Chrysler advances, but it's stop and go

Fiat acompli.

Lance Winslow wrote:

Fiat acompli.

do U ride on Dodge/Kryslier interpid??? or Kia accent?:-000

And Chrysler's first new vehicle....... the massive gas guzzling new Jeep Grand Cherokee. Oh yeah, they've really learned their lesson! I predict they will be back in bankruptcy within 5 years.

I really like that pun about stop and go. It reminds me of I'll stop procrastinating when I get around to it.

Unfortunately, the points the Paul Krugman makes in his latest column are true. The prevailing cut taxes - starve the beast idea seems crazy. The problem is that there seems to be a general way in which people have a positive view of this. It is sad. Now the question is what are people like and how will they go. I think it is still 40 - 20 - 40 with that middle 20% vascillating all the time. It seems like it will take a complete disaster to finally blow the cover.

Every now and then Charles Krauthammer writes a really good column. Actually, I had kind of feared that those days were gone. He wrote the column years ago saying that the left thinks the right is evil and the right thinks the left is naive. Today he writes that the right would underestimate Obama at their own peril. This is, of course, true, but it is something that is usually not acknowledged. There has always been some question about whether the "just say no" strategy was sound as a strategy. One aspect of the right is this kind of blind self confidence. "I can drive at 100 MPH with a blindfold on and nothing will happen." "I can never compromise and yet, politically, I will come out smelling like a rose." I definitely agree with Krauthammer that the worst thing that could happen is not for the Democrats to lose the House, or even the Senate. He is right that 2011 and 2012, for the administration, will consist in trying to consolidate the results of this year and in preparing for the 2012 election. We'll see how it all starts to play out.

Paul Krugman's blog of yerterday, After The Fall, looks absolutely reasonable. There does appear to be a good chance that the Republicans will take over the House, and then what will they do? Certainly, Boehner will butt heads with Obama. What will be the result? One must assume it will be an insistence on my way or the highway. Since the FY11 will be in place by the time the new Congress sits down in January, all of this will be over the FY12 budget, for which there will be no compromise whatsoever.

Paul Krugman's article today was certainly correct about what occurred during the recent Bush administration and its aftermath, especially with regard to the economy. The problem is the question of what, in the long run, can be done. He is right that if the Republican's regain power, they will resurrect those policies, not because they were Bush's policies, but because they are the policies of the right. The question is how do you deal with those policies in the long run. As the upcoming election shows, there is a political force that is always heading to push political results back and forth. In fact, the Bush administration illustrated the biggest problem with Keynesian economics. Keynes called for countercyclical fiscal policy. In bad times that means you run deficits. In good times, that means you run surpluses. But if, as soon as the good times hit, the right refuses to run surpluses because they insist on cutting taxes, how can you ever reach the Keynesian surplus point? This would need to be answered. It is becoming clear that in the short term, everything rides on President Obama. What will he do under a given set of circumstances? We can start with the expiring Bush tax cuts. As part of his campaign promises, he said that he was not going to "raise" taxes on the middle class. The problem is probably going to come when the Republicans try to bargain further tax cuts for the rich as the price for them to agree to tax cuts for the middle class. Then the question will be whether he can stand up to them and simply refuse the bargain. Next will be a likely government shutdown, if the Republicans gain control of one or both houses of congress. But the key point is that you cannot count on a surplus developing and staying there. They will sabotage it. So, as Paul Krugman would say, how do you adjust your Keynesian model to take that into account?

Well, it appears that the gauntlet has been thrown. The differences between the Democrats and the Republicans on the Bush tax cuts are pretty clear, and the question is, will either side flinch? The article I was just looking at says that the administration backs letting the tax cuts on the high end expire while extending the tax cuts in the middle. Interestingly, according to the chart I saw, there never was a tax cut for the lower middle. And, as usual, because you need 60 votes to do anything in the Senate, the first hurdle to getting the tax cuts extended is to get 60 votes for anything. That will apparently be difficult. And then, if you do, say, get everything extended, will the administration veto it? And the other question is when all this would take place. Will it take place before the election? Will it take place in a lame duck session? Could it conceivably take place in the new congress but retroactively? I suspect that this will be the next big issue out there. It is becoming apparent that the big issue in the election coming up is simply whether or not the Democrats can retain control of the House and Senate, by even the slimmest of margins. If they can, then everything immediately moves towards 2012, with a lot of these issues becoming the key debating points in the upcoming Presidential election.

