European banks, balance of payments and thinking out loud about something I don't understand

Paul Krugman knows lots more about this stuff than I do. Which is what most people could say, too. So I pay attention when he says things like "the euro crisis is, at its root, a balance of payments problem." (The Breakeven Point (Wonkish But Terrifying) 06/01/2012)

But I'm not convinced from what he's written why the balance of payments problem should be considered more fundamental than the weakness of the financial system in Europe, mostly due to the under-capitalization and insufficient regulation of the banks. And this formulation seems to suggest that he thinks the banking problem is the basis of the current crisis:

And this in turn means that overall eurozone inflation must be sufficiently high. That’s a necessary but not sufficient condition for salvation; not sufficient because a banking crisis can still blow the thing apart, but necessary because you can't resolve the banking crisis unless there's some plausible path back to sustainable economies.

Maybe it's a matter of perspective. He's looking at the way the euro has created a trap in dealing with the current situation, so maybe what he's trying to say is that is that until the EU leaders start handling this thing in full recognition that Germany has to inflate its economy in order to provide counter-cyclical relief to the eurozone countries like Greece and Spain hardest hit by the depression, they can't solve the crisis.

He discussed the balance of payments point in a post earlier this year, European Crisis Realities 02/25/2012. There, he puts it like this:

What we're basically looking at, then, is a balance of payments problem, in which capital flooded south after the creation of the euro, leading to overvaluation in southern Europe. It's not a perfect fit — Italy managed to have relatively high inflation without large trade deficits. But it’s the main way you should think about where we are.

Maybe it's partly a difference of perspective from my own background in banking. But as I understand it, I would call this a banking problem generating a balance of payments problems which compounds the difficulty of dealing with the banking problem and the depression due to the weaknesses in the structure of the euro.

I'm not sure it makes any difference on Krugman's point in the 06/01/2012 post, which is that the eurozone needs higher inflation in Germany and the measures of inflation expectations provided by the German bond market don't point to that happening in anything like the time frame in which it's needed. Krugman's conclusion: "This chart shows a euro on the verge of imploding. If the ECB can't change this perception very, very soon — and I think it really is up to them — this goose is cooked."

And I'm pretty sure he means the euro as a whole, not just a "Grexit" (Greek exit from the euro).

I should say that part of my reservation about Krugman's position on the currency question is connected with what I suspect is too much faith on his part in the effectiveness of monetary policy. Yes, I know he's been saying for years that in depression conditions with interest rates hitting up against the zero lower bound that monetary policy has very limited effectiveness. Here I'm still a hardcore follower of the Galbraiths John Kenneth and Jamie, who don't encourage much faith in monetary policy even in normal times.

I'm not going to resolve that here!

But Krugman's post, Catastrophic Credibility 06/02/2012, is one that I tend to think overvalues the "credibility" of central bankers. He coined the term "confidence fairy" to debunk the con-man arguments about how the One Percent always need lower and lower taxes and more and more deferential treatment to bolster their confidence and make them invest. I suspect there could be a "credibility fairy" flitting around out there, too, when it comes to estimations of the mystical powers of central banks over money.

Here again, his basic point is right. To the extent that the Federal Reserve and European central banks can do anything to boost economic growth in the current situation, like raising their inflation targets, they should be doing it now.

Tags: austerity economics, eu, euro, european union, paul krugman

June in the European crisis: showdown in Athens, showdown on the Rhine

This promises to be a dramatic month in the European crisis. The Greek election of June 17 will be a major event. There will be a formal EU summit at the end of the month. French parliamentary elections are on June 10 and June 17.

Welt Online is reporting on a new plan to strengthen the institutions of the euro: F. Eder/A. Ettel/J. Hildebrand/S. Jost et al, Der Geheimplan für ein neues Europa 03.06.2012; Florian Eder/Dorothea Siems/Matthias Kamann, "Der europäische Superstaat durch die Hintertür" 03.06.2012.

The basic story they tell is that EU leaders are looking at the fairly dramatic drop in the value of the euro the last couple of weeks, the increasingly high likelihood of the "Grexit" (Greek exit from the euro) and the escalation of the banking crisis in Spain and realizing that another stopgap solution like they've pieced together with increasing frequency over the last two years isn't enough. The "informal" EU summit May 23 tasked José Manuel Barroso (Commission President), Mario Draghi (ECB President), Jean-Claude Juncker (Chairman of the Euro Group) and Herman van Rompuy (President of the European Council) with coming up with a longer-term plan. Apparently "roadmap" is one of the latest management fad term for Big Ideas, so the three presidents and one chairman are expected to present a "roadmap" addressing four areas: political union, fiscal union, banking union and the "structural reform", the last being the buzzword for lowering salaries and wages, weakening labor unions, undermining protections for workers, and gutting government services that don't directly benefit the One Percent.

Cartoonist Yannis Ioannou pictured how it works with reference to Greek elections in this 05/07/2012 image):

Angie brings her Panzers (tanks) to Brusselanmen Square to persuade Greek voters

Displaying their conservative bent, Welt Online calls the "structural reform" the "most harmless" point of the three. As if. From the perspective of the One Percent, that's how the world looks.


They also report that German Chancellor Angela Merkel is strongly backing the reform plans, which in itself should be an alarm signal that she expects them to empower her to further wreck the European economic and political systems. "Merkel forderte eine echte politische Union und warb damit, diese bringe auch stärkere Zugriffsrechte mit sich, um Schuldenländer zur Haushaltskonsolidierung zwingen zu können." ("Merkel supports a true political union and along with it asks that this also includes a stronger right of intervention in order to compel debtor countries to consolidate their budgets.")

Since there are no concrete plans on the table yet, and since the eurozone crisis is at another boiling point which could worsen conditions in a major way before the planned EU summit late this month, this may turn out to be hot air. Knowing how Angie has approached this whole crisis, if her reported position is correct, all she wants out of this is more power for Germany to squeeze other EU countries into lower living standards and into destitution if necessary to protect Germany's current exporting advantages in the euro and the convenience of German banks.

Her whole approach is delusional. But that doesn't mean it can't do far more damage. Angie's approach to crisis is to come up with a firm position and try to cram it down the throats of her partners and opponents. At the moment, it's becoming hard to tell the difference between those two groups. But she also favors "bet the farm" plays, which the Germans describe by the French phase of playing va banque. Given Germany's economic clout in Europe, the EU and the eurozone, her my-way-or-the-highway approach has won out again and again, most significantly in recent months with the heads of government agreeing to her fiscal suicide pact, the main item of public contention between Germany and the newly-elected French President François Hollande right now.

