As regular readers of this blog know, I have been sounding the tocsin regarding government spending since the Bailout Swindle of 2008.  Here is one of my posts in which I list other posts I have written on the subject.

Yesterday the Director of the Congressional Budget Office had a chilling post on his blog which you may view here.  He states in part:

“Under current law, the federal budget is on an unsustainable path, because federal debt will continue to grow much faster than the economy over the long run. Although great uncertainty surrounds long-term fiscal projections, rising costs for health care and the aging of the population will cause federal spending to increase rapidly under any plausible scenario for current law. Unless revenues increase just as rapidly, the rise in spending will produce growing budget deficits. Large budget deficits would reduce national saving, leading to more borrowing from abroad and less domestic investment, which in turn would depress economic growth in the United States. Over time, accumulating debt would cause substantial harm to the economy. The following chart shows our projection of federal debt relative to GDP under the two scenarios we modeled.” 

His chart is at the top of this post.

Keeping deficits and debt from reaching these levels would require increasing revenues significantly as a share of GDP, decreasing projected spending sharply, or some combination of the two.

He concludes on this somber note:

The current recession and policy responses have little effect on long-term projections of noninterest spending and revenues. But CBO estimates that in fiscal years 2009 and 2010, the federal government will record its largest budget deficits as a share of GDP since shortly after World War II. As a result of those deficits, federal debt held by the public will soar from 41 percent of GDP at the end of fiscal year 2008 to 60 percent at the end of fiscal year 2010. This higher debt results in permanently higher spending to pay interest on that debt. Federal interest payments already amount to more than 1 percent of GDP; unless current law changes, that share would rise to 2.5 percent by 2020.

This is fiscal madness.  We have the wealth and the ability to solve this problem by spending cuts, and minor tax increases if, and only if, combined with meaningful and deep spending cuts.  What we lack is the political will.  We are destroying the future prosperity of our kids because of current political cowardice, folly and inertia.

For me, numbers are intangible unless I can feel their effects and trace them straight to my wallet…the pennies help. In the case of government spending on health care reform, I tend to agree with the narrator that problems with our current plans should be solved before we strike out anew.

Lori Montgomery reports that Congressional Budget Office director Douglas Elmendorf stated that bills crafted by House leaders and the Senate health committee do not propose “the sort of fundamental changes that would be necessary to reduce the trajectory of federal health spending by a significant amount. On the contrary,” Elmendorf said, “the legislation significantly expands the federal responsibility for health-care costs.”

Here’s a visual take on the results of Obama’s healthcare proposals as they’ve played out in Massachusetts:

Not so appealing! HOWEVER, just today a commission from the Massachusetts Office of Health and Human Resources recommended that the state turn from the traditional “fee for service” model of paying for healthcare toward a system where providers would receive a sum total to care for a given person or family, providing greater incentive to deliver care in a cost-effective way. This would replicate (on a larger scale) Mayo Clinic’s model of providing team care in order to reduce wasteful treatments.

We’ll be watching…

A “kick-in” contingency plan? Skip to 1:05 for the big question from Dan Balz.
Washington Post Interview: June 26, 2009

*Sorry for the redirect, the video wouldn’t load correctly when I embedded it.

A new book via Knowledge@Wharton that is making the case for opportunities in India, as well as explaining the complexities and contrasts:

Nandan Nilekani: Well, you know, I wanted to do something different. My role in the last several years has been going around the world and projecting India in global forums and all that, and I was not able to answer a lot of questions that people would ask me. They would ask me, “Why is it that you have such beautiful campuses like Infosys and such large slums? Why is it that there are so many billionaires and so many poor people? Why is it that you have all the educated people in technology and the world’s largest illiterate population? Why is it that you guys seem to coexist in the 17th Century and the 21st Century at the same time?” When asked questions like these, I was not able to give very convincing answers, so I felt the need to get down to the bottom of, “Why are we the way we are?”The other important thing, I felt, was that India had a very small window of opportunity. It had this huge demographic dividend and this young population, but that demographic dividend could well become a demographic disaster if we did not make the right investments in our human capital. I felt that window of opportunity was passing by, so I thought it would be good to write it down and say, “Hey guys, we have this beautiful opportunity, let us not mess [it up].”Also I found that a lot books on India were written from a particular perspective, an economist’s view or a sociologist’s view. I felt that to really give India its due you had to take a much more holistic look at it — which is why I looked at the country from all these angles. I interviewed 126 people, and it is a sort of a composite of all that.

http://www.cnbc.com/id/31917337

No sooner had I published yesterday’s piece, critical of Obama for abandoning American workers, when I came across this article.  It seems that the Obama administration understands that our trade deficit is unsustainable. 

