In what will be a surprise to many New Yorkers, the city isn’t the most expensive place in the country to rent a modest two-bedroom apartment, a new report released has found. In fact, it’s not even the most expensive rental market in the region.

San Francisco has the most costly rents for non-luxury two-bedrooms, followed by the Stamford-Norwalk area in Connecticut and Honolulu, according to the annual study released Tuesday by the National Low-Income Housing Coalition, a group that advocates for affordable housing. New York City ranked 14th on the list; Long Island’s fourth-place ranking among metropolitan areas made it the most expensive two-bedroom rental market in New York state.

The study tracks “fair market rents” for two-bedroom apartments, a measure defined by the federal government that seeks to estimate the cost of a non-luxury rental unit in each area’s current market.

The average New York City fair market rent for a two-bedroom was $1,424 a month, trailing Long Island at $1,682 a month and even the $1,302 statewide average price for New Jersey, according to the report.

San Francisco, in contrast, had a fair market rent of $1,905 a month. The national average is $949.

The Republicans are a sick joke, and their narrow ideological stupidity has left rational voters no choice in the coming presidential election but Barack Obama. With Ron Paul out of it and warmongering hedge fund hustler Mitt Romney the likely Republican nominee, the GOP has defined itself indelibly as the party of moneyed greed and unfettered imperialism.

Mayor Michael R. Bloomberg signed a bill on Monday that extended the city’s participation in rent regulation for another three years by redeclaring a state of housing emergency, even as a challenge to rent regulation laws looms in the United States Supreme Court.

“The Department of Housing Preservation and Development reports the vacancy rate in rental apartments to be at 3.12 percent,” Mr. Bloomberg said at the bill-signing ceremony. That, he continued, is “well below the 5 percent rate at which the law requires that rent regulation be discontinued.”

The city has had a vacancy rate of less than 5 percent since the department began keeping track more than 40 years ago, which means it has been in a state of housing emergency for all that time. But critics of rent regulation argue that an emergency by definition must be temporary.

Among them are James D. and Jeanne Harmon, who own a brownstone on the Upper West Side that has rent-stabilized apartments. The Harmons have been challenging the state’s rent-regulation laws, and they have taken their battle to the Supreme Court.

What’s the difference between price controls on milk and price controls on rent? Do landlords in Manhattan and trailer-park owners near San Diego have the same rights? Is rent stabilization in New York City a foolish racket or a rational policy to help tenants?

The fate of New York City’s rent laws could hinge on answers to these questions. As the Journal reported Monday, the U.S. Supreme Court is taking a surprisingly serious look at a federal lawsuit in which a Manhattan couple is trying to overturn the regulations shielding their tenants.

James and Jeanne Harmon, the owners of an Upper West Side brownstone, are waging an underdog constitutional battle against rent rules forcing them to subsidize their tenants — including Nancy Wing Lombardi, an executive who pays about $1,000 a month for a one-bedroom unit and also owns a house in the Hamptons.

Few expected the case — swatted down by lower courts — would get to this point. In a twist that startled both critics and champions of rent controls, the Supreme Court this winter asked the city and the state to explain why the court shouldn’t hear the couple’s case.

On Monday, the Bloomberg administration and New York Attorney General Eric Schneiderman submitted to the high court their opposition briefs defending the merits of the state-enforced and locally adopted Rent Stabilization Law, the blanket of rent regulations covering about two million renters in the city. In separate briefs, Schneiderman and the city’s corporation counsel, Michael Cardozo, laid out similar arguments, but the attorney general’s brief also presented a more spirited defense of rent controls as a matter of policy. (See the city’s brief here.)

Here’s a primer on the key points from the legal arguments:

“The president is wrong.” So says one of the newly appointed co-chairs of President Barack Obama’s re-election campaign.

Those four words headline the website of the organization Progressives United, founded by former U.S. Sen., and now Obama campaign adviser, Russ Feingold. He is referring to Obama’s recent announcement that he will accept super PAC funds for his re-election campaign. Feingold writes: “The President is wrong to embrace the corrupt corporate politics of Citizens United through the use of Super PACs—organizations that raise unlimited amounts of money from corporations and the richest individuals, sometimes in total secrecy. It’s not just bad policy; it’s also dumb strategy.” And, he says, it’s “dancing with the devil.”

...

As I interviewed Feingold, just hours after he was named one of the 35 Obama campaign co-chairs, I asked him if he was an odd choice for the position. Feingold responded: “How about a co-chair that’s proud of him for bringing us health care for the first time in 70 years? How about a co-chair who thinks that he has actually done a good thing with the economy and helped with the stimulus package, and we’ve had 22 months of positive job growth? How about a co-chair for a president that has the best reputation overseas of any president in memory, that has reversed the awful damage of the Bush administration, who in places like Cairo and in India and Indonesia has reached out to the rest of the world. Believe me, on balance, there’s no question. And finally, how about a co-chair of a president who I believe will help us appoint justices who will overturn Citizens United?”

Until then, as the Obama campaign “dances with the devil” of super PACs, perhaps campaign co-chair Russ Feingold will help us follow the money.

So there was big news yesterday on the foreclosure settlement front. We still have to wait and see what the final deal looks like, but there are reports out that the long-awaited settlement is a far, far better deal for the public than expected. If these reports are true, it looks like New York Attorney General Eric Schneiderman and California AG Kamala Harris have scored an enormous victory in narrowing the scope of the settlement to the point where it really only covers robosigning abuses.

According to reports (like this one in the Huffington Post), the deal will not include:

1. Criminal liability.
2. Tax liability
3. Fair lending, fair housing, or any other civil rights claim.
4. Federal Housing Finance Agency or the GSEs [Fannie Mae and Freddie Mac]
5. CFPB claims for the period after they came into existence in July 2011
6. SEC claims
7. National Credit Union Association Claims
8. FDIC claims
9. Federal Reserve Board claims
10. MERS claims

If that is true, and all of those things are out of the deal, and the banks are still exposed to liability not only for all of those things, but also for the broad range of offenses related to securitization, then $25 billion, dare I say it, might not even be a completely sucky number

During Tuesday night's New Hampshire Primary election coverage, Lawrence O'Donnell hilariously and saliently described Ron Paul as "not a candidate," therefore Jon Huntsman was the realistic second place winner, though not technically since he placed third on paper. Likewise, Mother Jones' Kevin Drum recently wrote that Ron Paul is a "crackpot."

Naturally, they're both correct. Times a thousand.

But a million Elvis fans can't be wrong. Or can they? In other words, Ron Paul supporters are easily some of the most exuberant, die-hard, overzealous political activists around, and you'll probably get a hearty sampling of that zealotry in the comments below this post. Nevertheless, the perpetual question about a movement like this is: how can so many people be so completely delusional?

The word "cult" is often employed in political contests, but seldom in recent history has it been more appropriate than when describing the so-called Ron Paul Revolution. Specifically, Ron Paul has no chance of winning the nomination (and he doesn't really want to); if a miracle happens and he actually does win the nomination and, subsequently, the presidency, he has no chance to successfully govern; and his libertarianism is pure hocus-pocus science fiction, evidenced by the fact that it's never been successfully implemented. Ever. But Ron Paul's supporters don't know it. Or, at least, none of them can describe a single instance in history when such a system has prospered without serious consequences and horrendous side-effects.

The GOP is engaged in a wholesale effort to redefine the government help that Americans take for granted as an effort to create a radically new, statist society. Consider Romney’s claim in his Bedford speech: “President Obama believes that government should create equal outcomes. In an entitlement society, everyone receives the same or similar rewards, regardless of education, effort and willingness to take risk. That which is earned by some is redistributed to the others. And the only people who truly enjoy any real rewards are those who do the redistributing—the government.”

