Let's stipulate that Barack Obama's comments about class resentments in America were impolitic. But they track fairly closely to research about what's going on in the poorer regions of our country. Just a few observations.

• American consumer culture raises our aspirations to believe that anyone can get rich.


• When expectations outstrip real outcomes, we feel either resentful or depressed.


• The use of drugs (speed, oxycontin,etc) to self medicate these symptoms is at an all time high among lower income households.


• Lower income individuals live in a much more disrupted society (divorce, drugs, crime) than do the people they want to be like.



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I wanted to bring everyone up to date on some upgrades we're making to the site and also discuss community rules for posting and commenting. As you've probably been able to see over the last few days, comments and reader blog posts are now appearing on the site much more rapidly than they were before. We're also planning on pushing through another upgrade to the publishing software that runs TPMCafe early this next week and that should resolve some remaining glitches that have afflicted the site since the relaunch in early February.

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The BBC reports that at least 19,000 teachers and students have protested in Paris, along with more protesters in other cities, in response to a proposal to cut funding for schools and lay off teachers. The contrast with the situation in Massachusetts school districts, the subject of my last post, could not be more stark. This demonstration of democratic energy is amazing. It is also a bit demoralizing, though, since it is so foreign to my experience of democracy here.

I am pleased that Jared has dropped the ambiguity and declared that he is indeed using "merit" to mean marginal product in Principle 1, as I have assumed since my original post. I still believe that Principle 1 does not accurately describe Jared's real concerns, which have little or nothing to do with marginal product. I'm certain that he would remain concerned about the increase in inequality, even if it were shown to result from widening inequality of marginal product rather than the exercise of power that has driven income away from marginal product.

Indeed, much (not necessarily all) of the rise in inequality almost certainly is due to widening inequality of marginal product. Jared acknowledges that globalization has caused part of the rise in inequality. Globalization reduces the marginal product of low-skilled workers by lowering the value of the goods they produce through competition from low-cost production abroad. If Jared really meant what he said in Principle 1, he would be unconcerned about that phenomenon because the low-skilled workers have less marginal product and therefore less "merit." In actuality, though, he still is (and should be) concerned because none of us really consider marginal product to be merit.

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For the third time in two years, Massachusetts' lawmakers passed a bill that would require employers to pay triple damages to workers for not paying wages on time or other violations of the state's wage laws.

When the bill was passed in 2006, the veto by the pro-business governor, Mitt Romney, was no big surprise. But when Democrats pushed the bill through the legislature earlier this year, Governor Deval Patrick's response shocked many. Instead of signing the legislation into law, he proposed amending the bill to create more wiggle room for employers who break the law. Lawmakers have rejected Patrick's attempt to please business by watering down the bill; instead they sent the original version to his desk once again. This time, hopefully, Patrick will not repeat his mistake.

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I saw the film STOP-LOSS last night. I don't go to the movies much, usually waiting for a film to turn up on DVD.

But I went to see this one because, like all anti-war films, no one is seeing it despite an all star cast topped by Ryan Phillipe (who deserves an Oscar for this performance).

Some of the critics say it's not anti-war just pro GI. To me there is no difference. By graphically showing what the war does to these American kids (and what the war makes them do), it cannot help but lead the viewer to conclude that all these kids need to come home now.

STOP-LOSS is the procedure by which Bush can keep extending a soldier's tour of duty in Iraq after the fighter's commitment has ended. The kid can be back home in Indiana or Brooklyn tending to the kids and the job when he or she can be summoned back. He either goes back or goes to jail.

As STOP-LOSS shows, alot of these kids are barely holding it together. The war messed them up bad. Another tour could either kill them or leave them mentally ill for life.

But no matter. Bush can't sustain his commitment to 140,000 troops in Iraq without using and reusing the same soldiers.

It is sickening. We are all used to the government lying. But with stop-loss, the government breaks its commitment to the soldier in a way that can and often does lead to his death.

But, as I said, no one is seeing this film, just like they didn't go to the theaters to watch RENDITION. We don't want to know.

One group of war enablers should have to see STOP-LOSS. That would be every Democrat in the House and Senate who voted for the war knowing it was wrong but because it was politically expedient. They should see what they did. All the rest of us should see it because, if these kids are living this hell, at least we should know what it looks and feels like.