The trade imbalance between the United States and China is not sustainable, and the two countries have a joint responsibility to reduce greenhouse gas emissions, U.S. Commerce Secretary Gary Locke said on Wednesday.

China should shift from export-led growth, increase its exchange rate flexibility, and open its markets more, Locke said in remarks prepared for a speech to the American Chamber of Commerce.

The Obama administration’s approach to correcting our trade imbalance defies logic.  Having sworn to adopt no protectionist measures of any kind, he has given up all credibility and leverage on the issue.  In addition, singling out China while ignoring the trade deficit with other nations makes absolutely no sense.  Of course our trade deficit with China is by far the largest of any nation; China accounts for one fifth of the entire world’s population.  But when put in per capita terms (adjusting for the size of the nation in question), our trade deficit with China barely makes the top twenty.  The per capita trade deficit in manufactured goods with other nations like Japan, Germany, Mexico, South Korea and others is much worse.  So what is China to think when they are attacked by the Obama administration for a $270 billion trade deficit when we seem perfectly willing to accept a $100 billion trade deficit with Japan, a nation with one tenth as many people?

The problem isn’t China.  The problem is U.S. trade policy.  Just exactly what did the U.S. expect when it applied the same policy that was already a proven failure all over the world to a nation with one fifth of the world’s population?  Unfettered free trade and blanket applications of protectionism are merely the two extremes in the spectrum of trade policy available.  Each is just as dumb as the other.  Smart trade policy takes into account the role of population density in driving trade imbalances and applies varying degrees of protectionist tariffs as necessary (like a tariff structure on manufactured goods that is indexed to population density) to assure that a balance is maintained. 

The Obama administration can hardly be faulted for taking its cues from economists who, because they are close-minded toward any consideration of the role of population growth in the economy, have no clue as to why our decades-old policy of unfettered free trade (while other nations maintain tariffs) is failing.  But you’d think that after thirty-three consecutive years of trade deficits – a cumulative $9.4 trillion – that those responsible for economic policy would begin to question whether the problem is our own policy and not some failure on the part of the rest of the world.

This is Rome

About two weeks ago my wife and I walked into an all-night diner in Ithaca’s Collegetown, to get something to eat after her weekly gig singing with a funk band. This particular joint features 3 large televisions running continually, usually the endless overnight loop of Sports Center. But on this night they were tuned to CNN. “Breaking News” said a big banner running across the screen over footage of a crowd cheering wildly. I stopped short, anxious to see what had happened. Had the Iranian people managed to get their contested election overturned? Had the citizens of Honduras managed to stand down the military coup? Had a sudden popular uprising broken out in some other corner of our profoundly troubled world?

Within seconds I realized how absurd my excitement was: The cheering crowd was merely stock footage, B-roll of Michael Jackson at an awards show some years back. The “breaking news” turned out to be some newly released detail concerning the singer’s recent death. I really should have known better. I am a cynic of long standing, but still I somehow manage to be continually shocked and surprised at the vapid, sensationalized trivia that the corporate mainstream media presents as “news.”

This was some number of days after the enigmatic pop star had died.  And nearly two weeks later, Michael Jackson remains a lead story on my Yahoo front page; his picture is ubiquitous at the grocery checkout, along with alleged lists of the pills he was taking, sordid details about the paternity of his surviving children. Even on National Public Radio, an organization that continually congratulates itself on covering high-minded topics and “serious news,” the late, great King of Pop has become an ongoing story. The death of Michael Jackson has become the official trivial distraction of the summer of 2009.

Well, they had to find something. Without all Jacko, all the time, they might have been forced to spend these first two unsettlingly cold weeks of July talking about, well, who knows what? The fact that June saw the unemployment rate climb to nearly 10% nationwide? The fact that the Congress passed a climate bill which will do very little to slow down catastrophic climate change, but will provide Goldman Sachs with yet another trading bubble to manipulate? The fact that the “healthcare reform” the Congress looks set to offer up is a tax-raising, employment-stifling, insurance industry give-away that will be even more complicated than Bush’s Medicare D boondoggle? The fact that the much heralded and anticipated “June pull out” of Iraq is turning out to have been not so much of a “pull out” after all? The fact that our Federal Government’s computer networks were revealed to be disturbingly vulnerable to attack, (and, it appears, from a nation ranked in the bottom 10 world wide in computer savvy)? The fact that our most populous state (and the sixth largest economy in the entire world, and the state that is generally viewed as the trend-setter for the nation) is so broke that they have been forced to issue I.O.U’s, like some hard luck loser a Tony Soprano card game?

