Austerity Is Killing US

I read this analysis of the gross and simple mathematical error  on http://www.nakedcapitalism.com/ which has been used to  justify  the austerity programs that are bringing misery across the world. Oops! Don't expect this to change anything as policy is based on belief not facts.

By Lynn Parramore, a senior editor at Alternet. Cross posted from Alternet.
Somebody has some 'splaining to do! Please savor the following twisted tale of bad math, academic folly and pundit hubris.

Since 2010, the names of Carmen Reinhart and Kenneth Rogoff have become famous in politic and economic circles. These two economists, of the University of Maryland and Harvard respectively, wrote a paper, “Growth in the Time of Debt” that has been used by everyone from Paul Ryan to Olli Rehn of the European Commission to justify harmful austerity policies. The authors purported to show that once a country's gross debt to GDP ratio crosses the threshold of 90 percent, economic growth slows dramatically. Debt, in other words, seemed very scary and bad.

Their historical data appeared impressive, as did their credentials. Policy-makers and journalists cited the paper to convince the public that instead of focusing on the jobs crisis that was hampering recovery, we should instead focus on deficits. The deficit hawks jumped up and down with excitement.

But something didn’t smell right.

Progressive economists I knew were shocked at what appeared to be the shoddiness of the research and the absurdity of the conclusions. In their paper “A World Upside Down? Deficit Fantasies in the Great Recession,” Thomas Ferguson and Robert Johnson observed that R&R had truncated their sample of British data in a way that skewed their conclusions, eliminating more than a century of data in which British debt loads exploded but economic growth raced ahead (see pages 11-13). The always savvy Marshall Auerback called them out in a blog for New Deal 2.0, which I edited at the time, criticizing the relevance of the cases they had used to justify their conclusions.

But plenty of pundits took their suspect arguments as gospel. The editorial board of the Washington Post declared that "debt-to-GDP could keep rising — and stick dangerously near the 90 percent mark that economists regard as a threat to sustainable economic growth." The economists cited were Reinhart and Rogoff, whom the WP passed off as speaking for the entire field. A new Washington consensus was born, and the public was hammered with the idea that cutting jobs, stripping away vital public services and letting infrastructure crumble was a good was to get the economy going. Most any ordinary person on the street would probably intuit that this made no sense, but there was this Academic Research By Esteemed Persons, so the argument was over.

Enter Thomas Herndon, Michael Ash and Robert Pollin of University of Massachusetts, Amherst, the heroes of this story. These three researchers kept trying to replicate the Reinhart-Rogoff results and couldn’t do it. So they asked R&R to give them their data spreadsheet, which allowed them to see how the data was put together. They found a whole host of problems, including selective exclusion of years of high debt and average growth, a problematic method of weighing countries, and this jaw-dropper: a coding error in the Excel spreadsheet that excludes high-debt and average-growth countries.

Herndon, Ash, and Pollin write: "A coding error in the RR working spreadsheet entirely excludes five countries, Australia, Austria, Belgium, Canada, and Denmark, from the analysis. [Reinhart-Rogoff] averaged cells in lines 30 to 44 instead of lines 30 to 49…This spreadsheet error…is responsible for a -0.3 percentage-point error in RR's published average real GDP growth in the highest public debt/GDP category."
A coding error! Reinhart and Rogoff had been so sloppy in their work that they had not bothered to check their own spreadsheet.
When you fix R&R's problematic methodology and coding errors, you get a very different result that – guess what? – does not support austerity and shows that countries can most certainly cross the phony debt-to-GDP “threshold” and grow.
In their newly released paper, "Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff” Herndon, Ash and Pollin show that "when properly calculated, the average real GDP growth rate for countries carrying a public-debt-to-GDP ratio of over 90 percent is actually 2.2 percent, not -0:1 percent as published in Reinhart and Rogo ff. That is, contrary to RR, average GDP growth at public debt/GDP ratios over 90 percent is not dramatically different than when debt/GDP ratios are lower."
Herndon, Ash, and Pollin have set off a firestorm, with those who long suspected that R&R's work was crap shouting hallelujah and defenders scrambling to figure out a way to support deficit hysteria despite the body blow to their theory.
Bottom line: The foundation of the entire global push for austerity and debt reduction in the last several years has been based on a screwup in an Excel spreadsheet and poorly constructed data.
Reinhart and Rogoff have done a great deal of damage to the world. As Paul Krugman has observed, their replies to their critics have thus far only compounded the confusion. They need to come clean, stop talking like their mistakes are minor, and own up to the enormity of their errors.