Paul Krugman today made what I consider to be the key point. Keynes called for countercyclical government policies. He called for deficit spending when times are bad, but surpluses when times are good. The problem is that it seems impossible to get the surpluses kept when times get good. Clinton had a surplus of sorts, but Bush killed it as follows: "So that was the fiscal sin of the Bush years: deficits continued even when times were good; there was no effort to prepare for future shocks. And don’t say “what can you expect from politicians”. The ratio of federal debt to GDP fell from 49 percent in fiscal 1993 to 33 percent in fiscal 2001; it could have continued on that downward path. But candidate George W. Bush declared that if the government is running a surplus, it means that it’s collecting too much in taxes; Alan Greenspan told Congress that we had to cut taxes to avoid paying off our debt too fast; then came an unfunded war, and the rest is history. Despite all that, we actually did have enough room to take strong fiscal action. But we didn’t. And we’ll spend at least the next decade paying the price for the combination of irresponsibility when times were good and irresolution when they were bad."

And so now we reach the next big issue. This morning on the all of the Sunday shows, they were talking about what is going to become of the expiring Bush tax cuts. Now things become interesting. Here we have a situation where, if nothing is done, the Republicans lose something that they want, which is to keep the top marginal income tax rate at 35%, rather than let it return to 39.6%. They have been able to be the party of no so far with no problem, confident that nothing that they hold dear will be messed up because of their intransigence. But I suspect they feel differently about this tax cut than they did about health care or the stimulus. So far, the administration has said that they do not want to stop that rate from going back up. But they do want to keep the rates below that. This whole thing is totally anti-Keynesian. From the Keynesian perspective you would want an even bigger tax cut. Although what you might prefer is a WPA jobs program, instead. But, in any event, from Keynes, you would want stimuli in place to push the economy as much as possible. But the left also knows that there will possibly never be a chance to get that marginal rate above 35%. The way everyone talks, perhaps the more interesting question is whether this whole thing will be argued out in the light of day. Or will it be a quick behind closed door result. They've got about five and a half months.

This whole tax question is symbolic of the overall problem that seems to be present. As has been pointed out, it is interesting that the whole idea that no tax cut ever has to concern itself with deficits is something else. You wonder how they can get away with this. It is clear that there needs to be a certain amount of disingenuousness in order to counter the political power of supply side economics. The analogy I always use is to someone who says that they can drive even though they have had too much to drink. The problem is that most of the time, they will be able to get away with it. So if you show that statistically, they are much worse off, they can just argue that they got home safe last night. This also applies to nuclear disarmament. You would think that the Cuban Missile Crisis would have taught them how dangerous it is to leave nuclear weapons out there. But no. And people forget. So it looks like the administration should allow a temporary extension of the Bush tax cuts because of their stimulative effect. Maybe they can bargain for bigger stimulus as a price for allowing the rich to keep their tax cut temporarily. This is because they need to be able to try to maintain the Presidency. We know what will happen if Obama can't retain it. All of this means that it is not so important what happens in November. But hopefully things will start getting better. The question is under what circumstances the independents will start to go back. We'll see.

