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Stimulus arithmetic (wonkish but important)

Friday, January 30, 2009

By Paul Krugman
The New York Times


Bit by bit we’re getting information on the Obama stimulus plan, enough to start making back-of-the-envelope estimates of impact. The bottom line is this: we’re probably looking at a plan that will shave less than 2 percentage points off the average unemployment rate for the next two years, and possibly quite a lot less. This raises real concerns about whether the incoming administration is lowballing its plans in an attempt to get bipartisan consensus.

In the extended entry, a look at my calculations.

The starting point for this discussion is Okun’s Law, the relationship between changes in real GDP and changes in the unemployment rate. Estimates of the Okun’s Law coefficient range from 2 to 3. I’ll use 2, which is an optimistic estimate for current purposes: it says that you have to raise real GDP by 2 percent from what it would otherwise have been to reduce the unemployment rate 1 percentage point from what it would otherwise have been. Since GDP is roughly $15 trillion, this means that you have to raise GDP by $300 billion per year to reduce unemployment by 1 percentage point.

Now, what we’re hearing about the Obama plan is that it calls for $775 billion over two years, with $300 billion in tax cuts and the rest in spending. Call that $150 billion per year in tax cuts, $240 billion each year in spending.

How much do tax cuts and spending raise GDP? The widely cited estimates of Mark Zandi of Economy.com indicate a multiplier of around 1.5 for spending, with widely varying estimates for tax cuts. Payroll tax cuts, which make up about half the Obama proposal, are pretty good, with a multiplier of 1.29; business tax cuts, which make up the rest, are much less effective....(Click for remainder).

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Republican claims stimulus would aid illegal immigrants

It's also going to help green space aliens, and, probably, robot pigeons from the plant Xenu. Why does anyone listen to these people? They're completely bereft of ideas; they're morally bankrupt; and only care about themselves. Would you really expect them to say anything else?

By The Associated Press

WASHINGTON: Illegal immigrants who lack Social Security numbers could not get tax credits under the $800 billion-plus economic stimulus package making its way through Congress.

Two senior GOP congressional officials expressed concern Thursday that the bill could steer government checks to undocumented workers, but in fact the measure indicates that Social Security numbers are needed to claim tax credits of $500 per worker and $1,000 per couple. It also expressly disqualifies nonresident aliens.

The Republicans spoke on condition of anonymity because they were not authorized to discuss the matter publicly. But Democrats were quick to reject the notion.

"This legislation is directed toward people who are legal in our country. It is about time the Republicans got a different piece of reading material and get off this illegal immigrant stuff," said Senate Majority Leader Harry Reid, D-Nev. "This bill has nothing to do with anything illegal as far as immigration. It creates jobs for people who are lawfully in this country."

A revolt among GOP conservatives to provisions of last year's economic stimulus bill, which sent rebate checks to most wage earners, forced Democratic congressional leaders to add stricter eligibility requirements. That legislation, enacted in February 2008, required that people have valid Social Security numbers in order to get checks....(Click for remainder).

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John Yoo blasts Obama over Torture Ban - Incriminates Bush in War Crimes

By Vyan
Daily Kos


In an WSJ Op-ed former OLC Attorney John Yoo blasts President Barack Obama for removing the One and Only Effective Tool for protecting America from the horrors of Terrorism which is - well - using Terrorism.
While these actions will certainly please his base -- gone are the cries of an "imperial presidency" -- they will also seriously handicap our intelligence agencies from preventing future terrorist attacks. In issuing these executive orders, Mr. Obama is returning America to the failed law enforcement approach to fighting terrorism that prevailed before Sept. 11, 2001.
You mean the policy that captured, tried and successfully imprisoned Terry Nichols, Ramzi Yousef, the "Blind Sheikh" and executed Timothy McVeigh under Clinton or the "Ok, Now you've covered you ass" policy of Bush?
He's also drying up the most valuable sources of intelligence on al Qaeda, which, according to CIA Director Michael Hayden, has come largely out of the tough interrogation of high-level operatives during the early years of the war.
Michael Hayden would be the former head of the NSA who illegally spied on Everyone? Yeah, we should take his advice....(Click for remainder).

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Senator Russ Feingold on Bush Prosecutions

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Dennis Kucinich States His Intention To Put The Federal Reserve Under Government Control

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US jobless claims hit record high

By Al Jazeera English

The number of people in the US claiming unemployment benefits has reached a record high, officials have said.

On Thursday the US labour department said 4.78 million US citizens were now claiming
unemployment funds up to the week ending January 17, the highest level since records began in 1967.

The number marks a jump of 159,000 from the previous week and was worse than analysts' expectations of 4.65 million.

Meanwhile, in other economic news, sales of new US homes fell 14.7 per cent in December to 331,000, the lowest monthly level on record, the US government also said on Thursday.

And US car giant Ford reported a $5.9bn loss in the fourth financial quarter and announced it was to cut 1,200 jobs, although it insisted that unlike many other US car firms it would not seek government loans.