Key West Porches

Today is Earth Day, which for me is similar to Ride To Work Day. I try to live mindfully, not always successfully, but I am conscious of the reduce, reuse and recycle mantra but at the same time, as obsessive as I am, I try not to get obnoxious with myself or others. Ride to Work day? I ride my motorcycle to work pretty much every day anyway; why wouldn't I? I love to ride and the weather here is perfect, though sometimes people complain about it being too hot or too windy or too uncertain to be on a motorbike... I usually drive when I feel unwell or unfocused and I don't need a media reminder to "celebrate" a made up day to encourage me to get out on my motorcycle.

So instead of celebrating my empty garbage can and overflowing recycling bins I thought this might be the day to celebrate a really nice walk Cheyenne and I took yesterday. It was rather silly but I wanted to drive to Key West to enjoy the city at a time when not too many people were crowding it, and so it was. Early Sunday morning, me and my dog and hardly anyone to be seen. It was lovely, warm but not too humid, the city was washed clean by a fearsome summer thunderstorm that swept the Keys Saturday night with lots of wind and rain. On a whim I decided to photograph empty porches and this, a photo essay is what I found between Olivia and United Streets, walking at random.

 

 

 

 

 

 

 

 

An old eyebrow home with an old tin roof and fence decorated as usual with a cheap nasty and pointless plastic sign advising you to beware, keep out, the dog etc...

Key West is a city designed for sitting on the porch and doing whatever you want to you do. And you can do it year round. Nice eh?

 

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Clubbing on Stock Island

It's starting to look good for ocean swimming so my wife and I have been gingerly prepping our 14 foot center console boat to get it out of winter mothballs and ready for swimming duty. While that project develops we are still going swimming at our favorite heated pool at the Key West Harbor Yacht Club, on Stock Island.

This place used to be the grimy but useful Peninsular Marine, where we'd bring our sailboat for haul outs from time to time. The gravel, mixed in with liberal coatings of ground off toxic bottom pant has gone, covered by asphalt and brick paving. Te rue some offices and even more unwholesome toilets, reminiscent of a Turkish jail are gone replaced by a super gentrified clubhouse with sauna, gym, restaurant and bar. I'd like a range of decent modern craft beers but Yuengling will do in a pinch.

Kathy had herself a glass of red wine, while Carol, on the right, stuck with white. My wife favors Mojitos around here and after our strenuous swim, sort of, we ordered lobster pasta, salad and duck breast. And lots of conversation, on the outdoor patio.

it was busy even though snowbirds have been streaming North. This here Yacht Club has nothing to do with the Key West Yacht Club on North Roosevelt, a bastion of Conch power, much disliked because the city rents them their waterfront space for a dollar a year. We should all be so lucky!

Coming here is like taking a small vacation from Key West, a paradox I know for people who consider the city a destination in and of itself. But when you live here this is a nice change of pace, cheerful service, crisp linens, nice views and nowhere to be and nothing to do. Ah!

Gentrification has its benefits.

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Why I'm A Progressive

I discovered this political blog at addictinginfo.org and quite enjoyed this lengthy entry:

 

 

By Molly Gum, The Blue Street Journal, of bluestreetjournal.com

This was a response that I wrote to a family friend who took issue with what she perceived to be the Democratic platform. It ended up being far longer than I expected, but every word was necessary. I hope you will read this in its entirety.

