Economists Kenneth Rogoff and Carmen Reinhart.

By Beverly Bandler

Regarding the Austerity Scandal, I wonder if you are as angry as you should be. I am outraged. This is indeed a significant story that the corporate mainstream media appears to be ignoring.

One reader tells me that he has the impression that the Reinhart-Rogoff scandal has not been widely reported. He says Jon Stewart had Thomas Herndon on his program. Herndon is the graduate economics student who revealed the flaw in the R&R data. Herndon said the error in Reinhart-Rogoff’s spreadsheet was so blatant that it was spotted by his girlfriend, a sociology student. (I don’t like to use exclamation points, but this deserves a couple: !!)

This scandal is important because the economic theory presented by Carmen Reinhart and Ken Rogoff was central to the Republican-led demands for sharp austerity even at the cost of continued high and painful unemployment. The two economists claimed that their data proved that government debt equal to 90 percent of GDP would strangle the economy, thus justifying extreme steps to bring the debt down immediately.

However, other economic studies of the same question came up with dramatically different results, showing continued GDP growth at that level of debt. Finally, Reinhart and Rogoff made their data available to a team at the University of Massachusetts at Amherst and the mystery was solved. The two economists had made an obvious computation error. In other words, the austerity hysteria that had fueled Republican insistence on slashing spending was driven by a botched economic analysis.

The Washington elite had made major economic policy decisions that have affected every single American based on a single paper that had errors so blatant that the mistakes were spotted by a sociology student? The elite policymakers then ignored all the reliable economics work of practically every reputable economist in the nation who questioned the Reinhart-Rogoff study?

Would you want a surgeon to do your brain surgery based on one new technique that had never been vetted and was seriously questioned by other surgeons, including some of the best in the field? But that is how the Republicans and some “deficit hawk” Democrats slashed spending and killed proposals to invest in infrastructure, fund research and rehire laid-off police, firefighters and teachers. God help us!

Not only political “elites,” but financial elites bought into the one paper. Bill Gross, manager of the world’s largest bond fund for PIMCO, in 2010 “warned that UK debt levels were too high, leaving gilts ‘resting on a bed of nitroglycerine,’” basing his warning on the widely cited R&R paper now under fire for “possible statistical errors.”

Gross has changed his tune: he is now criticizing efforts by Britain and much of the Euro Zone to cut debt rapidly with severe austerity measures, warning that such action risks stifling recovery. “The UK and almost all of Europe have erred in terms of believing that austerity, fiscal austerity in the short term is the way to produce real growth,” he stated to the Financial Times, “It is not. You’ve got to spend money.”

Slate business and economics correspondent Matthew Iglesias writes “the academic research bolstering the austerity drive was confused, at best.” It is important to remember that the “academic research” to which he refers was one paper, one research study.

Does this mean the political and financial elites have never read the economic history of the Depression? Updated and related empirical studies of same? That they have never read Paul Krugman, Christina Romer, Joseph E. Stiglitz and a host of other prominent economists and instead chose to embrace one paper “as gospel,” not vetting it, not reading the responses to the paper from other economists when it shot out of the gate?

Incredible!

Beverly Bandler’s public affairs career spans some 40 years. Her credentials include serving as president of the state-level League of Women Voters of the Virgin Islands and extensive public education efforts in the Washington, D.C. area for 16 years. She writes from Mexico.

(Originally posted at Consortium News)

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Anthony Weiner is considering running to be the next New York City’s mayor and I am all for it.  The former Congressman and ardent liberal should run.  You probably remember a few years ago he was pushed from Congress for tweeting his privates. Well, that was the official reason. Personally, I think if he had more friends up on the Hill, he would have had more defenders — to quote his brother, Jason, he had a certain “douchiness” that is apparently absent now.

Weiner had a way of getting under people’s skin — and I mean members of his own party who weren’t thrilled with his abrasive style and penchant for grabbing attention. His congressional tenure included a fierce liberalism and a take no prisoners approach.  If those two things aren’t included in the NYC mayor’s job description, they should be.  He would bring a tenacity to the job that is much needed in the city that never sleeps.  Plus, he has served his time in the political wilderness, it’s time to return him to public life and the public discourse.  I wrote this piece at the time — calling for him to NOT resign.

Hell, if Mark Sanford can have a political rebirth, so can Weiner.

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The Daily Banter Headline Grab from Huff Post:

Despite constant budget fights in Washington, the U.S. economy managed one of the best months for job gains in the past year in February, driving the unemployment rate to its lowest level in more than four years.

But the job market would be even better, and the unemployment rate even lower, had not the government spent most of the recovery cutting spending and jobs. And though Wall Street may cheer February’s jobs report, the pain of government cutbacks looks to get worse as the year goes on.

