Foghorn Leghorn Speaks

Haley Barbour on Sarah Palin's fundraising ability (h/t the Dish):

“She can raise enough money to burn a wet mule,”

Compare that to this post.

Republicans and Tax Increases

Bruce Bartlett at Fiscal Times, via Ritholtz:

Back in 1982, Ronald Reagan was persuaded that the deficit was such a severe impediment to growth that a tax increase to reduce it would be economically beneficial. Many in his party strenuously objected, citing research by Republican economists. For example, on August 12, 1982, U.S. Chamber of Commerce president Richard Lesher sent to Congress an analysis of the proposed tax increase. Said Lesher:

“If H.R. 4961 is passed in these troublesome economic times, we have no doubt that it will curb the economic recovery everyone wants. It will mean a lower cash flow as more businesses pay more taxes, with a depressing effect on stock prices. It will reduce incentives for the increased savings and investment so badly needed to improve productivity and create more jobs. It will mean higher prices for many products and services. It will increase government costs in caring for those who, because the economy is held down, cannot find employment.”

It would be hard to find an economic forecast that was more wrong in every respect. Looking at real gross domestic product, it grew 4.5 percent in 1983 and 7.2 percent in 1984 – an exceptionally strong performance. The stock market had one of its best years ever in 1983 – both the Dow Jones Industrial Average and the S&P 500 Index rose 35 percent. There was no increase in the rate of inflation, which was exactly the same in 1983 and 1984 as it was in 1982. The unemployment rate fell from 10.6 percent in December 1982 to 8.1 percent by December 1983 and 7.1 percent in December 1984.
The Chamber was not an outlier. Virtually every Republican economist made similar dire predictions. Economist Arthur Laffer told his clients on July 26, 1982, that the Tax Equity and Fiscal Responsibility Act, which raised taxes by about one percent of GDP, “will stifle economic recovery,” “retard economic growth,” and undercut “the economy’s ability to enter into a period of expansion.” On August 20, 1982, he told his clients that TEFRA “will tend to lengthen and deepen the recession.” Writing in the New York Times on September 12, 1982, economist Norman Ture said the administration’s claim that TEFRA would promote economic growth was “bizarre.” He said it would “weaken the impetus for economic growth” and make the economic recovery “less certain and less vigorous.”
Despite these erroneous predictions, Republican economists said pretty much the same thing when Bill Clinton proposed a tax increase in 1993. On April 12, 1993, the Republican members of the Joint Economic Committee predicted that the unemployment rate would be 0.3 percent higher in 1994 and 1995, 0.5 percent higher in 1996, and 0.6 percent higher in 1997. Real GDP growth would be 0.4 percent slower in 1994, 0.5 percent slower in 1995, 0.8 percent slower in 1996, and a full percentage point lower in 1997.
On August 20, 1993, Laffer told his clients, “Clinton’s tax bill will do about as much damage to the U.S. economy as could feasibly be done in the current political environment.” He said that interest rates would rise and the stock market would fall.
Once again, it would be hard to find a forecast that was more completely wrong.

Arthur Laffer was wrong?  No way.  Republicans were wrong?  Naaa.  Let's see, if they were wrong each of the other times, think they are wrong today, saying the exact same thing? Hmmmm.  Well, it is important to remember that Bartlett worked with Laffer over the years, especially in the Reagan administration, and might very well know that Laffer is a clown.  I've picked up on that, and I've never met the guy.  The Republican insistance on not raising taxes at all to amelierate the deficit is totally asinine, and a good reminder why I can't in good conscience vote for those morons.

More on La Nina

Elwynn Taylor posted the following picture on Twitter:

I just wanted to highlight that, after this post.