It's a great film.

Jared Bernstein writes:

Let me be, I hope, totally clear: for Brad, Alan, and any other economist, merit=marginal product. Thus, principle one is very simply arguing that while a central tenet of economics is that your income is equal to the marginal value you add to the economy, reality is otherwise. Your bargaining power—your ability to claim more than your marginal product or get stuck with less—is an ever-increasing determinant of economic outcomes.

But I am not really a real economist! I am an ex-interdisciplinary social science major who thought it would be fun to become a professor, and figured out in time that the job market for young economists was booming while that for history and poli sci Ph.D.'s was totally cr---- out! (And there was my freshman roommate Larry, who had found this brilliant and charismatic young MIT professor--think of the professor in the movie "21" with hair, with youth, and without the evil.)

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The Obama campaign is taking fire in Philadelphia because it's refusing to literally hand over bags of cash to local party bosses. Ward bosses are demanding "street money," loose cash they need to keep their loosely put together political machines moving. They aren't getting it because the Obama campaign believes they can, once again, circumvent an entrenched political hierarchy.

Obviosly, as Jay Newton-Small points out over at Swampland, part of this is optics. Promising a new politics and then handing out "street money" would be hypocritical, to say the least. But this also has to be put in the context of a sea change in how campaigns engage voters that started in the Dean campaign and is continuing in both the Obama and Clinton campaigns this cycle.

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The Great Merit Debate: OK, OK…mea culpa re the ambiguity of “merit.” I’m not trying to be elusive. I’m just trying to find words that work for lots of different readers from different walks of like.

Let me be, I hope, totally clear: for Brad, Alan, and any other economist, merit=marginal product. Thus, principle one is very simply arguing that while a central tenet of economics is that your income is equal to the marginal value you add to the economy, reality is otherwise. Your bargaining power—your ability to claim more than your marginal product or get stuck with less—is an ever-increasing determinant of economic outcomes.

The litany of “I see this here and there in today’s economy” in the earlier post responding to Alan was supposed to provide a bunch of examples, ones I don’t think Alan has addressed, but let me be more precise and try to draw Brad deeper into this too.

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Let me join Alan Viard in beating up on Jared Bernstein for the undefined term "merit" in his first basic principle:

Let's Talk "Crunch": Economic
outcomes are generally thought to be fair, in the sense that market
forces dole out rewards to those who merit them. But that’s not always
the case. Power, whether it’s based on political clout, wealth, class,
race, or gender, is also a key determinant of who gets what.

"Merit" can, I think, mean four things:

--Marginal productivity: the amount by which, given who you are where you are with the resources you happen to own, total collective
product would be reduced if you and your resources were to suddenly  
vanish from the scene.

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In the right's latest attempt to blame liberals for the failures of conservatism, today's Wall Street Journal editorializes that Congressional Democrats are responsible for the widespread cancellation of American Airlines flights for re-inspections for wiring problems. Years of lax, airline-friendly FAA oversight of the sort that the Journal and the conservative movement has long advocated apparently has nothing to do with the mess. The paper's case is so desperate that it includes a self-evidently irrelevant graph showing that a lot more people die in auto than plane crashes. But the paper's broader argument is the most revealing:

There's a lesson here, and it reverberates beyond the FAA and the airline industry. Mr. Oberstar and other Democrats in Congress would just as soon do to the Food and Drug Administration and the Consumer Product and Safety Commission and other "consumer protection" agencies exactly what they've managed to do to the FAA inside of a month's time. We thought we'd left this hypernanny state mentality in the 1970s, but with this Democratic Congress it is back with a vengeance. The FAA fiasco gives us a glimpse of what the world would look like under this re-regulatory assault. It would mean that every business misstep, no matter how rare, could potentially result in industry-wide repercussions. Congress would call for more rules and greater enforcement, in the name of "safety." And regulatory agencies would respond with overkill. The cost of doing business would rise, and consumers would pay for it in higher prices, less convenience or both.

But the absence of consumer protection (no quote marks necessary) over the past seven-plus years has led directly to demonstrable harms and increased risks to the public.