It even won a majority in the Irish referendum last Thursday. The Irish campaign should be warning to European leaders: the Yes side, backed by the conservatives and the social democrats, essentially campaigned on fear of Germany. The EU (Angie) will deny us the bailouts we need to stay in the EU and meet the reckless decision of a previous conservative government to guarantee the debts the largest private Irish banks. (I say reckless, but it was sound orthodoxy to the Very Serious People who define the neoliberal consensus in Europe and the US.) Ireland is currently shut out of private credit markets altogether, i.e., it can't sell its sovereign debt to private borrowers. That's what the Yes side's position came down to: if we vote this down, Angie will get mad at us and wreck our economy even more.

The EU has become not only a threat to the European economy but a threat to democracy, when protecting democracy and promoting international peace in Europe are supposed to be its primary mission. Angie already replaced two elected governments (Greece's and Italy's) late last year with governments of bankers' collection agents. As the Greek election in May showed, it further discredited the irresponsible conservatives and social democrats who agreed to play along with Angie's game of wrecking the Greek economy for a generation or more to provide for the comfort and convenience of European banks who don't want to have to face the consequences of their own weakness and bad management.

The key political fight right now is still between Germany and France over the fiscal suicide pact, formally called the Intergovernmental Treaty on Stability, Co-ordination and Governance in the Economic and Monetary Union. Hollande is insisting that the treaty itself be amended to provide for fiscal stimulus. That position on its face is self-contradictory, because if it is changed enough to allow for sensible fiscal stimulus, it would no longer be the fiscal suicide pact Angie wants.

Angie, on the other hand, wants that treaty passed in its current form. She's looking for ways to propose some fig leaf of stimulus that Hollande would be willing to accept, though anything Angie would like wouldn't be a real stimulus. It would maybe be some token infrastructure investments along with more "structural reforms".

This is "disaster capitalism" in practice. The One Percenters want to use the crisis to remove every possible obstacle to unrestrained corporate dominance of the economy and of politics. The question is how much damage it will cause before popular resistance halts and reverses the process.

French Parliamentary elections on June 10 and June 17 will be an important milestone in this process. As Brian Love reports in Hollande to tighten grip in French parliament election Reuters 06/03/2012:

The Socialist Party [Hollande's party] has no guarantee of winning outright control of the lower house and may end up depending for a majority on the support of the Greens, or the more radical left-wingers and communists of the Left Front.

That would not hamstring Hollande as long as the Socialists win enough seats to limit the leverage of the Left Front, given the Greens should prove a loyal parliamentary partner. Analysts see this as a plausible scenario.

While the prospect of hardliners winning greater influence may alarm some in the financial markets, the Socialists mastered such a partnership with aplomb when last in power, and even kicked off the privatization of Air France under the tenure of a communist transport minister, Jean-Claude Gayssot.

With the parliamentary elections in France and Greece, June 17 is going to be a big day.

Tags: angela merkel, austerity economics, eu, euro, european union, france, françois hollande, greece

David Sirota notices President Middle-Man picking up on the Vietnam War stab-in-the-back nonsense

David Sirota looks at President Obama's Memorial Day speech in Dissent over war isn't disrespecting the troops SFgate.com 06/01/2012. And he finds in in his role of President Middle-Man, this time repeating of the the worst prowar revisionist themes on the Vietnam War:

Out of all the status-quo-sustaining fables we create out of military history, none are as enduring as Vietnam War myths. Desperate to cobble a pro-war cautionary tale out of a blood-soaked tragedy, we keep reimagining the loss in Southeast Asia not as a policy failure but as the product of an America that dishonored returning troops.

Incessantly echoed by Hollywood and Washington since the concurrent successes of the "Rambo" and Reagan franchises, this legend was the central theme of President Obama's Memorial Day speech kicking off the government's commemoration of the Vietnam conflict.

"You were often blamed for a war you didn't start, when you should have been commended for serving your country with valor," he told veterans. "You came home and sometimes were denigrated, when you should have been celebrated. It was a national shame, a disgrace that should have never happened."

This is a classic case of Obama accepting a Republican framing of an issue. And in this case it's a framing based on pseudohistory.

Tom Tomorrow's classic jab at Obama's "postpartisan" politics

Tags: barack obama

Andrew Bacevich on the problem of Special Forces secret war

Andrew Bacevich takes a look at the problems presented by President Obama's current approach to secret war by Special Forces in Unleashed: Globalizing the Global War on Terror TomDispatch 05/29/2012.

Bacevich doesn't try to tiptoe around the right wing's hissy fits over Patriotic Correctness. For instance, he writes:

The displacement of conventional forces by special operations forces as the preferred U.S. military instrument -- the "force of choice" according to the head of USSOCOM, Admiral William McRaven -- marks the completion of a decades-long cultural repositioning of the American soldier. The G.I., once represented by the likes of cartoonist Bill Mauldin’s iconic Willie and Joe, is no more, his place taken by today’s elite warrior professional. Mauldin’s creations were heroes, but not superheroes. The nameless, lionized SEALs who killed Osama bin Laden are flesh-and blood Avengers. Willie and Joe were "us." SEALs are anything but "us." They occupy a pedestal well above mere mortals. Couch potato America stands in awe of their skill and bravery.

This cultural transformation has important political implications. It represents the ultimate manifestation of the abyss now separating the military and society. Nominally bemoaned by some, including former Secretary of Defense Robert Gates and former Joint Chiefs Chairman Admiral Mike Mullen, this civilian-military gap has only grown over the course of decades and is now widely accepted as the norm. As one consequence, the American people have forfeited owner’s rights over their army, having less control over the employment of U.S. forces than New Yorkers have over the management of the Knicks or Yankees.

As admiring spectators, we may take at face value the testimony of experts (even if such testimony is seldom disinterested) who assure us that the SEALs, Rangers, Green Berets, etc. are the best of the best, and that they stand ready to deploy at a moment's notice so that Americans can sleep soundly in their beds. If the United States is indeed engaged, as Admiral McRaven has said, in "a generational struggle," we will surely want these guys in our corner. [my emphasis]

He also reminds us that the fact that secrecy hides much of what they do doesn't at all mean that we should assume everything is going alright. If anyway, we should assume the opposite. Bacevich writes, "From a president’s point of view, one of the appealing things about special forces is that he can send them wherever he wants to do whatever he directs. There’s no need to ask permission or to explain. Employing USSOCOM as your own private military means never having to say you’re sorry." Or, more to the point, with no need for "notification or consultation" with Congress, much less accountability to the public.

As U.S. special ops forces roam the world slaying evildoers, the famous question posed by David Petraeus as the invasion of Iraq began -- "Tell me how this ends" -- rises to the level of Talmudic conundrum. There are certainly plenty of evildoers who wish us ill (primarily but not necessarily in the Greater Middle East). How many will USSOCOM have to liquidate before the job is done? Answering that question becomes all the more difficult given that some of the killing has the effect of adding new recruits to the ranks of the non-well-wishers.

