Bloomberg View, in effect the editorial board for the financial news giant Bloomberg, has endorsed raising the Social Security income tax  cap above $110,000.

This helps explain why Bloomberg View supports raising taxes on income over the $110,000 ceiling on wages subject to Social Security’s 12.4 percent payroll tax as part of a plan that closes more than half of the financing gap with new taxes.

Beezer here.  Read the article because it easily drills down through the data showing the challenges Social Security faces.  People will have to save more, particularly those in the labor and lower middle class.  Social Security hasn’t been a front and center component of the Presidential campaigns, although Romney has recently attacked Obama regarding Social Security.  The truth is Romney and Obama both face the necessity to raise SS taxes, either implicitly by raising the SS eligibility age upwards (this age shift upward essentially shifts costs to individuals who will need to save more), or directly in the form of raising the cap, which Bloomberg endorses as part of the long term solution.  Economics Prof. Robert Reich, Labor Secretary during President Bill Clinton’s first term, recommends a new cap of $180,000 which he claims basically makes SS solvent throughout the Baby Boom retirement years.

Now I know why President Obama didn’t become a courtroom lawyer after graduating from Harvard law school.  Last night, Mitt Romney came prepared for a debate.  President Obama came prepared for a BBQ or something.  I don’t think he’s actually seen his own TV ads.

I mean he didn’t even ask where the real Romney was.  You know, the guy who told his real friends 47% of Americans cannot take responsiblity for themselves.

I turned the TV off after about 45 minutes because it became uncomfortably apparent the President was not prepared for a debate.  Romney’s assertions went unchallenged by the President, who was woefully inadequate in his command of the facts.   And there are plenty of facts at hand.  He did not ask Romney for specifics.  Romney ran with nothing new, by the way, so it wasn’t as though he brought out any surprises.

Obama is a terrific orator.  But he was not in a speech contest last night.  He was in a debate.  And based on last night’s perfomances, Romney is a far better debater than Obama.  Round one solidly in favor of Romney.  Romney might as well have been shadow boxing, because no opponent showed up.  Might as well have put Clint Eastwood’s empty chair in the President’s corner.

Economist Paul Krugman, ever a thorn letting the air out of Republican mythology, points out the real statistics regarding government spending.  It’s a return to 1937, where FDR pulled back stimulus only to plunge the nation back into near-Depression.  No wonder we’re slowing down, again.

Remember all the talk a few years back about how we wouldn’t repeat the mistakes of 1937, when FDR pulled back too soon on support for the economy? Here, from FRED, is the rate of change of real government spending per capita (federal, state, and local):

Gosh, I wonder why the economy is underperforming?

Update: Actually, a bit of a longer perspective may be useful. Here’s the same number calculated directly from FRED, using rates of growth: Government current expenditures – GDP deflator (the right measure of inflation) – Growth in civilian noninstitutional population; I’ve left out the immediate post -WWII years because they would spread the scale so much that recent stuff becomes invisible:

So we haven’t seen spending cuts like this since the demobilization that followed the Korean War.

Beezer here.  Add in the austerity induced recession in Europe and you’ve got a problem.  And of course the GOP is more than willing to sacrifice the country’s economy in order to gain political power.

In an obvious attempt to divert attention from the GOP’s quite obvious war on women, presumptive Presidential nominee Mitt Romney today fired off his opening salvo claiming Obama’s policies have hurt women most.  By being very selective in what time period he references Romncy is able to claim that women had lost 92.3% of ‘net total of jobs lost’ since his inauguration.   From the Economix column at the New York Times, written by  Catherine Rampel:

As my colleague Trip Gabriel reports, Mr. Romney has been pointing to the fact that 92.3 percent of the net total of jobs lost since President Obama took office in January 2009 belonged to women.

The net number of jobs held by women has fallen by 683,000 since Mr. Obama’s inauguration, while those held by men have fallen by 57,000. But the statistic is misleading for several reasons.

First, women have lost a lot of jobs in the last three years, but men lost far more jobs during the recession. For this reason, the great recession has also been nicknamed the “mancession.”

Technically, the recession ended in June 2009, but let’s give Mr. Romney the benefit of the doubt and use his chosen benchmark of the start of the Obama presidency. From December 2007, when the recession began, to the Obama inauguration, men lost 3,264,000 jobs, while women lost “only” 1,157,000 jobs.

The chart below shows the monthly change in jobs held by men and women over the last five years. You can see the magnitude of losses by gender  from 2007 to 2011 — and also that job losses have actually turned into job gains in each of the last 10 months for both men and women.