Obama believes no such thing. If he did, why are so many continuing to make bundles on Wall Street? As my colleagues Greg Sargent and Paul Krugman have been insisting, Romney is saying things about the president that are flatly, grossly and shamefully untrue. But Romney’s sleight of hand is revealing: Republicans are increasingly inclined to argue that any redistribution (and Social Security, Medicare, student loans, veterans benefits and food stamps are all redistributive) is but a step down the road to some radically egalitarian dystopia.

Obama will thus be the conservative in 2012, in the truest sense of that word. He is the candidate defending the modestly redistributive and regulatory government the country has relied on since the New Deal, and that neither Ronald Reagan nor George W. Bush dismantled. The rhetoric of the 2012 Republicans suggests they want to go far beyond where Reagan or Bush ever went. And here’s the irony: By raising the stakes of 2012 so high, Republicans will be playing into Obama’s hands. The GOP might well win a referendum on the state of the economy. But if this is instead a larger-scale referendum on whether government should be “inconsequential,” Republicans will find the consequences to be very disappointing.

Held aloft by the highest approval ratings of any governor in America, Andrew Cuomo scarcely seemed to worry about angering his state’s progressives, who were disappointed by his refusal to extend a state surtax on New York’s millionaires. But in what may come to be regarded as a watershed moment in his tenure, Cuomo now plans a sweeping tax reform that is expected to demand more, not less, from the state’s wealthiest, while reducing the burden on the middle class—in the name of “fundamental fairness.”

Over the weekend, rumors of a shift in Cuomo’s anti-tax position began to circulate, confirmed on Monday morning when his office dispatched a short essay by the governor to newspaper editors around the state arguing that New York’s current tax code is “unfair” to the middle class and inhibits economic growth.

Rather than the expiring surcharges, which Cuomo castigates for raising the taxes of families making $200,000 a year—“hardly millionaires,” as he put it—his proposed new system would add higher brackets at the top end and lower brackets in the middle. Although he didn’t offer details yet, his aims are clear enough:

The president's speech Tuesday in Osawatomie, Kansas -- where Teddy Roosevelt gave his "New Nationalism" speech in 1910 -- is the most important economic speech of his presidency in terms of connecting the dots, laying out the reasons behind our economic and political crises, and asserting a willingness to take on the powerful and the privileged that have gamed the system to their advantage.

Here are the highlights (and, if you'll pardon me, my annotations):

It did not take long before I was old enough to realize that the largesse of Thanksgiving was the rare exception, and that “just getting by,” as my mother’s brave optimism would have it, was the norm. Getting by, thanks to Mom’s piecework in the downtown sweatshops and my mechanic father’s signing on to one of the New Deal’s public jobs programs.

Then came the economic miracle of World War II, dismissed in its day by some Republicans as Franklin Roosevelt’s treachery, and my parents and other relatives got their jobs back. The relevance of the wartime jobs to Thanksgiving in our family was that my Uncle Edward, the welder, was rewarded every year at his plant with one enormous turkey or two smaller ones.

The result was what I recall as an annual day of bloating, as if my extended family was frantically storing calories in preparation for a severe economic winter that was certain to return. But for us it didn’t return. Not with the good union jobs that abounded in the postwar boom and the opportunities provided by the GI Bill and the spread of affordable college education that made upward mobility a truly plausible American goal.

In the pantheon of billionaires without shame, Michael Bloomberg, the Wall Street banker-turned-business-press-lord-turned-mayor, is now secure at the top. What is so offensive is that someone who abetted Wall Street greed, and benefited as much as anyone from it, has no compunction about ruthlessly repressing those who dare exercise their constitutional “right of the people peaceably to assemble, and to petition the Government for a redress of grievances” that he helped to create.

You would think that a former partner at the investment bank Solomon Brothers, which originated mortgage-backed securities, a man who then partnered with Merrill Lynch in the high-speed computerized trading that has led to so much financial manipulation, would have some sense of his own culpability. Or at least that someone whose Wall Street career left him with a net worth of $19.5 billion would grasp the deep irony of his being the instrument for smashing Occupy Wall Street, the internationally acknowledged symbol of opposition to corporate avarice.

But only in America is the arrogance of the superrich so perfectly concealed by the pretense of democracy that the 12th richest man in the nation can suppress dissent against corporate rapacity and expect his brutal actions to be viewed not as a means of preserving his own class privilege but as bureaucratically necessary to providing sanitary streets.

The author makes the case that Obama does not have a chance to win in 2012 unless he carries the heartland, including rust-belt states like Pennsylvania and Ohio. There are aspects of Obama's record which are laudable, but his record isn't going to be enough with the economy still in such terrible condition. Obama will have to retool with another aggressive round of remedial action to turn things around. None of these ideas are brand new, but they are cast in a starkly political light here.

 

How can Obama recast the economic discussion? Here's my best shot:

First, he must acknowledge Americans' sense of being stuck and then explain why recovery from this downturn has been so painfully slow -- in particular, the impact of the financial collapse and our excessive debt burden, private as well as public.

Second, he must display some humility and acknowledge that he didn't get everything right. It was a mistake not to underscore the difficulty of our circumstances right from the start. It was a mistake to predict that unemployment would peak at 8 percent if his stimulus bill were enacted. While it was necessary to save the big financial institutions from a total meltdown, it was a mistake to ask so little from them institutions in return. And it was a mistake to act so timidly in the face of a housing and mortgage crisis that has cost the middle class many trillions of dollars in lost wealth.

Third, he should emphasize what most Americans believe: without the steps his administration took at the depth of the crisis, there might well have been a second Great Depression. Sure, "It could have been much worse" isn't much of a bumper sticker, but it's a place to start, and it has the merit of being true.

Fourth, what he has done so far has not only halted the decline but has yielded more than twenty consecutive months of growth in private sector jobs -- progress that would be more noticeable if states and localities hadn't been shedding so many employees in response to the squeeze on their budgets.

Fifth, while most Americans didn't like it when his administration intervened to save GM and Chrysler, it was the right thing to do, not only for auto workers, but for much of the heartland's economy as well. Allowing these two firms to dissolve would have broken the back of regions already struggling with double-digit unemployment. Leadership means doing what's necessary and right, even when it's unpopular.

Sixth, we now have the opportunity to build on the foundation laid during this painful period in our history. Obama can emphasize steps such as: a bold new response to housing foreclosures and underwater mortgages; an infrastructure bank that mobilizes both domestic and foreign capital to put Americans back to work on projects that will strengthen our economy; and a tougher stance vis-à-vis Chinese policies that have taken their toll on American workers and firms. And yes, we need to come together around fundamental spending and tax reform that can stabilize our fiscal future without further undermining the hard-pressed middle class.

That's the guts of the affirmative case Obama can make.

On planet Washington, where reducing the federal budget deficit continues to be more important than creating jobs, everyone is talking about "triggers" that automatically go into effect if certain other things don't happen.

Yet no one is talking about the most obvious trigger of all -- no budget cuts until the official level of unemployment falls to 5 percent, its level before the Great Recession.

The biggest trigger on the minds of Washington insiders is $1.2 trillion across-the-board cuts that will automatically occur if Congress's super committee doesn't come up with at least $1.2 trillion of cuts on its own that Congress agrees to by December 23.

That automatic trigger seems likelier by the day because at this point the odds of an agreement are roughly zero.

Here's the truly insane thing: The triggered cuts start in 2013, a little over a year from now.

Yet no one in their right mind believes unemployment will be lower than 8 percent by then.

We’ve been at war for decades now—not just in Afghanistan or Iraq, but right here at home. Domestically, it’s been a war against the poor, but if you hadn’t noticed, that’s not surprising. You wouldn’t often have found the casualty figures from this particular conflict in your local newspaper or on the nightly TV news. Devastating as it’s been, the war against the poor has gone largely unnoticed—until now.

The Occupy Wall Street movement has already made the concentration of wealth at the top of this society a central issue in American politics. Now, it promises to do something similar when it comes to the realities of poverty in this country.

