Government Spending: Low and Falling

Just a quick note about an article by Paul Krugman that appeared on his blog today.

Krugman posits that the increase in government spending is mainly due to two factors.

1 - Since the economy has contracted, government spending is going to make up a larger percentage of GDP. Pretty straight forward.

2 - More people are unemployed and are thus collecting from various social safety nets: unemployment, medicaid, food stamps, etc.

The blue line is government (at all levels) spending as a percentage of GDP, so in the last 25 years it was fairly consistently was between 31%-34% of GDP. I'll also note it fell under Clinton and rose during W, although not by too much. Today it's 36%, actually not that high, relatively speaking. The red line is this same measure but as it relates to potential GDP. Basically, what our economy can and should produce. This number is about 34% which is much closer to the trend for the last 25 years.

Source: Paul Krugman's Blog: The Conscience of a Liberal

So there has been some increase in government (again, this is all levels of government, not just federal) spending, but a large portion of it is clearly due to our economy contracting (red line). If one considers #2 from above then it becomes clear that our government, sans safety net programs, has actually contracted in the last several years. This is extremely troubling. 

Politics and our general inability to come together as a nation and implement our hard won knowledge (see Great Depression) has prolonged this recession and harmed many lives in the process. This isn't "oh we just don't have quite as much money..." This is more young people committing suicide, high school students skipping college, older workers not being able to retire when they planned to (even when working class people's life expectancy has stagnated. Source: 1, 2), and increasing rates of depression that are no doubt related to the inability to find a decent paying job. Bad things happening are a fact of life, but watching them happen when they're largely preventable is tragic

Links for May 13th

First, some background music, Irene by Beach House (hat tip: Chris).

The first several Boeing 787's are going into service. Why is this interesting? There are two main airline manufacturers in the world: Boeing and Airbus. They've both moved to composite materials to reduce weight and increase the range their planes can travel. This changes the routes airlines can fly - it's game changing; new hubs, longer distances, smaller cities being connected, more diffuse growth in general. Where they differ is in size. Airbus went huge with the A380 and Boeing downsized with the 787. In my opinion, one of the lessons of recent history has been to downsize: smaller baseball parks, smaller cars, smaller laptops, smaller homes, smaller cameras. I'm betting on Boeing but to be honest I think the contest will mostly just be awash.

It's no longer illegal to tape record police officers in Illinois. How anyone thought that police officers being immune to public scrutiny in this manner benefited citizens I will never know. In my opinion every police officer should be wearing a camera at all times. Tiny cameras that can fit in sunglasses already exist. Why shouldn't we be allowed to see the activities of those who have been entrusted with such immense power and responsibility?

Apparently being unemployed is bad for people. No shit? Among other negative side effects, people commit suicide more often when unemployed. So yes, in the long run the economy will fix itself, but by sitting idly by we are in fact collectively allowing an entire generation of young (and old) Americans to suffer. Krugman on the matter (sort of).

Oh, and college is expensive. Colleges response: “I didn’t think a lot about costs. I do not think we have given significant thought to the impact of college costs on families.” - the president of Ohio State University

Paul Krugman

Liberal or conservative, anyone I espouse Krugman's ideas to gets uncomfortable/mad. Which is interesting because his track record on macro is the best of anyone out there. That and he offers actual solutions. Here's one of his latest.

We Need Growth and No That's Not a Bad Thing

Note: every link in here is worth reading/looking at.

A common response, especially among young liberally minded people, to my all too frequent tirades about how economic stimulus is still needed is "why do we still need growth? Do we really need more stuff?"

Of course we do - and we need it at an increasing rate. Here's why - population growth in the US is about 1% per year. Inflation is currently about 1.5% although the natural rate is more like 3 to 4.5%. Therefore, right now we need to increase GDP by about 2.5% a year just to sustain our current standard of living. Nothing tricky here just some arithmetic.