U.S. employers added 236,000 jobs to non-farm payrolls in February, the Bureau of Labor Statistics reported on Friday, up from 119,000 in January. That was the best payroll growth since 247,000 jobs last November and the second-best month for job growth of the past 12 months.

The unemployment rate dropped to 7.7 percent from 7.9 percent in January, with 12 million people looking for work. That is the lowest unemployment rate since December 2008, when the rate was 7.3 percent.

“The recovery is gathering momentum,” Paul Ashworth, chief U.S. economist at Capital Economics, wrote in a note.

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The Daily Banter Headline Grab from Huff Post:

Federal employees began receiving furlough notices on Friday, as the deep budget cuts known as sequestration went into effect.

More than 1 million federal employees face the possibility of unpaid time off due to the across-the-board spending cuts. While some notices are going out on Friday, the furloughs will not actually take effect until April, as the government is required to give employees 30 days’ notice.

The Democratic staff of the House Oversight Committee released a furlough notice sent to an assistant U.S. attorney on Friday, which read, “This memorandum notifies you that the Department of Justice (DOJ) proposes to furlough you no earlier than 30 days from receipt of this notice.”

“We recognize the difficult personal financial implications of any furlough, no matter how limited its length. We will make every effort to keep you informed as additional information regarding agency funding becomes available,” the letter added.

The sequester contained in the Budget Control Act of 2011 was originally intended to be so painful — $85 billion in across-the-board cuts to both domestic and defense spending — that Congress and the White House would work together to come up with an alternative plan to reduce the deficit. If they didn’t, the cuts would kick in, as they will on Friday.

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The Republicans have the upper hand in dealing with the sequester. If 2012 had not happened and their ability to be as incompetent as Democrats not been so clear (or if I were a fan of conspiracy theories, which I am NOT), I might think they planned this.  They lost the first few rounds of this tit for tat with the White House on the budget to win when they wanted to.  And their laissez faire attitude towards the whole thing reminds me of Tom Cruise in A Few Good Men when he instructed his team to never look upset or surprised — jut act is if everything was going just as they planned.  They have become the cat who ate the canary.

President Obama, however, seems to have lost his coating of cool.  At least his Administration has.  This is why I think you can tell the GOP is winning.  One could make the same argument about what happens when you call someone Hitler; it means you are losing the argument.  The same can be said of fear mongering.

If you believed some from the Obama Administration, you might expect to wake up tomorrow morning to hoards of locusts.  Education Secretary Arne Duncan, for instance has told multiple news outlets that approximately 40,000 teachers will lose their jobs and that the pink slips are already going out.  Some of that may be true but it doesn’t necessarily have anything to do with the sequester.

If this was just based on who looks calmer, the GOP currently holds the lead.  The cause of their upper hand is another story.  Most Americans just aren’t paying attention.  Several polls indicate they aren’t worried about the cuts because they don’t know about them.  My feeling is that this is a lot like a bad sequel to a bad movie.  This is Police Academy 4.  We’ve been to the brink, we’ve even gone over it and survived.  How is this any different?

And then we come to how they are winning.  First, they are getting spending cuts that they claim they want (they have done nothing to make me think they are more interested in cutting spending than the Democrats).  Secondly, John Boehner said that if we want to prevent the sequester, “the Senate needs to get off of their asses.”  Ouch.  Could that be a dig at Mitch McConnell?

See the Budget Control Act of 2011 http://www.fas.org/sgp/crs/misc/R41965.pdf

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As a political writer, being pissed off about certain issues and policies is like rocket fuel. I’m not an angry guy by nature, but there’s a universe of things in politics that piss me off and, combined with an involuntary need to seek and disseminate the truth, I’m never really at a loss for topics to cover.

But the sequestration issue has been one of those rare items that frustrate me to the point of being incapable of spending time on it. When I read about sequestration, my brain seizes. The stupidity of it all simply confounds me to the point of being speechless. For me, this is a shocking and rare predicament.

It’s not even the chronic brinksmanship — the reoccurring doomsday countdowns and the Republican-manifested economic sabotage that’s behind it all. It’s not the Keynesian in me who opposes the very notion of deficit reduction during a sluggish recovery. Granted, these are both points of irritation, but the characteristic of the sequester that ought to force us all into complete apoplexy and subsequent outrage-induced catatonia is the epidemic of ignorance regarding the status of the federal budget deficit.