Dear Friend,

You said that conservatives believe that rights are endowed by our Creator while liberals believe that rights are provided by the government. I take issue with that notion; liberals believe that the government has a responsibility to protect and defend our God-given rights to life, liberty, and the pursuit of happiness, not define them or interpret their limitations for us. As a Democrat, I take that to believe that each individual is entitled to live a free and happy life in any way they choose as long as they do not hurt another person or interfere with another person’s liberties. The government doesn’t give us our rights; it makes a promise to protect them. It is my belief that no person has the liberty to tell someone what is right for them. We don’t always stop to recognize that our circumstances are often much different from someone else’s, and that what might be right of us isn’t necessarily right for them. That is one of the primary reasons that I am so socially liberal; I can choose what is right for my own life as long as I don’t harm anyone else, but I have no right to tell someone else how to live their own life. In contrast, banning something like abortion or gay marriage imposes a single view on everyone with no room for personal choice. That is not freedom. That is not upholding the creed that “all men are created equal,” and that is where my biggest qualms with the Republican Party lie.

Our Constitution says, “We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity…” Telling someone that they do not have the right to make decisions about their own body or marry the person they love is not upholding our liberties. Denying help to the most vulnerable among us is not promoting “the general Welfare,” and stigmatizing them as lazy and parasitic is, in my view, obscenely iniquitous and injudicious. There will always be people who take advantage of the system, but the vast majority of people receiving government aid are hard-working, and often disadvantaged individuals: veterans, children, the disabled, single mothers, widows and widowers, the elderly, the mentally challenged… The notion that everyone can climb to the top if they just work hard is a myth. It sounds beautiful in theory, but the fact of the matter is that children who grow up in poverty have everything stacked against them. Yes, the occasional exception is out there, and my respect goes out to those incredible individuals, but this is not the reality for 99% of others who share their circumstances. People get caught up in a cycle of poverty that becomes near impossible to escape. If you grew up in a family that had nothing and you had to drop out of school to help pay the bills, when do you have time to get an education and make something of yourself? And the sad truth is that most of the people who live in these circumstances do not actually receive any federal or state aid. The ones that do receive food stamps and health care for their children, and my God, it’s the least that we can do for them. My cousin would not have health care or groceries without the state aid that her mother receives. Should we tell her mother that she just needs to go out and work harder to provide for her daughter, as if she isn’t already working as hard as she can? She was raised by parents who were drug addicts. There were times when she didn’t even have a place to live. She never had a chance to develop the life she deserved. Do her life circumstances not justify the paltry aid that she receives? Should we punish the innocent for being born into life circumstances they did not ask for or deserve? Should we not give them a chance to escape that cycle? What would our nation look like if we just left these people to fend for themselves? We would be ransacked by poverty, and it would seep into every corner of our nation.

I too believe that each individual is entitled to the fruits of their labor, but I don’t see this as a black and white issue. We are members of a dynamic economy that requires efforts and contributions from all angles in order to function properly. Businesses need labor to run efficiently and reap profits, and workers need businesses to offer them employment. Neither side can function or succeed without the other. At the same time, in order for any of this to be possible, we need a government that protects the common good and enforces protections to ensure that the market runs efficiently. Laissez faire sounds great in theory, but an entirely unregulated free market is an unpredictable and unstable system, and there is absolutely no evidence to suggest that Adam Smith’s invisible hand is a guarantee. As Franklin D. Roosevelt said, “Taxes are the price we pay for a civilized society.” Many of the services provided by the government, like education and infrastructure, strengthen our nation and give us the opportunity to become active and productive participants in our society and economy. Research shows that no personal or government investment yields greater returns than education; yet, the education budget has been dramatically slashed at the federal and state levels over the past decade.

