President Obama will pardon the Thanksgiving turkey ( Politico ) Obama will press for an extension of the payroll tax holiday ( New York Times ) The possibility of the sequester’s cuts taking effect has taken the Pentagon off-guard ( New York Times ) The federal government has sued Utah over new immigration law ( USA Today ) Mitt Romney will make a rare Des Moines campaign stop today ( KCCI Des Moines ) 60 second recap of last night’s debate: On the main site: Newt Misses His Moment , by
The supercommittee is expected to announce this afternoon that it has failed ( Washington Post ) Both parties hope to twist the supercommittee’s failure to their advantage ( Politico ) President Obama will sign bill creating tax breaks intended to spur hiring of veterans ( Politico ) Michelle Obama was booed at a NASCAR event over the weekend ( The Hill ) New York man charged with plotting to detonate pipe bombs in New York city was influenced by al-Awlaki ( New York Times ) Newt Gingrich unloads both barrels on Occupy Wall Street: On the main site: Super Dud , by
While Democrats don’t often concern themselves with too much government spending, the one place you often see consternation is in defense spending. As a percentage of federal spending, defense has constituted around 20 percent of total spending, and is one of the largest (often the largest) single categorical source of spending. Regardless, we conservatives typically apologize for bloated military spending, because we think that national defense is a more legitimate function of government than the provision of a social safety net. Nevertheless, the deficit-cutting “Supercommittee” was set up so that, if they cannot come to a compromise plan, spending gets cut across the board, including significant defense-spending cuts. And as the supercommittee barrels towards failure, Leon Panetta, President Obama’s Secretary of Defense, is worried about the cuts his department faces . With Congress’ supercommittee stymied, Defense Secretary Leon Panetta warned Thursday of a “paper tiger” Pentagon if the panel fails to agree on a deficit-reduction plan and automatic spending cuts take effect as a result beginning in 2013. The supercommittee has until Nov. 23 to agree on a deficit-reduction package of at least $1.2 trillion over a decade. Any amount less than that would be made up in across-the-board cuts divided evenly between defense and domestic programs. If the committee failed entirely, according to estimates by the Congressional Budget Office, the Pentagon would have about $450 billion less to spend over the next 10 years than current projections, leaving it with nearly $600 billion at its disposal in 2021. Considering that the debt-ceiling agreement signed by President Obama put Sec. Panetta in this situation in the first place, one has to imagine that most Democrats aren’t actually troubled by the defense cuts facing DoD. And Republicans made the deal as well. The choices for the Supercommittee – made by leadership of both parties in Congress – were clearly made without nods to compromise. The failure of the Supercommittee to come up with a compromise plan is likely to lead to pretty deep defense cuts – something that both Leon Panetta and Republicans will have to deal with.
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As Supercommittee Faces Failure, Both Parties Have to Deal With Defense Cuts
Back when I was a lawyer I handled several sexual harassment suits. None of mine settled for less than the high end of six figures. Reading about these two complaints, my gut reaction to them is that settling for five figures, which could be as little as $10,000.00 and as high as $99,999, was “go away” money. If the Chief Executive Officer of the National Restaurant Association, at the time one of the top 25 trade associations in Washington, D.C., were sexually harassing someone, that someone could get a lot of money. It just strikes me that a settlement for less than six figures is money paid to deal with the nuisances of an employee fired or otherwise let go who decided to raise the specter of harassment to get more money to leave without causing a scene. Dealing with harassment claims, no matter how substantive or frivolous, is one of the costs of doing business in America that causes more and more businesses to not do business in America. We don’t know a lot of the facts, but Ben Domenech does raise a good point I remember well from 2008. In his Transom this morning, he writes: Many staffers were struck throughout the 2008 campaign by how often leaks about certain candidates would come out right before previously scheduled media availabilities or TV appearances, forcing a candidate to immediately answer difficult questions to a horde of rabid journalists or duck the avail and make it seem even worse. Now Cain has this story drop at 8 PM on a Sunday night—whole cloth, with no evidence of investigation beyond calling the people named in the documents—a mere 12 hours before he’s supposed to have a full day of media availability in Washington, DC at the American Enterprise Institute and the National Press Club. I feel like I’ve seen this movie. There are only two candidates running this time who ran then, and I don’t think Ron Paul even has an oppo research arm. Curiouser and curiouser. I think people are finally starting to take Herman Cain seriously. I would also note to the Cain campaign that they need to let the candidate deal with this himself. The communications director’s call in to Geraldo last night disqualifies him from doing so. And if he keeps on, it’s only a matter of time before reporters start asking the communications director about his own history at the Pentagon where he accused a female reporter of sexual harassment.
