To create a Hispanic-majority district in the Chicagoland suburbs, the state of Illinois combined a Puerto Rican neighborhood with a distant Mexican neighborhood via a nonresidential strip of Interstate 294. The problem? The highway is eight miles west of either enclave.I really find it humorous when they trace down highway right-of-ways to connect pieces of districts. How can you go miles where nobody lives?
Of course these sentiments are nonsense. Anyone with any understanding of the complexity of economics, the effect of government programs and the problems besetting the unemployed would know that such a gigantic cut in government spending would have only a negative impact upon the US. It would cause social and economic pandemonium.While the Republican governors here in the Midwest are slashing budgets, their approval ratings are shrinking also. We haven't even really felt the effects of their policies, and yet people don't like them. I don't see why people think that cutting federal discretionary spending or entitlements will help out the economy. I would guess that the impact of those cuts will make Republican policies even more unpopular. Their ideolody has become so radical that I don't think people understand that people like Jim Jordan mean what they say. Jordan always waits for the sane folks to make a deal, then he votes against it and "stands on his principles." This act is pretty popular out here in flyover country, and lots of Tea Party folks are doing the same thing. Now, the inmates in the asylum are nearing a majority in the House of Representatives. If we weren't already in very terrible shape economically, I would like to see folks call Jordan and his idiot associates' bluffs. Let them reap the whirlwind of their moronic rants against big government. Let them sink the economy and screw average Americans so the super wealthy can pay less in taxes. Let them face the voters after their idiocy takes hold. Unfortunately, they will always be able to collect their Congressional pay while never having to take any responsibility for anything, because saner people will come in and make deals, and leave Jim Jordan preaching about how moral and upstanding he is. Nobody will call him what he is, a leech, sucking money from taxpayers for doing nothing.
And yet part of me wants to the GOP to do it. I do admit that there is some perverse pleasure in watching an economic collapse unfolding, in the same way that people hang around and watch the aftereffects of an accident.
Nevertheless I do have a rather pragmatic reason for wanting this to occur - the disaster that it brings on the nation (and the rest of the world) will be so damaging that no one would take hard-line conservatism seriously ever again. The disaster would be so horrible that Obama would be re-elected by a landslide and the Republicans would be utterly humiliated in Congressional elections. More than that, hard-line conservatism throughout the world would be discredited in the same way as communism was discredited after the collapse of communism.
And why? Conservatives have painted themselves into a corner. They are just so angry that things like Medicare, NASA, unemployment benefits and the Department of Education exist. It's not just that they don't like big government, it's that they so strongly believe that their understanding of limited government was the same thing believed by the founding fathers that anything, anything which suggests slightly higher government tax revenue or spending is immediately cause for revolution and "watering the tree of liberty". In the words of Grover Norquist, "I don't want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub."
Remember, the Social Security payroll tax applies only to earnings up to a certain ceiling. (That ceiling is now $106,800.) The ceiling rises every year according to a formula roughly matching inflation.I didn't realize that. I wasn't sure where they came up with the number.
Back in 1983, the ceiling was set so the Social Security payroll tax would hit 90 percent of all wages covered by Social Security. That 90 percent figure was built into the Greenspan Commission’s fixes. The Commission assumed that, as the ceiling rose with inflation, the Social Security payroll tax would continue to hit 90 percent of total income.
Today, though, the Social Security payroll tax hits only about 84 percent of total income.
It went from 90 percent to 84 percent because a larger and larger portion of total income has gone to the top. In 1983, the richest 1 percent of Americans got 11.6 percent of total income. Today the top 1 percent takes in more than 20 percent.
If we want to go back to 90 percent, the ceiling on income subject to the Social Security tax would need to be raised to $180,000.