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The Second Obstacle to Health Care Reform
The High Cost of Care

If we are going to win enough votes in Congress to achieve health care reform, we need to confront runaway health care inflation. Without the votes, reform is a wonderful idea, and we could talk endlessly about what shape it should take. But it will never happen until we learn how to rein in spending.

The truth is that our national health care bill has been growing faster than the economy—and faster than the average worker’s wages—for years. And now we are talking about covering 47 million uninsured Americans, many of whom haven’t seen a doctor for years. In addition, we plan to offer millions of underinsured Americans comprehensive health coverage. Many of them have put off getting the health care they need. In both cases, there will be a lot of very expensive catching up to do.

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The Labor Department reported today that the price of non-oil imports rose by 1.1 percent in March. This brings the annual rate of increase in non-oil import prices to 9.6 percent over the last quarter. This should concern people because higher import prices translate into higher consumer prices, leading to a lower standard of living. Non-oil imports are equal to approximately 12 percent of GDP. This means if import prices continue to rise at their recent rate, it will raise inflation and reduce our standard of living by a bit more than 1 percent by the end of the year.

Those wondering why import prices are rising don’t have to look far. Import prices are rising because the dollar is falling. A falling dollar means that it takes more dollars to buy the same number of yen or euros. If Japanese and European producers are charging the same price for their products in their own currencies, then the goods they export to the United States will cost us more dollars. That one is pretty straightforward.

The next question is why is the dollar falling? The answer is that the dollar is falling because it was too high.

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Readers know that I have long believed that Charles Krauthammer is out of his mind. And they know that I don't believe that only because he's a right-wing extremist and a neocon promoter of everything evil in American foreign policy. For instance, I don't think Bill Kristol is nuts. I just think that he's a right-wing extremist and a neocon promoter of everything evil in American foreign policy.

But Krauthammer is different because he is such a complete hater. Hate is his life-blood and he demonstrates that at every opportunity. Additionally, I had that amazing experience of watching him flip out in synagogue on Yom Kippur in 2001 when he began to bellow (from his pew) at the rabbi for saying that ultimately there must be peace in the Middle East. It was the first and only time I've ever seen anyone bellow from his seat at the rabbi -- on Yom Kippur no less.

But today Charles ratchets it up.

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Earlier today I posted a piece from today's Los Angeles Times which trashes Barack Obama for being perceived as empathetic to Palestinians.

It's a ridiculous piece. Writer Peter Wallsten, seems to be suggesting that Obama may have problems with Jews because some Arabs like him.

But thanks to TPM Cafe reader Lally and the great NATION reporter, Ari Berman, we now have the rest of the story. Turns out that Wallsten was trolling for anti-Obama dirt and turned to the far right Kahanist blogger Debbie Schlussel to give it to him. She obliged but because he didn't credit her, she blows the whistle on him.

Schlussel also also reveals that Wallsten, the LA Times reporter on the Obama beat, is desperately trying to find links between Obama and Farrakhan. (I guess that is the "scandal" the Clinton folks are counting on to end Obama's candidacy, the one they keep hinting about.)

It's pretty amazing. When did the Los Angeles Times stop being a real newspaper? Will it soon recruit Michelle Malkin to write about the immigration debate? It already has Lucianne Goldberg's son as a regular columnist. How low can it go?

The good news. We have a heads up on the Farrakhan story. The inside scoop is that he and Obama use the same barber. And that barber once said Ariel Sharon had a weight problem. You read it here first. Get ready for the firestorm.

Ed Siegel reflects on the empty spectacle that was this week's Petraeus/Crocker hearings, and notes on the side that if the logic behind the Sons of Iraq gambit were applied to its fullest extent, we could hypothetically pay every Iraqi $500 per month not to shoot at American soldiers. Or we could just get those soldiers the hell out of Iraq.

Amid the growing clamor of economic jeremiads, Robert Feinman asks (and attempts to answer) a fundamental question, namely, what is wealth and where has it gone?

More after the jump. . .

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Chris Hayes, stealing from his own publication, posts the text of a compelling editorial reflecting on yesterday's Petraeus/Crocker testimony:

Here’s the problem: after Bush and Cheney have left and even if the American people reject McCain’s plan to faithfully continue their policy, our politics will remain trapped. For empire comes with constraints, and it is within this cage of thought that our war “debate” continues to pace and growl. To “change course,” as the current vocabulary has it, requires more than a package of strategic adjustments. We must unlock empire’s cage and reject the entire project of occupation as something to be properly managed instead of ended as soon as possible.