Whatever unsavory behavior the controversial singer might have been guilty of in life, Michael Jackson’s death has been a god-send for those who benefit from having American public discourse dominated by lurid gossip. And who, exactly is it, that benefits from this? The economic elite—the corporate tycoons, who day and night are busy at work in the Capital, making deals with our elected officials from both parties, making sure they manage to steal as much as possible, before Rome finally burns.

And make no mistake: This is Rome we are living in, and the glory years are now in the past, in the review mirror and getting smaller with each passing day. Some future Gibbons looking at the American Empire will view these years we have been living through as the period when we commenced in earnest with the process of decline and fall. Early this century we launched our war of aggression, a naked, desperate grab to secure the oil needed to keep our imperial citizens cozy and complacent back home, to maintain that lifestyle that Obama famously refused to apologize for. We have been rewarded with bankruptcy, with a million new “barbarians” anxious to tear us down. We are Rome, and Michael Jackson is merely the latest elaborate circus staged inside of the electronic Coliseum, to placate the angry, hungry plebes.

So perhaps the time has come for all good men and women to turn away from this vain, futile task of putting the failed empire back on track, of returning it to the Founder’s inspired vision of a Democratic Republic of, for and by the people. That was the dream and the accomplishment of our ancestors; bravely defended in the 1940’s by the generation of our grandparents, then carelessly given away by, first our parents, and then by ourselves. For the sake of our children and our grandchildren, and the generations to come, it is time to start building something new, and fast.

The corporations own our Federal Government, they write laws to facilitate their ability to steal from and abuse the citizens, and when their corrupt “capitalist” economic system begins to falter, their bought off politicians indebt the rest of us for generations, in order to preserve the grotesquely lavish lifestyles of that very small chosen few. The rest of us get mounting economic uncertainties, sometimes genuine hunger, desperation and want. We get a rapidly collapsing environment, and an increasingly destabilized global-political world.

But no empire is sustainable—sooner or later, they all over-reach, contract and then crash. That is the process we are seeing now, in our lifetime. For the brave, this will be an intensely exciting time to be alive. But the crash is coming; indeed, it has already begun. The first responsibility of all ethical grownups is to get themselves, their families and their communities as safely clear of it as possible. And that must mean, first and foremost, resisting all the mesmerizing spectacles that the Empire’s elite would use to distract us from the fall.

AP News headline, that should give us all pause, titled “Budget deficit tops 1 trillion for the first time.“

Do I really need to comment much on this one?

It’s called taking a serious recession and turning it into a economic disaster that is quickly heading for an economic catastrophe. Fixing problems caused by excessive spending by spending even more money, just defies all logic. But it’s not about fixing it (yet), it’s about power grabs and political paybacks.

Few key parts:

“WASHINGTON – The federal deficit has topped $1 trillion for the first time ever and could grow to nearly $2 trillion by this fall, intensifying fears about higher interest rates, inflation and the strength of the dollar.”

and…

“The soaring deficit is making Chinese and other foreign buyers of U.S. debt nervous, which could make them reluctant lenders down the road. It could also force the Treasury Department to pay higher interest rates to make U.S. debt attractive longer-term.

“These are mind-boggling numbers,” said Sung Won Sohn, an economist at the Smith School of Business at California State University. “Our foreign investors from China and elsewhere are starting to have concerns about not only the value of the dollar but how safe their investments will be in the long run.”"

and…

“The deficit of $1.09 trillion so far this year compares to an imbalance of $285.85 billion through the same period a year ago. The deficit for the 2008 budget year, which ended Sept. 30, was $454.8 billion, the current record in dollar terms.

Revenues so far this year total $1.59 trillion, down 17.9 percent from a year ago, reflecting higher unemployment, which cuts into payroll taxes and corporate tax receipts.

Under the administration’s budget estimates, the $1.84 trillion deficit for this year will be followed by a $1.26 trillion deficit in 2010, and will never dip below $500 billion over the next decade. The administration estimates the deficits will total $7.1 trillion from 2010 to 2019.”

Mortimer Zuckerman has an interesting Wall Street Journal Op-Ed piece titled “The Economy Is Even Worse Than You Think.“

It speaks for itself.