As a Democrat, I believe that our society and economy are dynamic entities, and no single person, industry, business, or government can succeed independently of their counterparts. As a result, we all have a responsibility to do our part to contribute to the “general welfare” of our nation. Citizens pay income and sales taxes, business provide jobs and markets, and the government provides services that protect and care for its people. The fruits of our labor include our personal income along with the services and infrastructure that our taxes buy for us. I don’t know about you, but I would rather not privatize and pay out of pocket for the use of freeways, first responders, education, and other publicly funded programs. That is why we pay taxes: so that these services and protections are available and accessible for all of us. I believe whole-heartedly in personal responsibility and individual rights, but we must not forget that it takes a group effort for an economy and society to exist in the first place—an economy and society that gives us the opportunity to cultivate our individual passions and achieve the life that we want for ourselves. I have worked tirelessly to accomplish the things that I have, but I could not have accomplished those things without the platform that was provided to me by my government and economy. No, our government is not perfect, but it has made this nation a better place to live than most places on earth. I believe that Senator Elizabeth Warren put it best: “There is nobody in this country who got rich on their own. Nobody. You built a factory out there – good for you. But I want to be clear. You moved your goods to market on roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn’t have to worry that marauding bands would come and seize everything at your factory… Now look. You built a factory and it turned into something terrific or a great idea – God bless! Keep a hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.”

Under President Clinton, federal tax revenue hovered around 20% of GDP, approximately 2% higher than the average rate for the preceding five decades. While Americans in the top two tax brackets were paying higher tax rates, our economy was thriving, we were running budget surpluses, and unemployment was around 4.5%, the lowest it had been since World War II. Certainly, some of the policy changes that occurred under the Clinton Administration contributed to the financial crisis that occurred in the following decade, most notably the nullification of Glass-Steagall and the implementation of the Community Reinvestment Act. I don’t want you to think that I am disregarding these issues, I am just limiting my focus to tax rates and revenue at the moment. After the Bush tax cuts went into play, federal tax revenue fell to around 18% of GDP on average, although it dipped a bit lower than that for a few years. As a result of these tax cuts, the federal government lost $5.01 trillion in potential revenue since 2001. We had a solid and effective budget during the Clinton years (which to be fair, can be attributed to compromise between Congressional Republicans and the President) and a thriving economy, but the Bush Tax Cuts made it impossible to present a budget that was even remotely comparable to the previous decade. We no longer had money to effectively fund education, research, renewable energy, infrastructure and other discretionary spending that serves as an investment in a growing and innovative economy (things that we were easily paying for while still running a surplus under Clinton).

In my view, we did not have a spending issue at this point, we had a revenue issue. Perhaps this is where our ideologies differ, but I would personally rather pay a slightly higher tax rate and have a thriving economy that is rich with opportunity than pay a lower tax rate and have an economy that blatantly favors the highest earners. Statistics consistently and blatantly demonstrate that every time tax rates were reduced over the past century, the income inequality gap grew drastically. The poorest Americans got poorer, the richest Americans got richer, and the middle class remained hopelessly stagnant. This is the point where Republicans usually misinterpret or misrepresent Democratic views. We don’t believe that everyone should share an equal size piece of the pie; that is unrealistic, unfair, and fatal to a capitalist economy. What we do believe is that the income inequality gap should not be so needlessly massive. In the Reagan years alone, the top 1% of earners in the U.S. saw their incomes increase by 60% while the bottom 40% saw their incomes decrease by an average of 15%. Middle-class incomes largely stagnated or decreased slightly (all of these numbers come from the Congressional Budget Office). Under George W. Bush’s tax breaks and deregulation, the top 1% saw an additional 70% increase in their income while the bottom 40% lost another 15% and the middle-class once again remained stagnant. This can be largely attributed to the massive tax breaks given to the top 2% of earners. Rather than paying a ratio of their income in the same way that the other 98% of Americans did, these top earners were provided with credits, deductions, loopholes, and exemptions that allowed them to pay a lower percentage of their income in taxes than those in the bottom three tax brackets when all was said and done. Someone who makes $5 million per year only has to pay payroll taxes on their income up to $250,000. That is less than 1% of their income while you and I have to pay 6.2% of our total income to payroll taxes. I have no problem with entrepreneurs and innovators making enormous profits, but I do have a problem with them having more leeway in their taxes than the working class, especially when they never have to struggle to make ends meet.

