slices; bundles] of $350 billion each. The Bush administration, still in charge during TARP’s passage in October 2008, used none of the first tranche on mortgage relief, nor did Treasury Secretary Henry Paulson use any leverage over firms receiving the money to persuade them to lower mortgage balances and prevent foreclosures. Frank made his anger clear over this ignoring of Congress’ intentions at a hearing with Paulson that November. Paulson argued in his defense, “the imminent threat of financial collapse required him to focus single-mindedly on the immediate survival of financial institutions, no matter how worthy other goals were.”

But Frank kept pushing: 

With the first tranche of TARP funds running out by the end of the year, Frank writes, “Paulson agreed to include homeowner relief in his upcoming request for a second tranche of TARP funding. But there was one condition: He would only do it if the President-elect asked him to.”

The "President-elect" was Barack Obama, and he said no, we're just going to bail out the banks, which is told by Frank via this classic Frank-ism:

Frank goes on to explain that Obama rejected the request, saying “we have only one president at a time.” Frank writes, “my frustrated response was that he had overstated the number of presidents currently on duty,” which equally angered both the outgoing and incoming officeholders.

Dayen goes on to document just how often the President-elect violated that "one president at a time" principle before taking office. He also notes that there was a second round of negotiation with Congress about releasing the second tranche, in which promises were made by the President-elect and broken. Seems the man was determined not to bail out the "wrong people" — an opinion widely held among elite opinion makers and leaders.

Remember, this is Barack Obama vintage 2008. Certainly post-campaign — he'd already won — but pre–taking office, with all the rolling betrayals that entailed. Only those watching his FISA vote, perhaps, knew what was coming.

Dayen couches this unfortunate event in humanitarian concerns, as he should, but also in economic terms. By not bailing out the nation's purchasers, the public, Obama extended the crisis:

That’s the main reason why the significance of Obama’s decision cannot be overstated. The fact that we waited six years to get some semblance of a decent economic recovery traces back directly to the failure to alleviate the foreclosure crisis. Here was a moment, right near the beginning, when both public money and leverage could have been employed to stop foreclosures. Instead of demanding homeowner help when financial institutions relied on massive government support, the Administration passed, instead prioritizing nursing banks back to health and then asking them to give homeowners a break, which the banks predictably declined.

But again, we're back to elite opinion, which holds that even though the way out of a crisis like this is to stimulate buying and demand, that option is off the table. Because, whether people will say it or not, in our post-Reagan job-creator world, only the wealthy deserve to be made whole by the government. That's not snark; it's one of the guiding principles of our government.

Dayen makes a great catch, and his Salon piece is a very good read, including his baseball-metaphor conclusion. My point is a little different than his, however. Our need to service the "free" market  wealthy, obvious in this anecdote, will kill us, literally. But that's a climate story for another day.

He drank the milkshake of the mortgaged.
Did Obama hold the straw?

Do stay tuned though; the "free" market wealthy are draining most of California's water, drinking that milkshake as well, and there's a war brewing. More on that shortly.

GP

Scott Walker-- Serial Flip-Flopper

by Zach Wisniewski

Throughout his career in politics-- a career that has spanned virtually his entire adult life-- Wisconsin Gov. Scott Walker has tried to portray himself as a man of principles who can't and won't be intimidated by standing up for what he believes. In fact, Gov. Walker is so desperate to convince folks outside Wisconsin that's he's got the mettle necessary to be president of the United States that he titled his ghostwritten memoir Unintimidated: A Governor's Story and a Nation's Challenge. However, while Scott Walker wants us all to believe he's an unintimidated leader with steel in his spine, the fact is he's a political opportunist who's had almost as accomplished a career as a flip-flopper as former Massachusetts governor and Republican presidential nominee Mitt Romney.