Keith Hennessey has  taken President Obama’s recent Washington Post Op-Ed apart piece by piece in his posting titled “Responding to the President’s Op-Ed.”

Keith does a good job of exposing the heavy political spin and numerous false statements President Obama made in his Op-Ed.

http://www.reuters.com/article/reutersComService_2_MOLT/idUSTRE56D1RA20090714?sp=true

After promising, during the election campaign, to revise NAFTA and fix other broken trade deals that have robbed the U.S. of its manufacturing jobs, President Obama now seems to figure that, with the rescue of Chrysler and GM, he has done enough to repay Big Labor for their campaign support.  We now see that he’s cut from the same cloth as his Republican rivals in the election and has begun reading his lines from the G20 globalization play book, offering nothing more than job retraining for those unfilled millions of jobs in mythical “new industries.”

President Barack Obama took a dose of reality to Michigan on Tuesday, saying that thousands of jobs lost to the auto industry’s downturn are not coming back and it is time to prepare for new industries.Traveling to Michigan, a state hit hard by job losses as Detroit’s Big Three automakers have reeled from the U.S. recession, Obama planned to promote a $12 billion initiative to boost community colleges and increase the graduation rate.

“(The) hard truth is that some of the jobs that have been lost in the auto industry and elsewhere won’t be coming back,” Obama was to say, according to prepared remarks released by the White House.

“They are casualties of a changing economy. And that only underscores the importance of generating new businesses and industries to replace the ones we’ve lost, and of preparing our workers to fill the jobs they create,” Obama will say.

Like a boat captain, happening upon a shipwreck, he scooped up as many survivors as his boat could handle and dropped them at the nearest, deserted island.  But, instead of going back for the rest, he has tossed the shivering survivors a cell phone, told them to call for help, and then continued on his way, shamefully abandoning the rest. 

Obama has done absolutely nothing to revise NAFTA (the North American Free Trade Agreement) or any other trade deal and, even worse, has remained silent in the face of dumping by Japan and tariffs imposed by Mexico.  I suppose that the math dictates that it is better to be thought a good statesman by the majority of the 83% of Americans still employed than to risk the ire of our trading partners just to make the 17% unemployed happy. 

Retraining.  Retraining to do what?  What new industries is he talking about?  Would these be the same new industries that were supposed to be our salvation the last time – like the “high tech” computer and cell phone industries, whose jobs have followed more low tech occupations overseas, or the health care industry, whose unending expansion now hangs like a millstone around our necks? 

No, I suppose he’s talking about renewable energy – wind power and solar – industries that have existed on the margins for decades, languishing for lack of demand, a demand that may have picked up dramatically if his “cap and trade” program hadn’t opted instead to rely almost exclusively on carbon capture and sequestration instead of a big move toward renewable energy.

And if the demand for solar panels and wind turbines - equipment widely available from foreign manufacturers - does pick up, what are the odds that he will do anything to steer that demand to American suppliers, risking  the very charges of “protectionism” from the rest of the world that have cowed him into inaction on other trade issues?  And even if he did, would jobs created in those fields even offset the jobs lost in the conventional power industry? 

Obama has cast his lot with economists who, simultaneously clinging to their half-hatched 18th century theories of free trade and curling into a fetal position and covering their ears at any suggestion of concerns about overpopulation, steadfastly proclaim that jobs magically appear for anyone who wants them, regardless of how fast we pile on new workers with never-ending population growth.  They’re absolutely incapable of comprehending that consumers can’t possibly continue to consume at the rate necessary to absorb the productive output of a swelling labor force, magnified by increases in productivity. 

Instead of real action to help American workers, Obama, like every other politician, dangles the carrot of ”retraining.”  During his speech in Michigan, he praised Governor Jennifer Granholm’s “No Worker Left Behind” program in which a few workers have successfully retrained for new jobs with Michigan’s budding but miniscule film industry or with a couple of tiny makers of renewable energy equipment, leaving hundreds of thousands of workers waiting their turn in the unemployment lines.  It seems that retraining is needed because there are millions of jobs going unfilled simply because Americans are too dumb to perform them.  $12 billion to prop up community colleges.  Less than $100 per American worker.  That’s Obama’s plan to create jobs. 