There are two sides to this deficit idiocy. Firstly, the completely inexcusable conflation of the deficit and the debt, and, secondly, the total failure to acknowledge actual deficit reduction. The press, and especially the Republicans, refuse to acknowledge that not only has the deficit been reduced by more than half-a-trillion dollars since 2009, but also that the deficit will continue to drop with or without the automatic cuts that appear to be inevitable by the end of the week. As a result, deficit hysteria is based on nearly unprecedented stupidity and deliberate deception. And very few players are innocent in this endeavor.

Turn on cable news and you’ll hear the words “deficit” and “debt” used interchangeably as if they’re the same thing. Not too long ago, Fox News Channel ran a segment in which they aired a clip of the resident discussing in his State of the Union address how his proposals won’t “add a single dime” to the deficit. Then, with a satisfied gotcha tone, they showed how the debt — the debt, not the deficit — has increased by $5.86 trillion since Obama took office. Therefore the president must be lying about the deficit. He’s actually spent a crapload of dimes, they said. 58 trillion of them.

The dishonesty and cynicism is astonishing, even for Fox News. This was a deliberate attempt to deceive its audience into believing the, I don’t know, deficitdebt is not only the same thing but that the president lied to the tune of $5.86 trillion dollars.

On top of the ridiculous lies and inability of too many people to use the correct word to match the numbers, when was the last time you heard anyone on cable news or the Sunday shows, much less the White House press room, note with emphasis that the deficit has been reduced by $555 billion since 2009. Let’s go through this again: the final Bush administration budget bill authorized spending for 2009, creating a deficit of $1.2 trillion by the time President Obama was sworn in. An additional $200 billion was added by Obama by the end of that year, creating a total of a $1.4 trillion deficit. From that high water mark, the deficit has steadily decreased to a projected $845 billion by the end of this year. The CBO projects that by the end of 2016, the deficit will have dropped to $433 billion, for a total of nearly a trillion dollars in deficit reduction in six years.

Here’s a fantastically disgusting example of an obvious lie about deficit reduction. Last week, the president said, “Over the last few years both parties have worked together to reduce our deficits by more than $2.5 trillion.” He’s clearly referring to cumulative long-term deficit reduction and not the year-to-year reduction. But CNS News, a right-wing outfit, claimed, like Fox News, that the president was lying because the debt has gone up. Furthermore, the author, Terence P. Jeffrey wrote:

In fiscal 2008, the federal deficit was $454.8 billion. In fiscal 2012, it was $1.2967 trillion. By this measure, President Obama did not reduce federal deficits by $2.5 trillion. He increased the annual deficit by $841.9 billion.

Needless to say, that’s a complete distortion. The 2012 deficit was $1.1 trillion. Not nearly $1.3 trillion. And, as I wrote earlier, the first deficit Obama ought to be responsible for is 2010 — not 2008 or 2009.

Ultimately, all of the dumbstupid about the deficitdebt has resulted in an American electorate which is utterly clueless on the deficit. Via JM Ashby and Steve Benen, the results of a new Bloomberg poll:

A 62% majority believe the deficit is getting bigger, 28% believe the deficit is staying roughly the same, and only 6% believe the deficit is shrinking.

In other words, in the midst of a major national debate over America’s finances, 90% of Americans are wrong about the one basic detail that probably matters most in the conversation, while only 6% — 6%! — are correct.

I think you get the idea… even though everyone else most definitely does not.

The entire sequestration debate is based on the premise that the government needs to reduce the deficit or else we’re all screwed — and debt and insolvency and Greece. Run for your lives! Thus we either have to come up with a deal or slash an additional $85 billion. Add into the mix the fact that we wouldn’t be in this situation in the first place if the Republicans hadn’t played games with the debt ceiling because of similar misrepresentations of the facts and total lies about the deficit.

Yet David Brooks and others believe that both sides are to blame for it, in spite of the fact that it was the Republican effort to sabotage the economy and, therefore, the Obama presidency, and the party’s reckless decision to use the debt ceiling as a political cudgel for the first time in history. Yeah, the both sides meme is part of the sequestration insanity. All told the sequester is a huge shit sandwich with all the trimmings — everything that’s infuriating and stupid about the current political and fiscal debate, stacked high and tasting appropriately, you know, shitty.

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The Daily Banter Headline Grab. From Reuters:

The U.S. economy could take a big hit from automatic government spending cuts even if Congress only leaves them in place for a month or two.

The cuts were meant to be so painful that they would force Congress to find a more thoughtful way to tighten the budget.

But many analysts assume they will take effect as scheduled, forcing federal offices to furlough some of their 2.8 million workers and trim spending on everything from paper clips to missiles.

It is anyone’s guess, however, how long lawmakers will be able to stomach the economic pain. The duration of the austerity measures will determine the force of the blow to the economy. Some analysts think having the cuts in place for more than a few months could trigger a brief recession.