In short, handing war to the special operators severs an already too tenuous link between war and politics; it becomes war for its own sake.

Bacivich links to this article by David Isenberg, The Globalisation of U.S. Special Operations Forces Inter Press Service 05/24/2012, which reports:

It was recently reported that U.S. Special Operations Command (SOCOM) commander Adm. Bill McRaven and Deputy Director of Operations Brig. Gen. Sean Mulholland want to establish a worldwide network linking special operations forces (SOF) of allied and partner nations to combat terrorism. ...

This plan may seem ultra-ambitious but given the demand on and pace of U.S. SOF activities in recent years it hardly comes as a surprise. The forces will be conducting missions in 120 countries by year's end, up from about 75 currently. And while they account for only three percent of the military as a whole, they make up more than seven percent of the forces assigned to Iraq and Afghanistan. [my emphasis]

Tags: andrew bacevich, special forces

A victory for Merkel: Irish voters approve fiscal suicide pact

The "No" advocates are conceding that the Irish that the referendum on Angela Merkel's fiscal suicide pact is going to pass. The vote on the Intergovernmental Treaty on Stability, Co-ordination and Governance in the Economic and Monetary Union was Thursday. Although votes are still being counted, it seems to be passing by the margins indicated by pre-election polls, on a low voter turnout: Referendum set to be passed by comprehensive margin Irish Times 06/01/2012

Angie's fiscal suicide pact basically outlaws Keynesian economic stimulus policies and in practice gives Germany (Angie) a practical veto control over the national budgets of the participating countries. The big battle over the treaty will be this month, as French President François Hollande pushes for amendments to treaty to include fiscal stimulus before France will approve it.

Two trade unionists from the British-Irish union UNITE testified about the effects of the treaty before the Irish Oireachtas' (Parliament's) Sub-Committee on the treaty on 04/18/2012 (the Irish Parliament is formally called the ). One of the two, Michael Taft, described what he sees as six problems with the fiscal suicide pact:

The fiscal treaty will require substantially more austerity measures in the medium term. ... This level of austerity on top of what the Government has already planned could cut the nominal GDP growth by up to 2% and this, of course, will result in lower employment, driving up the live register and cutting wages and incomes.

The fiscal treaty will depress growth in the eurozone. ... Most eurozone countries will have to undergo some form of fiscal consolidation over the next two or three years which, in some cases, will be quite substantial. The German Institute for Macroeconomic and Economic Research estimates the effect of this fiscal consolidation on eurozone growth to mean that it will average a 0.5% each year up to 2016. That is how far down eurozone growth could be driven if the fiscal treaty provisions are implemented. ...

Even the Government regards the structural deficit as unrealistic. The structural deficit is a hypothetical. It is derived first by comparing actual GDP with the hypothetical potential GDP. From this, the output gap is derived - another hypothetical. To determine the structural deficit, a cyclical sensitivity measurement is applied - yet again a hypothetical. A structural deficit rests on layers of hypothetical measurements inside a model with variables that cannot be observed in the real world. ... Under its model, the EU projects that by 2014, the Irish economy will actually be overheating, that is, that we will be back in a boom. This is not only unrealistic but it is absurd. However, the Government should explain why it is calling on people to give constitutional force to measurements and hypotheticals which it has dismissed as highly uncertain and unrealistic.

The fiscal treaty will limit the amount of counter-cyclical measures future Governments can employ during downturns. Take the example of the Irish economy falling back into recession later this decade. Under the fiscal treaty, we will still be required to run primary surpluses, that is, the budget surplus, excluding interest payments. Given this constraint, it is unlikely that automatic stabilisers will be allowed to operate in full, never mind proactive fiscal measures to counter the downturn. Nor should we rely on provisions for temporary departures in the event of a severe economic downturn. Spain is heading back into a full blown recession and yet no temporary departure is being allowed. The treaty has little to do with a sustainable counter-cyclical macroeconomic framework and all to do with self-defeating deficit reduction via deflationary fiscal adjustments.

The treaty will perpetuate instability in the eurozone - in the first instance by depressing economic growth during a period of stagnation. This will undermine confidence in our economy’s ability to generate future revenue needed to repay its debt. Again, witness Spain. Increased austerity measurements are only pushing it into and not away from a bailout as market confidence is drained. If a number of temporary departures are granted out of necessity, combined with changes in structural deficit measurements so as to allow countries to more easily achieve their targets, this will undermine confidence in the actual framework itself. We saw this when the European banks underwent not one but two stress tests. Market investors had no confidence in these tests and eventually the ECB was forced into an unprecedented release of €1 trillion to prevent the European banking system from freezing up. If investors believe the fiscal compact is being similarly manipulated, the process will perpetuate the crisis.

The debt reduction rule will lead to an unsustainably low level of government debt, falling to levels of 20% of GDP or less. Government debt provides a secure investment for financial institutions, in particular pension funds and if this is removed such funds will be forced to introduce higher risks into their profiles and may end up creating bubbles in equities and property. [my emphasis]

The Irish Times' live blog 06/01/2012 on the referendum vote count reports:

[Anti-treaty Left nationalist party] Sinn Féin deputy leader Mary Lou McDonald says it was clear throughout the campaign that the Labour party was on the wrong side of the argument when its traditional supporters were considered. “The Labour party were on the wrong side of the debate in respect of the trade union movement right across Europe and the wrong side of the debate laterally even in terms of their own sister parties across the EU,” she said.

"Austerity hasn’t worked and [Labour Party leader and deputy prime minister] Eamon Gilmore knows that as surely as I know that. They have promised big and we want to see them deliver on it. We will be reminding them of all the promises and assertions they have made."

Tags: angela merkel, austerity economics, eu, euro, european union, greece, ireland

A mini-catalog of all the damage a Greek exit from the euro or a eurozone breakup could do

Bloomberg News provides a description of the range of possible-to-probable results of a Greek exit from the euro: Simon Kennedy, Greek Exit Aftershocks Risk Reaching China 05/28/2012:

Beyond the euro area, major trading partners such as the U.K., Switzerland and nearby emerging economies including Romania’s could be hurt as demand slows. Their currencies probably would rise against the euro, making exports less competitive. China’s biggest investment bank says that nation could see its weakest growth in more than two decades.

Even if the dollar surges, the U.S. may be more insulated given signs of a rebound in its domestic economy -- at 8.1 percent in April, the jobless rate is down from a peak of 10 percent in October 2009 -- and the fact that just 13 percent of its exports head to the euro area. Capital flooding into a perceived safe haven may also hold down interest rates.

Still, BofA Merrill Lynch estimates U.S. bond and stock markets each account for a third of global capitalization, leaving them prone to a European shock. Greek elections helped wipe almost $3 trillion from worldwide equities this month.