Yet, real jobs, for which there is a real demand, seem to be reserved for other workers of the world.  Japanese, German, Korean and Mexican workers have a right to buid at least half of the cars driven in America.  You don’t.  Bangladeshi workers have a right to manufacture apparel.  You don’t.  Chinese workers have a right to manufacture virtually every other product imaginable.  You don’t.  Jobs for Americans?  Flip burgers.  Ring cash registers.  And, oh yeah, teach other Americans how to do something other than what they used to do.  Those are American jobs.

I’m always on the lookout for non-coercive ways to encourage resource conservation and I’ve just learned about a doozie.

Psychological research into what motivates people to save has made great strides, in, of all places, hotel rooms. Hotel guests have become familiar with cards that encourage re-use of towels, or that suggest not asking for fresh bedding every day. It turns out that if they ask guests to conserve, only a few do it. But if the card says “37 percent of guests who have stayed in this room in the past month chose to re-use towels and linens,” (or whatever the number is), compliance goes way up. People like to be normal. They like to do what others do. They are inclined to keep up with the Joneses and even “show the Joneses” by doing a little better.

Enter Positive Energy, a California company that has developed software that lets electric utilities tell their customers about the average bill in their neighborhood. According to a report in the current issue of The Atlantic, “people who received personalized ‘compared with your neighbors’ data on their statements reduced their energy use by more than 2 percent over the course of a year.”

Now the company is expanding to provide the service via utilities across the U.S. and is looking at how the method can be applied to water bills as well. This dovetails perfectly with my effort to find ways to encourage water and energy conservation here in WNC. Let’s do it!

1. Population:

India’s increasing population is a big hindrance in India’s becoming a Super power. Rising population has affected the quality of life of the people for sure as imparting access of basic amenities and education to bigger population becomes more difficult. In the last several decades, fertility control policies in India have failed to promote a sustainable solution to the problem of overpopulation. India needs to take strict measures to counter the prevailing birth rate in the country.

2. Corruption:

India is one of the most corrupt countries on the world map. Corruption in India has assumed such large proportions that public have come to believe that it is impossible to get rid of this malaise.

We need variety of strategies to fight corruption, ranging from the simplification of rules and procedures and the application of information technology to specific steps such as trapping corrupt public servants. Open and transparent political systems are must at all levels.

3. Decline of public institutions:

key institutions like —politics, universities, judiciary, bureaucracy, police etc. are witnessing deterioration on the matter of accountability and productivity. In India, average incomes have risen fourfold and yet public institutions have not improved. Indian policy makers need to come up with number of public institutional reforms steps to counter this malaise.

4. Naxal and Maoist menace :

Extremism in the form of the Naxalite movement has to be checked. Stern and sincere steps should be taken to rein in the menace.

Rehabilitation programme has to be launched to bring the Naxalites into the mainstream and at the same time police force should be given modern training and equipments to counter ultras.

5. Social inequality and Unequal distribution of income across society:

India needs to address growing unequal income distribution and need to narrow the gap between the poor and rich . This disparity has only increased over the years. Economic policy makers need to work on this. The present global financial crisis is bound to make matters worse unless long-term structural reforms are adopted.

6. Environmental degradation:

Economic development without environmental considerations can cause serious environmental damage in turn impairing the quality of life of present and future generations. The degradation is impacting people’s lives in very real ways, whether in the form of massive depletion of underground aquifers, chemical contamination of soil, death of rivers, loss of species etc.

7. Religious extremism :

Current trends shows Religious extremism has risen sharply in Indian society and if not taken care of, they have potential to completely destroy the secular and democratic fabric of the nation.

Religious riots, communal clashes and bombings in every nook and corner of the country are hindrance in the set up of secular fabric, scientific advancements, technological breakthroughs in the country. Matured democracy and vibrant, fast-growing economy like INDIA have to deal with this issue ASAP.

8. Media Apathy :

Indian media has failed to cover all relevant and real issues revolving around our society. Media needs to come up with the coverage of real and main issues like social inequality and environment degradations. Media has to play an active role in spreading awareness among masses towards major issues of the society.

9. Political chaos :

The political fragmentation across central and regional levels makes it very difficult to forge sustainable long term policies in the realm of health, education, infrastructure etc.

10. Border conflicts:

India’s unresolved border disputes, especially in Kashmir and the North East (Nagaland and Manipur) which indicates that there are parts of India that are not comfortable with being part of India. India needs to take proactive steps to resolve the conflict and fasten the development in these disturbed territories.