Naked Capitalism Link of the Day

Today's link: Europe's return to Westphalia, at the Financial Times

A little while ago I spoke at a small gathering hosted by Portugal’s Fundação Oriente at the Arrábida monastery near Lisbon. I called my contribution “Europe’s return to Westphalia”. The thesis – that the Union is turning back the clock a few hundred years as it succumbs to the pressure of resurgent nationalisms – was intended as a provocation. As I watch Europe’s leaders stumbling through the debt crisis I am increasingly persuaded that this is no more than a simple description of present reality.
The modern European state was born with the peace of Westphalia in 1648. The doctrine of state sovereignty replaced the waning supranational authority of the church. As the distinguished Brussels diplomat Robert Cooper has observed, Europe’s rulers purchased domestic order and popular consent at the price of more competition between states.
This system endured until the middle of the 20th century, when the appalling devastation wrought by the second great war within 30 years finally persuaded the continent’s leaders that the cost of sustaining a European order based on the balance of power had become too high.
Europe’s postmodern experiment in shared sovereignty has so far lasted 60 years. Now the bargain is unravelling as governments once again separate narrow national from wider mutual interests. The world has globalised, but politics remains local. Europe’s states are responding to domestic pressures by seeking to reclaim Westphalian independence.
Not long ago the Union was held up as the model for the new multipolar international order. By pooling sovereignty, Europe had cracked the big challenge of globalisation: how to marry cross-border interdependence with national politics. Integration turned a zero-sum game into a positive-sum game.

A little history for the morning.  It appears that the Euro's potentially fatal flaw, which mirrors the United States system at an earlier point in history, is that the individual nations are tied by a single currency, but a single central bank controls monetary policy.  Therefore, the problems in the PIIG countries can't be alleviated by each individual state weakening its currency.  This is the same sort of financial union in which U.S. states are combined, but the states don't have hundreds of years of state sovereignty to overcome in a short period of time.  The Euro is an important improvement in European history, but it may have been rushed into without the proper preparations and compromises made.  I hate to see it go, but it may be doomed.  The return of nationalism to Europe probably won't work out well.

More on the Minot Flood

From mistermix at Balloon Juice:

They call it the Souris in Canada, the Mouse in North Dakota, and it’s having the biggest flood in recorded history this Spring and Summer. A couple of weeks ago, the city of Minot seemed to have been spared because of heroic efforts to add clay to the top of the dikes that line the river. With 4-6 inches of rain falling earlier this week in Saskatchewan, and heading down the river, the dams that protect Minot are all full and releasing tremendous amounts of water.

“What’s happening here,” explained [Weather Service hydrologist] Schlag, “is that the Souris has finally gone so far out of its banks that we are seeing significant flow short-circuiting the normal meandering course of the river. It is now wall-to-wall throughout the valley and is traveling in a straight line.”

Over one-quarter of Minot’s 41,000 residents have now been evacuated, and all they can do now is watch their houses fill up with water.
When you hear “North Dakota flood”, you might think about Fargo and the Red River valley, which floods regularly. This is a different place—Minot had a major flood in 1969 and built a series of levees that protected the city for more than 40 years. This is the first flood since then, and the river is 8 feet higher than any level recorded in 130 years. To put the recent 4-6 inch rainfall in perspective, that part of the country normally gets 15-18 inches of rain per year.

4 to 6 inches of rain in an area which normally gets 15-18 inches of rain per year.  That is incredible.  Again, I don't know if La Nina plays a role in that, but that is what I figure is making our spring really wet, just as it may be causing the drought in Kansas, Oklahoma and Texas.  This is supposed to be the strongest La Nina in fifty years, but I'm just curious if global warming will make the El Nino/La Nina effect stronger, weaker or not be an influence?

