What to Do About the Miserable February Job Numbers

The big news of the day today is the fact that the economy shed 650,000 more jobs in February and the job loss numbers for the previous two months were revised upwards. The nationwide unemployment rate is now 8.1 percent, the highest in 25 years. Since December 2007, which is the technical start of the current recession, the economy has lost 4.4 million jobs.

We gathered the thoughts of Dean Baker and James Galbraith, two of the most prominent economists on the left. Baker makes it clear that not only are things bad, they are worse than expected:

The one piece of somewhat good news in this report is that wages are continuing to rise, with nominal wages rising at 3.5 percent annual rate over the quarter. However, everything else in this report is extremely bad. The economy is in a free fall with no obvious breaks in place. The recent forecasts used in analyzing the stimulus and the budget, which projected 8.5 percent unemployment for the 4th quarter, now look impossibly optimistic. The unemployment rate is likely to hit 8.5 percent by March and will almost certainly cross 9.0 percent by the early summer. Without substantial additional stimulus, it could cross 10.0 percent by year end. This report shows that recent economic projections were overly optimistic.

Galbraith suggests the following steps to spur recovery:

1. Increase Social Security 30 percent across the board
2. Declare a full holiday on the payroll tax.
3. Cut the age of eligibility for Medicare to 55.
4. Make general revenue sharing open-ended.
5. Do the National Infrastructure Fund, also open-ended.
6. Put a moratorium on all foreclosures, and turn over the problems to a new HOLC.
7. Unleash Sheila Bair on the banks.

Somebody mail this to the freaked out Obama economic team.

Dealing With Iran

Over at Marc Lynch's place, Gary Sick argues that the change in U.S. policy toward Iran since Obama took office is much greater than most people think:

There is a flurry of signaling by the US — both positive and negative: keeping pressure on Iran (Stuart Levey and restrictions on banks), reassuring Israel (appointment of Ross) & Arabs (Hillary's downplaying of expectations at Sharm el-Sheikh), providing some funding for the Palestinians while pressing Israel to relax entry into Gaza, renewing an opening to Syria, talking about cutting US nuke stockpiles (US Ambassador Schulte in Vienna), talk of including Iran in Afghan security discussions (Holbrook), willingness to remove (anti-Iran) missile defense in E Eur while cajoling Russia on Iranian missile development, nice words from Obama (sometimes), harsh words from Susan Rice (always?), tough words from Adm Mullen, more soothing words from SecDef Gates, unified declaration about Iran by all five UN veto powers at the IAEA (without threatening new sanctions or return to the UNSC), etc etc.

Sick may be overstating things a bit here, but that's still a pretty impressive list — especially, as he says, for a guy who's only been in office for six weeks. But will it work?  Iran has run hot and cold in the past, and either by coincidence or design they seem to run hottest when we're running coldest, and vice versa.  Because of this, there's rarely been any sustained period during the past couple of decades when both sides have been genuinely interested in rapprochement, and that seems like it might be the case right now too.  For that reason, my own guess is that this dance is going to take quite a while to produce any results.  Obama and Hillary Clinton are probably going to have to keep up the pressure, keep up the overtures, stay calm in the face of provocations, and display almost inhuman patience for several straight years if they want to see any progress.  We'll see if they can do it.

Quote of the Day - 03.06.09

From Fox News chief Roger Ailes, talking about Barack Obama's efforts to turn America into a socialist hellhole:

"I see this as the Alamo.  If I just had somebody who was willing to sit on the other side of the camera until the last shot is fired, we'd be fine."

Last night I was channel surfing and happened to land on Sean Hannity's show for a few minutes.  Marian walked in and wondered why I was watching it.  "Doesn't he just increase your blood pressure?" she asked.

I'd never really thought about it, but I realized right then that he doesn't.  Lou Dobbs increases my blood pressure.  Chris Matthews increases my blood pressure.  Maureen Dowd increases my blood pressure.  But Hannity?  Rush Limbaugh?  Glenn Beck?  Nah.  They seem so frankly clownish, and so completely insulated in their little cocoon of viewers who already agree with them anyway, that they just don't bother me much.  That's probably a little too lackadaisical on my part — they can still drive cards and letters into congressional offices, after all — but the fact is that they've lost their ability to push my buttons.  Their particular brand of freak-showism just doesn't seem so scary these days.

Nobody Left

Atrios responds to the latest government plan to restart the credit markets via partnerships with hedge funds and private-equity firms:

They made bad bets when they at least theoretically thought they could incur losses. Now the cunning plan is to hope they make good bets even though...no chance of losses!