Understandably, Sarah Palin presents a solid rebuttal of President Obama’s “cap and trade” energy plan. After all, she’s from the state of Alaska, with significant interests in an oil pipline from the Arctic. But her analysis is broad-ranging, covering the costs to American workers and households in the form of lost jobs and higher electricity costs. Here’s Obama’s own admission that electricity rates will “skyrocket,” costing each family anywhere from $700-1400 a year.

Is the price too high? Or will the benefits of reduced emissions and the technologies developed to streamline the production process outweigh the initial cost?

Governor Sarah Palin wrote on the dangers of the Cap and Trade proposal in the Washington Post today.

I am deeply concerned about President Obama’s cap-and-trade energy plan, and I believe it is an enormous threat to our economy. It would undermine our recovery over the short term and would inflict permanent damage.

American prosperity has always been driven by the steady supply of abundant, affordable energy. Particularly in Alaska, we understand the inherent link between energy and prosperity, energy and opportunity, and energy and security. Consequently, many of us in this huge, energy-rich state recognize that the president’s cap-and-trade energy tax would adversely affect every aspect of the U.S. economy.

There is no denying that as the world becomes more industrialized, we need to reform our energy policy and become less dependent on foreign energy sources. But the answer doesn’t lie in making energy scarcer and more expensive! Those who understand the issue know we can meet our energy needs and environmental challenges without destroying America’s economy.

Job losses are so certain under this new cap-and-tax plan that it includes a provision accommodating newly unemployed workers from the resulting dried-up energy sector, to the tune of $4.2 billion over eight years. So much for creating jobs.

In addition to immediately increasing unemployment in the energy sector, even more American jobs will be threatened by the rising cost of doing business under the cap-and-tax plan. For example, the cost of farming will certainly increase, driving down farm incomes while driving up grocery prices. The costs of manufacturing, warehousing and transportation will also increase.

The ironic beauty in this plan? Soon, even the most ardent liberal will understand supply-side economics.

More recommendations from the Washington Post on how to solve our burgeoning healthcare budget…without neglecting uninsured Americans.

“Two potential changes would require Congress to cede some control over Medicare, which may explain why they are not part of the House measure. Draining the politics out of Medicare payment policies could help create a more rational system. And because of the program’s size, the way it pays for health care has implications for the whole system.”

The recommendations include paying doctors and hospitals to manage the overall health of a patient instead of footing the bill for individual office visits and multiple doctors; bolstering the power of the Medicare Payment Advisory Commission (MedPAC) with recommendations subject to an up-or-down congressional vote; taxing employer-provided health insurance; and limiting malpractice premiums.
Representative Peter Roskam discusses some of the drawbacks of Obama’s approach here:

Today is Bastille Day in France and the Prime Minister of India, Dr Manmohan Singh, at the invitation of President Sarkozy, is visiting Paris (where the Government of India has flown in military contingents to participate in the annual parade), before he goes to another summit in Egypt with Present Mubarak and others, following his recent summits in Italy with the Pope and others, and in Russia with President Medvedev and others, and in London with President Obama and others, etc.   Dr Singh has  almost certainly become the most internationally well-travelled of all Indian leaders on official visits ever in history, which adds to his having had the longest experience in India’s bureaucracy of any Indian political leader in history, which came to be followed by his stint in the Rajya Sabha as Finance Minister and now as a two-term Prime Minister.

But as a result of being out of the country yesterday, the Prime Minister would have missed the TV interview broadcast last night with his chief economic policy aide when it was said that “foreign investors and analysts” are an important constituency for Indian economic policy-makers, as expressed in the President’s speech to the new 15th Lok Sabha or Pranab Mukherjee’s Budget speech last week.  The interviewer seemed to agree and constantly pressed the aide, who is doubtless the most prominent Government economist on television,  about how stock-market brokers and businessmen seemed to have found the Budget not to their immediate liking, and how  privatisation or “raising insurance caps” would have been seen by businessmen as  crucial elements of future economic reform.  In fact privatisation or the insurance business have little to do with any important economic reform but the lobbying power and spin-control of  organised business becomes manifest in getting interviewers to ask such questions of Government spokesmen –  all part of the (doubtless unconscious) process of camouflaging their private interests in the guise of purported public economic policy discussion.