Read it all.

In his response to my first post, Jared continues to leave "merit" undefined. But, the bulk of his remarks confirm my belief that his agenda is really one of narrowing inequality in general rather than trying to move incomes closer to marginal productivity. Indeed, much of the inequality that he is concerned about, such as the portion due to globalization, probably reflects competitive markets at work rather than economic power overriding competitive forces. Jared's concern about such inequality is justified, but I think that Principle #1, with its mysterious reference to "merit," does not accurately describe his outlook.
 
In his response, Jared also asked about evidence on the effects of tax rates on behavior. The growing literature on the elasticity of taxable income has yielded significant evidence that marginal tax rates affect behavior. For example, Jon Gruber and Emmanuel Saez estimate that each one percent increase in the after-tax reward spurs a 0.5 percent increase in taxable income. According to this estimate, raising the top rate from 35 to 39.6 percent would lower the after-tax reward to earning taxable income by about 7 percent (from .65 to .604) and thereby lower taxable income by 3 to 4 percent. To be sure, some studies find smaller effects or none, while others find larger effects. I remain convinced, however, that we should not dismiss incentive effects until we have conclusive evidence of their absence.

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It's school budget time in Massachusetts (and elsewhere), which means it's time to lay off teachers, increase class sizes, and cut funding for everything from basic supplies (i.e., make teachers pay more out of their own paltry salaries) to "extras" like music, art, or P.E.. As the Boston Globe has reported this week (here and here), some towns are putting measures on the ballot to allow them to assess additional property taxes for school funding and other municipal services. Since 1981, Massachusetts has prohibited municipalities from raising property taxes more than a certain amount unless voters specifically approve the increase by referendum (details here). In "Taxachusetts," although some towns are enacting the increases, many are voting them down (not to mention those towns where the council doesn't even put it on the ballot). If only we lived in a society where "Support Our Teachers" had the same valence that "Support Our Troops" commands now.

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Mark Penn may be gone but his spirit lives on.

A major piece in today's Los Angeles Times reveals that Obama may face political problems because Arab-Americans "consider him receptive despite his clear support of Israel."

This is all part of the continuing effort (especially in Philadelphia and Pittsburgh these days) to paint Obama as something less than a friend of Israel.

This is nothing new.

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For the last month, Barack Obama has made a direct connection between the $10 Billion per month we are spending in Iraq and the unmet fiscal needs of an America falling into a potentially deep recession. Yesterday Republican House Leader John Boehner tried to counter this argument.

“While American consumers are dealing with spiking fuel prices today, these costs would pale in comparison with those they would face if radical jihadists or the Iranian regime gained the upper hand in the Middle East.”

But most oil analysts believe there has been at least a $25 per barrel "war premium" built into the price of oil since our invasion of Iraq. In addition, Paul Wolfowitz's idea that Iraqi oil could be the new "swing producer" (flooding the market to lower prices) turned out to be another fantasy. Although I have written extensively about the role of Cheney's Oil Task Force in the run up to the Iraq War, Boehner's notion that somehow our imperial control of Iraqi oil benefitted the American economy is totally false.

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Every day I hear Obama and Clinton supporters say that they have no intention of voting for the Democratic nominee if Obama [or Clinton] is "robbed" of the Democratic nomination.

It's no surprise. This is a heated campaign and feelings are intense.

But let's all take a pledge that no matter if we nominate Clinton, Obama (or any Democrat other than Zell Miller), we will vote Democratic and tell our friends to do the same.

The reason: we don't want to die. At least, not earlier than absolutely necessary.

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The Washington Post published quite an interesting story a few days back for those of you who missed it. It turns out that the Mortgage Brokers Association is having trouble paying its mortgage!

This is, of course, just a particularly glaring example of how much the industry has suffered from its own excesses. With the exception of a handful of top managers in the financial sector who have made out pretty nicely with exorbitant severance packages, a whole lot of bankers and brokers and real estate agents are suffering from unemployment and otherwise right now. It's too bad the industry spent so long 1) taking risks; and 2) pushing back on regulation.