Beyond the euro area, major trading partners such as the U.K., Switzerland and nearby emerging economies including Romania’s could be hurt as demand slows. Their currencies probably would rise against the euro, making exports less competitive. China’s biggest investment bank says that nation could see its weakest growth in more than two decades.

Even if the dollar surges, the U.S. may be more insulated given signs of a rebound in its domestic economy -- at 8.1 percent in April, the jobless rate is down from a peak of 10 percent in October 2009 -- and the fact that just 13 percent of its exports head to the euro area. Capital flooding into a perceived safe haven may also hold down interest rates.

Still, BofA Merrill Lynch estimates U.S. bond and stock markets each account for a third of global capitalization, leaving them prone to a European shock. Greek elections helped wipe almost $3 trillion from worldwide equities this month.

If the U.S. economy is pulled down it may complicate President Barack Obama’s re-election bid, said [economist Barry] Eichengreen. Obama said May 21 that what happens in Greece has an impact in the U.S. and called for “greater urgency” from European leaders.

"The election will turn on the economy and the economy is significantly affected by Europe," Eichengreen said. "The longer it remains unresolved and the more volatility it creates the worse it is for Obama." [my emphasis]

The headline writer on the following story seems to have gotten a little carried away in trying for rhymes for Sharon Smyth's and Neil Callanan's report, Spain Delays And Prays That Zombies Repay Debt: Mortgages 05/29/2012:

"Spain has engaged in a policy of delay and pray," Echavarren said in an interview. "The problem hasn’t been quantified by anyone because there is huge pressure not to tell the truth."
The Economy Ministry says that Spanish banks have 184 billion euros of developers' loans and assets that are "problematic," while the remaining 123 billion euros are performing. The need for more reserves to cover losses on the loans can’t be ruled out, Nomura International analysts Daragh Quinn and Duncan Farr said in a May 14 report. If Spain took losses on developer loans like Ireland did, Spanish banks would need 8.9 billion euros under the best case to 76.5 billion euros of additional provisions in the worst scenario, Nomura estimates.

Spain's Bankia firm is already in critical condition:

Bankia, which Spain nationalized this month, said on May 25 it will seek 19 billion euros of state funds after it made 5.5 billion euros of provisions for non-developer loans, mostly home mortgages and company borrowing. Banco Santander SA (SAN) and Banco Bilbao Vizcaya Argentaria SA (BBVA), Spain’s biggest lenders, were among 16 of the country’s banks downgraded earlier this month by Moody’s Investors Service, which cited a recession and the increase in non-performing loans to real-estate companies.

The Reuters video at this link, Market Pulse: Spain bank plan doomed, Troika bailout looms 05/28/2012, talks about how Bankia will likely need "Troika" (EU, IMF, ECB) assistance to salvage Bankia. This is a more optimistic report from the day before, 05/28/2012, Breakingviews: Bankia's bailout is a mixed blessing:



As this editorial from El País, La catástrofe de Bankia 29.05.2012 mentions, the government's actions so far in assuming the bad credits for Bankia have been a factor in Spain's high bond interest rates at the moment. M. Veloso and M. Cuesta report in Tres alternativas para pagar la factura de Bankia ABC.es 29.05.2012 that Spain's conservative government has basically three alternatives open at the moment: borrow more through Spanish bonds; get an injection of capital from the ECB; and, get rescue funds from the IMF or the EU.

The Bankia problem is yet another reminder that the main financial problem in Europe is the weakness (under-capitalization) of European banks, not the sovereign debt of Greece or the other countries.

Tags: austerity economics, eu, euro, european union, greece, spain

Irish referendum today (Thursday) on eurozone fiscal suicide pact

Ireland is having a nationwide referendum today on whether to adopt the treaty that Germany's Angela Merkel is demanding they accept, a fiscal suicide pact that basically outlaws Keynesian economic stimulus policies and in practice gives Germany (Angie) control over the national budgets of the participating countries. This is the treaty that newly-elected French President François Hollande has insisted must be changed to include fiscal stimulus if France is to approve it, officially named the Intergovernmental Treaty on Stability, Co-ordination and Governance in the Economic and Monetary Union. The European Trade Union Confederation opposes the treaty.

General descriptions of the Treaty can be found at the website of the Irish Referendum Commission, a supposedly independent body. The Irish Times has a this-side-says, the-other-side says summary: Paul Cullent, The treaty explained 05/30/2012.

Siobhan Dowling reports for Global Post on the campaign, Key Irish euro referendum pits fear against anger 05/30/2012:

The latest polls indicate that the Irish are going to vote in favor of austerity, bucking the recent voting trend in Greece, France and even Germany. But that doesn’t mean that the Irish are enthusiastic adherents of Merkel’s belt-tightening fixation.

As much as anything, the Irish referendum could be described as a battle between fear and anger.

Sadly, that's what the hopes for the euro and even the EU have degenerated into for much of the European public, "a battle between fear and anger." It seems to have been not so long ago that it was a truism that depressions could weaken democracies and lead to dictatorships and other bad stuff. Maybe growing up in East Germany, Angela Merkel never learned about that:

Many Irish people are furious at their political elite for getting them into this mess, and at the European Union for forcing them to effectively take on the gambling debts of speculators, bankers and property developers.

The bailout became necessary as a result of the previous government’s ill-fated decision to guarantee all of the country’s banking debts in 2008. Those debts turned out to be astronomical, as a result of reckless lending to property developers, and Ireland bailed out the banks at enormous cost.

As the state took on these liabilities the markets pushed up its borrowing costs, leaving Dublin with little choice but to turn to the troika [EU, ECB, IMF].

Making matters worse, the state has been overly reliant on real estate transaction taxes. Once the property market crashed, that left a massive hole in public finances. At the same time, there is more demand on the public purse due to soaring unemployment. For 2012 the funding gap is an estimated 13 billion euros.

That deficit comes despite a succession of harsh budgets that have been imposed at the behest of the troika, imposing billions of euros worth of expenditure cuts and new taxes.

At the same time, the bondholders — who had loaned to the reckless Irish banks — have been paid back billions of euros from the state coffers. [my emphasis]

They are right to be angry.


And democratic governance should give them more options that a choice between economic collapse, on the one hand, and agreeing to have their government wreck their own economy so that the government can collect debts for banks that made bad risks. This is the moral hazard problem of too-big-to-fail banks. In the theology of the Great God Free Market, stockholders and bondholders are assuming the risk that the company may fail, with the potential rewards that they make money if the company prospers. But what happened here is that the Irish government stepped in to remove the risk from bondholders and thereby sacrificed the well-being of the whole country to the comfort of the bondholders. The bondholders were relieved from the down side of their risk. At the cost continues to grow: Banks may require an extra €3-€4 billion, says Elderfield Irish Times 05/30/2012.