But that wouldn't be fair. How could such people pay those taxes and still afford a Manhattan apartment, a house in the Hamptons, a ski villa in Vail and a house in Palm Beach? And how would they be able to trickle their wealth to the rest of us? I think there is a way to make our budget deficits manageable without slashing benefits for the very poor, it's just that the people who might have to pay more have more power than the rest of us. I think people should be able to make lots of money, I just think we should try to put some type of upper limit on it. A 90% top marginal rate seemed to work like a charm back in the 50s, maybe we ought to try out a 60% top rate over, say $5 or $10 million. I think it is counterproductive to limit charitable deductions in order to lower the top marginal rate under 30%, but that's just me. It seems like lower marginal rates is the direction our "tax reform" will be headed. I just don't think that will help ameliorate the growing income inequality.If corporations and households amassing $1 million or more in income each year were now paying taxes at the same annual rates as they did in 1961, the IPS researchers found, the federal treasury would be collecting an additional $716 billion a year.In other words, if the federal government started taxing the wealthy and their corporations at the same rates in effect a half-century ago, the federal debt to investors would almost totally disappear over the next decade.Similarly stunning numbers have just come, earlier this month, from MIT economist Peter Diamond and the University of California's Emmanuel Saez, the world's top authority on the incomes of the ultra-rich. These two scholars have calculated some fascinating "what ifs" that dramatize just how spectacularly the incomes of our wealthiest have soared over recent decades.In 2007, Diamond and Saez point out, taxpayers in the nation's top 1 percent actually paid, on average, 22.4 percent of their incomes in federal taxes. If that actual tax burden were to about double to 43.5 percent, the top 1 percenter share of our national after-tax income would still be twice as high as the top 1 percent's after-tax income share in 1970.
The great bulk of the literature about the industrial revolution has been devoted to explaining how it began. This has been to the neglect of the equally important question of why the growth did not grind to a halt as all previous experience suggested was inevitable. It is in this context that the history of energy usage is critical to the understanding of the changes which took place.The potential of limited increases in energy production is very disconcerting for our way of life, that's for sure. If, because we are cooking the planet, we have to change our current energy-intensive lifestyle, things will not be fun.
Societies whose productive capacities were limited by the annual product of photosynthesis operated within severe and seemingly immovable constraints. Societies which switched to depending on the stored products of photosynthesis in the form of fossil fuels were released from these constraints, though whether the immense benefits which were thus made possible will prove durable and stable remains an open question.
I'm not a Lone Star hater. Texas has thrived with cheap work, cheap homes, and cheap living costs. In the dawn of a recovery, these are virtues, and it does no good for liberals to pretend otherwise. But ultimately, I'm a believer that economic conditions matter more than policy, and Texas' conditions are perfectly suited to the moment. The American consumer is weak, and the industries and states that are growing fastest in the U.S. rely on something other than the American consumer: namely protected parts of the federal government and growing global markets. With defense and energy as two of its leading industries, Texas' major markets are the federal government and the global commodities market. Take away the steadiness of the military (including medical) and oil and gas demand, and you've got a very different story in Texas.I don't happen to be a fan of Texas. They aren't exactly setting the standard for education or health care. So they don't have a state income tax. I'll pay Ohio's and stay here. It's plenty hot for me in the Buckeye State, I'll pass on the heat of Texas.
I expect to see a globally integrated market for fresh water within 25 to 30 years. Once the spot markets for water are integrated, futures markets and other derivative water-based financial instruments — puts, calls, swaps — both exchange-traded and OTC will follow. There will be different grades and types of fresh water, just the way we have light sweet and heavy sour crude oil today. Water as an asset class will, in my view, become eventually the single most important physical-commodity based asset class, dwarfing oil, copper, agricultural commodities and precious metals.That is definitely interesting. It makes the debate about withdrawals from Lake Erie more significant. It also makes Dayton's buried valley aquifer more valuable as a resource. I think it is interesting that discussions of China's South-North Water Transfer Project don't automatically bring up California's large aqueduct projects. Those are pretty large-scale.