Now that we’ve debated the principles of Crunch economics for a few days, I wanted to post one of the questions and answers that make up the core of the book. This one’s about globalization. It’s longer than most of the book’s Q&A discussions, but it’s not a simple topic and I try to add some nuance. See what you think.

Q: What’s so right and/or wrong about globalization? Am I really hurting American workers if I buy cheap imports? Should I feel lousy about this? Am I supposed to oppose trade deals? Isn’t our loss the gain of some poor person “over there” who probably needs the money even more than we do?

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Under the headline "The End of the End of History," (but behind a paywall, I think) TNR carries a long piece, maybe an excerpt, from a new book by Robert Kagan. The last line:

The world's democracies need to begin thinking about how they can protect their interests and advance their principles in a world in which these are, once again, powerfully contested.

It's unfair to judge a book by an article, but what strikes me about the latter is how it strains to renovate a scenario for major embattlement by conjuring a proper target for unilateralist belligerence. The curtain rises on... the autocracies of the in- or resurgent great powers, Russia and China.

I can't help but wonder whether what we're getting here is a polished-off brief for the battered neocon project. Reader, don't think that you have to retire your Martian belligerence just because the Iraq war was a boundless disaster. Don't despair. The Cold War will be back.

From the New York Times: "Comments by Gen. David Petraeus raise the prospect that no U.S. forces will leave Iraq after the last of 30,000 "surge" personnel return home in July, meaning a new president will take office with as many as 140,000 soldiers still in Iraq. An average of about 130,000 soldiers have been there for most of the war."

Can historians recall any field commander ever asking that his force be reduced in number? It's not General Petraeus but the commander-in-chief, President Bush, who owns responsibility for the allocation of troops to different theatres in the war on terror.

That decision is more difficult than in some conflicts because Americans do not face a single enemy either in Iraq or Afghanistan, and must be prepared for engaging with many other potential enemies in still other locations. But in the great struggle of World War II the United States fought multiple opponents around the world, and in the hotter years of the long Cold War similarly the military was engaged in many theatres at the same time.

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Thanks to Alan Viard for a provocative analysis of the principles of Crunchian economics. Not surprisingly, we disagree on many fundamental points.

Alan found principle #1 ambiguous, and since it’s central to a) the book, and b) my understanding of the economy, let me repeat the principle and try to clarify.

#1: Economic outcomes are generally thought to be fair, in the sense that market forces dole out rewards to those who merit them. But that’s not always the case. Power, whether it’s based on political clout, wealth, class, race, or gender, is also a key determinant of who gets what.

This seems crystal clear to me, but maybe that’s because I view many of the economy’s outcomes through this lens. Simply put, I see evidence of large and growing gap between overall economic growth and the living standards of working families. And I see disproportionate power—not merit, not marginal product, not efficient resource allocation—as one driving force behind it.

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I just watched on my Tivo the Doug Feith interview on 60 Minutes. Tommy Franks called him "the dumbest man on the planet", but that was generous. Here is a man who refuses to take any responsibility for the tragic deaths of 4000 of our men and women, the maiming of 20,000 more soldiers and the deaths of hundreds of thousands of Iraqis. In a better world he would be serving as an orderly in a Baghdad hospital for $10 a day instead of holding a professorship at Georgetown University.

All I can think of is Bob Dylan's line "Tears of grief, tears of rage".

Interesting noises have been coming recently from the leader of the Hamas political bureau, Khaled Mashal, and the Israeli Minister of Defense Ehud Barak. Looking at what they both said in relatively quick succession, one might even be tempted to draw the inference that perhaps this was coordinated and that something is cooking here. Khaled Mashal gave an interview to the Palestinian daily al-Ayyam that appeared on April 2nd (I know, I know, we have to listen to what Palestinian leaders tell their own public in their own language, and not…wait a minute, this was in their own language. This was an interview in Arabic in a Palestinian paper. I guess people will now say you have to start listening to what they say in Yiddish). Being serious again, Mashal in this interview explicitly endorses a Palestinian state within the ’67 borders, he in effect accepts the Arab initiative and reiterates Hamas support for the previous agreements reached with Fatah and the Palestinian national platform (the ‘Prisoners’ Documents’ and Mecca Agreement).