The Dowling article quotes international relations professor Ben Tonra saying, "The ECB has been utterly dogmatic in terms of protecting not only senior bondholders but junior bondholders. And has basically said all these speculators have to be paid back and they have to be paid back on the shoulders of Irish taxpayers." Democracy? Prosperity? To hell with them! Bondholders money comes first! This is not the purpose of the EU. The main purpose of the EU was to promote democracy and international peace in Europe. It has become an ugly travesty of itself.

Ireland's level of public debt only became problematic and subjected them to the ugly side of the bond market because of the depression that began in 2007, and because the government made the decisions not to require weak banks to be reorganized but to have the government assume their bad debts. Dowling also describes the partisan politics of austerity within Ireland in describing the phenomenon that Paul Krugman regularly mocks, the notion that Ireland is some kind of austerity success story:

Commentators often point to Ireland as Europe’s austerity success story. Unlike in Spain and Greece, on the surface, Ireland’s economy appears to have returned to growth, albeit modestly, with the EU predicting a rate of just 0.5 percent for 2012. Moreover, official figures show a trade surplus, although this may not be a reliable indicator since it is distorted by the many multinationals based in Ireland who repatriate their profits.

Yet most Irish people don’t feel that things are getting better. The number of those struggling to pay back often-massive mortgages is growing. On Friday the Central Bank announced that one in 10 mortgages are in arrears of more than 90 days. Unemployment remains around 14 percent, up from 4.5 percent just five years ago, and would be even higher if not for high levels of emigration and the return home of many immigrants who contributed to Ireland’s boom.

The party seen to have caused the mess, Fianna Fáil, was booted from office last year. However, members of the current government, particularly the center-left Labour Party, have seen their support decline, with backers angry at them for continuing the same austerity agenda.

Left-wing nationalist party Sinn Féin, the biggest critic of the Fiscal Treaty — which it dubs the “Austerity Treaty” — has seen its support soar, particularly among working-class voters.

Other opponents include businessman Declan Ganley, who helped defeat the Lisbon Treaty first time around, and smaller left-wing groups, including the Socialist Party. [my emphasis]

The Irish Times reported on Tuesday (Treaty campaign in last stretch 05/29/2012):

Both sides in the fiscal treaty referendum are using the final hours before the onset of the broadcast moratorium on referendum content tomorrow afternoon to persuade the electorate.

Speaking tonight on RTÉ’s Prime Time Labour’s Joan Burton encouraged people not to send out the “wrong signal” in Thursday’s vote saying the country has done very well for 40 years out of EU structural funds.

She was joined on the programme in calling for a Yes vote by Fianna Fáil’s Timmy Dooley who said if the country doesn’t learn to balance its budgets it will become an inhibiter to security of the euro.

"Both sides", the two major political parties, are insisting that the Irish people accept Angie's fiscal suicide pact. This is yet another example of the extent to which the neoliberal ideology has corrupted the establishment parties in Europe.

The same paper reports in Government 'lying' over treaty, "Three recent opinion polls revealed a 60/40 split in favour of the fiscal treaty among Irish voters who go to the polls on Thursday." But there is also a large undecided bloc going in to the election. Turnout will play a big role.

Padraic Halpin reports for Reuters on the failure of Angienomics austerity in Ireland, Pioneer Ireland fears austerity was in vain 05/29/2012.

Two trade unionists from the British Irish union UNITE testified about the effects of the treaty before the Irish Parliamentary Sub-Committee on the treaty on 04/18/2012 (the Irish Parliament is formally called the Oireachtas). Jimmy Kelly warned:

The eurozone economy and the European project itself are put at grave risk by this treaty. It addresses the wrong question and therefore comes up with the wrong answer. The crisis does not stem from recklessness in State spending but from the recklessness of financial institutions. This crisis is unfortunately still continuing. In Ireland we are all too aware of the direct cost of reckless banks and property speculation. We are also aware of the economic burden this recklessness has imposed on the State in terms of unemployment, falling incomes and collapsed tax revenue, and we are aware that had the fiscal treaty been in place ten years ago it would not have averted the disaster in Ireland nor changed budgetary policy one bit. Instead, the fiscal treaty targets the State and the public sector with a set of rules based on arbitrary targets and hypothetical measurements.

And he describes how the treaty will force what economists call internal devaluation, i.e., reduction of wages and salaries and workers' living standards:

The fiscal treaty will lead to further austerity measures, which no one doubts. UNITE estimates that this could result in an additional €8 billion or more in spending cuts and tax increases over the next few years. This will have a significant impact on workers’ living standards.

It would cut economic growth which will inevitably lead to lower job creation. Currently, more than 14% are employed and another 10% are under-employed or can only find casual work. Even more alarming is that the IMF, in its last review in March, estimated that even by 2017, unemployment will be above 10%. Additional austerity over and above what the Government is already planning will depress domestic demand even further. This will slow the already low level of job creation. We will be facing into a decade of high unemployment and emigration.

The European Commission has projected that even in 2015, real wages will still be falling, that is, wages after inflation. Between 2012 and 2015, average real wages are projected to fall by nearly 0.5% each year, which will reduce domestic demand and job creation. This will put downward pressure on wage growth. We will have a situation where inflation is eroding workers’ living standards at the same time as the Government is increasing taxation and households are trying to escape from extraordinarily high levels of debt. This is a recipe for continuing growth and falling living standards. [my emphasis]

Tags: angela merkel, austerity economics, eu, euro, european union, greece, ireland

Another sign of how the neoliberalism adopted by Germany's SPD is causing them problems

I did and do respect former German Gerhard Schröder's (SPD) foreign policy performance, especially his opposition to the Iraq War.

But his downside was his open-armed embrace of the neoliberal economic doctrines that are now, in their Angela Merkel-ified form are strangling much of Europe. In Chancellor Altkanzler Schröder warnt Sozialdemokraten vor Hollande, Die Zeit reports that neither the experience of countries like Greece and Spain, nor the electoral problems of pro-austerity social-democratic parties in those two countries and others, have persuaded him that some rethinking may be in order.

Schröder is saying no, no, the SPD should actually copy the French Socialist Party's successful course under François Hollande, oh no, that won't do at all!

Taking pretty much an Angiebot line, Schröder said, yes, some kind of growth measures or other would be nice, "kritisierte aber die mangelnde Bereitschaft, Strukturreformen beispielsweise auf dem Arbeitsmarkt oder in der Verwaltung umzusetzen." ("but he criticized the insufficient readiness [of Hollande] to adopt, for instance, structural reforms in the labor market or reorganize the bureaucracy.") In the neoliberal vocabulary, labor market reforms = lowering wages, weakening unions; reorganizing the bureaucracy means cut government services.

And he emphasizes that, goodness me, you can't raise taxes on the Job Creators! He didn't actually use the Job Creator phrase the Republicans apply to the One Percent, but it wouldn't surprise me if he started doing so. The SPD is formally in agreement with the former Chancellor on that, sadly enough.