Senate Republicans are showing far more flexibility than their tea party-backed House colleagues as Washington policymakers seek to steer the government away from a first-ever default on its financial obligations.The Senate GOP has been ridiculous in its use of the filibuster, but there are some sane Republicans left there. The question is, for how long will that be the case? As the Tea Party idiots continue to climb the political ladder, how long will the Senate keep a few sane members. Wisconsin elected the nutty Ron Johnson, and Pennsylvania elected Pat Toomey. The Ohio GOP was talking about Jim Jordan running, and Josh Mandel, Ohio
As the House doubled down on a symbolic vote to condition any increase in the government's borrowing authority on congressional passage of a balanced budget constitutional amendment and a fresh wave of spending cuts, the warm reception by many Senate Republicans to a new bipartisan budget plan revealed a thawing in GOP attitudes on new tax revenues.
Beef cattle shipments from areas near Japan’s stricken Fukushima nuclear plant were banned as consumers and lawmakers accused the government of negligence after more cows were found contaminated with radiation.I am surprised it took them this long to address trying to keep contaminated livestock out of the market. Of course, they've had their hands full dealing with other problems from the disasters, but it seems like a no-brainer to protect the food supply. This undermines confidence in the whole system.
Authorities discovered 637 cattle that had been fed hay tainted with radioactive cesium and sent to market from farms in prefectures including Fukushima, Masahiro Seki, an official at the Ministry of Agriculture, Forestry and Fisheries’ livestock and feed division, said in an interview yesterday.
Four months after an earthquake and tsunami crippled the Fukushima Dai-Ichi power station causing the worst nuclear disaster since Chernobyl, Chief Cabinet Secretary Yukio Edano said yesterday the government halted all shipments of cattle from the area. Aeon Co., Japan’s biggest supermarket chain, said July 16 it had sold beef from cattle tainted by radiation at 14 of its stores in Tokyo and four other prefectures.
The mathematical work is way beyond me, but it is interesting to me. Glad somebody's smart enough to figure it out. He says later on that the article is a call out for funding for mathematicians, and he explains why, in his opinion, mathematicians are worth having around:Spanish physicist Juan Parrondo, writing with University of Greenwich mathematician Noel-Ann Bradshaw, describes a paradox Parrondo himself proposed in 1996 that gives a game-theory interpretation of the intriguing concept of Brownian ratchet, a device that appears to extract free energy from a fluid. (Equally fascinating to me is how pervasive Brownian ratchets seem to be in biology, where they power many of life’s nanomotors.)
Works for me.On the other hand, mathematicians are cheap. They just need a small office, some chalk, a computer and, once in a while, a ticket to a conference. They make you smile by wearing nerdy T-shirts. They are good to have around on university campuses in case you are a scientist who happens to have calculus (or Riemannian geometry) questions. Oh, and they teach math to students. Lots of students.
By 1990, slot machines accounted for a full two-thirds of Las Vegas’ gaming revenue, a percentage that has remained fairly constant ever since. Slots took over the prime casino real estate previously reserved for blackjack and roulette; three-quarters of gaming-floor acreage in Las Vegas is now inhabited by slots. And IGT grew into the industry’s Goliath, with annual revenue of close to $2 billion and a coveted spot on the S&P 500 index. Roughly half of America’s 833,000 slot machines are produced at IGT’s manufacturing plant in Reno.I knew there was a lot of psychology that went into it, and this is one more industry, along with finance, that steals our nations best mathematical brains to make money gambling. Nice.
Armed with detailed intelligence regarding gamblers’ behavior, IGT’s designers now tailor each new machine to appeal to a specific type of player. “One of the things that really defines how a game plays is volatility of the math model,” says Chris Satchell, the company’s CTO, who previously filled the same role at Microsoft’s videogame division. Some games, he explains, are based on algorithms that produce frequent but small payouts, ensuring that risk-averse players are able to play for long stretches before losing their bankrolls. High-volatility games, by contrast, offer large jackpots but long odds of winning and are thus designed to attract gamblers who want a quick shot at a big score. Creating those varied experiences, while still ensuring that the house always wins a predictable amount over the long run, requires the expertise of professional mathematicians. IGT scours the nation’s graduate mathematics programs in search of talent who would rather develop slots software than devise Wall Street trading algorithms.