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A New York Times article of March 30 described the “foreclosure machine:” the law firms and default servicing companies that represent and assist mortgage lenders in foreclosing and pursuing claims in bankruptcy and regular courts. The article gives several examples of questionable practices, including payment by volume of motions filed rather than by the legitimacy of those motions. This can lead to homeowners having to fight off baseless motions in court, or paying to settle a case that never should have been brought. As the article explains, bankruptcy judges and the U.S. Trustee (the powerful office that oversees the integrity of the bankruptcy system) have already noticed this abuse of the system. A recent Bankruptcy court ruling in Houston is the most recent example.

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Firstly, I feel obliged to publicize destor23's recent (but perhaps long-awaited?) switch to Obama. (Reader genghis has the requisite commentary.)

In non-TPMCafe news, Paul George takes the brave and novel step of attempting to transform the discussion of Mark Penn's latest bit of short-sighted silliness into attention to some of the pressing concerns currently straining U.S.-Latin American relations.

According to reader satya, wearing an Obama t-shirt in Nairobi elicits quite a bit of excitement, and reactions bode well for America's reputation on the continent.

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The discussion of Mark Penn's representation of Columbia while being a top aide to Hillary Clinton inevitably gets reduced to discussions of the politics of trade, or just plain electoral politics.

But let's be clear, the government of Columbia is uniquely hated by the global labor movement. In no other country are labor leaders ROUTINELY murdered in the streets. Not fired from their jobs, not jailed, but killed by rightwing paramilitary forces that linked to rightwing forces backing the exact government paying Mark Penn's exorbinant commission. See this chart of union murders by EPI, outlining recent years of killings, in a country where more than 2,534 unionists have been assassinated over the last 21 years.

Now compare this to Venezeuela's Chavez, not my favorite representative of leftist leadership, but still a head of government who faced rightwing labor leaders who led a general strike against him and even collaborated with a coup against him. Yet Chavez did not have those labor leaders murdered or even engage in mass jailings.  Instead, he fought elections both at the polls and within the labor movement itself.  It's a messy story and some not always stellar democratic actions, but compared to a place like Columbia where labor relations have involved death squads, a shining beacon of democracy.

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OK, Jared – you’re enabling me, so I’ll just get more apocalyptic.

First, I think your YOYO (You’re On Your Own) vs. WITT (We’re In This Together) forrmulation is brilliant and I’m glad the Dems have picked up on it. I’m wondering, though, whether a YOYO economy is even worth calling an “economy.” The notion of an “economy” implies that we are all connected in some way, through our wages, the prices we pay, etc. Of course, we are. But when “the economy” serves only a few, at the expense of the many, it becomes a kind of “granfalloon” – Kurt Vonnegut’s term for an imagined community, like the “community” of Redskins’ fans.

And granfalloons are distracting. We say, “There’s something wrong with the economy,” rather than, “I’m getting screwed by the oil companies, the banks, and my employer.” Things get mystified and depersonalized. We say there’s a “recession,” as if were some sort of bad weather, rather than pointing our fingers at the people who brought it down on us and who are, for the most part, profiting still. Maybe, instead of talking about “the economy” and “the recession” we should be talking about the ongoing looting and concerted attack on our standard of living --which will likely end only when there’s nothing left to squeeze out of us.

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As Rick Perlstein observes, almost all of yesterday's Pulitzer winners in journalism owe a debt of gratitude to the conservative movement for creating and implementing the ideas that produced the calamities unveiled in their exceptional reporting. I would add, though, that the media in general have largely failed to draw the connections linking the right-wing's belief system and policies to outcomes like children harmed by unsafe toys and cribs, the importation of poisonous pharmaceuticals from China, the transgressions attributable to private security contractors in Iraq, abuses of power based on the sham "unitary executive" concept, negligent management of a government-run hospital, and the subprime fiasco. Even in most of those award-winning articles themselves, relatively little effort was made to underscore the reality that the conservative movement's hostility toward government was the root cause of those failures of government.

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It is time, I think, to face the realpolitik of health care reform. This means asking a question few reformers dare to discuss: How will we win the Congressional votes needed to pass universal care?