By making Wall Street its symbolic target, and branding itself as a movement of the 99%, OWS has redirected public attention to the issue of extreme inequality, which it has recast as, essentially, a moral problem. Only a short time ago, the “morals” issue in politics meant the propriety of sexual preferences, reproductive behavior, or the personal behavior of presidents. Economic policy, including tax cuts for the rich, subsidies and government protection for insurance and pharmaceutical companies, and financial deregulation, was shrouded in clouds of propaganda or simply considered too complex for ordinary Americans to grasp.

Sometimes there isn’t a mountaintop high enough to shout out the obvious: SUPPLY-SIDE ECONOMICS HAS BEEN AN UNMITIGATED DISASTER! Period, end of discussion.

The facts are as clear as the nose on your face.  Not only has this bastard-child of an economic scheme been responsible for the bulk of the U.S. debt over the last three decades, which the vaunted defenders of the faith fail to even acknowledge, it has been responsible for the biggest upward redistribution of wealth in this country since the 1800s – the time of the great land barons.

 

WASHINGTON -- The Obama administration is introducing a new program on Monday designed to lower monthly mortgage payments for more troubled homeowners.

But a key new condition in the plan would shift the financial liability for refinanced loans from Wall Street banks to the American taxpayer. And by focusing on lower payments, the program does not confront what housing experts view as the core problem in the foreclosure crisis -- borrower debt that exceeds the value of one's home.

As the U.S. Senate prepares to vote down legislation that would raise tax rates on the wealthiest Americans to pay for a jobs plan that most economists believe would stop the recession, a new poll has surfaced showing just how out of touch those Senators are with mainstream America.

According to figures released by Bloomberg and The Washington Post on Tuesday, eight in 10 Americans, including a majority of Republicans, support raising taxes on households earning over $250,000 a year. A full 81 percent of Democrats were behind the plan, along with 67 percent of independents and 53 percent of Republicans.

 

The elites believe, and seek to make us believe, that globalization and unfettered capitalism are natural law, some kind of permanent and eternal dynamic that can never be altered. What the elites fail to realize is that rebellion will not stop until the corporate state is extinguished. It will not stop until there is an end to the corporate abuse of the poor, the working class, the elderly, the sick, children, those being slaughtered in our imperial wars and tortured in our black sites. It will not stop until foreclosures and bank repossessions stop. It will not stop until students no longer have to go into debt to be educated, and families no longer have to plunge into bankruptcy to pay medical bills. It will not stop until the corporate destruction of the ecosystem stops, and our relationships with each other and the planet are radically reconfigured. And that is why the elites, and the rotted and degenerate system of corporate power they sustain, are in trouble. That is why they keep asking what the demands are. They don’t understand what is happening. They are deaf, dumb and blind.

There are no excuses left. Either you join the revolt taking place on Wall Street and in the financial districts of other cities across the country or you stand on the wrong side of history. Either you obstruct, in the only form left to us, which is civil disobedience, the plundering by the criminal class on Wall Street and accelerated destruction of the ecosystem that sustains the human species, or become the passive enabler of a monstrous evil. Either you taste, feel and smell the intoxication of freedom and revolt or sink into the miasma of despair and apathy. Either you are a rebel or a slave.

It’s getting too late to give President Barack Obama a pass on the economy. Sure, he inherited an enormous mess from George W., who whistled “Dixie” while the banking system imploded. But it’s time for Democrats to admit that their guy bears considerable responsibility for not turning things around.

Two cheers for the president and his America's Jobs Act. Cheer Number One: In presenting it to a joint session of Congress, he sounded as passionate and determined as he's ever sounded.

Second cheer: He laid out the problem correctly and effectively. He explained why jobs and growth must be the nation's first priority now -- not the federal deficit. The economy is in crisis. People are hurting. So government must act, and act quickly. It's irresponsible at a time like this to suggest that government should simply close down.

But a jeer because the jobs plan he presented isn't nearly large enough or bold enough to make a major dent in unemployment, or to restart the economy.

President Obama has only one option as he ponders a world economy teetering on the edge: He needs to go big, go long and go global.

Obama should not be constrained by what the tea party might allow subservient Republican leaders in Congress to do. He should state plainly, eloquently and in detail what he thinks needs to happen. Neither history nor the voters will be kind to him if he lets caution and political calculation get in the way.

When an economy is in a slump and the fear of debt overhang and default surrounds us, there is a tendency to tighten our belts. But these actions only serve to deepen the slump. Economists suggest that to offset private caution, we should resort to public sector stimulus. Hopefully, such stimulus is directed toward building things that boost our future productivity, like science and research, infrastructure repairs and upgrades, and education. In the short term, the economic activity created by these investments allows people to work out from under debt overhangs and leads to more private sector jobs. Investing in these things will also make it easier in the future to pay off the debt incurred in the slump.

When coherent and rational approaches have left the building, as they have in the current U.S. ideological conflict over the role of government, what else can still be done?

Expansionary monetary policy, aka "quantitative easing," is one thing, but its effectiveness is questionable.

It is unfathomable that yet another Texas blowhard governor has emerged as a front-runner for the GOP presidential nomination. The persistent appeal of the mythology of Texas as a model for the nation defies the lessons of logic and experience, and yet here we are with Rick Perry, a George W. Bush look-alike, as a prime contender to once again run our nation into the ground.

To begin with,

WASHINGTON -- It's become almost daily practice for President Barack Obama to point out the four things he says Congress can pass now to create jobs "immediately," if only lawmakers would act: infrastructure investments, patent reform, free trade deals and a payroll tax cut extension.

But even if all four proposals became law -- a huge "if" with a dug-in House GOP -- it's not clear they would actually create jobs. In fact, the proposals with the best shot of passing Congress appear the least likely to create jobs. One of the most likely to pass, the trade pacts, will probably cost jobs.

What a year. Rage in London, Egypt, Athens, Damascus. All real. Just a metaphor in the new “Planet of the Apes” film? No, much more. Warning: More rage is dead ahead. Across our planet a new generation is filled with rage. High unemployment. Raging inflation. Dreams lost. Hope gone. While the super -rich get richer and richer.

Listen to that hissing: The fuse is rapidly burning, warning us. Wake up before the rage explodes in your face. This firestorm is endangering America’s future. From forces outside, yes. But far more deadly, from deep within our collective psyche. We have lost our moral compass. We are self-destructing.

Crackpot warning? No. This warning comes from the elite International Monetary Fund. A recent IMF report looked at “the causes of the two major U.S. economic crises over the past 100 years, the Great Depression of 1929 and the Great Recession of 2007,” writes Rana Foroohar, an economics editor at Time magazine. 

“There are two remarkable similarities in the eras that preceded these crises. Both saw a sharp increase in income inequality and household-debt-to-income ratios.” And in each case, “as the poor and middle-class were squeezed, they tried to cope by borrowing to maintain their standard of living.”

But the rich “got richer, by lending, and looked for more places to invest, bidding up securities that eventually exploded in everyone’s face. In both eras, financial deregulation and loose monetary policies played roles in creating the bubble. But inequality itself — and the political pressure not to reverse it, but to hide it — was a crucial factor in the meltdown. The shrinking middle isn’t a symptom of the downturn. It’s the source of it.” Today the consequences of the meltdown still haunt us — there’s more to come.

The next bubble

There’s a new bubble blowing. No one can stop it ... soon it will explode.

Get it? There’s enormous “political pressure not to reverse” inequality till it “explodes in our faces.” We deny the inequality between rich and the other 99%. The rich are addicts. More is never enough. They thrive on greed, blind to the needs of others. Worse, they have no commitment to America as a nation. From Forbes billionaires and signers of “no new taxes” pledges, to Mitch McConnell’s un-American willingness to sabotage the economy to deliver on his main promise to make Obama a one-term president.