Corporations pay hefty fees for the opportunity to discuss policy with legislators at ALEC's conferences, and they also host banquets, open-bar parties and baseball games. Legislators, on the other hand, pay a nominal membership fee, and can be eligible for "scholarships" that pay for their conference attendance. When the legislators bring the model bills back to their state capitals, the role played by ALEC—or by the corporations—seems to be rarely, if ever, disclosed.This is a perfect fit for the lockstep conservative movement. One state passes an idiotic bill, then 6 or 8 other states are passing the exact same thing. It is kind of creepy that they write bills for immigration reform, destroying public sector unions and even ridiculous photo ID requirements for voting. The corruption of the democratic system is stupefying.
Crucially, ALEC says it is not a lobbying organization, and thus because of its nonprofit status, it does not have to disclose its donors or the amount of their donations. (The Times says Common Cause is trying to challenge ALEC's nonprofit status.)
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| Photo credit: Clark Street Blog |
Since 1911, Limburger makers have stood their ground to the point where there is but one Limburger man left in the United States—Mr. Myron Olson of Monroe, Wisconsin. They had help, to be sure, from the intractable cheese itself. Limburger’s odor—caused by a unique bacteria that decomposes it in a few months time from a fresh, bland, feta-like cheese into a sharp, stinky one that eventually gives off ammonia tones—has proven impossible to remove without dulling its taste. Still, that smell was no secret. So how did a working-class cheese, one of the most popular in America, dwindle to but one producer? Not every immigrant’s story is a happy one, and such a tale is Limburger’s.For several years at our neighbor's party during the Ohio State-Michigan game, one of the guys would bring some Limburger cheese. I was always tempted to try some, but never did. I do remember guys complaining about who "cut the cheese" when they were near it. Now that he hasn't brought any for a couple of years, I feel like I missed out on something. I know that at one point, the only major plant making Limburger (or Liederkranz) cheese was in Van Wert, Ohio.
Consider a largely invisible proposal for balancing the budget, the People’s Budget, released in April by the Congressional Progressive Caucus, which includes 83 members of Congress. Its proposed budget savings include major cuts to military spending based on immediate withdrawal from Iraq and Afghanistan. Its proposed revenue sources include new tax brackets for the rich (from 45 percent on income over a million dollars a year to 49 percent on income over a billion a year), restoring the estate tax and eliminating the Bush tax cuts.Republicans strategy is to cut spending enough that they can lower taxes more. That might sound good to average folks, but it is their Social Security and Medicare which will get cut to make way for more tax cuts for the people who make the most money. I would suggest the 49% tax rate on income over $5 or $10 million. If a person made $20 million, they'd still take home over $10.4 million a year (excluding state and local taxes). That ain't chicken scratch. Assuming the person works 80 hours a week with no vacation, that's $2500 an hour in take-home pay. I'm not sure what kind of work earns that kind of pay, but it makes autoworkers look like a bargain.
The Economic Policy Institute provides a more detailed supportive analysis. Proponents have also developed a three-way comparison with budget proposals advocated by President Obama and Congressional Republicans that allows you to register your own preference.
Deficit hawks (at least those who are not tax chickens) should welcome the People’s Budget, because it offers a plausible path to debt reduction.
Matt Miller of The Washington Post noted that the People’s Budget would, unlike the Roadmap for America’s Future advanced by Representative Paul Ryan, Republican of Wisconsin and chairman of the House Budget Committee, generate a budget surplus at a predictable point in the future, winning the “fiscal responsibility derby.”
The Examiner goes on to say that the bill cutting subsidies doesn't actually do that. I'm not surprised. This is a boondoggle which has lasted too long. Hopefully they will really phase out the tax credit.