This is all going to end really badly.

I have some longer thoughts on this subject that I haven't quite had the nerve to write and post yet, but the short version is this: everyone in the financial industry made bad bets over the past seven years.  So if you think the government shouldn't work with any of these guys, it means you think the government should refuse to work with the financial industry, full stop.  That's just not practical, though.  Even if you think they're all idiots, we have to work with someone, and the idiots are all we have.

Now, as it happens, I don't think they are all idiots.  But that's the post I haven't written yet.  Maybe later.

Staffing Trouble

Three stories, one theme.  First, from the Wall Street Journal:

Two candidates for top jobs at the Treasury have withdrawn their names from consideration, complicating efforts by Treasury Secretary Tim Geithner to staff his department at a time of economic crisis, according to people familiar with the matter....People familiar with the matter said Ms. Nazareth and Ms. Atkinson withdrew in part because of the long vetting process, which had dragged on for weeks and included several rounds of intense questioning.

Second, Bloomberg:

President Barack Obama’s economic advisers are increasingly concerned about the U.S. Senate’s delay in confirming the nominations of Austan Goolsbee and Cecilia Rouse to the White House Council of Economic Advisers....Their stalled nominations serve as another reminder that Obama may find it difficult to live up to his campaign promise of changing the partisan culture in Washington. Democratic Senate Majority Leader Harry Reid of Nevada "was outrageous in abusing the Senate’s advise and consent powers," said Tony Fratto, a former Bush spokesman. "So no one should be surprised if Senate Republicans follow the precedent he set."

Finally, Ryan Grim at the Huffington Post:

Barack Obama made no secret of his feelings for "Washington lobbyists" during the campaign and vowed that they wouldn't be staffing his White House. The implementation of that rule, however, has led to a number of consequences that Obama could never have intended....Lobbyists who for years have fought for workers' rights, environmental protection, human rights, pay-equity for women, consumer protection and other items on the Obama agenda have found the doors to the White House HR department slammed shut.

So: endless vetting is spooking good candidates, Republicans are throwing temper tantrums, and anti-lobbyist goo-gooism is draining the progressive pool.  Meanwhile, Rome is burning.  This isn't very encouraging news.

"Sophisticated and Fact Based"

Earlier this week David Brooks penned a cri de coeur about the "revolutionary fervor" he found lurking beneath the covers of Barack Obama's budget proposal for next year.  The next day he started getting pushback from White House aides.  By the time he'd finished talking to them, Brooks says, he didn't find himself completely convinced:

Nonetheless, the White House made a case that was sophisticated and fact-based. These people know how to lead a discussion and set a tone of friendly cooperation. I’m more optimistic that if Senate moderates can get their act together and come up with their own proactive plan, they can help shape a budget that allays their anxieties while meeting the president’s goals.

Fact based is a big improvement over the past eight years, no?  All by itself, that demonstrates a certain pragmatism and moderation even if Obama does favor things like carbon pricing and universal healthcare.

On the other hand, Brooks also came away from his conversations convinced that the Obama administration is "plotting politically feasible ways to reduce Social Security as well as health spending."  I wonder if he's going to get another set of phone calls about that on Friday morning?

Vote The Rock

Whether we like it or not, we're going to have to learn how to sequester CO2. Current suggestions include storing liquid or gaseous CO2 underground in saline aquifers, depleted oil wells, and porous coal seams. These "solutions" however come with nuclear-bomblike thrills of unintended consequences: notably, sudden and unintentional leaks.

But there's another idea. Turning carbon back into a solid. Which just happens to be  a way to permanently get rid of CO2 emissions. Our ally in that mission is rock. And geologists have now mapped 6,000 square miles of ultramafic rocks at or near the surface in the US (map [pdf]) that could absorb more than 500 years of America's CO2 production. Most of these formations are clustered along the east and west coasts, some near major cities, including New York, Baltimore, and San Francisco, making the sequestration process downright convenient—someday. Soon. We hope.

Here's how it works: Ultramafic rocks originate deep in the Earth and contain minerals that react naturally with CO2 to form solid minerals—a process known as mineral carbonation. Columbia University’s Earth Institute scientists are experimenting with ways to speed up a process that under natural conditions takes thousands of years.

One model involves capturing CO2 directly from power-plant smokestacks and other industries, dissolving in water and piping it underground, while capturing the heat generated by the reaction to accelerate the process. The first major pilot study is underway in Iceland, where a collaboration of international researchers will inject CO2-saturated water into basalt formations, also good sequesters. The rock should absorb 1,600 tons of CO2 from a nearby geothermal power plant over 9 months.