A front page story in Sunday's New York Times gave the country the bad news. President Obama is no longer paying attention to economists and economics in designing economic policy. Instead, he will do what his campaign people tell him will get him re-elected, presumably by getting lots of money from Wall Street.
The article said that President Obama intends to focus on reducing government spending and cutting programs like social security and Medicare. This is in spite of the fact that: "A wide range of economists say the administration should call for a new round of stimulus spending, as prescribed by mainstream economic theory, to create jobs and promote growth."
In other words, President Obama intends to ignore the path for getting the economy back to full employment that most economists advocate. Instead, he is going to cut government spending – because his chief of staff and former JP Morgan vice president Bill Daley and his top campaign adviser David Plouffe both say this is a good idea.

The whole thing is nuts. The economy is a shambles, saved from a free fall only by the Federal Reserve’s unprecedented promise of free money for banks for at least two years. That’s how long a seven-member majority of the Fed’s Open Market Committee expects it to take for significant relief to take hold for the 25 million Americans who can’t find full-time employment.

President Obama is a strange man whose sincere desire to restore cooperation and civility to government is admirable, but for nearly three years has been unreciprocated. Despite that, he seems unwilling to be president. What a contrast he makes to George W. Bush, in his boots and with his swagger—the Decider who promised “to create chaos, to create a vacuum” in every corner of the world if that were necessary to save America from the mortal threat he saw everywhere, and ruthlessly started out keeping that promise. He left Obama with the wreckage.

Standard & Poor's downgrade of America's debt couldn't come at a worse time. The result is likely to be higher borrowing costs for the government at all levels, and higher interest on your variable-rate mortgage, your auto loan, your credit card loans, and every other penny you borrow.

Why did S&P do it?

Not because America failed to pay its creditors on time. As you may have noticed, we avoided a default.

And not because we might fail to pay our bills at the end of 2012 if tea-party Republicans again hold the nation hostage when their votes will next be needed to raise the debt ceiling. This is a legitimate worry and might have been grounds for a downgrade, but it's not S&P's rationale.

S&P has downgraded the U.S. because it doesn't think we're on track to reduce the nation's debt enough to satisfy S&P -- and we're not doing it in a way S&P prefers.

Of all the ways President Barack Obama tried to rationalize his surrender to the Republicans, none was more infuriating than when he said the deficit deal would lead to the “lowest level of annual domestic spending since Dwight Eisenhower was president.”

Since Eisenhower was president? That was half a century ago—before the Civil Rights Act, the Voting Rights Act, Medicare, Medicaid, food stamps and federal aid to education, including Head Start.

“These programs defined America as a decent, yes, a Great Society,” Democratic Sen. Tom Harkin of Iowa said Monday during the debate on the so-called compromise debt settlement. What President Obama supported, he said, was “tantamount to repeal of the Great Society.”

The die has been cast. Obama’s “nearly complete capitulation to the hostage-taking demands of Republican extremists,” as an editorial in the normally sedate New York Times described the deal to raise the debt ceiling, is a disaster in the making. It rules out a vigorous government response to the persistent economic stagnation in which joblessness, housing foreclosures and an ever-widening gap between the top 2 percent and the rest of Americans have become the norm.

But to use the word “capitulation” is too kind, since this president, as was Bill Clinton before him, is clearly one of those “New Democrats” who welcomes the opportunity to jettison the legacy of Franklin Delano Roosevelt as outmoded political baggage. Otherwise, why would Obama have reached for a “grand bargain” in which he even put Social Security and Medicare cuts on the table before the Republicans rolled him?

President Barack Obama touted his debt ceiling deal Tuesday, saying, “We can’t balance the budget on the backs of the very people who have borne the biggest brunt of this recession.” Yet that is what he and his coterie of Wall Street advisers have done.

In the affairs of nations, Alexander Hamilton wrote in January 1790, “loans in times of public danger, especially from foreign war, are found an indispensable resource.” It was his first report as secretary of the treasury to the new Congress of the United States. The country had borrowed to fight the Revolutionary War, and Hamilton proposed a system of public debt to pay those loans.

The history of the U.S. national debt is inexorably tied to its many wars.

foreigners hold of the United States. This was displayed during the ignorant and solipsistic debate over when or whether the United States will pay its debts, which concluded Tuesday with a promise that it will soon be renewed. The debate was conducted as if foreign lenders had no role in the affair, and as if “the full faith and credit” of the United States were not a guarantee freely offered to those who in the past chose to purchase American bonds and other obligations.

The belief held by members of the House of Representatives and the Senate that the U.S. is the greatest country in history is good enough for them, and in their view ought to be good enough for everyone else.

It’s supremely galling. It’s unbalanced, unfair and mostly unwise. For President Obama and the Democratic Party, it’s a comprehensive defeat. But it’s not the end of the world.

The deal struck Sunday to free the U.S. economy from its Republican hostage-takers is impossible for progressives to love. It gets all the big things wrong, starting with the most fundamental: Obama never should have acquiesced in linking a routine hike in the debt ceiling—necessary to pay bills Congress has already incurred—with all the difficult spending questions that should be dealt with in the budget process.

Obama’s starting point was a demand for a “clean,” unencumbered bill to raise the ceiling; House Speaker John Boehner said no. What would have happened if Obama refused to budge? We don’t know because that’s not his style. It would be nice, someday, to find out.

Anyone who characterizes the deal between the president, Democratic, and Republican leaders as a victory for the American people over partisanship understands neither economics nor politics.

The deal does not raise taxes on America's wealthy and most fortunate -- who are now taking home a larger share of total income and wealth, and whose tax rates are already lower than they have been in eighty years. Yet it puts the nation's most important safety nets and public investments on the chopping block.

It also hobbles the capacity of the government to respond to the jobs and growth crisis. Added to the cuts already underway by state and local governments, the deal's spending cuts increase the odds of a double-dip recession. And the deal strengthens the political hand of the radical right.

Yes, the deal is preferable to the unfolding economic catastrophe of a default on the debt of the U.S. government. The outrage and the shame is it has come to this choice.

Nobel Prize winning economist Paul Krugman warned Sunday that proposed spending cuts in a deal to raise the nation’s debt ceiling would end up hurting the economy.

“From the perspective of a rational person, we shouldn’t even be talking about spending cuts at all now,” Krugman told ABC’s Christiane Amanpour. “We have nine percent unemployment. These spending cuts are going to worsen unemployment… If you have a situation in which you are permanently going to raise the unemployment rate — which is what this is going to do — that’s actually going to reduce future revenues.”

 

With that backdrop, President Obama may find that there is only one course left to avoid a global economic calamity: Invoke Section 4 of the Fourteenth Amendment, which says that “the validity of the public debt of the United States … shall not be questioned.” This constitutional option is one that the president alone may exercise.
If the Aug. 2 deadline arrives and no deal has been made, Obama could use a plain reading of that text to conclude—statutory debt ceiling or not—that he is constitutionally required to order the Treasury to continue paying America’s bills. In that sense, this is not just a constitutional option, it is a constitutional obligation, one even the Tea Party will have trouble denying.

As Coy concluded commenting that cuts would be needed to Social Security and other entitlements, C-SPAN moderator Susan Swain pointed out that Coy's chart showed a long-term surplus for Social Security of $22 trillion. Coy confirmed  as accurate her interpretation of the chart and, after some stumbling, admitted that, "The trust fund is not the crucial issue."  Indeed, his own figures show that it is not an issue at all. So, why did he continue to insist that Social Security cuts are needed?

Social Security should not be part of the debt ceiling discussion. The whole notion that social security is doomed to collapse is a blatant lie. The misinformed have bought into this and now we have a real chance of losing a safety net for our seniors. Please wake up America before it's too late.

This article was written by an investment manager who works with very wealthy clients. I knew him from decades ago, but he recently e-mailed me with some concerns he had about what was happening with the economy. What he had to say was informative enough that I asked if he might fashion what he had told me into a document for the Who Rules America Web site. He agreed to do so, but only on the condition that the document be anonymous, because he does not want to jeopardize his relationships with his clients or other investment professionals.