This is a table I took from Krugman here where he explains basically the same thing. This is Okun's Law by the way:

The take away from this is that an economy needs 2.5% real growth just to keep unemployment from rising and an increase of 2% of real growth to knock 1% off of unemployment.

Typical GDP growth rates are about 2.5-3.5% a year... see where this is going? Real GDP growth in 2010 was 2.6% and in the last quarter it was slightly up to 3.2% (as a part of the whole, not an additional 3.2%) so... at this rate unemployment should start to look semi normal around late 2018 or so.

Back to the point - so this sets up a system where we can only sustain ourselves through continual growth - evidence of the brutality of a market based economy!

Why not? Well population growth and inflation are a fact that must be dealt with and I don't think it's wrong that people should want employment although perhaps I think our mindset towards employment should shift to projects as opposed to a 9-5 but that's not relevant here. What is relevant is that a growing economy and an increased GDP does not necessarily mean a bigger house and an SUV. Whenever predicting how we will live in the future it's usually a good idea to look at Europe now. They've focused on increasing quality of products over tons. As Krugman puts it here:

The way I see it, by the way, is that it’s about shifting the mix away from tons of stuff to quality. You have a small electric vehicle (powered by solar-thermal) instead of an S.U.V., but it drives itself most of the time, and has a great built-in entertainment system. You live in an apartment or townhouse instead of a McMansion, but the brain-wave controlled kitchen turns out gourmet meals on demand. And if we do the GDP accounting right, this will show up as economic growth.

This is something I blogged about a while ago. I was talking about buying fewer quantity but nicer things. There's a good TED talk there too.

Brief Overview as to the State of World Macroeconomics II

Part one can be found here.

Here's a depressing round table with Krugman and some other huge macroeconomists. It's 55 minutes and grim.

To add to that Ezra Klein talks about pretty similar scenarios in which growth is basically stagnate for the next 10-20 years.

Almost no one, not even my most liberal friends, want to hear about more stimulus spending. Yet, government size has decreased by 350,000 jobs since Obama took office, and over the last two years government expenditures have risen a paltry 3% - well below what they were for the previous two years and far below typical economic growth rates. But year America is somehow now socialist. The point is to fill the gap in spending temporarily until it picks up again. Exact numbers are given and they're huge - the initial bill was about half the size it needed to be and 40% tax cuts. Of course it was going to have a weak effect.

The market has been doing fairly well recently and some people are calling for a correction (essentially a devaluation) of anything from very little to 90%. The Big Picture's writer, Barry Ritholtz, is guessing that about 25% is perhaps at the high end, but at the same time - do you want to make money or do you want to be right?

Staying with Ritholtz for a minute - he says we need an intervention as a nation. This is in light of the fact that the foreclosure process (great article) has recently been shown to be in tatters, or rather, businesses that serve foreclosures are falsifying documents proving ownership of a loan that courts then use to seize property. Yeah, that's illegal.

Peter Diamond and two collaborators won the Nobel Prize in Economics (I know, I know - it's not the original) this morning. Why does his name sound familiar? Obama selected him as a Fed governor but the Republicans in the Senate blocked his nomination citing his lack of relevant experience. Then why did Obama choose him? Well, besides the fact that he was Bernacke's professor he also wrote the seminal paper, which he's now won a Nobel for, on... wait for it... unemployment in a distressed market (see: America, present).

Tax receipts get proposed:

I often get asked, or rather chided, about my support for TARP. It's somewhat hard to explain shadow banking to someone who doesn't really know how a reserve ratio works. Anyways, America get its money back and may even make a profit. PLus the banking system didn't collapse... yay? Somehow I feel as if that would have led to zombie attacks... I know, it's weird.

