Diane Lim Rogers is very smart

Around three weeks ago, she expressed well a point that I have not expressed so well:

That’s why the two concerns Bruce has about the Bush tax cuts–(1) that they were and are unaffordable; and (2) that they did not permanently reduce marginal tax rates and hence weren’t true “supply side” tax cuts–lead to only one conclusion, and that’s that we need to be thinking more seriously about fundamental (truly base-broadening, keep-rates-low) tax reform.

But of course, now it’s the Obama Administration who’s in charge, and they’ve decided to include $2 trillion worth of deficit-financed Bush tax cuts in their own 10-year budget–that’s $2 trillion of the possible $2.6 trillion of the entirety of the Bush tax cuts.

So left-leaning commentators are reiterating their disdain towards the Bush tax cuts:

[by Robert Creamer on Huffington Post:] [L]et’s be clear, the Bush tax cuts didn’t just produce fewer jobs than advertised. They didn’t produce any private sector jobs at all. The whole experiment in handing over money to the wealthiest people in America so they could use it to benefit the rest of us was a colossal - empirically verifiable - failure.

Turns out that when given the chance to use all of those tax cuts, the top two percent of the population used them to speculate in exotic derivatives, to drive up the prices of high end real estate, pay exorbitant prices to the designers of $4,000 blouses and $2,000 shoes. There is absolutely no evidence that they made any more investments in new manufacturing plants, or started up any more businesses than they would have had they paid the same tax rates that they did when Ronald Reagan took office and private sector job growth was 3% per year.

No, instead the rich used the Bush Tax Cuts to create the gigantic economic “bubble” that ultimately burst and caused immeasurable hardship and suffering to millions of average Americans and everyday people across the globe.

Bottom line is that the rich sold America a bill of goods. Give us big tax cuts and we’ll give you jobs growth, they told us. America kept its end of the bargain, and the rich reneged entirely on theirs.

In a word, the economic theories of the Republicans and the Right were simply wrong. In fact, they were elaborate intellectual justifications for the richest among us to enrich themselves even more…

…but are failing to recognize that almost all of the tax cuts that President Obama has proposed–and in fact all of the deficit-financed tax cuts President Obama has proposed–are in fact the old “Bush tax cuts,” which will now become the “Obama tax cuts” as soon as President Obama signs the extension into law before the end of next year. And while those who have hated the Bush tax cuts but love President Obama would like to believe that President Obama is letting the worst part of the Bush tax cuts (those “for the rich”) expire, the truth is that the “Obama tax cuts” will still go disproportionately to “the rich,” even with the upper tax brackets expiring.

Yep. The Bush/Obama tax cuts are a sad truth that all of us (Reagan supply-siders, Clinton fiscal conservatives, and even the most liberal of Obama supporters) don’t want to believe our new President who stood for “change” could let happen.

Talking about baseball and watching game, with Bill James - Joe Posnanski - SI.com

Bill James does not have, er, sophisticated econometric skills. But he thinks about and writes about data as well as anyone in existence. For me, the triumph of Moneyball is the triumph of evidence-based decision making over "gut-feel."


Talking about baseball and watching game, with Bill James - Joe Posnanski - SI.com

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Is it a bottom? Or just one strange month?

Last week, the California Association of Realtors put out the July EHS numbers for the state. Prices had fallen 40 percent from a year ago, and sales increased by 43 percent. Inventories were whittled down to about six months, which is very close to an equibilibrium level (a nice rule for real estate--when inventories for a type of building are about equal to the length of time it takes to build that type of building, the market is more or less in equilibrium). I have talked to people at CAR to make sure that there isn't some quirk in the data to explain the extraordinary change.

As I have written before, prices in California have fallen so rapidly that in many markets it is now just as sensible financially to own as it is to rent--assuming one can get her hands on financing. There are, moreover, many cash buyers in places like the Inland Empire right now, and cash buying is a powerful indicator of a bottoming market. Finally, I am hearing lots of anecdotes about multiple offers on properties for sale.

The problem is that a very large number of the sales are foreclosure sales or short sales--properties that lenders are trying to dispose of, and are therefore selling at extremely low prices. Whether this tendancy will extend to the rest of the market is very much an open question. But if the next few months are similar to July, we may well be at bottom out here.

Diane Swonk has a nice, short, colloquial history of the Fed's management of the crisis.

It begins:

* August 1, 2007: BNP Paribas, one of Europe's largest banks released better-than-expected earnings...
* August 9, 2007: Bloomberg reported that BNP Paribas halted withdrawals from three funds because they could no longer "fairly" value their holdings...

This news, coupled with the fact that the CEO of the bank seemed oblivious to the situation just eight days prior, sent European markets into a tail spin. Trust between banks was shattered, and the overnight loans that banks provide to one another all but disappeared.

In response, the European Central Bank (ECB) was forced to intervene to stabilize markets and provide liquidity.

The piece is entertaining and short, and does a nice job of capturing some of the personalities involved.