A lot of Democrats took one look at the McConnell plan, which would raise the debt ceiling without substantive fiscal concessions, and saw their way out of this mess. But not the White House. What’s come clear in recent weeks is that the Obama administration is much more intent on reaching a major deficit deal, and much less intent on making revenues a major part of it, than most observers assumed.

That’s led them to offer Republicans a deal that is not only much farther to the right than anyone had predicted, but also much farther to the right than most realize.

Here are the Administration’s arguments, in summary form.

1. Finishing off deficit reduction, which is crowding out all other issues in Washington, will allow for job creation measures to come back onto the table.
2. Only the big deal would include stimulus measures, like extending the payroll tax cut or unemployment insurance. A smaller deal won’t.
3. Republicans will demand and get immediate spending cuts if there’s no deal, by slashing 2012 appropriations. If you get a phased-in 10-year deal, you can control the timing of when the cuts hit.
4. Obama has to be re-elected to protect other policy gains and prevent more crippling austerity, and a big deal will help Obama in 2012.
5. They truly believe that deficit reduction would help the short-run economy. Obama himself put it best in his July 2 address: “Government has to start living within its means, just like families do. We have to cut the spending we can’t afford so we can put the economy on sounder footing, and give our businesses the confidence they need to grow and create jobs.”

OK, we’ll take these in kind. First, there’s no way you can “finish” deficit reduction...

The notion that a Democratic president can win reelection with an unemployment rate that is edging upward and talk of cutting Social Security is beyond unrealistic.

...

No president since Franklin Roosevelt has won reelection when the unemployment rate was over 7 percent. And Roosevelt won because he ran as a candidate who was fully willing to use the power of the federal government to create jobs —and programs like Social Security.

The notion that a Democratic president can win reelection with an unemployment rate that is edging upward—perhaps toward double digits—and talk of cutting Social Security is not merely unrealistic. It is evidence of a disconnect that could devastate not just Obama's reelection campaign in 2012 but Democratic prospects for years to come.

Viewing the Republican presidential debate was two hours of sheer misery, mixed with a foreboding that one of these people could defeat President Barack Obama.

Ever since the Great Recession shook the foundations of the U.S. economy, President Obama has been promising recovery. Evidence of this recovery, we were told, was manifested in the massive post-bailout profits corporations made. Soon enough, the President assured us, these corporations would tire of hoarding mountains of cash and start a hiring bonanza, followed by raising wages and benefits. It was either wishful thinking or conscious deception. The recent stock market meltdown has squashed any hope of a corporate-led recovery.

The Center on Budget and Policy Priorities has updated and refined a widely cited chart, laying out the origins of the country's current fiscal trajectory. And as before, the lion's share of the problem comes from ongoing George W. Bush-era policies -- particularly deficit-financed tax cuts, which eliminated Clinton-era surpluses and left the Treasury poised for a huge hit when the financial crisis and economic downturn further eroded federal revenues.

As newly resigned International Monetary Fund head Dominique Strauss-Kahn (aka DSK) hunkers down in his jail cell, IMF news has fallen into two categories. The first involves salacious details of his alleged attempted rape, and the second, questions about whether his absence will keep the IMF from its main focus of constructing pro-bank bailout packages for Greece, Portugal and other struggling European countries. Both categories miss the devastation the IMF causes, regardless of who heads it.

Today the Economic Policy Institute (EPI) released a Snapshot of the 10-year deficit-reduction projections for the Republican plan, the budget framework outlined by President Obama and the “People’s Budget” developed by the Congressional Progressive Caucus. While the Republican and Obama plans do achieve a reduction in the deficit over the next decade, the People’s Budget goes a step further by creating a budget surplus by 2021.

EPI says the Ryan plan’s savings come mostly from domestic spending cuts, cuts in Medicaid and Medicare. Obama’s framework cuts the deficit through some domestic spending cuts and slight reductions in defense spending, and saves money through health care reform and broad-based tax reform.

In contrast, the People’s Budget achieves deficit reduction mainly by shifting the tax burden more fairly to high-income individuals and corporations: Its proposals include rolling back the Bush tax cuts, taxing capital gains as ordinary income, raising the payroll tax cap and enacting a financial transactions tax.  The plan also cuts defense spending, enacts a public option for health care coverage and makes room for $1.4 trillion in vital investments in infrastructure, education and innovation over the next decade.

After it destroyed neighborhood retailers, forced manufacturing overseas and helped bankrupt the middle class, Wal-Mart is suddenly surprised to learn that its customers are too poor to shop. But the company’s top brass won’t admit that they are to blame for their shoppers’ poverty. Instead, they say it’s all about high gasoline prices and plan on expanding Wal-Mart’s e-commerce division to pick up the slack in sales. Yeah, that’ll solve the problem. —YL

This week's biggest economic show occurs tomorrow (Wednesday) when Fed chair Ben Bernanke steps in front of the cameras for the Fed's first-ever news conference. The question on everyone's mind: Will the Fed signal it's now more worried about inflation than recession? Much of Wall Street thinks inflation is now the biggest threat to the U.S. economy. As has been the case in the past, the Street is dead wrong. The biggest threat is falling into another recession.

Predictably, the budget framework that Barack Obama outlined quickly became used as the leftward pole in the debate. After all, Obama gave a partisan speech! He criticized Paul Ryan! So with the Obama plan on the left and the Ryan plan on the right, the range of debate had been narrowed artificially. But there is an actual budget plan on the left; several, to be precise. But one has legislative language and got 77 votes in the House. That would be the People’s Budget from the Congressional Progressive Caucus. This plan brings the budget into balance by 2021, with primary balance by 2014, without any cuts to social programs and even a modest but sustained stimulus package to create US jobs. It does so through progressive taxation, an end to two unnecessary wars in Iraq and Afghanistan and further cuts to the defense budget.

A funny thing happened to the American ruling class: It stopped being concerned with the health of society as a whole and became almost entirely obsessed with money.

President Obama has finally decided to take his own side in the philosophical struggle that is the true engine of this nation's budget debate.

After months of mixed signals about what he was willing to fight for, Obama finally laid out his purposes and his principles. His approach has difficulties of its own, and much will depend on execution. But the president was unequivocal in arguing that the roots of our fiscal problems lie in the tax cuts of the last decade that we could not afford. And he raised the stakes in our politics to something more fundamental than dry numbers on a page or computer screen.

A "working class hero," John Lennon told us in his song of that title, "is something to be/ Keep you doped with religion and sex and TV/ And you think you're so clever and classless and free/ But you're still @!$%#ing peasants as far as I can see."

The delusion of a classless America in which opportunity is equally distributed is the most effective deception perpetrated by the moneyed elite that controls all the key levers of power in what passes for our democracy. It is a myth blown away by Nobel Prize winner Joseph E. Stiglitz in the current issue of Vanity Fair. In an article titled "Of the 1%, by the 1%, for the 1%" Stiglitz states that the top thin layer of the superwealthy controls 40 percent of all wealth in what is now the most sharply class-divided of all developed nations:

Why aren't Americans being told the truth about the economy? We're heading in the direction of a double dip -- but you'd never know it if you listened to the upbeat messages coming out of Wall Street and Washington.

Consumers are 70 percent of the American economy, and consumer confidence is plummeting. It's weaker today on average than at the lowest point of the Great Recession.

The Reuters/University of Michigan survey shows a 10 point decline in March -- the tenth largest drop on record. Part of that drop is attributable to rising fuel and food prices. A separate Conference Board's index of consumer confidence, just released, shows consumer confidence at a five-month low -- and a large part is due to expectations of fewer jobs and lower wages in the months ahead.

If it had been revealed that Jeffrey Immelt once hired an undocumented nanny, or defaulted on his mortgage, he would be forced to resign as head of President Barack Obama's "Council on Jobs and Competitiveness." But the fact that General Electric, where Immelt is CEO, didn't pay taxes on its $14.5 billion profit last year—and indeed is asking for a $3.2 billion tax rebate—has not produced a word of criticism from the president, who in January praised Immelt as a business leader who "understands what it takes for America to compete in the global economy."