The Roots of Financial Crisis

via Mark Thoma, Paul Krugman and Robin Wells review Age of Greed: The Triumph of Greed and the Decline of America, 1970 to the Present, by Jeff Madrick:

The first thing you need to know about the cycle of financial overreach, crisis, and bailout is that it was not always thus. The United States emerged from the Great Depression with a tightly regulated financial sector, and for about forty years those regulations were enough to keep banking both safe and boring. And for a while—with memories of the bank failures of the 1930s still fresh—most people liked it that way. Over the course of the 1970s and 1980s, however, both the political consensus in favor of boring banking and the structure of regulations that kept banking safe unraveled. The first half of Age of Greed describes how this happened through a series of personal profiles.
To some extent Madrick covers familiar ground here. He recounts the economic turmoil of the 1970s, as the country was caught in the grip of stagflation. And as he points out, Nixon and Ford—like today’s Republicans—blamed the economy’s troubles not on the true culprits but on big government. Madrick stresses a key point that is often forgotten or misunderstood to this day: the surging inflation of the 1970s had its roots not in some general problem of “big government” but in largely temporary events—the oil price shock and disappointing crop yields—whose effects were magnified throughout the economy by wage-price indexation. Yet constant policy shifts by the Treasury and the Federal Reserve (remember wage-price controls?) under Nixon, Ford, and Carter, Madrick argues, made the American public lose faith in government effectiveness, creating within it a ready acceptance of the antigovernment messages of Milton Friedman and Ronald Reagan.
While we believe that there were deeper reasons for Reagan’s rise, Madrick is right that the economic malaise of the 1970s gave Reagan his big opening. As Madrick describes, Reagan’s enormous capacity for doublethink and convenient untruths enabled him, the front man for business interests, to convince a credulous public that “government had become the principal obstacle to their personal fulfillment.” In possibly the best chapter of the book, Madrick recounts the irony of how Reagan, the great moralizer, made unchecked greed and runaway individualism not only acceptable, but lauded, in the American psyche.
Madrick also does an especially persuasive job of demythologizing Milton Friedman, who provided intellectual heft for the antigovernment movement. As Madrick points out, although Friedman offered some important economic insights, he often shoehorned real-life data to fit into a one-sided narrative, gaining his theories wider acceptance than was ultimately justified. And Friedman, like Reagan, preferred “overly simple assertions of free market claims,” discarding the caveats.

The whole review is worth a read, and the book sounds like it will be worthwhile too.  This is a pretty good summary of the big changes which took place beginning in the turmoil of the seventies, but really taking root in the eighties and have grown monstrously since.  The transfer of the banker from staid conservative to freewheeling gambler is at the heart of the crisis, along with the ever more endebted consumer, trying to hold on to an assumed standard-of-living which is increasingly outside of his means.  These forces have combined to place us in a no-win situation, with pain and negative consequences in every direction.  So far, we have bailed out the wealthy at the expense of everyone else.  Now, I think the least damaging outcome is to have the wealthy join in sharing the pain, to mitigate the suffering of the many. What are the odds of that outcome coming to fruition?

Charts of the Day

From Minyanville, via Ritholtz, first, Ethanol Distillation Margins:

Then, Ethanol Cost vs. Gasoline:

From the article:

Yet despite all of this, the Senate came dangerously close to ducking an opportunity to taking a stand against a policy that had resulted in 40% of our corn crop going to feed yeast to make a more expensive low-grade motor fuel. Yes, while the distillers’ dried grains sold back by ethanol plants can be used as a livestock feed, only an imbecile should not understand DDG’s have a lower food content than the original corn, and that is before we have to account for the processing and transportation losses.

I've got to agree.  The subsidy is just bad policy.  The high cost of gasoline is just passed into the grain market, causing food inflation, without making a significant dent into oil consumption or oil imports.  It just doesn't work.

Deep-Fried Kool-Aid is a Hit

San Diego Union-Tribune:

The deep-fried Kool-Aid is selling like deep-fried hot cakes, according to their famed creator, "Chicken" Charlie Boghosian.

Chicken Charlie's is a staple of fried rations at fairs across the country. It sold 400 to 600 orders of deep-fried Kool-Aid per day the first weekend of the San Diego County Fair. That's about double the rate of previous debut items, Boghosian said.