And the real reason I wanted to write about this: "China has an unloaded water pistol at our head"

Everyone knows that we trade a lot with China. They are out second largest trading partner after Canada, but what most people don't know is that China keeps its currency undervalued on purpose in order to increase its export volume. Normally if an import country taxes a good coming in, a tariff, the country where the good originated from gets mad so almost no one does that. Trade is mostly open in the world today - as in most cases it should be. But China "sterilizes" its inflows. What does that mean? When there's a trade imbalance one countries monetary base (amount of currency in its economy) gets bigger, so every year money flows from the US to China faster than the opposite. Every year Chinese currency becomes stronger in proportion to our currency as their monetary base grows. Normally this would mean that their currency, the renminbi, would be appreciate relative to the dollar. Literally, a dollar would buy less in China. Chinese exports would cost more and the US would buy less. That's how trade usually balances itself, so why doesn't that happen.

The Chinese sterilize inflows. That means that the Chinese government uses that excess domestic currency to buy US government debt so that their monetary base won't expand which keeps prices low and exports up. This essentially allows the Chinese to put a tariff on US imports and a subsidy on exports, but most people don't understand sterilization and thus it isn't perceived that way (Krugman's explanation).

The US recently passed the Levin Bill allowing the government the power to place a tariff on any country that manipulates its currency. The Chinese are pissed. They keep saying they will let their currency float (act naturally on the markets) but they never do - they just keep stringing us out.

Monday Reading

China becomes the worlds second largest economy (as measured by country) passing Japan. China's economy is still 1/3 the size of the US's.

Wind power manufacturing in the US is growing... fast. The cost of transporting the large components too far means that domestic manufacturing is here to stay and grow.

Portable lightweight housing that can be erected in a day with nothing but a screw driver. Here's a somewhat more established non-profit manufacturer, World Shelters, of a similar product that has humanitarian and individual sales in mind.

Roosevelt Island near New York has an island wide trash sucking system... no more garbage cans. Photos.

Secretary of Defense Robert Gates is slashing the Pentagon's budget which has increased unabated since late 2001 - in fact in nominal terms it has doubled in the last decade. This isn't small stuff. He's talking about almost trillion dollars over 9 years. Lots of this has already happened.

^ Speaking of a trillion only 21% of Americans knew how much a trillion dollars was relative to a million. It's a million millions. There are 1000 millions in a billion and 1000 billions in a trillion.

Greenspan calls for an end to the Bush tax cuts! But for all the wrong reasons... he thinks the deficit is too big and the (to use Krugman's coinage) the invisible bond vigilantes could strike at any time. Yet somehow bond rates hit a record low yesterday.

Best story ever? Wikileaks, after having embarrassed the military by releasing some 77,000 classified transcripts from Afghanistan, says it wants to release another 17,000. The military is coyly threatening them, so what did wikileaks do? It distributed an encrypted torrent through Piratebay.org that has a large file size. They say the classified information in the torrent is much more damaging that what is already out there. So... if the government does anything, they tweet the encrypted torrent passwords and tens of thousands of people around the world unlock their classified torrent. Brilliant.

NYT story on purple martins - the bird that eats a ton of insects and relies on humans for its housing. We had one in my backyard when I was growing up that still exists.

All sorts of old people are missing in Japan, or rather lots of them have died and their children hide their death in order to collect their pensions.

Ecosystem engineering - I'm curious to see the results of this test. If it's at all promising it could mean huge gains for the natural world.

One of the most famous daguerreotype series recently went under restoration efforts which found that they have a degree of detail that is - utterly shocking. Basically at 30x magnification the plates don't lose detail. That means the series of 8 - 6.5"x8.5" plates could be blown up to 170' by 20' without losing any detail. The irony is that photography in its early stages often produced images that are in many ways more detailed, fine, and artistic than modern cameras are capable of producing. How powerful would your digital camera need to be? Oh, 140,000 megapixels.

Readings From Monday

This is a free movie produced by a group of two guys called the Yes Men. Basically they find ways to trick event promoters, journalists, and talk show hosts into believing that they represent some company. They then go on to embarrass the company by revealing truths, stating positions that make sense but that the company themselves would never agree to, or just straight up comedy. At the very least watch the first 10 minutes or so.