Bachmann has built her foreign-policy platform on the nuance-free defense of Israel. She does this not because Israel is a strategic ally, or because it’s a democracy, but because the Bible states that God will curse those who betray it.WTF? A curse that comes into play? Does she realize that this country existed for 172 years before the creation of the State of Israel? Or that the United States wasn't exactly working actively for the Zionist cause before the end of World War II? How exactly are the two nations inextricably entwined? As Goldberg points out, this fervent, blind support of the most right-wing segment of Israel is dangerous to the United States and Israel This woman has no business in Congress, let alone in the White House, but the Republican party has been taken over by loons. God, please protect us from your most fervent believers.
At a recent meeting of the Republican Jewish Coalition, she said, “I am convinced in my heart and in my mind that if the United States fails to stand with Israel, that is the end of the United States.” She went on: “We have to show that we are inextricably entwined, that as a nation we have been blessed because of our relationship with Israel, and if we reject Israel, then there is a curse that comes into play.”
Just imagine, then, Bachmann’s paralysis when confronted by the reality of Tel Aviv, which is home to the largest annual gay-pride parade in the Middle East. The most recent one, held last month, drew about 100,000 people. According to a Guardian reporter, “Every square metre of shade was crammed” and “friends greeted one another with sweaty kisses and hugs.” A man named Amit Margalit, described as a bare-chested 28-year-old, said, “The weather is hot, the guys are hot, it’s a hot city.”
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| Messerschmitt Me 262 Werk-Nr. 111711, seen here post-war during a test flight in the USA. It was the first intact Me 262 to fall into Allied hands on March 31st 1945. (U.S. Air Force photo) |
5.) More skills Why is this so hard to accomplish? MLB's Homerun Derby has proven to be nearly as popular as the game itself. Yet baseball refuses to capitalize on its own success by adding more skills contests. For instance, you take a half-dozen players with great arms, stick them in centerfield, and set targets at every base and home plate. Tadah! An Outfield Skills Competition.I remember when they used to do just that. I think the year I watched, Cory Snyder won or was in the finals. But they could feature some catchers throwing to bases, some timed baserunning, and stuff like that. Of course, if the home run derby lasts 3 hours, it's hard to get any more stuff in. I also agree with Less Bud, although that applies to the whole season, not just the All-Star Game.
President Obama will nominate former Ohio Atty. Gen. Richard Cordray to head the new agency to protect consumers in the financial marketplace, acting just days before it is set to begin operations. After months of speculation about who would lead the powerful Consumer Financial Protection Bureau, the White House announced Sunday that Obama decided to bypass Elizabeth Warren, the Harvard law professor and liberal darling who proposed creation of the agency in 2007. She has been working as a special administration advisor for nearly a year preparing the agency for launch on Thursday.Rortybomb explains why the Republicans will blow off his nomination also:
Warren, an outspoken consumer advocate who has drawn Republican ire, was seen as too controversial to be confirmed by the Senate. Obama opted for Cordray, who lost his reelection bid in Ohio last fall and was hired by Warren this year to be head of enforcement for the consumer agency.
44 Republican Senators have vowed to block anyone unless structural changes are made to the CFPB, and have reiterated today that they will continue to do so. This is important as there are many things the CFPB can’t do, basically powers that aren’t transfered over from another agency, without a Director. What’s their deal?Their deal is that they think financial businesses should be free to screw consumers, and they don't want anybody who will try to help consumers be in charge. Elizabeth Warren would have done a good job, and so would Cordray, who should still be an elected official in Ohio. Therefore, Republicans don't want anyone to hold the job, unless it is powerless. They are terrible business lackeys, and are repulsive in their behavior. Cordray is definitely going to be opposed by these tools, and the country will be worse off. Ohio might end up better-off though, as Cordray would be the strongest candidate to run against John Kasich in 2014.