That's not all. Another mapping effort is underway in Oman, where peridotite formations might mineralize as much as 4 billion tons of CO2 a year—about 12 percent of the world’s annual output. And another pilot study by the Pacific Northwest National Laboratory will eventually inject 1,000 tons of C02 into rock under land owned by a paper mill in Washington.

But wait, there's more. Hazardous tailings left behind by asbestos mining in Vermont and California could finally be neutralized by CO2 sequestration. The asbestos was mined from peridotite formations and the tailings are just waiting to gobble CO2 and return to their former lives as mantle rocks benign enough for your mantlepiece.

Just as Gordon Brown was lauding Senator Ted Kennedy in the U.S. House chamber yesterday, his government was basking in its victory before the European Union court to uphold a British law forcing people into mandatory retirement at 65. The British, of course, are also in the midst of a big economic downturn, and what their law does is to deny older people the right to work to get the money to provide for themselves with a modicum of decency–especially now that their retirement savings are decimated, just like ours are.

As the BBC reports, “The government continues to consign tens of thousands of willing and able older workers to the scrapheap,’’ said one advocate from Age Concern, the group that brought the suit. And Paul Cann, director of policy for Help the Aged, told the BBC, “Mandatory retirement ages are unfair and the government should act to abolish them as soon as possible…Challenging financial circumstances mean it is even more important for older workers to be able to choose to work longer if they want to. Ageism in all its forms must be eradicated from our society once and for all.”

The irony of this is extraordinary. Kennedy, who is 77 and was going strong until his recent diagnosis with brain cancer–and who has spent his entire life fighting for health care and decent treatment of workers of all ages–receivies a knighthood from the Queen, at the precise moment her government is sending older members of the British working class down the gangplank.

Don't Bank on It: FDIC Running Out of Money

Driven by a tanking stock market, a lot of people are looking to move their money to a “safe” place. This is especially  true of older people, who don’t have the option to follow the advice that’s being doled out by most money managers, which is to “stick it out” and wait for the market to “come back.” The safest place of all is supposed to be an FDIC-insured bank, where it may earn no more than a pittance, but it will at least be protected, since up to $250,000 in deposits for each individual are backed by the federal government through the Federal Deposit Insurance Corporation.

The problem is, the FDIC is now running out of money itself. According to Bloomberg news:

Federal Deposit Insurance Corp. Chairman Sheila Bair said the fund it uses to protect customer deposits at U.S. banks could dry up amid a surge in bank failures, as she responded to an industry outcry against new fees approved by the agency….

The fund, which lost $33.5 billion in 2008, was drained by 25 bank failures last year. Sixteen banks have failed so far this year, further straining the fund.

Banks are reportedly upset that they are being asked to pay additional fees to the government to shore up the FDIC. They are accustomed to money flowing only in the other direction–from the government's coffers into theirs.

Scaling Up

True confession: as a blogger, I like articles that have a clear takeaway which I can excerpt and comment on.  If there isn't one, I sometimes put the piece aside and then never get back to it.  Bad blogger.

Paul Roberts has a piece like that in our current issue.  It's about food, and it's got way too many moving parts to summarize fairly.  So here's a sort of randomly chosen taste:

When most of us imagine what a sustainable food economy might look like, chances are we picture a variation on something that already exists — such as organic farming, or a network of local farms and farmers markets, or urban pea patches — only on a much larger scale....But that's not the reality. Many of the familiar models don't work well on the scale required to need billions of people.

....Consider what it would take to make our farm system entirely organic. The only reason industrial organic agriculture can get away with replenishing its soils with manure or by planting nitrogen-fixing cover crops is that the industry is so tiny — making up less than 3 percent of the US food supply (and just 5.3 percent even in gung-ho green cultures like Austria's). If we wanted to rid the world of synthetic fertilizer use — and assuming dietary habits remain constant—the extra land we'd need for cover crops or forage (to feed the animals to make the manure) would more than double, possibly triple, the current area of farmland, according to Vaclav Smil, an environmental scientist at the University of Manitoba. Such an expansion, Smil notes, "would require complete elimination of all tropical rainforests, conversion of a large part of tropical and subtropical grasslands to cropland, and the return of a substantial share of the labor force to field farming — making this clearly only a theoretical notion."

I'm something of a bug about scale problems, so this whole theme appeals to me.  But the rest of the article is really good too.  It's well worth a few minutes of your time.