I have taken a very different view.  For example, I said a few years ago in starkest contrast:

“Running through the new foreign policy is a fiction that it is driven by a new economic motivation to improve development and mass well-being in India. The bizarre idea of creating hundreds of so-called “Special Economic Zones” (reminiscent of 17th and 18th Century colonial fortifications) illustrates this. India’s ordinary anonymous masses ~ certainly the 850 million people entirely outside the organised sector ~ have little or nothing to do with any of this. Benefits will accrue only to the ten million Indian nomenclatura controlling or having access to the gaping exit holes to the outside world in the new semi-closed economy with its endless deficit finance paid for by unlimited printing of an inconvertible domestic currency. It is as fallacious to think private investment from foreign or domestic businessmen will support public “infrastructure” creation as it is to think foreign exchange reserves are like tax revenues in being available for Government expenditure on “infrastructure”. Such fallacies are intellectual products of either those who know no economics at all or those who have forgotten whatever little they might have been once mistaught in their youth. What serious economics does say is that Government should generally have nothing to do with any kind of private business, and instead should focus on properly providing public goods and services, encourage competition in all avenues of economic activity and prevent or regulate monopoly, and see to it all firms pay taxes they are due to pay.  That is it. It is as bad for Government to be pampering organised foreign or domestic business or organised labour with innumerable subsidies, as has been happening in India for decades, as it is to make enterprise difficult with red tape and hurdles. Businessmen are grown ups and should be allowed to freely risk their capital and make their profits or their losses without public intervention. An economics-based policy would have single-mindedly sought to improve the financial condition of every governmental entity in the country, with the aim of improving the provision of public goods and services to all 1,000 million Indians. If and when budgets of all governmental entities become sound, foreign creditors would automatically line up before them with loans to sell, and ambitious development goals can be accomplished. As long as public budgets (and public accounts) remain in an outrageous shambles, nothing can be in fact achieved and only propaganda, corruption and paper-money creation results instead. Whatever economic growth does occur is due to new enterprise and normal technological progress, and is mostly despite and not because of New Delhi’s bureaucrats (see “The Dream Team: A Critique”, The Statesman 6-8 January 2006).  The first aspect of the new Indian foreign policy has been for Government to become wholly ingratiating towards any and all “First World” members visiting India who may deign to consider any kind of collaboration whatsoever. The long line of foreign businessmen and heads of government having photo-ops with the Indian PM began with Vajpayee and has continued with Manmohan, especially when there is a large weapons’ or commercial aircraft or other purchase to be signed. The flip-side has been ministerial and especially Prime Ministerial trips abroad ~ from Vajpayee’s to a Singapore golf-cart immediately after commiserating Gujarat, to Manmohan receiving foreign honorary doctorates while still holding public office.  Subservience to foreign business interests in the name of economic policy extends very easily to Indian naval, military or diplomatic assets being used to provide policing or support services for the great powers as and when they may ask for it. Hence, Indian naval forces may be asked by the Americans to help fight pirates in the Indian Ocean, or escort this vessel or that, or India may be asked to provide refuelling or base facilities, or India may be requested to vote against Iran, Venezuela or whomever here or there. But there would be absolutely no question of India’s role in international politics being anything greater than that of a subaltern or comprador whose response must be an instant “Ji, Huzoor”. The official backing of the Tharoor candidacy was as futile and ridiculous as the quest for UN veto-power or the willingness to attend G-8 summits as an observer. While subservience towards the First World’s business and military interests is the “kiss up” aspect of the new foreign policy, an aggressive jingoism towards others is the “kick down” aspect….”

Dr Singh’s aide at one point challenged his friendly interviewer  suggesting the very need for “fiscal stimulus” could hardly be questioned as if such a thing was beyond his imagination.  And again, I am afraid, I may have been quite alone  in December 2008 in lambasting as counter-productive all this purported “fiscal stimulus”. Just another colossal, indeed perverse, waste of public resources driven by organised business lobbies in their own interests, since in fact no one — not Dr Singh nor any of his aides, acolytes or flatterers, foreign or domestic, or anyone else anywhere — has any empirical or theoretical models of any kind depicting the phase, period or amplitude of any possible business-cycle that India’s economy may be on.  Since none of them has any idea whatsoever of what the amplitude or frequency is of any such purported business cycle, they are as likely to have caused a pro-cyclical exacerbation of the amplitude as any sort of counter-cyclical dampening! (Viz., Leibniz ’s principle of insufficient reason.)

How to see what is happening in Indian macroeconomic policy in the simplest comparative static terms is this: both the IS and LM curves are being pushed outwards drastically based on a deliberately erroneous assumption that there is  or might develop mass involuntary unemployment of the sort Maynard Keynes once described in 1936.  The overall impact on nominal interest-rates is indeterminate; the process of inflationary deficit-finance with an inconvertible currency that the Government has indulged in for half a century merely continues, further pushing us towards a potential hyperinflation.