It's not clear from that report whether Schröder supports or opposes the SPD current position that they will vote for Angie's fiscal suicide pact only if fiscal stimulative measures accompany it. The SPD's position certainly leaves them wiggle-room to agree to some basically cosmetic stimulus proposal from Angie as an excuse to approve the fiscal suicide pact, officially named the Intergovernmental Treaty on Stability, Co-ordination and Governance in the Economic and Monetary Union.

The fiscal suicide pact is a screamingly bad idea. It essentially outlaws counter-cyclical Keynesian stimulus policies even in a depression like this one, when they are most needed. Because it's based on debt ratios to GDP, it makes stimulus especially difficult in times like this, when GDP's are shrinking or growing very slowly.

Hollande is threatening to reject the treaty if the text isn't renegotiated to allow stimulus. We'll see how serious he is about that over the next month. It's hard to see how any responsible treaty that protected the need for deficit spending in a depression could contain the provisions that Angie likes the most, the ones that restrict public borrowing especially during the worst economic times.

The fiscal suicide pact isn't worth adopting unless it's changed to the point that it no longer is a fiscal suicide pact. It would write Chicago School economics into the constitutions of the countries foolish enough to ratify it.

Tags: angela merkel, austerity economics, eu, euro, european union, françois hollande, gerhard schröder, spd

Chris Hayes and Patriotic Correctness about "the troops"

Liberal journalist Chris Hayes took some flak from the usual suspects this past weekend when he suggested that talking about soldiers like 12-year-old fanboys gushing about their favorite comic-book heroes might not be entirely appropriate on all occasions for adult citizens in a democracy.

Paul Campos gives an account in Chris Hayes apologizes for saying something intelligent LGM 05/28/2012. Charlie Pierce recalls how Republican partisans "honored the troops" back in 2004. (What Are the Gobshites Saying These Days? Esquire Politics Blog 05/29/2012)

Chris is neither the first to catch this kind of flak nor will be be the last. I'm even seeing little inspirational posters to honor military dogs these days. I addressed this issue, for instance in Sleaze 02/17/2012. I posted on the issue on which Hayes' controversial comment touched in Do "the troops" = the war policy? 04/16/2012.

On 02/07/2007, I posted William Arkin gets in deep doody for not "supporting the troops". The links to Arkin's columns there are now broken. (Which is why I like to quote relevant passages from the articles I link as well as referencing the article name and source, which makes them easier to locate with a web search. Although I wasn't able to find versions of those on a quick search that I would consider reliable ones.)

Here's what I wrote about Arkin's offense against Patriotic Correctness in that post:

He was challenging the increasingly daffy political convention in America of arguing about Iraq War policy in terms of what's best for "the troops", who are routinely described as brave, noble, self-sacrificing, [fill in your favorite superlative]. We're against the war because we're asking too much of "our troops" who are fine, wonderful, etc. No, we need to stay in Iraq because "the troops" want to finish the job, being as they are brave, determined, capable, etc.

This convention has become increasingly popular over the last three decades. To a significant extent it's the result of having an all-volunteer military, though other trends have contributed to it, such as the Christian fundamentalists deciding that the military was a rich "mission field" for their message. But was result of all those trends is that fewer and fewer Americans have direct contact with the military themselves or through neighbors and family members. Idolizing "the troops" is kind of an informal but real psychological bargain.

The civilians who don't serve and haven't served gush about the nobility of those who do. Those in the military are expected to then be jacked around as the politicians and our infallible generals decide (the generals also being dedicated, noble, selfless, etc.), and they shouldn't make everyone else feel uncomfortable by bitching and moaning about it. More particularly, no one should make the offspring of affluent Republican white folks feel guilty about the fact that while they cheer for wars and recite bloody slogans as loyal Republicans are expected to, most of them don't feel moved to volunteer for those wars they find so vital to the interests of the Homeland. That's what we have fine, noble soldiers for, who just happen to be disproportionately Southern, disproportionately minorities and disproportionately working class. Military recruiters should confine their high-pressure recruiting efforts to mall and high-schools in working-class neighborhoods and not trouble nice young Republican white folks about such things.

And that's a big downside of this idolization of "the troops". Because "the troops" are strangers to so many Americans, and because they are abstracted to be the Best of the Best, it makes it psychologically much easier for most of the public to cheerfully agree and even applaud to send them off on dubious missions where their lives and bodies are placed on the line. Too many people view them as The Troops, not as what they are: men and women just like the rest of the society they come from, though with the demographic disproportions I mentioned above.

Arkin made the point in a clumsy way. But doing verbal somersaults to make Iraq War policy sound in the best interests of the soldiers is getting increasingly unreal. Anyone who's not a Big Pundit or totally into the Oxycontin worldview understands that it's obvious that war is never in the best interests of "the troops". Their best interests is in not being put in some Middle Eastern hell-hole where they may be killed or maimed or shot out their helicopters or driven to PTSD.

Also, it surely must be clear to most anyone not washed in the blood of High Broderism that whether the soldiers in the field want to carry on the fight is not the determining factor in war policies, unless things come to the extremes of the army collapsing or revolting. I'm not aware of any country which lets the rank-and-file soldiers vote on whether to initiate, continue or end a war. I suppose you could make some sort of romantic-Bolshevik case that they should get to decide by a vote. (Not that Communist governments ever followed such a practice.) Soldiers in the American Civil War got to elect some of their officers, a system that didn't have such great practical results.

But who outside Beltway punditry or rightwing think-tanks pretends that's the way the world works? Of course, wars are bad for the soldiers' health and well-being, including the businesses, marriages and family lives that are negatively affected by their absence. And of course the soldiers in the field don't get to decide, short of some kind of insubordination or revolt, whether or not their country is going to enter a war, keep on fighting or come to a peace agreement.

And I quoted Arkin describing the rightwing "populism" of war fans who argue for their policy preferences in the name of "supporting the troops" (even when "the troops" themselves have a diversity of opinions on the policies relating to the wars in which some of them are fighting):

But the bigger point is that any dissenting voices are just those of whores, politicians, tin foil hat liberals, or worse, un-Americans. In this view, there are no actual experts in this world, no one who studies and measures public opinion, no one who studies war or the military, who do not wear the uniform. This is not some post-modern relativism, it is pure anti-elitism. The elite think they know it all, while those who do all of the dirty work, who do all of the suffering, are methodically ignored and dominated.

But this is Tea Party style "anti-elitism". I quoted a Military Times analysis from late 2006 of a poll of soldiers that found, "Only 35 percent of the military members polled this year said they approve of the way President Bush is handling the war, while 42 percent said they disapproved." And, "in this year’s poll only 41 percent of the military said the U.S. should have gone to war in Iraq in the first place, down from 65 percent in 2003."