When the financial crisis hit in 2009 and unemployment skyrocketed, the federal government took an average loss of $418.17 billion per year in income tax revenue for a total of $2.1 trillion by 2012. Most of these people ended up on the unemployment payroll which added even more to our loss in revenue. In the meantime, the budget deficit as a percentage of GDP actually shrank during each consecutive year at the fastest rate since World War II, something economists warned would result in further job loss. So, to answer your question: no, I do not think we have a spending problem. I think we have a revenue problem, a tax code problem, an unemployment problem, and a corporate regulation problem. In the U.S. today, the top 1% of earners own more than 40% of the nation’s wealth while the bottom 80% of U.S. workers own just 7%. Is there really nothing wrong with that picture? I’m not advocating for equal distribution, but, My God, could we level the playing field even just a little bit? Because of these statistics, Democrats do not see cutting spending as the solution; we see fair taxation and loophole/deduction closures as the solution. Cutting spending will do nothing to revive our economy and reduce unemployment. In fact, in a recent National Association for Business Economics poll of 49 nonpartisan economists, 95% of them agreed that spending cuts will hurt economic growth. Cutting spending results in cutting jobs and puts more people on unemployment. If you want to cut spending, let’s talk about corporate subsidies. Cutting oil subsidies alone would open up more than $8 billion for investments like education or paying off the debt. Furthermore, placing this financial debacle on the shoulders of President Obama is highly unfair, seeing as President Reagan tripled that nation debt by adding $2 trillion and Bush doubled it again adding another $4 trillion. The debt added under President Obama can be explained by the circumstances I discussed above, not by reckless spending as some people would have us believe.

The final point I would like to make is about who our political parties actually represent. Based on the recent political climate in Washington, I believe that Republicans seek to serve the interest of their corporate and religious sponsors while the Democrats seek to serve the people. More than 94% of Mitt Romney’s campaign donations came from corporate sponsors and financial institutions while 47% (ironic number) of Obama’s came from private individuals who gave $200 or less. The legislation alone tells the story. In the past 4 years, Republicans have introduced more than 1,000 bills trying to limit female reproductive rights, and focused the remainder of their efforts on stripping away corporate regulations and cutting tax rates for top earners. That is supposed to be a party that fights for the American people? They would like us to believe so, and at one point they were, but somewhere along the way that stopped being the truth. This is not the Republican Party that most of us once had enormous respect for. Democrats are certainly not perfect and they certainly serve their own special interest groups at times, but their mission has always been and always will be to fight for the individual citizen and ensure their right to Life, Liberty, and the pursuit of Happiness, and they have never lost sight of that promise.

--------------------------------------------------------------------------------

- Molly Gum, The Blue Street Journal

Read more at bluestreetjournal.com or follow us on Facebook

References

“It’s the Inequality, Stupid.” Mother Jones. N.p., n.d. Web. 16 Mar. 2013.

“Five Media Myths About Welfare.” FAIR Fairness Accuracy In Reporting. N.p., n.d. Web. 16 Mar. 2013.

“Recent US Federal Deficit Numbers.” US Federal Deficit by Year 2008_2017. N.p., n.d. Web. 16 Mar. 2013.

“USGovernmentRevenue.com Past Debt Briefing.” USGovernmentRevenue.com Past Debt Briefing. N.p., n.d. Web. 16 Mar. 2013.

“The Long Story of U.S. Debt, From 1790 to 2011, in 1 Little Chart.” The Atlantic. N.p., n.d. Web. 16 Mar. 2013.

History of Unemployment in the U.S. Infoplease, n.d. Web. 16 Mar. 2013. .



Prayer and Faith

I don't have a spiritual bone in my body, quite honestly, but I do enjoy the architecture. It sits at 729 Fleming Street, the Southernmost Prayer and Faith Center. I like this place so much I did a thorough essay previously on it, but I cannot it seems keep away.