Economists View via Krugman (seem to be reading a lot of him lately... yet he's so accurate and great at representing data) - why the climate bill was killed.

The Big Picture explains why deficits don't matter much to bond holders which is kind of an explanation of what Krugman would call the invisible bond vigilantes. thirty year bond notes are still below 3%... Also, AMAZING graphic on federal income and expenditures.



(Explanation of what I'm talking about - bonds being below 3% means that EVERYONE is willing to lend the US government money because they view it as safe. This goes somewhat counter to the idea being promulgated by conservatives that as the government amasses more debt bond buyers will at some point be completely unwilling to lend the government money and bond prices will soar and we will be unable to finance our expenditures - i.e. Greece. My own addition to this is that the US government enjoys a position of lender of last resort to the world - that is - if we default the world we know will cease to exist. It will make the Great Depression look like a shallow recession. It's like the Supreme Court, it's not that they're infallible, they're infallible because they're the highest court in the land.)

The Big Picture on net worth on as percentage of disposable income.



Algae as a biofuel seems to be nearing the possibility stage.

The biggest story of the day - wikileaks published 77,000 reports from Afghanistan that give a different view of the war then what is generally portrayed.

This is a must read: Martin Wolf, a British economist, explains supply side economics or rather the failure of along with a host of other scientifically broken models that politicians love to tout. Scarey. Here's Krugmans simple take down of supply side economics.

Nanosecond market trading pushes the envelope of internet speeds for all.

Sunday Reading

From the NYTimes: The Supreme Court is getting more conservative.

The Bush tax cuts of '01 and '03 are expiring and Republicans are vowing to extend them while Democrats plan to extend only the cuts to the middle class (under $200,000 a year per individual or $250,000 a year for a family, yea... middle class) and below - which only accounts for 95% of the country, but the Republicans are drawing the line in the sand. Surely a party that talks about balancing the budget AND keeping taxes low for the rich can be taken seriously.

An old article from Slate by Krugman on cornering commodities markets, in this case copper. This is in response to a British man doing the same now to cocoa - that is, chocolate.

Completely random: Clownfish change sex and stay small to form social hierarchies. Very short and utterly fascinating.

BP does some terrible photoshopping on "official images" of the oil spill clean up effort.

The DOT (Department of Transportation) is looking at creating water highways for barges to alleviate road traffic. Which is interesting because ships are the most efficient way of transporting large quantities of anything... but yet require so much resistance from water to move. I wonder if anyone has ever conceived of a barge sized train?

Machete, the spoof trailer from Grindhouse, is actually getting made. I'm excited. Here's the new trailer.

Brief Overview as to the State of World Economics

G-20, the worlds 20 largest economies accounting for something like 85% of world GDP and 80% of trade, got together and agreed to reduce their debt loads to incoming revenue by 2016 - among other vague but hugely influential measures. Debt is the new buzzword politically and economically, but it's a double edged sword given the fact that by lessening debt right now a country very seriously risks hurting its economy for a very long time. Whereas by not doing anything one risks a Greece type situation, no one is willing to lend money to the government and essentially their financial system stops, at some unknown point.

Other current issues include:

Chinese workers don't spend enough money and China won't let its currency fluctuate. Thus, its kind of a black hole for world currency that everyone keeps feeding. Recently the Chinese government announced it would begin letting their currency float but... only time will tell.

Not entirely dissimilar, Germany is pissed at the rest of the world but mostly the US even though - and listen closely - Europe is just as complicit in the world financial crisis as America is.

Wolfgang Franz, who heads the German government’s economic advisory panel known as the Wise Men, tore into Krugman — and the US — in an op-ed in the German business daily Wednesday, titled “How about some facts, Mr. Krugman?”