The housing meltdown, sparked by the subprime mortgage crisis in which millions of Americans were given mortgage loans they were unable to repay, has led to massive financial losses worldwide.

US stocks fell sharply following the gloomy data, with the Dow Jones Industrial Average falling 226.44 points or 2.7 per cent to close at 8,149.01....(Click for remainder).

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Blackwater banned from Iraq

By Al Jazeera English

Blackwater, a US private security firm, has been barred from providing security for US diplomats in Iraq for its alleged involvement in the deaths of at least 17 civilians in 2007.

The Iraqi interior ministry on Thursday said the measure followed the firm's "improper conduct and excessive use of force".

"It is because of the shooting incident in 2007 ... [Blackwater] came to us and applied and we refused them. They tried by all means to stay here and we said 'no'," General Abdel Karim Khalaf, an interior ministry spokesman, told AFP.

Five former Blackwater guards are awaiting trial in the US for the incident that took place in September 2007.

One Blackwater guard has pleaded guilty to voluntary manslaughter and attempt to commit manslaughter over that incident.

A US embassy official in Baghdad and Khalaf gave no exact exit date for Blackwater employees.

They also did not clarify whether the Blackwater guards would be allowed to continue guarding US diplomats until a date is decided.

"We don't have specifics about dates. We are working with the government of Iraq and our contractors to address the implications of this decision," the US embassy official said....(Click for remainder).

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Impeached Illinois Gov. Rod Blagojevich has been removed from office

By Ray Long and Rick Pearson
Chicago Tribune


SPRINGFIELD, Ill. - Sweeping aside six years of scandal and crippling political infighting with a historic impeachment vote, the state Senate on Thursday ousted one governor for abusing his power and anointed another who built his political career around having no power at all.

Senators voted 59-0 to remove Rod Blagojevich, who walked out of the silent chamber after delivering an impassioned plea for mercy. Within hours they applauded his former running mate and lieutenant governor, Patrick Quinn, who was sworn in as the state's 41st governor vowing a new course for Illinois.

"The ordeal is over," said Quinn, long viewed as an unwelcomed outsider by the state's political establishment. "In this moment, our hearts are hurt. And it's very important to know that we have a duty, a mission to restore the faith of the people of Illinois in the integrity of their government."

He replaced a defiant Blagojevich, 52, the first Democratic governor in a quarter century and the first governor in Illinois history to be impeached. After racing back to his Chicago home before the vote could deprive him of a ride home on the state plane, Blagojevich once again said he was the victim of a rush to judgment....(Click for remainder).

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FBI saw mortgage fraud early

So what this boils down to, is that the Bush Crime Family could have confronted this crisis before it was actually a crisis. Does it surprise anyone that Too Stupid to Eat a Pretzel was either asleep at the switch, or just wanted what was best for his business cronies.


Bank repossession, foreclosure and for sale signs sit outside a foreclosed home in Houston. Two retired FBI officials asserted that the Bush administration was thoroughly briefed on the mortgage fraud crisis and its potential to cascade out of control, but made the decision not to give back to the FBI the agents it needed to address the problem.

By Paul Shukovsky
Seattle Post-Intelligencer


The FBI was aware for years of "pervasive and growing" fraud in the mortgage industry that eventually contributed to America's financial meltdown, but did not take definitive action to stop it.

"It is clear that we had good intelligence on the mortgage-fraud schemes, the corrupt attorneys, the corrupt appraisers, the insider schemes," said a recently retired, high FBI official. Another retired top FBI official confirmed that such intelligence went back to 2002.

The problem, according to the two FBI retirees and several other current and former bureau colleagues, is that the bureau was stretched so thin that no one noticed when those lenders began packaging bad mortgages into bad securities.

"We knew that the mortgage-brokerage industry was corrupt," the first of the retired FBI officials told the Seattle P-I. "Where we would have gotten a sense of what was really going on was the point where the mortgage was sold knowing that it was a piece of dung and it would be turned into a security. But the agents with the expertise had been diverted to counterterrorism."

The FBI not only lacked the resources, but also never got the tips it needed from the banking regulatory agencies. The Securities and Exchange Commission, the Office of Thrift Supervision and the Office of the Comptroller of the Currency also failed to detect the securities issue, said the first retired FBI official.

"These are very resource-intense cases that take a lot of work by very skilled people," said John Falvey Jr., a former federal prosecutor who currently does white-collar criminal defense work in Boston.

And Falvey said that financial executives who deliberately chose not to learn the facts about dicey mortgage-lending practices in their companies -- who chose to be "willfully blind" to such practices and the subsequent securitization of those mortgages -- could be vulnerable to prosecution for securities fraud....(Click for remainder).

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House Repubs Bet the (Foreclosed) Farm on Opposing Stimulus Bill

By David Corn
CQ Politics


The stimulus bill that the House passed on Wednesday night is not perfect. No doubt, it includes spending projects and tax cuts that are not all that stimulus-y. But it's the only train at the station these days. So even though the Republicans had threatened to withhold their votes from the bill, it was sort of surprising that not a single GOPer voted for the bill. In essence, the House GOPers are betting the farm on further economic collapse. They are truly selling short.