What it takes, evidently, is shifting profit and jobs abroad:

What do these events have in common? They're all evidence that slashing spending in the face of high unemployment is a mistake. Austerity advocates predicted that spending cuts would bring quick dividends in the form of rising confidence, and that there would be few, if any, adverse effects on growth and jobs; but they were wrong.

It's too bad, then, that these days you're not considered serious in Washington unless you profess allegiance to the same doctrine that's failing so dismally in Europe.

Welcome to America in the second decade of the 21st century. An army of long-term unemployed workers is spread across the land, the human fallout from the Great Recession and long years of misguided economic policies. Optimism is in short supply. The few jobs now being created too often pay a pittance, not nearly enough to pry open the doors to a middle-class standard of living.

Arthur Miller, echoing the poet Archibald MacLeish, liked to say that the essence of America was its promises. That was a long time ago. Limitless greed, unrestrained corporate power and a ferocious addiction to foreign oil have led us to an era of perpetual war and economic decline. Young people today are staring at a future in which they will be less well off than their elders, a reversal of fortune that should send a shudder through everyone.

As they prepare to wage political war against President Obama, the potential 2012 Republican candidates are doing everything they can to draw sharp distinctions with him.

But Mr. Obama isn't cooperating.

Rather than emphasize his differences with potential Oval Office rivals or Republican adversaries on Capitol Hill, the president is taking every opportunity he can to embrace members of the other party as co-conspirators in his efforts to confront the country's challenges.

According to Mr. Obama, the two parties have cooperated — or are showing signs of being willing to work together — on education reform, tax cuts, energy security, economic growth and potential changes to an entitlement system that has become a drain on the nation's budget.

Economically, rising inflation makes it that much harder for the Federal Reserve to keep resorting to very low interest rates to levitate a sick economy. At some point, the Fed's natural inflation-phobia will kick in, even though higher food and energy prices have nothing to do with overheated demand (with unemployment stuck near double digits, demand is still too low, not too high.) But as in the late 1970s, stagnation could turn into stagflation.

And the Republicans in Congress are compounding the crisis of prolonged recession and joblessness by slashing everything in sight -- throwing more people out of work.

Faced with the prospect of having to defend the administration's performance in an economy of still high unemployment, you might think the White House would be doing everything possible to highlight the Republicans' responsibility for the weak economy -- the perverse budget cuts, the unpopular assault on unions, the direct attack on Social Security.

Instead, the president has doubled down on his strategy of "more-bipartisan-than-thou." As the New York Times' Michael Shear wrote in a smart and skeptical piece last week,

The courageous actions by the citizens in Wisconsin are an inspiring defense of the core values of this country: a civil society based on freedom of association, ensuring that our communities have high quality public services—education, public safety and support for our elderly and most vulnerable—along with good jobs for all. The outpouring of support nationally shows the possibilities for challenging deepening economic inequality and political marginalization of the majority of the American people.

We are on the cusp of a great movement to resist and roll back that corporate domination by banks, energy companies and war profiteers. To join that movement and escalate the activism planned in the days, weeks and months ahead we are organizing a "National Teach-in on Debt, Austerity and How People Are Fighting Back." The live web-streamed teach-in will be held on Tuesday, April 5, 2011, at the Judson Memorial Church in New York City, beginning at 2 pm (EST). Admission is free. Speakers from schools and communities around the country will be hosted by moderators Frances Fox Piven and Cornel West in New York City through a live webcast that you can join by organizing a teach-in on your own campus.

"What better time than now for the wealthy elite to crush any chance of developing any critical thought. A substantial majority in the US have been so overwhelmed by the consumer/celebrity culture that distracts from the real situation that they are now fearful of harboring a critical thought, let alone speaking critically about the surrender of democracy to the wealthy elite. No matter what outrage the wealthy elite throws at us all, every indicator suggests there would be little, if any, resistance to that outrage. In fact, now is the best time for the wealthy elite to finally win the war and put into action all the highly repressive measures passed by Congress this decade. The repression already authorized, if put into full effect, would make the US a recognizably totalitarian state."

For a man who won office talking about change we can believe in, Barack Obama can be a strangely passive president. There are a startling number of occasions in which the president has been missing in action—unwilling, reluctant or late to weigh in on the issue of the moment. He is, too often, more reactive than inspirational, more cautious than forceful.

Organized labor's catastrophic decline has paralleled—and, to a disputed but indisputably substantial degree, precipitated—an equally dramatic rise in economic inequality. In 1980, the best-off tenth of American families collected about a third of the nation's income. Now they're getting close to half. The top one per cent is getting a full fifth, double what it got in 1980. The super-rich—the top one-tenth of the top one per cent, which is to say the top one-thousandth—have been the biggest winners of all. What is always called their "compensation" (wage workers lucky enough to have a job simply get paid) has quadrupled.

Over the same period, the composition of the labor movement, as it still defiantly styles itself, has radically changed. A few weeks ago, the Bureau of Labor Statistics reported that, for the first time, more union members are government workers, not private-sector employees. The Times quoted an official of the United States Chamber of Commerce as pronouncing himself "a little bit shocked," and he wasn't the only one. Yet this development has nothing to do with some imagined spike in public-sector unionism. It is entirely a function of the collapse of organized labor in the private sector. For the past four decades, the portion of the public workforce belonging to unions has held remarkably steady, at a little more than one in three. In the private sector, just one worker in fifteen carries a union card.

WASHINGTON — Deep spending cuts by state and local governments pose a growing threat to an economy that is already grappling with high unemployment, depressed home prices and the surging cost of oil.

Well, duh.

Last week, Lori Montgomery reported in The Washington Post that a bipartisan group of senators think a sensible deficit reduction package would involve raising the Social Security retirement age to 69 and reforming taxes, purportedly to raise revenue, in a way that would cut the top income tax rate for the wealthy from 35 percent to 29 percent.

Only a body dominated by millionaires could define "shared sacrifice" as telling nurses' aides and coal miners they have to work until age 69 while sharply cutting tax rates on wealthy people. I see why conservative Republicans like this. I honestly don't get why Democrats—"the party of the people," I've heard—would come near such an idea.

The media are full of commentary on President Obama's "failure of leadership." There is some truth to the critique but not in the way the charge is typically made.

Obama is not at fault for his budget proposals. But any fair examination of the news suggests that he is in danger of losing control of the national narrative again, just as he did during the stimulus and health care battles.

According to The Associated Press, "for the third straight year, American families and businesses will pay less in federal taxes than they did under former President George W. Bush. ..." In fact, as a share of gross domestic product, Americans haven't paid this little in taxes since Harry Truman called the shots.

IN a little over a week, President Obama will send Congress his budget for the 2012 fiscal year. The budget is not just a collection of numbers, but an expression of our values and aspirations. As the president said in his State of the Union address, now that the country is back from the brink of a potential economic collapse, our goal is to win the future by out-educating, out-building and out-innovating our rivals so that we can return to robust economic and job growth. But to make room for the investments we need to foster growth, we have to cut what we cannot afford. We have to reduce the burden placed on our economy by years of deficits and debt.

I didn't post this article to advocate its position, but rather to facilitate a discussion with regard to the merits of perusing an agenda of austerity as opposed to a Keynesian/Trickle-Up agenda.

Once again, the job numbers are dismal. In January, the U.S. economy created just 36,000 domestic jobs, far below the roughly 145,000 that economists had forecast. The unemployment rate fell, to 9 percent, but only because more and more discouraged workers are giving up and leaving the workforce.

The U.S. still has a jobs gap of about 14 million jobs, and that number is increasing as the labor force grows. Counting people who've given up, or who are working part time when they want full time jobs, the real unemployment number is around 17 percent. America now has about 25 million people either out of work or underemployed.