Beezer here.  So Romney cherry picks his dates (notice the recession technically ended a mere six months after Obama was sworn in!) and thus avoids mentioning what is known as the ‘mancession’ because men lost soooo many jobs, and that lets him blame Obama for women losing their jobs.    He also fails to mention that under Obama jobs are being added, not subtracted.  Also not mentioned is that municipal and state governments have been shedding jobs all along and most of those jobs, such as teaching and lower level administration, are dominated by women.  And finally the ‘war on women’ is all about the GOP defunding programs aimed at women, such as planned parenthood and aid to single women and their children. 

Economics professor Robert Reich, Secretary of Labor under President Bill Clinton describes our real problems and calls for Obama to reverse course and aggressively fight the great recession.

Before I turn to the President, though, let’s be clear: The lousy economy is due to insufficient demand. Consumers – who are 70 percent of the economy — can’t and won’t buy because they’re running out of cash. They can’t borrow against homes that are worth a third less than they were five years ago, and most consumers are bad credit risks anyway because they’re losing their jobs and their wages are dropping.  They also have to start saving for the kids’ college or for retirement, which will cut their spending even more.

 Without enough consumers, businesses won’t hire enough people and pay them enough to reverse the vicious cycle. So we’re dead in the water. Even the stock market has caught on to the truth.

Unfortunately for the economy, Reich hears President Obama has thrown in the towel and decided doing much about jobs is a non-starter given the Tea Party controlled House of Representatives.

Which gets me to the President. Even though the President’s two former top economic advisers (Larry Summers and Christy Roemer) have called for a major fiscal boost to the economy, the President has remained mum. Why?

I’m told White House political operatives are against a bold jobs plan. They believe the only jobs plan that could get through Congress would be so watered down as to have almost no impact by Election Day. They also worry the public wouldn’t understand how more government spending in the near term can be consistent with long-term deficit reduction. And they fear Republicans would use any such initiative to further bash Obama as a big spender.

So rather than fight for a bold jobs plan, the White House has apparently decided it’s politically wiser to continue fighting about the deficit. The idea is to keep the public focused on the deficit drama – to convince them their current economic woes have something to do with it, decry Washington’s paralysis over fixing it, and then claim victory over whatever outcome emerges from the process recently negotiated to fix it. They hope all this will distract the public’s attention from the President’s failure to do anything about continuing high unemployment and economic anemia…..

There’s still time for political operatives in the White House – and the person they work for – to change their minds. If economic stresses increase, Americans may insist on government doing more. A CNN poll released Monday found 60% believe the nation remains in an economic downturn and conditions are worsening. Only 36% believed that in April.

But for now the President is being badly advised. The magnitude of the current jobs and growth crisis demands a boldness and urgency that’s utterly lacking. As the President continues to wallow in the quagmire of long-term debt reduction, Congress is on summer recess and the rest of Washington is asleep.

The President should present a bold plan, summon lawmakers back to Washington to pass it, and, if they don’t, vow to fight for it right up through Election Day.

Beezer here.  Incredibly, those who have predicted runaway inflation and counseled austerity as the cure, both in the US and Europe, are still being listened to by politicians.  Everything these people predicted has been totally wrong.  Interest rates have never been lower.  Inflation is subdued to the point of indicating disinflation, even deflation, could be lurking ahead.  Equity markets are struggling to regain their footing because investors know that government austerity and the total lack of any real jobs programs is bad for the economy, not good.    They know that this approach will make debts harder to pay down, not easier.  Bank analysts are busy marking down their predictions for future growth.  Paul Krugman, a leading proponent of larger stimulus and aggressive jobs programs, complains that even though his and Reich’s predictions (among many others including Nobel laureate Joe Stiglitz) have all been correct, political leaders still listen to those who have been wrong all along.

To be an economist of my stripe these days — basically a Keynes-via-Hicks type, who concluded as soon as Lehman fell that we were in a classic liquidity trap with all that implied — is a bittersweet experience, with the bitter vastly greater than the sweet.

The good news, such as it is, is that our underlying model has performed very well. Interest rates have stayed low despite large government borrowing; crowding out has been totally absent; huge increases in the monetary base have not been highly inflationary.

The bad news is that policy makers almost everywhere have failed dismally, and seem determined not to take on board the lessons of experience, either historical or what we’ve learned the past few years. As Joe Stiglitz says,

When the recession began there were many wise words about having learnt the lessons of both the Great Depression and Japan’s long malaise. Now we know we didn’t learn a thing. Our stimulus was too weak, too short and not well designed. The banks weren’t forced to return to lending. Our leaders tried papering over the economy’s weaknesses – perhaps out of fear that if we were honest about them, already fragile confidence would erode. But that was a gamble we have now lost. Now the scale of the problem is apparent, a new confidence has emerged: confidence that matters will get worse, whatever action we take. A long malaise now seems like the optimistic scenario.