“Where did the financial crisis begin? Which central bank conducted monetary policy that was too loose? Which country went down the wrong path of social policy by encouraging low income households to take on mortgage loans that they can never pay back? Who in the year 2000 weakened regulations limiting investment bank leverage ratios, let Lehman Brothers collapse in 2008 and thereby tipped world financial markets into chaos?” he wrote.

They are an export economy much like China, which isn't necessarily bad but it fueled Spain and Greece's ability to consume in much the same way that a bar tender continues to serve drinks to a clearly inebriated person. Europe's housing bubble was as big if not bigger than the US's.

And during it all there are a large number of people calling for "tough measures" to right the economy. You know: smaller government, less spending, higher rates, etc. which sounds logical given the circumstances. Except for the fact that all of that is what will plunge us only further into ruin. It takes a bit of counter intuitive logic to arrive at, but contractionary or "belt-tightening" policies are not the right way to go right now - they just sound good as "tough times call for tough measures." Yes they do - running large deficits to stimulate the economy in the short run to ensure long term gains takes courage.

Krugman thinks that a lot of people are focusing too much on the long term and not enough on the short. Or as Keynes said:

"The long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is past the ocean is flat again."

Backlog of Readings

Now every time I post one of these obnoxious lists I'll point out the best article, or at least the one's that you can't skip.

Required Reading - This is a great (and lengthy) article by Malcolm Gladwell on brain damage and football. Kind of glad I never played.

Google says they overpaid when they purchased YouTube to the tune of 1 billion (they paid 1.65 billion for the site). Best part, they knew they were doing it.

According to Krugman the Fed, even under really rosy circumstances, won't raise rates for at least 2 years.

Ever hear of Conservapedia? They're hilarious, but now they've outdone themselves. They're going to rewrite the Bible to "remove the liberal bias."

New York City made a law requiring restaurants to show calorie counts on menu items. Oddly, the new law doesn't seem to be changing the amount of calories that people purchase in any given transaction.

New theories on altruism vis a vie termites.

A Nobel in medicine this year went to three scientists who discovered telomerase, an enzyme that allows a cell to divide perpetually without dying. It has implications for future cancer research.

Krugman says healthcare reform will happen.

Google's Android OS is about to tip. By the end of the year it'll be available on 12 phones.

Ugh, this wasn't even half of my list... more later.

Obama's Health Care Speech

Part one, two, three (where at 2:05 a Republican screams "you lie"), four, five, and six.

Paul Krugman's commentary on the speech complete with many links to key points he's talked about previously.

Reading from Wired

Cool British guy makes vertical hydroponic-type vertical gardens that cover buildings. Really pretty; not sure if it has an advantage over ivy. More water transpiration maybe?

Two budding conflict photojournalists talk about one anothers work (there's even mention of the format I shoot in, medium format).

Monkey music. Must read/hear.

Craigslist kicks everyones ass. This article explains how and why; basically just very simple yet counter intuitive business thinking.

... and Paul Krugman on debt now versus WWII. Really short.

Tons of Links

"I believe in arithmetic." - Ben Bernacke when asked how he felt about Bush's tax cuts. According to Paul Krugman the Bush years are responsible for roughly 20% of our national debt.

Astronomers discover a HUGE sun.

Windows 7 might not suck like just about everything else Microsoft. Even Bing isn't too bad.

Olympus came out with a camera that I think is a step in the right direction. See, point and shoot cameras (the small ones that just about everyone has) are awesome in a number of ways. They're small (so you always have them), relatively inexpensive, and are really powerful (most image sensors on point and shoots aren't much worse than my nice DSLR). But they lack manual control and nice lenses. Here's Olympus's solution... not amazing, but definitely worth noting.

A crazy smart mathematician solves an age old math problem (video, kind of long).

Crows are amazingly smart as demonstrated here. Then it turns out they're not only smart but also better than us at recognizing members of another species. Both are must reads/watches for the truly dorky.

Starbucks goes incognito to look like a local coffee shop.

Neatorama

Musicians can pick out sounds and hear better in crowds than the non-musically gifted.