The American Prospect’s Ezra Klein put this question on the table at “Take Back America’s” conference three weeks ago: “There are so many people in this town [D.C.] who do such smart policy thinking,” he observed, “but what we don’t give enough thought to is the politics of reform.” Yet this is a political problem. Without the votes,” Klein told his audience, “you don’t have a plan; you have a position.”

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I want to thank Jared Bernstein for giving me the opportunity to participate in this discussion of his new book, Crunch: Why Do I Feel So Squeezed? (And Other Unsolved Economic Mysteries). The book undertakes the challenging, but critically important, task of communicating basic economic ideas to a broad audience and discusses a wide range of important issues. While I don’t agree with everything in the book, it is thought-provoking and makes many good points.

In this post, I’ll comment on the basic principles of Crunch-style economics that Jared mentions in his first post and in the introduction to the book, reserving more specific discussion for future posts.

In his first basic principle, Jared says that it is “generally thought” that economic outcomes are “fair” because “market forces dole out awards to those who merit them,” but notes that this is “not always the case” and that power helps determine the distribution of awards.

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It’s great to have you here, Barbara, as you are always a voice of sanity in the wilderness. And thanks for getting us started—your entry raises great questions.

“Crunch” really does purport to be more about how the economy should work than about how it is working. And that’s important, because it’s pretty clear that it’s not working and has been broken for awhile. It has, as you say, “fallen down on the job.”

Right now, we see that through the lens of the housing meltdown, its spillovers into credit, financial, and now labor markets, and the resultant recession. But the distributional failure—the failure of growth to reach so many of those that helped to generate that growth—has been with us for most of the past few decades.

Of course, you’ve been writing about this market failure with great resonance for years.

I think there are two important questions to ponder: how did we get here and how do we get “back to the garden,” as we said in the ‘60s (that’s the 1960s, not the 1860s—we’re old, not ancient). I’ll address the how we got here question in this post and save the “where to from here” for a later one. But I’d love to hear your thoughts, Barbara, on both of these questions too.

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Hillary Clinton is making a wrong-headed play in her call to President Bush to boycott the opening ceremonies of the Beijing Olympic Games.

After the collision of an American EP-3 spy plane and a Chinese jet fighter in April 2001, neoconservative high priest Richard Perle advocated preempting China’s bid to host the 2008 Olympics. He felt that keeping China from being able to enjoy the prestige of hosting the Olympic games was the best way to punish China for the transgression of harassing an American military plane that may have been in its air space.

On CNN's Crossfire, I debated Perle on this issue and suggested that the approach he advocated was ultimately harmful to American interests and would seriously harm our ability to generate a broad array of contacts with China in different spheres through which we could hopefully constructively influence and encourage what Bob Zoellick coined a “responsible stakeholder” track.

In recent months, Fred Hiatt, editor of the Editorial Pages of the Washington Post, advocated boycotting the Olympics because China was failing to use its influence on Burma’s military junta. Others have advocated keeping U.S. athletes at home because China continues to deal with the Government of Sudan and has done little to advocate for relief in Darfur. James Fallows and I both countered Hiatt on this.

And now Hillary Clinton has called for President Bush to boycott the opening ceremonies of the games in Beijing in response as a rebuke for not stopping the violent clashes in Tibet and not using its leverage with Sudan to stop genocide in Darfur.

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How amazing is it that Doug Feith has the audacity to go on Sixty Minutes to essentially brag about the war he and his fellow neocons tricked America into?

4000 Americans dead. Iraq destroyed. Thousands of dead Iraqi children.

And this war criminal goes on television to hawk his book. Watch this portion of the interview. To his credit, interviewer Steve Kroft looks like he wants to vomit.

But why belabor Feith. Any administration that would give this guy a security clearance, let alone make him #2 at the Pentagon, clearly knew what it was doing. Feith is an idiot but he is what Bush and Cheney wanted.

And he regrets nothing. Does being an American, even an American traitor, mean that you never have to say you are sorry? Not even for dead American teenagers and Iraqi babies. Not for those brain damaged young soldiers at Walter Reed and other VA hospitals.

Sickening.

For Feith's sake, I hope there is no God. (Actually, I don't).

For more information on Feith, read this.

Jared, this is an enormously useful book, just as I expected, but I’m wondering if events aren’t overtaking us. The economy seems to be going down faster than anyone could have imagined. I know I’m having to re-write my “stump speech” every week.