The Congressional Budget Office said on Tuesday the cuts would translate into $42 billion less in federal spending between the beginning of March and the end of September.

If $6 billion in spending is cut in March – which would be the average decline over a seven-month period – economic growth would be stunted by roughly seven-tenths of a percent in the first quarter, said Omair Sharif, an economist at RBS in Stamford, Connecticut.

“You are going to feel the pain right away,” Sharif said.

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The Wizard of Oz was written during a time of political turmoil.  You know how politicians are always saying “This is the most important election EVER!”  I would seriously pay money to hear one say, “You know, not much is going on right now.  This election is just moderately important.  Actually, it’s downright insignificant.  Vote, don’t vote.  Whatever.” So despite being considered a child’s story, it has a lot of political subtext.  Given the current state of things in Washington, DC, I think it deserves another look.

What did the whole thing mean?  In the book, Dorothy’s shoes were silver, not ruby.  At the time we were moving from the gold to silver standard. Oz is the abbreviation for ounces. The Emerald City was Washington, DC.  The Scarecrow was Midwest farmers without much intelligence.  The Tin Man was industry without any heart.  The Cowardly Lion was Congress without any courage. (And the 112ths Congress was how far in the future?) The Wizard was the president without any power.  The wicked Witch of the East was eastern bankers. The Wicked Witch of the West was the untamed western US.  What the movie could do that the book could not was use color.  Kansas scenes are all black and white vs. the bright colors of Oz to show the depression.

Side note; Judy Garland was not slated to play Dorothy.  They wanted a blond – a younger girl and they wanted to use less makeup.   People think she was lucky for landing that role.  I don’t know.  At the end of her life, after she became an alcoholic, she said she had ‘rainbows coming out of her ass.’  I am sure she was speaking metaphorically because otherwise, that would suck.

Why does this matter?  It matters because we write off a lot of things as being ‘just entertainment.’  By doing so, we often miss the point.  Many current politically themed movies hit you over the head with their message, this one was more subtle.  The president, for all his problems, was still a well intentioned guy.  The lion was a wuss but he knew it and wanted to change.  As did the Tin Man.  People recognized their failings and did things to fix them.  I see no one in our federal government doing that today.  Look at Chuck Hagel.  Look at the moderate Republicans who left Congress because it was too annoying to stay.  Or look at Paul Ryan who doesn’t think the fact that he lost his own town in the presidential election means that maybe, just maybe, the country isn’t ready for him.  I am sure there are Democrats who are equally stubborn.  I think President Obama should spend more time with people from the other side of the aisle (and people on his side, rumor has it, he doesn’t much like spending time with either).

If you read my stuff regularly, you will find a common theme; we have to work together.  If this boat sinks, even the people with the best intentions will drown along with those that don’t.

PS. No post about this movie is complete without mentioning the infamous suicide that takes place in the background. Now you can research this and believe the stories that it’s a hoax, my gut tells me this is totally true. Right after the Wicked Witch of the West sets fire to the Scarecrow, the trio set off on the Yellow Brick Road singing.  If you look carefully, you have to have the DVD to do this, you will see a figure walk out and place a chair in the background. The figure then stands on the chair and is next seen swinging from a rope. Don’t believe me?  My roommates and I spent hours reviewing this DVD frame by frame (and you had better ways to waste your time in college?).  I think it’s true.  Don’t believe me?  Look at the DVD.

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If you are interested in politics, you know that former senator from Nebraska, Chuck Hagel, was pretty much cannibalized by Congress. This is the problem with absolutism. You might agree with Barry Goldwater when he said, “I would remind you that extremism in the defense of liberty is no vice! And let me remind you also that moderation in the pursuit of justice is no virtue!”

Perhaps not.  Perhaps we need to remember that our electeds represent us — in theory — the opposite of what is said is equally as valid.  Modernization is no vice and strict adherence to an ideology is no virtue.  I have grown up a lot since moving to Washington.

So we are this random space in time, to me — as a Democrat, I am not used to seeing such discord on the the other side. Republicans oppose Chuck Hagel”s nomination to be the next Secretary of Defense.  They have some real issues, some personal (looking at you, John McCain) and some policy oriented (hello there, Lindsay Graham).

I talk about this all the time.  Politics SHOULD end at our borders.  It doesn’t.  And as a liberal Democrat, my views on this may be meaningless.  And then my partisanship will leap out at you – Sarah Palin had no business talking smack about the country she claims to love. (For the record, I do believe she loves America.)

But really? We cannot even acknowledge good ideas if they come from a party to which we do not belong?

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