Monday Reading

Beautiful compact fluorescent light fixtures that open like a flower as they become warm.

Hubble Ultra Deep Field in 3D... again.

A great Q&A with Sam Adams Brewery founder Jim Koch.

The nine nations of North America. I've been saying this for years, but apparently someone realized it far before I did.

Just days from entering grad school for a profession that clearly doesn't need more people (architecture) I find that my other calling (statistics) is actually worth while... hmmm?

I don't know why I found this short article by Paul Krugman so interesting. It's just a comparative line graph between the US and Germany showing what the current recession has done to both countries' GDP. I guess it's just shocking to see what a 4% drop in GDP can do to our whole country.

I forgot to put in my "life update" below that I visited the more respectable part of my family; a neurosurgeon, a physicians assistant, a retired three star general, and between their three kids they have like... a doctor and three more masters degrees... it's sick; in Lafayette, IN. They, being part of the medical profession, are way more attune to the problems of socialized medicine than I. I learned some really interesting things and am of course a bit more skeptical now of the whole thing, but I just can't drop it. Why can't everyone in our country get decent health care? Why not? I get to have F-18's fly over my head every year, my whole city is power washed every week, we can land men on the moon, but I can't get affordable health care? There has to be a compromise. Here's an article from GOOD Magazine that highlights one of the many key issues to health care. That is, that we're willing to pay exorbant amounts of money on unneccesary or ineffective parts of health care (yes we all know this but their spin is interesting).

Oh, and one more. I was ready to tear this article to shreds, but it turns out I agree with the author. Want an affordable well built home? Make it smaller.

Apologizing x 304,059,724

I read this post by Paul Krugman which is basically him finding a now public email from Slate's publisher stating that he thinks Krugman (soon to be Nobel Prize winner) is a crank - supposedly because of his early on anti-Bush Administration rhetoric.

Anyways, this got me thinking. I felt like there was a general feeling of unhappiness in America beginning some time in 2002 or 2003 and lasting through the last part of 2008. I have absolutely no evidence for this. It's very possible that it was just my perception, but I really feel as though a lot of people were unsure about what our country was up to. Slight aside. My parents are a great source of information about the past events. One that I remember very vividly is my mum telling me about JFK. According to her the whole country was in somewhat of an emotional slump and it made everyone feel better to have a youthful and beautiful couple in the White House. Kennedy didn't really get anything done. He was way too young to have any sort of pull in Washington, but he made people feel better and to my mind that really counts for something. The president is, after all, mostly a figure head. I've always told people that regardless of what Obama does his initial appeal to me is that he'll make us feel better. Sounds corny I know, but when you're talking about 305 million people feeling better about their lives and their future prospects it has serious ramifications.

World War II had a deep and profound effect on the psychology of the Germans that persists to this day. We joke about it a bit - think; crazy scientist from Dr. Stangelove. We all laugh when he calls the president "mein Fuhrer!" but it's just a thinly veiled joke about the reality that Germans have to live with. What they did as a nation will go down as one of the worst atrocities that humans have ever been subjected to. How do you live down allowing a man now synonymous with mass murder to rule your country? You got behind him as a nation and undertook his bidding. Germany must now live with that. One would have to imagine that it has a profound effect on their collective psychology.

My point is this - hindsight is 20/20. There were people in Nazi Germany that knew what they as a nation were doing was wrong. The problem was that there weren't enough of these people. (Random aside; check out Valkyrie. It's unbelievably historically accurate. They even toned down certain parts to make it more believable.) You'd have to imagine that the majority of people weren't really truly into being a Nazi. But at the time... everyone was involved in it. Who in America hates American soldiers? I don't...