Tags: Tags: chris hayes, patriotic correctness, william arkin

Bobo's Grand Theory of history

If there's anything more sad that watching David "Bobo" Brooks try to talk about economics, it's watching him construct a Grand Theory of history. In this case, American history: The Role of Uncle Sam New York Times 05/28/2012.

In Bobo's Grand Theory, Alexander Hamilton established Social Darwinism and 19th-century style killer capitalism. And we did perfectly fine with it, until the Progressives came in at the turn of the century and mucked it all up.

And the Tide Of History now compels us to return to the 19th century, with a few tweaks here and there. Because, "If the U.S. doesn't modernize its governing institutions, the nation will stagnate. The ghost of Hamilton will be displeased."

Are The Voices who speak to Maureen Dowd now chatting with Bobo, too?

More likely, it's just Bobo straining mightily to put some highbrow varnish on the crackpot nostalgic for the Gilded Age and the robber barons that now dominates the Republican Party.

Bobo shows that he has some dim awareness that even in the early 19th century, there was something known as Jacksonian democracy:

In his engrossing new book, "Our Divided Political Heart," E.J. Dionne, my NPR pundit partner, argues that the Hamiltonian and Jacksonian traditions formed part of a balanced consensus, which has been destroyed by the radical individualists of today's Republican Party. But that balanced governing philosophy was destroyed gradually over the 20th century, before the Tea Party was even in utero. As government excessively overreached, Republicans became excessively antigovernment.

Bobo on Andrew Jackson? Please, no, no please!!! I'll steal one of my neighbor's chickens and sacrifice it live to the Great God Free Market if I can just be guaranteed I'll never, ever have to read a column of Bobo Brooks talking about Andrew Jackson.

Steve M at No More Mister Nice Blog in There's now, at most, an inch of daylight between David Brooks and Glenn Beck 05/29/2012) points out that this paragraph is a key statement of what Bobo is really talking about:

In each case [here Bobo means basically the entire 20th century], a good impulse was taken to excess. A government that was energetic and limited was turned into one that is omnidirectional and fiscally unsustainable. A government that was trusted and oriented around long-term visions is now distrusted because it tries to pander to the voters’ every momentary desire. A government that devoted its resources toward future innovation and development now devotes its resources to health care for the middle-class elderly. [my emphasis]

Health care for old people! That's what's making the Great God Free Market angry, according to what the ghost of Alexander Hamilton is telling Bobo.

I'm guessing it was actually the ghost of Aaron Burr who appeared to Bobo, but I don't have time to elaborate right now. I have a chicken to sacrifice.

Tags: david brooks

Neoliberalism in action: Trans-Pacific Partnership (TPP) edition

One of the hallmarks of the economic doctrine of neoliberalism has come to dominate the major parties in the US and the EU, the doctrine that is currently laying waste the economies of Greece, Ireland, Italy, Spain and Portugal, is the "free trade" agreement. NAFTA, negotiated under Old Man Bush's Administration, concluded and approved under the Clinton Administration, has been the prototype for American trade deals ever since.

There are many problems with the "free trade" agreements from the viewpoint of American workers as well as the less-developed countries who are often the partners on the other side. One of the most disturbing is that corporate lobbyists have been trying to use such treaties as backdoor mechanisms for undermining national regulations to protect workers and consumers.


Alyona Minkowski on her Alyona Show of 05/25/2012 addressed some important aspects of the Trans-Pacific Partnership agreement currently under negotiation, included the selective secrecy of the negotiations. Democratic Sen. Ron Wyden has objected to the fact that Congress is receiving little information about the terms being offered by the United States. Representatives of Chevron, Comcast, Halliburton, and the Motion Picture Association of America, on the other hand, seem to have generous access to that information. As The Alyona Show's summary at the YouTube video site reports (Fireside: Trans-Pacific Partnership, No Transparency):

Senator Wyden is also the Chair of the Senate Finance Subcommittee on International Trade, Customs, and Global Competitiveness. And it would make sense that someone with that title would have access to details surrounding trade agreements that our government is making, right? Well, turns out the Obama administration, isn't granting that access. This is all surrounding the Trans-Pacific Partnership, an international trade agreement between nine nations about which we know very little.

The American Prospect recently ran a special report section on trade agreements, with special focus on the TPP. In one of the articles, Clyde Prestowitz describes the foreign policy context of the TPP negotiations (The Pacific Pivot 03/13/2012). He warns that our experience with such agreements should make us all skeptical of the claimed benefits for American workers, something that is always part of the marketing campaign for such agreements:

Between 1960 and today, there have been four full-fledged rounds of global negotiations under the aegis first of the General Agreement on Tariffs and Trade (GATT) and then of the WTO that engaged the United States and the Asia-Pacific countries. In addition, there was a continuing series of talks with Japan under rubrics such as the Market Oriented Sector Specific Initiative (MOSS, ridiculed as More of the Same Stuff), the Semiconductor Negotiations, the Nippon Telegraph and Telephone talks, and more. There was the creation of the Asia-Pacific Economic Cooperation association, founded in the early 1990s to spread liberal democratic ideals within the Pacific Rim through trade and investment. There were the negotiations both to bring China into the WTO and for America to grant it permanent "most favored nation" treatment. The North American Free Trade Agreement and bilateral free-trade agreements with Peru, Chile, Singapore, Australia, and Korea are also part of this saga of trade deals that only widened trade imbalances.

Each of these projects had its causes, purposes, and dynamics, but certain critical patterns repeated. The premise was that all participants embraced the same free-trade philosophy and rules and that if the rules were set properly, the results would automatically be satisfactory for all. The fundamental difference in philosophy between laissez-faire, free-trade America and export-driven Asia was never directly confronted. One reason for this was that free trade was a kind of religion of U.S. policymakers, for whom any management of results was original sin. Another was that America was long considered economically invulnerable. Yet another was that the purpose of the deals was usually more to cultivate geopolitical allies, to stimulate development of struggling neighbors, or to facilitate U.S. investment abroad. But the agreements were always sold to the U.S. Congress and public as arrangements that would increase U.S. exports, reduce trade deficits, and create jobs.

They never did. Rather, the trade deficit relentlessly rose, offshoring of U.S.–based production and jobs accelerated, and trade became a drag on growth of U.S. gross domestic product as well as a cause of rising income inequality. As economic strategy, the trade deals and their logic were unsuccessful, or irrelevant, or both. [my emphasis]

The current US foreign policy of global dominance (as über-Realist Stephen Walt calls it) has been an overriding factor in the American negotiating position, Prestowitz argues, and it has been the major influence in making these agreements disadvantageous economically for the US - or at least for US workers:

There are, however, two clear purposes that all the deals have served. The first is the geopolitical grand strategy objectives of the United States. By making the United States the market of last resort, the trade agreements have helped persuade allies to accept U.S. hegemony. The second purpose served is that of U.S. businesses that profit immensely from outsourcing and offshoring to Asia but that need the security provided by Uncle Sam to do so. These realities reveal the flaws in U.S. trade efforts—misplaced priorities, a false doctrine, and false assumptions.