The auto industry is actually a terrific proxy for a trend toward short-term, myopically balance-sheet-driven management that has infected American business. In the first half of the 20th century, industrial giants like Ford, General Electric, AT&T and many others were extremely consumer-focused. They spent most of their time and money using new technologies to create the best possible products and services, regardless of development cost. The idea was, if you build it better, the customers will come. And they did.I'm no real fan of MBAs, but I find the Bob Lutz story to have limitations. His beefs are coming from a pure car enthusiast, but much of the problem the Big Three had was ignoring the demand for well-built small cars after the oil crisis, not a very big concern for pure car guys like Lutz. They didn't think people would stop buying American cars, no matter how poorly they were built. They had a long period of overcoming poisoned labor-management relations, while they didn't improve quality while they could. The MBAs contributed to the problem, but the inertia of a giant organization prevented necessary changes when they could be effective.
The pendulum began to swing in the postwar era, when Harvard Business School grad Robert McNamara and his "whiz kids" became famous for using mathematical modeling, game theory and complex statistical analysis for the Army Air Corps, doing things like improving fuel-transport times and scheduling more-efficient bombing raids. McNamara, who later became president of Ford, brought extreme number crunching to the business world, and soon the idea that "if you can measure it, you can manage it" took hold — and no wonder. By the late 1970s, M.B.A.s were flourishing, and engineers were relegated to the geek back rooms. (See why you should still go to college.)
Compulsive gambling is marked by poor impulse control. Where a non-gambler fears to tread, the compulsive gambler may rush in. Bet on the Mets to sweep a doubleheader against the Phillies with two kids brought up from AA pitching against Halliday and Lee? Seems like a great idea!I would think that is pretty much a given. Anybody who thinks they are going to beat the house with the odds against them is probably superstitious, and anybody placing large bets at the casino is probably impulsive.
Now a study of British gamblers finds that the ones who were the most impulsive were also way more likely to reason incorrectly. For example, they put more stock in superstition, like rituals or carrying a lucky coin. Or they’ll believe more fervently that they got a slot machine that had simply gone cold, offering them no chance to win. Thereby discounting the actual laws of probability that govern their alleged luck.
Fight Night was part of the five-week, multi-event Punchers & Painters festival which celebrates boxing, art and downtown Dayton. It’s a grassroots effort begun a year ago by three of us - local artist Mike Elsass, downtown gym owner John Drake and myself - and now joined by some other like-minded supporters like Trotwood gym owner Milt Pearson, whose son Chris is one of the favorites to make the U.S. Olympic boxing team for the 2012 London Games.Last year, I wanted to go down, but didn't make it. This year, I didn't realize it was going on. I'll keep my eyes open for it next year.
This Friday night Punchers & Painters will host “An Evening with Buster Douglas” - the former heavyweight champ (one time Sinclair Community College basketball player) and the first man to dethrone Mike Tyson - at the Color of Energy Gallery in the Oregon District.
All but the Dayton Dragons fight show Aug 12 are free. Although 16 ringside tables were sold for the Drake’s show, the Dayton Daily News donated the medals given the boxers and Price Stores provided Drake’s wardrobe, most of the Punchers & Painters expenses are handled by us without financial help from the city or some community fund.
“You just do what you can to help make our town better,” said Elsass, speaking for all of us.
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Image Credit & Copyright: Babak Tafreshi (TWAN) |
This makes it sound as though Helaba is a band of sharp operators trying to hide how overleveraged they are—like some of the Wall Street players that blew up in 2008. There is a lot you could say about the landesbanken, but sharp is not what comes to mind.That is interesting. I am intrigued by the Bank of North Dakota, which I understand serves a similar purpose. I am a fan of cooperatives and credit unions, and the wholesale public banks seem to fit into that pattern. I am not sure if any other state will follow the North Dakota model. My guess would be Vermont might be a candidate. I would guess that the financial industry has way too much pull in New York and California, other states which follow more liberal policies. With John Kasich as governor and Republicans holding 2/3 majorities in both houses of the legislature, I can guarantee that Ohio is out of the running.