"That's because it tastes so darn good," Boghosian said of the Kool-Aid.
The deep-fried novelty takes the shape of a doughnut-hole. There are five per order. That breaks down to as much as 9,000 balls of deep-fried Kool-Aid eaten over opening weekend.
Boghosian said Chicken Charlie's has already gone through 150 pounds of Kool-Aid powder and 1,500 pounds of flour. Chicken Charlie's debuted deep-fried Klondike Bars and Pop Tarts in past years.
Fairgoers on Tuesday were also buying up the deep-fried Kool-Aid.
"It starts off tart and tangy, and then finishes really sweet... I love this stuff," said Seth Baldwin of Vista.
"It tastes just like a doughnut ball," said Rashed Karram, who said he prefers the deep-fried Klondike Bars.

I'll stick with the deep-fried twinkies myself, although the deep-fried thin mints were something I was considering trying.  Looks like Chicken Charlie beat me to it.

Western Ohio State Representative Has Problem With Numbers

Columbus Dispatch:

A debate saturated with partisanship over the future of Lake Erie ended in a split along party lines in the Ohio House yesterday.
The resulting 60-37 vote sent House Bill 231 to the Ohio Senate.
The measure establishes rules about withdrawing water from Lake Erie in line with the Great Lakes Compact, adopted by Ohio in 2008. Seven surrounding states also signed the compact, which was designed to stem the flow of water out of the Great Lakes region.
The bill would require permits for businesses that tap more than 5million gallons of water a day from Lake Erie, 2 million from rivers or groundwater supplies, or 300,000 a day from rivers deemed "high quality."
Permits are not now required for water withdrawal, but all eight states in the compact must submit water-use plans in the next two years. Ohio draws 3.5 billion gallons a year from Lake Erie, mostly for power plants, industry and drinking water......
More water is flowing into Lake Erie than is being drawn out of it, Rep. Jim Buchy, R-Greenville, said.
Buchy said 122 billion gallons of water a year flow into Lake Erie from the Detroit River. An additional 15 billion gallons come from runoff, making the total 137 billion gallons.
He said Ohio and other states draw 11 billion gallons a year from the lake and about 17 billion gallons evaporate. Add those to 66billion gallons that flow over Niagara Falls, and the total flow out of the lake is 94billion. He said that leaves a 43 billion-gallon surplus. (emphasis mine).

I call shenanigans.  Buchy says that 137 billion gallons of water flows into the lake and 94 billion gallons flow out.  That leaves 31% of all the water flowing into the lake remaining there.  This would indicate that Lake Erie is rising annually.  I don't think his numbers are anywhere near accurate.  The New York Power Authority, which produces hydroelectric power from the Niagara River, states that on average 1.5 million gallons of water enter the Niagara River from Lake Erie every second.  That computes to 47 trillion gallons per year, slightly higher than the 137 billion gallons Buchy claims are flowing in.  Heck, an inch of rain, falling only on the surface area of the lake, would add 172 billion gallons of water to the lake, assuming evaporation at one end of the lake didn't contribute to the rainfall at the other end of the lake.

I find it interesting that Representative Buchy got all these numbers from somewhere, put them out as facts, but doesn't have the common sense to realize that they probably should balance out to near zero, not that the lake is acculumating 31% of the annual inflow into the basin.  Count me as not impressed.

Worst Spring Ever?

Not at this farm.  1996 beats 2011.  In 1996, our first field of corn was finished on May 20, and our last field of beans was completed June 21.  Compare that to this year, when our first field of corn was planted May 11, and our last field of beans was completed June 6.  Back then, we were using a 6 row corn planter and a 15' drill to plant approximately 700 acres, as compared to a 12 row corn planter and 15' drill to plant approximately 900 acres (800 this spring), which contributed to the longer season.  But the poor weather continued for a longer period in 1996.  Our last day planting corn in 1996 was June 1, as rain after that date pushed us beyond the prevented planting date.  We ended up switching 150 acres of corn to beans in 1996, and yields were poor.  Hopefully the yields will be better this time around.