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The Herman Cain Allegations
Congratulations to the two American economists, Thomas Sargent and Christopher Sims, who won the Nobel Prize in Economics for their independent work (mostly during the 1970s and 1980s) on macroeconomic analysis and tools. Here’s a fascinating 2010 interview at the Minneapolis Fed with Dr. Sargent in which he, while avoiding being too political, says that the calculations used by the Obama Administration’s Council of Economic Advisers to support the $787 billion (before interest) “stimulus” were “surprisingly naive for 2009. They were not informed by what we learned after 1945.” Sargent continues with about as damning an analysis as a professor of economics can offer: But I suspect that the council was asked to do something quickly, and they did what they thought was “good enough for government work,” as some of us said during my days at the Pentagon in 1968 and 1969. Back-of-envelope work can be a useful starting point or benchmark. But it does mischief when it is oversold. In early 2009, President Obama’s economic advisers seem to have understated the substantial professional uncertainty and disagreement about the wisdom of implementing a large fiscal stimulus. In early 2009, I recall President Obama as having said that while there was ample disagreement among economists about the appropriate monetary policy and regulatory responses to the financial crisis, there was widespread agreement in favor of a big fiscal stimulus among the vast majority of informed economists. His advisers surely knew that was not an accurate description of the full range of professional opinion. President Obama should have been told that there are respectable reasons for doubting that fiscal stimulus packages promote prosperity, and that there are serious economic researchers who remain unconvinced. Sargent also talks about the “moral hazard” created by deposit insurance, and how that can lead us to “too big to fail”, as well as discussing some of Europe’s structural problems including how their over-generous welfare system leads to high unemployment (despite the claims of Paul Krugman that it doesn’t). And in an equally interesting (if you’re an econ geek like me) late 2009 paper discussing government and central bank policy when the central bank is holding interest rates at or very near the “zero lower bound”, Christopher Sims argues that many current assumptions, especially of the New Keynesian school, are overly simplistic and wrong. Sims also explains why it is dangerous for the central bank to get into implementing policies which look more like fiscal than monetary policy, including the foreseeable issue of politicizing the central bank. In a statement that should (but hasn’t and won’t) have profound impact on the Obama administration’s thinking (and that of Ben Bernanke as well), Sims stresses that “If the public becomes convinced that current deficits correspond to large and uncertain future tax increases or budget cuts, then deficits may have little or no stimulative effect.” Sims’ paper concludes with this section: VI. DOES CURRENT POLICY IN THE US RESEMBLE GOOD POLICY? The expansion of the balance sheet, together with acquisition of the right to pay interest on reserves, is not in itself expansionary. Reserves attracted by high interest rates create no incentive to spend. The balance sheet expansion was undertaken for good reason, and markets seem to understand that there is no significant unwinding problem, because of the right to pay interest. But then, if expectations of higher future inflation are essential to mitigate the crisis, where are those expectations to come from? In fact, one might argue that US policy is not bad, in part unintentionally. The Fed is willing to say that it does not like deflation, but not to say that it would allow temporary above-2% inflation in the future. At least to first order, it may then be helpful that the US has a legislature with an effective 2/3 majority rule and a significant faction that believes all tax increases are evil. In the US, things may be working out as well as they are – “appetite for risk” is returning – precisely because the long-term returns from US debt are at least uncertain. On the other hand, real, coherent, coordinated fiscal and monetary policy with forward guidance could no doubt do better. The current situation creates unnecessary, large amounts of uncertainty about policy. Congratulations to Mssrs. Sargent and Sims for winning the Nobel Prize in economics, and congratulations to the Nobel Committee for not being afraid to select two men whose views at least partially oppose that of the current “I won a Nobel for what?” president of the United States.
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Nobel Prize Winners Don’t Love Obama, Fed Policies