Key West Diary: Southernmost Prayer And Faith Center

They describe themselves as an interdenominational charismatic Word of Faith Church, which means absolutely nothing to me. And their vision is to build people of purpose which sounds strenuous and wholesome I suppose. Beyond that I simply find the space relaxing and a pleasant escape from the heat. I like the traditional look of the place.

As a side note I had no idea there was a masjid, a Sunni Mosque, in Key West, and I stumbled across it by accident at 801 Emma Street. The fact that Key West has the state's oldest Jewish congregation, that everyone knows. But the mosque had been unknown to me and never mentioned among the heathen among whom I travel. Stick around long enough and all will be revealed I guess in this town of many secrets.

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Wheeling Through Key West

Contrary to popular opinion it is entirely legal in Florida to ride a bicycle on the sidewalk, and Key West is an excellent place to ride while enjoying the physical beauty of the town. However if you are going to ride on the sidewalk bear in mind two things (aside from the very good idea of wearing a jaunty sun hat his time of year): pedestrians have right of way and cyclists must have an audible means of approach, where vocal chords will do in a pinch.

Large trucks like this tank from North Dakota are popular but out of place on these narrow streets. Sidewalk parking is inevitable when unsuitablly oversized vehicles roll into town. And don't think locals all roll around in Smart Cars. The canard that one needs a tank is common in Key West. The idea that we are serious about energy independence in the US is about as real as the idea that once upon a time people felt lucky to have a Model T to ride around in, and therefore people could do the same today...

That I like small cars has nothing much to do with economy. My wife is mad to buy a Fiat 500 convertible and her fiscally prudent side is in constant strife with her self indulgent (the losing) side, when she sees one of these easily parked little cars. The trouble is her Sebring convertible works fine and she can't stand buying new/used cars. I think she deserves a Fiat not least because they are a barrel of laughs to drive (we test drove one at Carmax but the back seat is too small for Cheyenne - model T syndrome at work!) and used ones are coming on the market. There are lots in Key West and you can see why:

I have often asked myself why wing mirrors are so hard to reattach. This problem, seen below, is common in Key West where parked cars are frequently viewed as support arches for intoxicated passers-by and bumpers for out of control cyclists. My wing mirror on my last Fusion went the same way. I was surprised gorilla glue fixed it in place and the electric adjustment continued to work. This one is shit out of luck I think, judging by the frantic gluing attempts in evidence. Keeping your car looking nice if you park on Key West streets is futile. You have been warned!

There is lots of powered two wheeler parking in Key West though not every motorcycle or scooter rider seems able or willing to figure it out. I have known riders use their bikes to "save" spaces for their cars.

This one shown below (and barely visible in the first picture in this essay,) seems obtuse beyond reason. Perhaps there was a gaggle of scooters filling the spaces when this machine arrived...

Motorcycle parking as it should be done. Rear wheel to the curb so the rider can see the street clearly on leaving. The motorcycle won't roll back and the stand has it leaning at a safe angle...Done like a pro.

And that yellow scooter across Elizabeth Street looks about right. That I stole my wife's Vespa has nothing to do with it.

They say it's not easy being green but this bicycle is well endowed in that department. I am not used to green tires, perhaps I need to get out more.

This dude, also sporting a jaunty sun hat, has green Crocs. Humph. Wildly colored footwear. Whatever next.

I read lots of discussion on my favorite motorcycle forum scooter atgatt -- - ADVrider about whether scooter riders should wear All The Gear All The Time, like motorcyclists. In Key West that is hardly ever the case. I wear helmet gloves and armored jacket with long pants and shoes on the Overseas Highway but around town I tend to dress down. Flip flops and swimsuits are a little too scant for my tastes.

If all else fails ride the bus...take a tour, a cab, let the pros do the driving.

I always prefer two wheels, even over riding the bus. Model T syndrome I expect. How did people live before internal combustion changed everything?

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