Recent revelations showing that Gov. Walker has completely changed his position on immigration reform were certainly newsworthy, but it's absolutely not the first time he has flip-flopped a position when it suited his political ambitions. As noted in Todd Milewski's report for Madison's Cap Times, Gov. Walker is now opposed to the same amnesty programs he supported just two years ago when he supported a path to legal citizenship for undocumented immigrants already living in the United States. Here he is admitting his flip-flop to Fox News Sunday host Chris Wallace during a recent appearance on that show.

Wallace: But it's a little bit slippery here. Back when you were the Milwaukee County Executive, you actually supported the Kennedy-McCain comprehensive immigration plan. Are you basically saying that as part of a comprehensive plan, tough enforcement, E-Verify, the 11 million people already here pay penalty, they get citizenship?
Walker: No, I'm not talking about amnesty. And the reason for that is, over time...
Wallace: But you said you supported it.
Walker: And my view has changed. I'm flat-out saying it. Candidates can say that. Sometimes they don't. I'm saying my view has...
Wallace: So you've changed from 2013?
Walker: Absolutely.

While Gov. Walker's flip-flop on immigration reform is the most recent example of his willingness to change his beliefs to further his political ambitions, it's certainly not the only example. In fact, Scott Walker has made a career out of changing his beliefs when it benefits his political ambitions most.

With that in mind, let's take a look at just a few of Scott Walker's most blatant flip-flops during his career as a politician.


Scott Walker's Flip-Flop on Contributions From the Gaming Industry

As reported by Josh Israel of ThinkProgress, back in 1999, then-State Representative Scott Walker issued a press release calling for a ban on political contributions by gambling interests, who Walker felt held too much sway over the election of Democratic governors in other states. Here's an excerpt from Walker's press release.

We have witnessed problems with gambling contributions at the federal level and in other states, Walker told his colleagues at a September committee hearing on the 1999 version of the bill. With gambling interests seeking to expand all across Wisconsin, he urged, "We must act now before problems evolve in this state. Our measure will act as a protection against corruption here in Wisconsin."

Fast-forward just 13 years and Gov. Scott Walker seemed to have no problem accepting hundreds of thousands of dollars from billionaire casino mogul Sheldon Adelson, who donated $250,000 to Gov. Walker's recall campaign. What's more, Adelson made a $650,000 gift to the Republican Party of Wisconsin. While Sheldon Adelson is by far the largest gaming-related donor to Scott Walker's campaign, he's not alone. As the ThinkProgress report noted, Gov. Walker has taken thousands of dollars from other individuals and groups with ties to the gaming industry.

A ThinkProgress review of Walker's other donors found he also received $9,000 from the Forest County Potawatomi Community (a Native American tribe that operates a Milwaukee casino). Walker got $5,000 from Wild Rose Entertainment chairman Gerald M. Kirke and $3,000 from vice chairman Michael J. Richards (their company operates two casinos in Iowa). And Peter M. Carlino, chairman of Penn National Gaming, also contributed $1,000 to Walker in 2012.

In January, Walker rejected a proposed Menominee tribal casino, in a move that reportedly benefited the Potawatomi tribe.


Scott Walker's Flip-Flop on Outsourcing of Jobs to Foreign Countries 

During the 2012 presidential campaign Gov. Walker shared his thoughts about what he thought of President Barack Obama's attacks on his GOP challenger, Mitt Romney, over the issue of outsourcing. At the time, Gov. Walker was unambiguous that he felt President Obama was attacking Romney on outsourcing to distract voters from President Obama's poor job performance, saying, "The president's team desperately does not want to run on his record, so they are desperately trying to have it about anything other than his record." However, during his own 2014 gubernatorial campaign against Democratic challenger Mary Burke, Gov. Walker's campaign ran a number of ads attacking Mary Burke for supposedly profiting from outsourcing done by Trek. There's a certain amount of irony in Gov. Walker's attacks on Mary Burke for outsourcing, given that Gov. Walker's own job creation agency gave millions in tax dollars to companies that sent Wisconsin jobs to foreign countries.