Meanwhile, corporate profits continue to set records. Profits in the third quarter of 2010 were 1.659 trillion, about 28 percent higher than a year before, and the highest year-to-year increase on record.

What's going on? Very simply, America's corporations no longer need America's workers.

Amid last week's flood of business news, one story stood out as reason to hope for more than just a momentary uptick in your 401(k): Apple, you may have heard, announced record first-quarter profits.

David Leonhardt of The New York Times wonders why unemployment has remained so high for so long. At first, it seems to him that it is because American employers are too strong and American workers too weak. But after contemplating the matter further, he discovers his own folly.

Leonhardt starts with unions.

What is the state of the union? You certainly couldn't tell from that platitudinous hogwash that the president dished out Tuesday evening. I had expected Barack Obama to be his eloquent self, appealing to our better nature, but instead he was mealy-mouthed in avoiding the tough choices that a leader should delineate in a time of trouble. He embraced clean air and a faster Internet while ignoring the depth of our economic pain and the Wall Street scoundrels who were responsible—understandably so, since they so prominently populate the highest reaches of his administration. He had the effrontery to condemn "a parade of lobbyists" for rigging government after he appointed the top Washington representative of JPMorgan Chase to be his new chief of staff.

The speech was a distraction from what seriously ails us: an unabated mortgage crisis, stubbornly high unemployment and a debt that spiraled out of control while the government wasted trillions making the bankers whole.

He should point out that the U.S. economy is now twice as large as it was in 1980 but the real median wage has barely budged. Most of the benefits of economic growth have gone to the top. In the late 1970s, the richest 1 percent of Americans got about 9 percent of total income. By the start of the Great Recession they received more than 23 percent. Wealth is even more concentrated.

This is the heart of our problem. Most Americans no longer have the purchasing power to get the economy moving again. Once the debt bubble burst, they were stranded.

The President should make it clear corporations aren't to blame. After all, they're designed to make profits. Nor is it the fault of the rich who have played by the rules. The problem is the rules need fixing. He should stress that a future with no jobs or lousy jobs for most Americans is not sustainable - not even for American corporations, whose long-term profitability depends on the revival of broad-based domestic demand. (Watch out for the upcoming "correction.")

The solution is to give average Americans a better economic deal.

This may be smart politics. Arguably, Mr. Obama has enlisted an old cliché on behalf of a good cause, as a way to sell a much-needed increase in public investment to a public thoroughly indoctrinated in the view that government spending is a bad thing.

But let's not kid ourselves: talking about "competitiveness" as a goal is fundamentally misleading. At best, it's a misdiagnosis of our problems. At worst, it could lead to policies based on the false idea that what's good for corporations is good for America.

Have I got the program for you. And in addition to putting people back to work and lowering the long-term deficit, you'll be increasing the country's energy independence, reducing greenhouse gases, and growing a key sector of the economy.

What does all that? A massive investment in retrofitting buildings to make them more energy efficient.

The Home Star program, also known as "Cash for Caulkers," is President Obama's plan to use federally subsidized low interest loans to encourage consumers to make energy efficient improvements to their homes. Legislation to that effect has passed in the House and has stalled in the Senate.

That's a fine idea, but even at low interest, it's hard for some homeowners to make any kind of investment in their homes these days, no matter how quick the returns are going to be.

For the federal government to retrofit its own buildings, however, is truly a no-brainer.

The only reason we still have a payroll tax is because it's been specifically used to fund the two most successful and progressive social programs in American history: Social Security and Medicare.

Otherwise, we would have gotten rid of it ages ago. On its own, it's the most regressive tax imaginable: 12.4% of your salary (typically split between you and your employer) no matter how little you make, and capped at an annual salary of $106,800.

So for a millionaire, it's nothing; for the working poor, it's an enormous wallop. And worst of all -- especially in a period of widespread joblessness -- it is literally a tax on employment.

Three days before Christmas, President Obama gathered his economic team in the West Wing's Roosevelt Room to review themes for his State of the Union address. The edge-of-the-cliff crisis he inherited had passed, but with more than 14 million Americans still out of work, he was looking for bold ways to bring down unemployment. The ideas presented to him, though, seemed familiar and uninspired. "You know, guys," he said, according to someone in the room, "I've told you before, I want you to come to me with ideas that excite me." Nothing he was hearing excited him.

Obama's frustration could set the tone for the remainder of his term.

LAS VEGAS -- Senate Majority Leader Harry Reid branded Chinese President Hu Jintao a "dictator" on a local TV talk show on Tuesday night, a remark likely to make the start of Hu's first state visit to Washington, D.C., awkward for President Obama at a moment when the U.S. is trying to ease tensions with the Asian power.

Reid, Obama's top legislative ally and Congress' most powerful Democrat, was responding to a question from "Face To Face" host Jon Ralston about the December compromise that extended the Bush-era tax cuts. The recently reelected Nevada senator veered off on a tangent intended to compare the American and Chinese systems of government to give a roundabout defense of the importance of legislative compromise.

Here we go again. When Bill Clinton suffered an electoral reversal after his first two years in office, he abruptly embraced the corporate money guys who had financed his congressional opposition in an effort to purchase a second term. On Tuesday in his Wall Street Journal Op-Ed piece, Barack Obama veered sharply down that same course, trumpeting his executive order " ... to remove outdated regulations that stifle job creation and make our economy less competitive. …"

He employed the same "creating a 21st-century regulatory system" rationalization used by Clinton when he signed off on the sweeping deregulation legislation that unleashed the Wall Street greed that ended up being the biggest job-killer since the Great Depression.

Check out this political cartoon over at Truthdig.com.

As the do-something lame-duck Congress's triumphs were toted up, the White House pointedly floated the news that the president was meeting with Reagan administration veterans (David Gergen, Ken Duberstein) and taking Lou Cannon's authoritative biography "President Reagan: The Role of a Lifetime" on vacation. Reagan, of course, was also pummeled (though a bit less so) in his maiden midterms of 1982, then carried 49 states in his 1984 re-election landslide. In January 1983, Reagan's approval rating was much worse than Obama's — 35 percent. So was the unemployment rate (10.4 percent vs. our current 9.4 percent) as Americans struggled to recover from what was then the deepest economic downturn since the Great Depression.

My poll-crunching Times colleague Nate Silver has already poured cold water on the fantasy that history is fated to repeat itself in 2012. His numbers show zero correlation between presidents' post-midterms popularity and their fates two years later. But if Obama actually read Cannon, his comeback could have legs. It's full of leadership lessons that will be particularly useful in outfoxing political adversaries who seem not to have consulted so much as a picture book about the president they claim as their patron saint.

But it seems to me that before we go cutting kids off their field trips to the museum or their doctor's visits, we should start by looking for big chunks of money leaving New York state for useless purposes.

And it turns out there's a $9.6 billion stack of cash that's going to be sucked out of New York this year -- that's how much New York taxpayers will be charged for Afghanistan War spending this year.

Is it a case of murder, or has the Western economy deliberately, if unwittingly, attempted suicide and nearly succeeded?

John Maynard Keynes was not just talking about defunct economists when he wrote that the world is commonly ruled by dead ideas, its leaders the slaves of the past. He said, "Indeed the world is ruled by little else." If he were alive today, he could name management consultants and business gurus among those responsible for the economic crisis of the present day.

As 2011 begins, people still talk about the crisis of the Western economy as though we have been the victims of a blight from nowhere, like Haitians in a hurricane or blackbirds in Arkansas. No individual is held guilty for anything—certainly none of the leaders of finance or business who insisted that markets know best, or the political leaders who empowered them.

Thus my suicide argument.

Republicans are telling Americans a big lie, and Obama and the Democrats are letting them. The Big Lie is that our economic problems are due to a government that's too large, and therefore the solution is to shrink it.

The truth is our economic problems stem from the biggest concentration of income and wealth at the top since 1928, combined with stagnant incomes for most of the rest of us.