The Bourbon regime swept away by the French Revolution that Bastille Day celebrates were said to have “learnt nothing and forgotten nothing”.   I am afraid the macroeconomic illogic often found among Government economists, private commentators and business lobbyists in India today suggests to me nothing less than that they have  either learnt nothing or forgotten everything from their economics classes decades ago! We in India may need our own storming of the Bastille to sweep away the perverse thoughts and power structures of the post-1947 Dilli Raj.

Subroto Roy
Kolkata

We are simply reproducing the entirety of Economics Nobel Laureate Paul Krugman’s column because we have nothing to add and, considering the urgency of his voice, we think he’d want this as widely disseminated as possible.

“IS AMERICA ON ITS WAY TO BEING A BOILED FROG?

I’m referring, of course, to the proverbial frog that, placed in a pot of cold water that is gradually heated, never realizes the danger it’s in and is boiled alive. Real frogs will, in fact, jump out of the pot — but never mind. The hypothetical boiled frog is a useful metaphor for a very real problem: the difficulty of responding to disasters that creep up on you a bit at a time.

And creeping disasters are what we mostly face these days.

I started thinking about boiled frogs recently as I watched the depressing state of debate over both economic and environmental policy. These are both areas in which there is a substantial lag before policy actions have their full effect — a year or more in the case of the economy, decades in the case of the planet — yet in which it’s very hard to get people to do what it takes to head off a catastrophe foretold.

And right now, both the economic and the environmental frogs are sitting still while the water gets hotter.

Start with economics: last winter the economy was in acute crisis, with a replay of the Great Depression seeming all too possible. And there was a fairly strong policy response in the form of the Obama stimulus plan, even if that plan wasn’t as strong as some of us thought it should have been.

At this point, however, the acute crisis has given way to a much more insidious threat. Most economic forecasters now expect gross domestic product to start growing soon, if it hasn’t already. But all the signs point to a “jobless recovery”: on average, forecasters surveyed by The Wall Street Journal believe that the unemployment rate will keep rising into next year, and that it will be as high at the end of 2010 as it is now.

Now, it’s bad enough to be jobless for a few weeks; it’s much worse being unemployed for months or years. Yet that’s exactly what will happen to millions of Americans if the average forecast is right — which means that many of the unemployed will lose their savings, their homes and more.

To head off this outcome — and remember, this isn’t what economic Cassandras are saying; it’s the forecasting consensus — we’d need to get another round of fiscal stimulus under way very soon. But neither Congress nor, alas, the Obama administration is showing any inclination to act. Now that the free fall is over, all sense of urgency seems to have vanished.

This will probably change once the reality of the jobless recovery becomes all too apparent. But by then it will be too late to avoid a slow-motion human and social disaster.

Still, the boiled-frog problem on the economy is nothing compared with the problem of getting action on climate change.

Put it this way: if the consensus of the economic experts is grim, the consensus of the climate experts is utterly terrifying. At this point, the central forecast of leading climate models — not the worst-case scenario but the most likely outcome — is utter catastrophe, a rise in temperatures that will totally disrupt life as we know it, if we continue along our present path. How to head off that catastrophe should be the dominant policy issue of our time.

But it isn’t, because climate change is a creeping threat rather than an attention-grabbing crisis. The full dimensions of the catastrophe won’t be apparent for decades, perhaps generations. In fact, it will probably be many years before the upward trend in temperatures is so obvious to casual observers that it silences the skeptics. Unfortunately, if we wait to act until the climate crisis is that obvious, catastrophe will already have become inevitable.

And while a major environmental bill has passed the House, which was an amazing and inspiring political achievement, the bill fell well short of what the planet really needs — and despite this faces steep odds in the Senate.

What makes the apparent paralysis of policy especially alarming is that so little is happening when the political situation seems, on the surface, to be so favorable to action.

After all, supply-siders and climate-change-deniers no longer control the White House and key Congressional committees. Democrats have a popular president to lead them, a large majority in the House of Representatives and 60 votes in the Senate. And this isn’t the old Democratic majority, which was an awkward coalition between Northern liberals and Southern conservatives; this is, by historical standards, a relatively solid progressive bloc.

And let’s be clear: both the president and the party’s Congressional leadership understand the economic and environmental issues perfectly well. So if we can’t get action to head off disaster now, what would it take?

I don’t know the answer. And that’s why I keep thinking about boiling frogs.”