The first thing you need to know is what the state banks like Helaba are. They are publicly owned entities that rest on top of a pyramid of thousands of municipally owned savings banks. If you add in the specialized publicly owned real estate lenders, about half the total assets of the German banking system are in the public sector. (Another substantial chunk is in cooperative savings banks.) They are key tools of German industrial policy, specializing in loans to the Mittelstand, the small-to-medium size businesses that are at the core of that country’s export engine. Because of the landesbanken, small firms in Germany have as much access to capital as large firms; there are no economies of scale in finance. This also means that workers in the small business sector earn the same wages as those in big corporations, have the same skills and training, and are just as productive.
But the EU doesn’t like the landesbanken. They denounce the explicit and implicit public subsidies that state ownership entails, saying they violate the rules of competition policy. For over a decade they have fought to have the system privatized. In the end, the dispute is simply ideological: if you think that public ownership should only be an exception, narrowly crafted to address specific market failures, you want to see the landesbanken put on the auction block. If you think an economy should be organized to meet socially defined needs, you would want a large part of capital allocation to be responsive to public input, and you’d fight to keep the landesbanken the way they are. (There is a movement afoot in the US to promote public banking.)
One result of the EU attack has been pressure on the landesbanken to demonstrate competitive rates of return. The folks who move money in these banks are public servants, very good with forms and checklists in hallowed German tradition, but not very savvy in nouveau finance. Sadly, some of these naive beamters loaded up on the mortgage-based securities that collapsed in the financial crisis, since the returns were what Brussels was demanding, and, well, they were AAA.
But the real culprit — or at least the main one — has been hiding in plain sight. We are living through a tremendous bust. It isn’t simply a housing bust. It’s a fizzling of the great consumer bubble that was decades in the making.Further on, he says:
The auto industry is on pace to sell 28 percent fewer new vehicles this year than it did 10 years ago — and 10 years ago was 2001, when the country was in recession. Sales of ovens and stoves are on pace to be at their lowest level since 1992. Home sales over the past year have fallen back to their lowest point since the crisis began. And big-ticket items are hardly the only problem.
The Federal Reserve Bank of New York recently published a jarring report on what it calls discretionary service spending, a category that excludes housing, food and health care and includes restaurant meals, entertainment, education and even insurance. Going back decades, such spending had never fallen more than 3 percent per capita in a recession. In this slump, it is down almost 7 percent, and still has not really begun to recover.
Earlier this year, Charles M. Holley Jr., the chief financial officer of Wal-Mart, said that his company had noticed consumers were often buying smaller packages toward the end of the month, just before many households receive their next paychecks. “You see customers that are running out of money at the end of the month,” Mr. Holley said.This is something that is often overlooked when searching for the villains in the financial crisis. We are collectively villains (although Wall Street holds the key villains). Consumers are overly indebted. We have borrowed more and more in the 80s, 90s and oughts, and the bill is coming due. Continuously lower interest rates have allowed us to take on higher and higher amounts of debts as a percentage of income. Meanwhile, the government also was allowing us to spend more by lowering taxes and borrowing to pay for government. The main issue is how to mitigate the impacts of deleveraging. In my opinion, the only way to proceed is to improve the fiscal situation by making cuts in spending which will have the minimum negative effects on struggling people while raising taxes on the best off, because they are the ones who can afford to pay more. It doesn't make sense to me to refuse to raise revenue and try to narrow the deficit by spending cuts only. Likewise, there is no possible way to get a balanced federal budget at this time. Pushing for a balanced budget amendment while refusing to increase revenues is just plain stupid. Yet, that is what the majority in the House of Representatives is pushing for.
In past years, many of those customers could have relied on debt, often a home-equity line of credit or a credit card, to tide them over. Debt soared in the late 1980s, 1990s and the last decade, which allowed spending to grow faster than incomes and helped cushion every recession in that period.
Now, the economic version of the law of gravity is reasserting itself. We are feeling the deferred pain from 25 years of excess, as people try to rebuild their depleted savings. This pattern is a classic one.