Human psychology fascinates me because it easily explains all sorts of otherwise incomprehensible historic events. In the case of the Nazi's there is one seminal experiment that explains the phenomenon of "I was just doing my job" - type excuses (often uttered at the Nuremberg trials). That is, the Milgram Studies (if you don't know what this is read it). There's also diffusion of responsibility and a few other things that I don't feel like talking about. The point is that people as a whole act surprisingly similar given certain environmental conditions. People tend to think that they're unique and act differently... but it's just not the case. In any given situation your behavior is fairly predictable.

For example there's a TV show called "The First 48." The premise of the show is that they follow around homicide detectives as they try to solve murders. Usually if you don't have a good lead in the first 48 hours it's a sign that you may not ever catch the culprit. It's a really sad show to watch. It's usually the same sad story; young black kid involved in some sort of drug deal shoots someone because he's defending himself. He then sobbingly confesses to the police and gets 20 years to life in jail. Another mainstay of the show is the accomplice. This person usually confesses willingly and proudly to police that they rang the door bell of the house where the person was about to be murdered or in some other way helped but did not actually pull the trigger. Of course, they too get charged with murder because of their involvement - much to their shock. I posit that this is what they, Stanley Milgram's test subjects, German citizens circa 1945, and to some degree Americans from roughly 2003-2008 all felt - to one degree or another. Ours is obviously the most subtle of the four.

We all know we were accomplices in doing something wrong. Seriously. I know, I know, I'm a crazy liberal... but seriously. He allowed torture. He started a war for no good reason. He spied on his own people without warrants and we allowed him to do it. I am of course talking about our last president. Although, oddly enough, you could say the same thing about Hitler and his cronies. The comparison is not meant to be direct. As much as I dislike Bush, Cheney, and Rumsfeld they and their actions don't hold a candle to Hitler and the Nazis. Wasn't it our duty to protest? This isn't up for debate. Saying what Bush's Administration did was "okay" is no longer acceptable. There were no WMD's, they tortured people, they lied to us, and we did nothing. To deny this is as ignorant as denying evolutions existence.

So what is to be done? Let's act like rational adults who know they screwed up. First, apologize to the world. Then, lets try to fix the stuff we broke as best we can. A touch of humility wouldn't hurt either.

And to those who call me a crazy liberal (my family); Reagan. Love him right? No pun intended. He despised torture (my source is the Atlantic and if that isn't credible then what is?). And I dislike all the presidents back to Woodrow Wilson minus Ike's speech about the military industrial complex.

And one last aside - Teddy Roosevelt was a badass (read the intro).

Just Some Links

Desert rhubarb (plant) irrigates itself.

The evolutionary aspect of economics. I've always thought this way... didn't know it was "different."

Scientists to public: "We think you're dumb."

It was Tesla's birthday a few days ago, and I'm mildly infatuated with him so here's a 90 minute video on the man who more or less single-handedly invented AC electricity, the radio, the electric motor, hydro-electric power... get the point?

Economists oppose more stimulus. Krugman wants more.

Japan; totally screwed.

Dear Mr. Obama

Paul Krugman, this years recipient of the Nobel Memorial Prize in Economic Science (funnier version here), wrote a straight forward and compelling article on what must be done to fix the economy. It's peculiar that I liked it; if I hear one more person say "green" or talk about the economy I'm likely to blow up an animal shelter.

But first, shameless self promotion:

"But let's be clear: Tax cuts are not the tool of choice for fighting an economic slump. For one thing, they deliver less bang for the buck than infrastructure spending, because there's no guarantee that consumers will spend their tax cuts or rebates."

Thanks Mr. Krugman!

If you don't feel like reading the article here are the... most interesting parts?

"The U.S. economy needs to add more than a million jobs a year just to keep up with a growing population. Even before the crisis, job growth under Bush averaged only 800,000 a year — and over the past year, instead of gaining a million-plus jobs, we lost 2 million. Today we're continuing to lose jobs at the rate of a half million a month." That means a 9% unemployment rate where about 4-5% is considered "natural". That's 20 million Americans.

"For the past half century the Federal Reserve... has been taking care of day-to-day, and even year-to-year, economic management. Your fellow presidents were just along for the ride."