Robert Reich, talking to people in the administration, says that there has been a deliberate decision to focus on the wrong issues, knowing that they’re the wrong issues:

So rather than fight for a bold jobs plan, the White House has apparently decided it’s politically wiser to continue fighting about the deficit. The idea is to keep the public focused on the deficit drama – to convince them their current economic woes have something to do with it, decry Washington’s paralysis over fixing it, and then claim victory over whatever outcome emerges from the process recently negotiated to fix it. They hope all this will distract the public’s attention from the President’s failure to do anything about continuing high unemployment and economic anemia.

And in Europe, says Kantoos Economics, a low inflation target has become a sacred icon even though all evidence – including the experience under the gold standard! — says that this will be fatal:

I sincerely do hope that I read the wrong newspapers and missed all those European economists and commentators screaming all these things (or even better: that I am wrong). But whenever I try to hear something, there is just silence – or Axel Weber lashing out at Olivier Blanchard. Meanwhile, European policy makers and central bankers are wrecking one of the most fascinating projects in human history, the unity and friendship among the countries of Europe. This is beyond depressing. Way beyond.

I’m still trying to make sense of this global intellectual failure. But the results are not in question: we are making a total mess of a solvable problem, with consequences that will haunt us for decades to come.

Beezer here.  Hat tip once again to economics professor Mark Thoma’s economist’s view blogsite.  Everyday Thoma’s site scours the internet landscape culling the best economic thinking and highlighting it at economist’s view.  A first must-read for anyone seriously interested in understanding our nation’s economy, and the politics of it all.

Emory University professor of psychology, Drew Westen, has written a brilliant essay analyzing why President Obama’s performance falls far short of the hopes and aspirations his campaign rhetoric encouraged, at least among Democrats.  But the essay’s most valuable contribution is that it provides the narrative Democrats can use to bring real reform from the bottom up instead of waiting for Obama, somehow, to fight for the values he so clearly espoused in his campaign speeches.  Here’s the specific part of the essay explaining the narrative in the form of a  brief speech Obama could have made many times, but never has.

When Barack Obama rose to the lectern on Inauguration Day, the nation was in tatters. Americans were scared and angry. The economy was spinning in reverse. Three-quarters of a million people lost their jobs that month. Many had lost their homes, and with them the only nest eggs they had. Even the usually impervious upper middle class had seen a decade of stagnant or declining investment, with the stock market dropping in value with no end in sight. Hope was as scarce as credit.

In that context, Americans needed their president to tell them a story that made sense of what they had just been through, what caused it, and how it was going to end. They needed to hear that he understood what they were feeling, that he would track down those responsible for their pain and suffering, and that he would restore order and safety. What they were waiting for, in broad strokes, was a story something like this:

“I know you’re scared and angry. Many of you have lost your jobs, your homes, your hope. This was a disaster, but it was not a natural disaster. It was made by Wall Street gamblers who speculated with your lives and futures. It was made by conservative extremists who told us that if we just eliminated regulations and rewarded greed and recklessness, it would all work out. But it didn’t work out. And it didn’t work out 80 years ago, when the same people sold our grandparents the same bill of goods, with the same results. But we learned something from our grandparents about how to fix it, and we will draw on their wisdom. We will restore business confidence the old-fashioned way: by putting money back in the pockets of working Americans by putting them back to work, and by restoring integrity to our financial markets and demanding it of those who want to run them. I can’t promise that we won’t make mistakes along the way. But I can promise you that they will be honest mistakes, and that your government has your back again.”

 A story isn’t a policy. But that simple narrative — and the policies that would naturally have flowed from it — would have inoculated against much of what was to come in the intervening two and a half years of failed government, idled factories and idled hands. That story would have made clear that the president understood that the American people had given Democrats the presidency and majorities in both houses of Congress to fix the mess the Republicans and Wall Street had made of the country, and that this would not be a power-sharing arrangement. It would have made clear that the problem wasn’t tax-and-spend liberalism or the deficit — a deficit that didn’t exist until George W. Bush gave nearly $2 trillion in tax breaks largely to the wealthiest Americans and squandered $1 trillion in two wars.

Beezer here. This is the narrative that deserves to be repeated many, many times–enough times to stand up to the well heeled public relations firms and lobbyists on K Street who promote the conservative mantra.   The only way that can be done effectively is at the ground level in political races from town selectmen up to State Senators and to federal races.   Even FDR was at times too timid when he first took office in the teeth of the Great Depression.  At one point he is reported to have said ”I agree with you, I want to do it, now make me do it.”   It would be nice if Obama took up this narrative, but if he doesn’t he must be forced to.