Scott Walker's Flip-Flop on Federal Stimulus Dollars 

In 2009, then-Milwaukee County Executive Scott Walker said "Thanks but no thanks" to any federal economic stimulus money for county projects, saying the only federal economic stimuli he endorsed were tax cuts. However, just two short years later, then-Gov. Walker asked the U.S. Department of Agriculture to designate four Wisconsin counties as disaster areas due to crop losses caused in part by unseasonably cold, wet weather. While it's a fair point to note that federal stimulus dollars aren't exactly the same thing as federal disaster relief dollars, I'd argue that the federal stimulus dollars Scott Walker refused for Milwaukee County were absolutely a federal response to a disaster, albeit a nontraditional disaster, in the form of the "great recession" that began under Republican President George W. Bush. Scott Walker's refusal in 2009 to take federal stimulus dollars on behalf of the citizens of Milwaukee County was likely due to his desire to further bolster his conservative credentials to augment his chances heading into the 2010 gubernatorial race here in Wisconsin at the expense of the Milwaukee County citizens he was elected to represent.

These are but four examples of how Scott Walker has completely reversed his stated beliefs when it benefits him or his political ambitions, but there are many more flip-flops and reversals to be found littered throughout his career as a politician. In the interest of keeping this post to a manageable length, I've decided to break his flip-flops into a series of posts, so there will absolutely be more to come in the very near future. Until then, enjoy!




THE SCOTT WALKER SERIES CONTINUES --

with "Is Scott Walker The Principled Leader Republican Voters Hope To Contrast With Clinton?"

"Business leaders often give remarkably bad economic advice, especially in troubled times" (Paul Krugman)

"[D]oesn’t [successful business people's] success with money mean that they know how the economy really works? Actually, no. In fact, business leaders often give remarkably bad economic advice, especially in troubled times."

-- Paul Krugman, in his NYT column today, "Business vs. Economics"

by Ken

PK's column today is one after my own heart. I've tried a number of times to explain this distinction, between business and economic competence, drawing only on my intuitive sense of the critically different way the two groups look at the same problems, and the obviously different economic problems the two groups look at.

From the above quote, PK goes on to say, "I think it's important to understand why," meaning why the "expert" economic perspectives of "people who have been successful in business, like leaders of major corporations, entrepreneurs and wealthy investors," are so often so wide of the mark in terms of the working of economies, as opposed to companies, and offers a couple of pungent examples:

• "the hugely wealthy money managers who warned Ben Bernanke that the Fed’s efforts to boost the economy risked 'currency debasement' ";

• "the many corporate chieftains who solemnly declared that budget deficits were the biggest threat facing America, and that fixing the debt would cause growth to soar."

As it happens, PK is writing from Tokyo, and he has fresh in mind the decision last week by the Bank of Japan, the country's central bank, to pursue a new and aggressive round of monetary measures aimed at fighting the country's persistent economic deflation. The decision was made, he notes, "amid substantial internal dissent," with only five of the bank's nine governors supporting the package, and "with those closest to business voting against."

"Some of the people I’ve spoken to here," he sayd, "argue that the opposition of many Japanese business leaders to the Bank of Japan’s actions shows that it’s on the wrong track."

In saying this, they’re echoing a common sentiment in many countries, including America — the belief that if you want to fix an ailing economy, you should turn to people who have been successful in business, like leaders of major corporations, entrepreneurs and wealthy investors. After all, doesn’t their success with money mean that they know how the economy really works?

Which brings us back to where we started. And in this context we might add that among PK's examples of businesspeople giving lousy economic advice he points out that Japanese business leaders "played an important role in the fiscal mistakes that have undermined recent policy success, calling for a tax hike that caused growth to stall earlier this year, and a second tax hike next year that would be an even worse error."