"Reagan had absolutely nothing to do with [the economic boom of 1984]. It was, instead, the work of Paul Volcker, whom Jimmy Carter appointed as chairman of the Federal Reserve Board in 1979 (and who's now the head of your economic advisory panel). First Volcker broke the back of inflation, at the cost of a recession that probably doomed Carter's re-election chances in 1980. Then Volcker engineered an economic bounce-back. In effect, Reagan dressed up in a flight suit and pretended to be a hotshot economic pilot, but Volcker was the guy who actually flew the plane and landed it safely." This however won't work because:

"[W]hile the Fed can still print money, it can't drive interest rates down. Why? Because those interest rates are already about as low as they can go. As I write this letter, the interest rate on Treasury bills is 0.005 percent — that is, zero." This however hasn't led to lower interest rates as banks are afraid to lend money out, and who's spending (the effect of borrowing)? So basically this crisis is all on the president and legislative branches of government.

"There was, however, a big difference between FDR's approach to taxpayer-subsidized financial rescue and that of the Bush administration: Namely, FDR wasn't shy about demanding that the public's money be used to serve the public good. By 1935 the U.S. government owned about a third of the banking system."

"Conservatives will accuse you of nationalizing the financial system, and some will call you a Marxist. (It happens to me all the time.) And the truth is that you will, in a way, be engaging in temporary nationalization. But that's OK: In the long run we don't want the government running financial institutions, but for now we need to do whatever it takes to get credit flowing again."

"[Y]ou have to get job creation right — which FDR never did." FDR, concerned about budget defecits, also cut spending and raised taxes in 1937. This led to a recession. Learn from this.

"The lesson from FDR's limited success on the employment front, then, is that you have to be really bold in your job-creation plans."

"'Full employment' means a jobless rate of five percent at most, and probably less. Meanwhile, we're currently on a trajectory that will push the unemployment rate to nine percent or more. Even the most optimistic estimates suggest that it takes at least $200 billion a year in government spending to cut the unemployment rate by one percentage point. Do the math: You probably have to spend $800 billion a year to achieve a full economic recovery." Krugman goes on to say that this money should be spent on things of lasting value such as infrastructure. The hard part will be finding where to spend the money. Currently there are only about 150 billion in "shovel ready" infrastructure programs. Money can also go to state governments while tax cuts should go to the poor and middle class who are more likely to spend the extra money.

"Now my honest opinion is that even with all this, you won't be able to prevent 2009 from being a very bad year. If you manage to keep the unemployment rate from going above eight percent, I'll consider that a major success."

"The biggest, most important legacy you can leave to the nation will be to give us, finally, what every other advanced nation already has: guaranteed health care for all our citizens." Krugman advocates a shared payment/subsidized healthcare plan as he thinks a single pay (government) backed health care system, although more efficient, would be unpalatable to America currently.

"[L]et's put the costs of the economic-recovery program in perspective. It's possible that reviving the economy might cost as much as a trillion dollars over the course of your first term. But the Bush administration wasted at least twice that much on an unnecessary war and tax cuts for the wealthiest; the recovery plan will be intense but temporary, and won't place all that much burden on future budgets."

"[The Obama] team is well aware of the need to wind down the war in Iraq — which is, by the way, costing about as much each year as the insurance subsidies we need to implement universal health care."

"There is, however, one area where I feel the need to break discipline. I'm an economist, but I'm also an American citizen — and like many citizens, I spent the past eight years watching in horror as the Bush administration betrayed the nation's ideals. And I don't believe we can put those terrible years behind us unless we have a full accounting of what really happened." He gives the convincing argument that when Iran-Contra was swept under the rug many years ago those involved became responsible for similar transgressions 20 years later... in the second Bush Administration.

At second glance the article appears fairly partisan. But he's advocating better health care, economic recovery, ending pointless wars, and he won a Nobel Prize... I'll listen.