My brother-in-law just lost his job. I spent the weekend talking to truck drivers who were involved in nation-wide protests of $4/gal diesel fuel last week. They just can’t get by any more, and of course without truckers the whole thing grinds to a screeching halt. I also talked to a Bear Stearns employee who doesn’t know if she’ll have a job from one week to the next.

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The departure of Mark Penn from his central role in the Clinton campaign revolved around the question of "transparency", or as the Times put it, "his private business arrangements again clashed with her campaign positions." He would be by Hillary's side today if someone from the Columbian Embassy hadn't ratted him out. But there is a far greater issue of transparency with someone much closer to Mrs. Clinton--her husband. In 2005 and 2006 the William J. Clinton Foundation received donations of $216 million, the bulk of it from only 18 donors.

But what we don't know is how much of the Clinton Foundation money came from government or private investors eager to curry favor with what was presumed to be the heir apparent to the U.S. Presidency. Since the foundation haul has been growing at a rate of 70% per year, the assumption is that 2007 was a record setting year. But unlike the foundations of the "vast right wing conspiracy" like Heritage, the Clinton Foundation publishes no annual report listing its donors. Until Bill and Hillary agree to publish that information, any attempts to pretend that they have dealt with the problem of "private interests clashing with campaign positions" is fraudulent.

Kimberly Peirce's Stop-Loss is raw, plausible, shocking, and otherwise rich in aesthetic virtue, not the least of which is the way it faces squarely the impossible situation American troops are faced with in Iraq. Perhaps because the script is a collaboration between Peirce, said to be anti-war, and Mark Richard, said to be pro-war, the film puts its central character, Brandon King (Ryan Philippe) in an impossible situation. Called up for a second tour in Iraq when he was sure he was entitled to an exit pass, squad leader King faces nothing but bad choices. Will he skip out and betray his buddies? Will he go back and betray his mind? Call this an extended metaphor for the whole misbegotten war--there aren't going to be any happy endings. In every wrenching way, the war is a trap. Don't believe the critics who tell you the film is ragged and therefore flawed. All the characters have human dimension. The raggedness is the raggedness of the Odyssey. By the end, you can hardly breathe.

First, I want to thank TPM’s Andrew Golis for setting up this book club. Second, I want to thank Brad DeLong, Barbara Ehrenreich, and Alan Viard for agreeing to post along with me on “Crunch” over the next few days (Tyler Cowan is a “maybe”—I’m hoping he will post some responses too).

A bunch of “Crunch” is me answering real people’s questions about the economy—not wonk’s questions, but actual questions gathered from folks who are interested in matters economic but not necessarily schooled in them. The questions range from the definitional: “What’s GDP; how’s unemployment defined,” and “What does the Federal Reserve do, anyway?” and the timely: “What are bubbles and what is a recession?” There are behavioral questions, like “Should I give money to a homeless person or hire an undocumented worker?” as well as policy questions and solutions, like “Do other countries really spend less than we do on health care with better results?” or “Are budget deficits really a problem?”

And, of course, “Why do I feel so squeezed?”

Crunch is not Wikipedia, and the answers I provide are not simply descriptive or economic but are infused with “political economy,” which I describe as the intersection of economic rules and power. As you’ll see below, power plays a much more important role in my economic analysis than it did in my—or anyone else’s— economics education. And the reason for that is its dominant role in economic outcomes, especially those in recent years (and even in recent weeks).

In future postings, I’ll present questions and answers from the book, and I look forward to the posts from both my respondents and my follow cafe’ dwellers. But to get things started, I wanted to share an abridged version of the book’s introduction. Here, I lay out the paradigm within which I analyze the questions, problems, and solutions to the “Crunch.”

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Many of my friends have asked my why I oppose the housing bailout schemes that many progressives are pushing to keep moderate income homeowners in their homes as homeowners. The answer is simple: they are bad deals for homeowners – or least homeowners in bubble inflated markets.

I always thought that progressives were trying to improve the plight of low and moderate income people. These bailout plans are likely to make them worse off, compared to a scenario in which they returned to renting. At least that’s what the numbers show, and given the choice of relying on DC policy wonks or arithmetic, I’ll go with arithmetic every time.

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