The House Republicans are now on record as wannabe obstructionists. They say they will continue to play a role in the bill when the House and Senate negotiate the final legislation after the Senate approves its version of the measure. But the House Republicans have lost any claim of authorship. If the stimulus package has any positive results, the GOPers will be out in the cold. President Obama and Democrats will not be shy about reminding voters that the Republicans were the Party of No when it came time to save the economy. The Rs can only hope--politically--that no good comes from this stimulus.

Most, if not all, of the House Republicans will probably not face much electoral trouble for their thumb's down. The Republicans who remain in the House generally hail from conservative districts. Call it Limbaugh Land. There are not many swing-district Republicans remaining. For the House Republicans still in their seats, voting against a spending bill will not cause them much direct political risk back home. But this collective, lockstep action does define the entire Republican Party. And GOPers running for office in non-Limbaugh areas--and that will include presidential candidates in the future--will have this albatross around their neck. (For his part, Obama ought to reconsider his approach to bipartisan politics.)...(Click for remainder).

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Torturers are Terrified of Eric Holder

By Bob Fertik
Democrats.com


If you want to know how Bush's torturers are planning to defend themselves against war crimes charges, the best source is the Newsweek team of Michael Isikoff and Mark Hosenball. As a paean to Watergate's famous Woodward & Bernstein, who were nicknamed "WoodStein" by their editor Ben Bradley, I shall henceforth call them IsiBall.

IsiBall are valuable because they are the opposite of WoodStein - instead of leading the charge to expose the truth, they are leading the charge for a coverup. (In fact all of Newsweek and its parent company, the Pentagon Post, are devoting their full efforts to the torture coverup, but that's a topic for another time.)

Today, IsiBall look into the mess created yesterday by Sen. Kit Bond when he lied to the Moonie Times that Holder promised him he would not prosecute torturers. Holder promised no such thing, but his Big Lie caused a furor among human rights groups and a quick clarification from Holder.

Apparently some of the torturers have "lawyered up," and they are leaking their thoughts to IsiBall. And their thoughts are turning to nightmares:
"Once Holder said that [waterboarding is torture] I got nervous," said one lawyer who represents a CIA official involved in the interrogation program, who asked not to be identified talking about a legally sensitive matter. "If he says it was torture, he has to do something.
Here's what the lawyers are worried about:
In a response carefully vetted by Obama's White House lawyers, Holder responded that "no one is above the law. But where it is clear that a government agent has acted in 'reasonable and good-faith reliance on Justice Department legal opinions' authoritatively permitting his conduct, I would find it difficult to justify commencing a full-blown criminal investigation, let alone a prosecution.
Each of the bolded words has extremely important meanings.
  • "Agent" means guys who take orders, not give them. That means the guys who gave the orders (or wrote the legal memos) are not safe from Holder.
  • "Reasonable and good-faith reliance" excludes "unreasonable" and "bad-faith reliance." So torturers who committed outrageous acts are not safe from Holder.
  • "Authoritatively" requires a formal order from a direct superior. Torturers who acted on their own or without orders from their superiors are not safe from Holder.

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Why Reagan still matters: A sneak peek at "Tear Down This Myth"

By Will Bunch
Philadelphia Daily News


Jan. 20, 2009, was such a transformative day in American politics that it was easy to forget it also marked a 20th anniversary as well. The inauguration of President Barack Obama also meant it was two decades to the exact day since Ronald Reagan last sat in the Oval Office. When he and his wife Nancy boarded the Air Force One jetliner – the one that was later decommissioned, de-assembled and reassembled at the Ronald Reagan Library (and mostly paid for by oil billionaire T. Boone Pickens) – for the long trip back to California, it wasn’t clear how the world would remember Reagan’s presidency.

For the majority of his second term, Americans told pollsters that the nation was on a wrong track, and in 1987 a 55-percent majority said we needed a new direction away from Reagan’s often divisive policies. But in little more than five years after leaving Washington, the Great Communicator would be silenced by Alzheimer’s -- and a new generation of neoconservatives would construct a mythologized, iconic version of the 40th president that increasingly bore little resemblance to the flesh-and-blood Ronald Reagan. It is that modern version – and warped policies that could be collectively called Reaganism – that has given us an unfathomable national debt, a wide gulf between the nation’s rich and poor, the denial of basic science on energy and the environment, and which was even used to justify an unjustifiable war in Iraq that the real Gipper himself would never undertaken.

Twenty years gone – but Reagan still matters. About this time one year ago, unceasing Reagan idolatry hijacked the race for the White House. Sometimes it was voiced in the name of policies on immigration or toward Iran that were the exact opposite of what really happened a generation ago. The power of this political fantasy – expressed mainly, of course, on the GOP side but occasionally even spilling over to the Democrats – caused me to begin work on a book about the Ronald Reagan myth. The result – “Tear Down This Myth: How the Reagan Legacy Has Distorted Our Politics and Haunts Our Future” – is coming out now from Simon & Schuster’s Free Press....(Click for remainder).

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