If there's one piece of economic wisdom I hope people will grasp this year, it's this: Even though we may finally have stopped digging, we're still near the bottom of a very deep hole.

Why do I need to point this out? Because I've noticed many people overreacting to recent good economic news. What particularly concerns me is the risk of self-denying optimism — that is, I worry that policy makers will look at a few favorable economic indicators, decide that they no longer need to promote recovery, and take steps that send us sliding right back to the bottom.

There are two potential ways to measure the economic performance of a political leader. One is by the profitability, stock prices and executive bonuses of a nation's corporations. The other is by the financial condition of the majority of its population. Since he came to power, President Obama and his economic team have propped up the former and failed miserably to aid the latter.  (For the record, ever since the first paragraph of Obama's pre-primary website economics plan put free markets before people, this is where we were going, but it still hurts to get there.)

December 31, 2010 |

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The challenges we face as a people are daunting and nothing less than America's very purpose and promise are at stake. We need to reinvigorate American economic life — not to increase Wall Street's profits and bonuses, but to create good jobs and provide better wages for working people. We need to put people to work rebuilding and improving themselves, their communities, and the country's deteriorating infrastructures. And we must address the nation's staggering inequalities of wealth and power before they completely overwhelm what remains of American democracy.

However, the politics of the day afford little hope that we might do any of that.

America is on a collision course with itself. This month's deal between President Barack Obama and the Republicans in Congress to extend the tax cuts initiated a decade ago by President George W. Bush is being hailed as the start of a new bipartisan consensus. I believe, instead, that it is a false truce in what will become a pitched battle for the soul of American politics.

As in many countries, conflicts over public morality and national strategy come down to questions of money. In the United States, this is truer than ever. The US is running an annual budget deficit of around $1 trillion, which may widen further as a result of the new tax agreement. This level of annual borrowing is far too high for comfort. It must be cut, but how?

When historians look back at 2008-10, what will puzzle them most, I believe, is the strange triumph of failed ideas. Free-market fundamentalists have been wrong about everything — yet they now dominate the political scene more thoroughly than ever.

How did that happen? How, after runaway banks brought the economy to its knees, did we end up with Ron Paul, who says "I don't think we need regulators," about to take over a key House panel overseeing the Fed? How, after the experiences of the Clinton and Bush administrations — the first raised taxes and presided over spectacular job growth; the second cut taxes and presided over anemic growth even before the crisis — did we end up with bipartisan agreement on even more tax cuts?

The answer from the right is that the economic failures of the Obama administration show that big-government policies don't work. But the response should be, what big-government policies?

For the fact is that the Obama stimulus — which itself was almost 40 percent tax cuts — was far too cautious to turn the economy around. And that's not 20-20 hindsight: many economists, myself included, warned from the beginning that the plan was grossly inadequate. Put it this way: A policy under which government employment actually fell, under which government spending on goods and services grew more slowly than during the Bush years, hardly constitutes a test of Keynesian economics.

But the simple fact is that we live in a market economy. Businesses create jobs, and a healthy business climate is one key to a healthy society. It's a conclusion that progressives sometimes reach grudgingly. Former New York Gov. Mario Cuomo ably captured this feeling in 1977 during his unsuccessful run for mayor of New York City. "You must be good to business," he declared, "even if you hate rich people, even if you don't like pinkie rings, even if you can't stand Scarsdale and Rolls-Royces."

It's also important to recognize that there is no single business class or corporate model. Obama doesn't need to coddle CEOs so they will say warm things about him at parties in the Hamptons. He should figure out which parts of the private sector share an interest in reducing the dreadful inequalities that have metastasized over nearly four decades and in creating an economy that produces well-paying jobs.

There have been moments in our history when important elements of business were "progressive" in the sense of recognizing that social reform was in capitalism's long-term interest.

More than thirty years ago, Ronald Reagan came to Washington intent on reducing taxes on the wealthy and shrinking every aspect of government except defense.

The new tax deal embodies the essence of Reaganomics.

It will not stimulate the economy.

A disproportionate share of the $858 billion deal will go to people in the top 1 percent who spend only a fraction of what they earn and save the rest. Their savings are sent around the world to wherever they will earn the highest return.

The only practical effect of adding $858 billion to the deficit will be to put more pressure on Democrats to reduce non-defense spending of all sorts, including Social Security and Medicare, as well as education and infrastructure.

It is nothing short of Ronald Reagan's (and David Stockman's) notorious "starve the beast" strategy.

"It doesn't" create jobs, the president said. No gray area there. The exact opposite of what's being claimed by Markos and other progressives.

Concurrently, the president has obviously been ballyhooing his tax-cut compromise with the Republicans, while commenting that the deal will create jobs -- not the tax cuts part of the deal, specifically, but the overall deal. And he's right. If the CBO numbers indicating $1.61 in stimulus for every dollar spent on unemployment benefits are correct, then extending the benefits will create jobs as the economy grows.

What's so difficult to understand about this?

"Take your bow, Mr. Obama. The top 1 percent of Americans possess better than 90 percent of the nation's assets. More Americans are working longer hours for less pay. When was the last time that the minimum wage was increased?

So you sell out on what you had presented as a stark litmus test during your 2008 run for the presidency. You said then that you would never sell out the interest of Americans on such dangerous policy making as the Bush tax cuts and the harm they visited upon America, beginning with sharply increasing the nation's debt."

The sight of Bill Clinton back on the White House podium defending tax cuts for the super-rich was more a sick joke than a serious amplification of economic policy. How desperate is the current president that he would turn to the great triangulator, who opened the floodgates to banking greed, for validation of the sorry opportunistic hodgepodge that passes for this administration's economic policy? A policy designed and implemented by the same Clinton-era holdovers whose radical deregulation of the financial industry created this mess in the first place.

American decline is the specter haunting our politics. This could be President Obama's undoing—or it could provide him with the opportunity to revive his presidency.

I say, block those metaphors. America's economy isn't a stalled car, nor is it an invalid who will soon return to health if he gets a bit more rest. Our problems are longer-term than either metaphor implies.

And bad metaphors make for bad policy. The idea that the economic engine is going to catch or the patient rise from his sickbed any day now encourages policy makers to settle for sloppy, short-term measures when the economy really needs well-designed, sustained support.

In the short term, Obama did get more than most liberals expected. It is good news that he's focused on the need to give the economy another jolt, even if some of the measures the accord includes are not very stimulative.

The rest of the package delivers tangible benefits to the unemployed and to lower- and middle-income taxpayers. For roughly $100 billion to the rich, Obama got $197 billion in benefits he sought for the non-rich, $146 billion in business tax cuts to push job creation, plus an extension of the $280 billion middle-class tax cut. Many Democrats insist the Republicans would have eventually given in on relief for the middle class; the administration is not so sure.

These substantial concessions have led many liberal policy leaders—among them, Bob Greenstein of the Center on Budget and Policy Priorities, John Podesta of the Center for American Progress and Larry Mishel of the Economic Policy Institute—to support the deal, partly on the theory that any next deal would be worse. Other liberals would go along if the estate tax cut could be made less munificent.

And at least these negotiations have had the benefit of proving conclusively that the only people for whom conservative Republicans will go to the mat are the country's best-off citizens—and deficits be damned.

Ben Bernanke may or may not succeed in saving the economy, but at least he has the courage to try—and the honesty to tell the truth. The same cannot be said of our elected officials. Congress is buried under a crushing surplus of cynicism, while the White House seems paralyzed by a deficit of courage.

An expert on the Great Depression, Bernanke is determined not to be the Federal Reserve chairman who allows the nation to plummet into Great Depression II. Since our political leaders can't be bothered to do what urgently needs to be done—stimulate the fragile economy before it sputters out—Bernanke is using a rare bit of legerdemain called "quantitative easing" to pump $600 billion into the financial system.

Fed chairmen are usually as silent as the sphinx, except in official testimony. But Bernanke, facing criticism for his action, went on "60 Minutes" to explain why he's prepared to do even more.