Most misplaced has been the geopolitical priority with its subordination of long-term economic interests to short-term political/military objectives. Washington continually makes concessions, refrains from insisting on application of the GATT/WTO rules, or backs away from taking actions to counter mercantilism on national--security grounds. In the 1980s, the Reagan administration declined to invoke GATT rules against European subsidization of the Airbus, because Secretary of State George Shultz said doing so would shatter the North Atlantic Treaty Organization. Today, Washington declines to respond to China's blatant currency manipulation. Why? It thinks it needs the Chinese to help with problems like Iran and North Korea. It doesn’t understand that erosion of U.S. wealth-producing capacity is the most important national--security threat. [my emphasis]

Prestowitz makes the case that the Obama Administration sees the TPP is an tool in an ill-conceived approach to China policy.

Another trade agreement that facilitates corporate job export out of the United States is not what we need. I was struck in this connection by Prestowitz' comment quoted above, "One reason for this was that free trade was a kind of religion of U.S. policymakers, for whom any management of results was original sin."

This is the dogmatic obsession to which I'm referring when I talk about the theology of the Great God Free Market. For the Republican Party, and for way too many Democrats, the Free Market has become a dogma every bit as rigid and abstracted from reality as the worst of Cold War dogmatism. And it persists even in the face of facts and real-time experience that contradict its claims. It often functions much like a religion, a faith in which the Free Market becomes an end in itself and the results are blessed as optimal, whether or not more people are hurt than helped by the actual results.

Tags: neoliberalism, tpp, trans-pacific partnership

The willfully blind debating the clueless

I should probably go back and look at some of the PBS Newshour's Political Wrap segments to see if they were once notably better than they are now. That's the way I clearly remember it. But maybe I was being too generous back then.

Mark Shields has been the liberal part of this two-commentator discussion team since I guess about the time radio was invented. These days, he practically sleeps through them. But he does wake up occasionally and applies some actual thought to what he's saying. And at least he remembers from the dim past how to draw a coherent contrast between Democrats and Republicans. His syntax is slipping, but you can normally understand what he's saying.

David "Bobo" Brooks has been his verbal sparring partner for the last decade or so. Bobo's specialty in live commentary is to frame even the goofiest Republican ideas as something that any sensible person can understand is cautious and well-thought-out. He has a "tell". Whenever his voice gets notably softer and takes on a careful, deliberative tone, that means he's delivering some particularly ill-founded Republican talking point.

That's Quality TV political commentary on the Political Wrap these days. When Bobo is out, they usually bring in some forgettable dweeb from National Review to take his place. When Sleepy Mark is out, for the last few years his main replacement has been Washington Post columnist Ruth Marcus, who for reasons that are completely opaque to me is considered a liberal by contemporary Beltway Village standards.

Alleged Liberal Ruth seems to get worse over time. She was on Friday with Bobo (Brooks, Marcus on Coming Economic 'Chaos,' New Recession Fears, Bain Debate 05/25/2012):



One of their topics was the economic/currency/debt crisis in Europe. Bobo clearly knows next to nothing about the topic. But he's practically a scholar in it compared to Alleged Liberal Ruth. Her syntax also seemed to be having some serious issues. They started off talking about the Congressional Budget Office (CBO). Alleged Liberal Ruth's first contribution:

JUDY WOODRUFF: Congress going to come to its senses?

(LAUGHTER)

RUTH MARCUS: Well, I don't think anybody should ever bet on that.

But David said that Republicans seem chastened. You certainly couldn't tell it from the comments of Speaker Boehner, who seems more than willing to do a replay of the disastrous, from my point of view, economically, and also disastrous politically for Republicans, replay of the debt ceiling showdown last time around, a year ago.

And what's going to happen is, all of this Taxmageddon, as we are calling it, is going -- because of the timing of it, we will probably kick the can down the road from the lame-duck, for maybe six months into the next Congress. And guess what? That is going to coincide with, collide with hitting the debt ceiling yet again.

So the CBO -- I just -- quick thing on the CBO report. CBO used the R-word, which is very, very scary, recession. If all of these things come to pass, they said, the economy would be in recession in the beginning of 2013.

JUDY WOODRUFF: Which is what got everybody's attention.

RUTH MARCUS: Which got everybody's attention, but in some ways, that wasn't really the message that CBO wanted to send, because, yes, that would be a very bad outcome.

But the second thing they said is that the alternative, if you filled that entire fiscal cliff and cushioned it, and you just dug the debt deeper, the debt hole that much deeper, that would also be a terrible outcome, just later.

And so they have been begging in their very quiet-sounding CBO language, please, members of Congress, you need to both avert the fiscal cliff now and come up with a plan that markets can understand that you really have to fill the debt hole later on.

Whether Congress can manage that ...

So if we avert and fill the fiscal cliff, then later you can fill the debt hole, and, you know, the Taxmageddon debt ceiling, but the CBO at least uses polite language and that's nice. Or whatever, Boehner disaster.

Oooo-kay, then!

When they got to the Europe issue, Alleged Liberal Ruth should have said something like: "Honey, I don't have the faintest clue what you're talking about. And I would just embarrass myself if I even attempted to say anything about it."

Instead, she said this:

JUDY WOODRUFF: And, meanwhile, Ruth, you have got in Europe this week, became clearer that there really are serious disagreements on what they going to do to get out of their own debt crisis.

What -- is there a consensus on what effect that could have here?

RUTH MARCUS: Yes. The consensus is bad.

(LAUGHTER)

RUTH MARCUS: And the only question is how bad.

And that really, in a sense, though CBO didn't talk about it in their report, that just adds to the scariness and the height of the cliff, because what happens in Europe doesn't stay in Europe. We know that Europe seems -- the European problem just seems to be like a chronic disease now that we have been living with, and Europe doesn't seem to be getting well.

And as it's not getting well, and you see questions about economic growth in China, all of that has an impact on growth here, or lack of growth.

I have a wild hunch that Alleged Liberal Ruth was very impressed at some point with some presentation she heard on economics that used a lot of cliff metaphors, and that made her happy because she could think about pretty mountains and stuff while she sat there listening. Oh, and China, my, don't they have some nice cliffs in China!

This is Quality TV political commentary in the Age of OxyContin and Boehner debt filled cliff holes.

Maybe PBS should add Talking Tom animation that would repeat what the commentators just said but in a cute, high cartoon voice. That would at least make the segment entertaining.

Tags: david brooks, ruth marcus