"On the other side," PK writes,

the past few years have seen repeated vindication for policy makers who have never met a payroll, but do know a lot about economic theory and history. The Federal Reserve and the Bank of England have navigated their way through a once-in-three-generations economic crisis under the leadership of former college professors — Ben Bernanke, Janet Yellen and Mervyn King — who, among other things, had the courage to defy all those tycoons demanding that they stop printing money. The European Central Bank brought the euro back from the brink of collapse under the leadership of Mario Draghi, who spent the bulk of his career in academia and public service.

The point, he stresses, isn't that one group is smarter than the other, but that "success in business does not seem to convey any special insight into economic policy," and he wants to know: Why?

In a moment we're going to have PK referring back to a piece he wrote for the January-February 1996 Harvard Business Review called A Country Is Not a Company." (At that time, for the record, his biographical note began: "Paul Krugman is a professor of economics at Stanford University in Palo Alto. California." Not to be confused, I guess, with the Stanford University in Dirtlick, Alabama.) I'm going to cheat and sneak in the opening of the HBR piece:

College students who plan to go into business often major in economics, but few believe that they will end up using what they hear in the lecture hall. Those students un- derstand a fundamental truth: What they learn in economics courses won't help them run a business.

The converse is also true: What people learn from running a business won't help them formulate economic policy. A country is not a big corporation. The habits of mind that make a great business leader are not, in general, those that make a great economic analyst; an executive who has made $1 billion is rarely the right person to turn to for advice about a $6 trillion economy.

He went on to ask, "Why should that be pointed out?"

After all, neither businesspeople nor economists are usually very good poets, but so what? Yet many people (not least successful business executives themselves) believe that someone who has made a personal fortune will know how to make an entire nation more prosperous. In fact, his or her advice is often disastrously misguided.

I am not claiming that businesspeople are stupid or that economists are particularly smart. On the contrary, if the 100 top U.S. business executives got together with the 100 leading economists, the least impressive of the former group would probably outshine the most impressive of the latter. My point is that the style of thinking necessary for economic analysis is very different from that which leads to success in business. By understanding that difference, we can begin to understand what it means to do good economic analysis and perhaps even help some businesspeople become the great economists they surely have the intellect to be.

In the new NYT column, to answer the question why "success in business does not seem to convey any special insight into economic policy," PK refers back to the title of the HBR piece: "A country is not a company."

National economic policy, even in small countries, needs to take into account kinds of feedback that rarely matter in business life. For example, even the biggest corporations sell only a small fraction of what they make to their own workers, whereas even very small countries mostly sell goods and services to themselves.

It's still worth going back to the HBR piece, where PK had the time and space to go into the vast difference between the kinds of things a corporate executive has to consider and the realities of an entire economy, which includes not just of all the companies that are part of it but a vast assortment of other economic players. looking particularly at the difference between "open systems," like companies, and "closed systems," like countries. This enables him to show how hardly any of the considerations that may be eminently reasonable for a person running an open system apply to a closed one.

In the new piece, PK keeps the explanation simpler:

So think of what happens when a successful businessperson looks at a troubled economy and tries to apply the lessons of business experience. He or (rarely) she sees the troubled economy as something like a troubled company, which needs to cut costs and become competitive. To create jobs, the businessperson thinks, wages must come down, expenses must be reduced; in general, belts must be tightened. And surely gimmicks like deficit spending or printing more money can’t solve what must be a fundamental problem.

In reality, however, cutting wages and spending in a depressed economy just aggravates the real problem, which is inadequate demand. Deficit spending and aggressive money-printing, on the other hand, can help a lot.

He wonders, though, "how this kind of logic [can] be sold to business leaders, especially when it comes from pointy-headed academic types." And he says, "The fate of the world economy may hinge on the answer." He concludes:

Here in Japan, the fight against deflation is all too likely to fail if conventional notions of prudence prevail. But can unconventionality triumph over the instincts of business leaders? Stay tuned.

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