I've just been looking through some Paul Krugman blogs. He is very frustrated at the fact that people on the right aren't listening to him. This is not a surprise, and in a way I am surprised by his frustration. This is especially curious since he was such a big fan of The Foundation Trilogy. The point in Psychohistory was that you had to take all factors into account, including the political and the psychological, not just the economic. The question that I wonder about is whether there is any ability to affect the way things are going, or is it all basically Psychohistorical determinism. It seems like the kinds of variables that can be influenced are the sorts of things like bills that are brought up by the congressional leaders. For instance, Harry Reid decided that he was going to push health care right before Christmas. I don't think he or anyone else at that time could have imagined that the Republicans would win in Massachusetts. But for whatever reason, he decided to pursue it. That decision has had huge consequences. But since it could not have been planned, it just becomes part of the background. One decision that has been made is a politically smart one. And that is the Edujobs bill with Medicaid and having it paid for. It had to paid for to try to get it passed in the Senate. But the thing is that the payment, which is presumably out of stimulus funds, is really not that bad. I was reading an article recently which was talking about the differences between the WPA type programs of the 1930s and today. It said that there has really been no repeat of those programs because modern construction is not nearly as labor intensive. So you end up spending money on needed infrastructure repairs and improvements, but it doesn't go nearly as far towards creating jobs. One thing we do know, though, is that teaching jobs are solid jobs. In this case, we are talking about jobs that will simply not fall in the layoff category, so you know that the money will go directly into jobs. So this should do some good. It is also clear that there are a few Republican Senators who will vote for things like that even though the party as a whole does not. It is interesting that the Senators from Maine will buck the rest of the Republicans sometimes, but at other times they won't. The mere fact that they will goes and makes it so that you always have to assume that there is some way in which they will make the deal, even though the largest part of the Republican Senate leadership doesn't want them to. This, of course, will only apply for the rest of this year. Once the election occurs and the Republicans get back the seats that they will, the larger number of Republican Senators will undoubtedly be able to uphold vetoes even if the Senators from Maine threaten to bolt. So the thing that the Democrats need to do, outside of setting up the Senate showdown on the tax cuts as far before the election as possible, is to try to come up with as much as possible to lower the unemployment rate as much as possible before the election. The best way to do that would be to use stimulus money to produce jobs in as economical a way as possible. Perhaps it can go to much simpler construction jobs. But it needs to go. One question is why it has taken so long for the stimulus money to be spent. Originally, it was supposed to be because it took time to get even shovel ready projects going. There has to be some reason now, because that should no longer be a factor.

They should go out of business and let a real company make cars. They are a propped up crippled old diseased piece of Obama crap. All they are good for is passing taxpayer money to the greedy unions so Obama can buy votes. That's about it. Do not buy a commie car. You'll just encourage communism.

I had one Chrysler product in my life....my first and last. What a lemon!!

I don't expect much better with Fiat on board except a new name....Frysler.

Chrysler had it's big probs in the late 70s and early 80s. It got bailed out then.

Then it teamed up with Mercedes....failed.

Teaming with Fiat...another fail.

Let Chrysler die.

Eighthman wrote:

They should go out of business and let a real company make cars. They are a propped up crippled old diseased piece of Obama crap. All they are good for is passing taxpayer money to the greedy unions so Obama can buy votes. That's about it. Do not buy a commie car. You'll just encourage communism.

I used to love Eighthman when I was a boy. One of the most haunting memories I have was from the time when Dr. Spectra's daughter was killed because of this fight involving Eighthman and another robot of Dr. Spectra's. At the end, Eighthman brings his dead daughter to Dr. Spectra and tells him that this need not have happened if he used his abilities for good. He then hands his daughter to Dr. Spectra and Dr. Spectra takes her, then turns without a word and walks away. I saw that over 40 years ago and the thought of that scene still makes me want to cry.

Robert Reich just wrote a column that seems to express where things are pretty well in my view. The big problem being that demand is down in ways that won't spontaneously reverse themselves. It is meant as a paean against the deficit hawks. But it really gets down to the crux of macroeconomic theory. If he is right, the economy won't right itself on its own. It is well known that it took World War II to finally end the Great Depression. But earlier economic downturns, like the Panic of 1907, reversed themselves quickly. Ron Paul says that you should do nothing and the economy will quickly go down and come up. But that doesn't seem to follow. There is no way that the suggestions of Robert Reich will be implemented. Are we due for another 10 years of The Great Recession? Or will it fix itself? If it doesn't within the next two years, it will be the primary subject of the 2012 Presidential election.

I've been thinking about what to do lately. It seems like a methodology needs to be developed that takes into account the political leanings of people. As Paul Krugman writes, people can believe that 2 + 2 = 5 and vote accordingly, but that doesn't make them right. In this case, the question is how do you lower unemployment? Lots of stimulus would seem to be the answer, but you can't get it through Congress. What to do? You need to have a political message that, while it may not help now, may do so in the future.

In the aftermath of the mid-term election, there is a lot to think about. Perhaps the key point is what the right maintains. The independents certainly indicated that they lean right. The problem is that political victory doesn't imply objective correctness. My current theory is that this is the reason why the right doesn't simply win all the time. Once they are in power, they need to govern. But the way that they govern is flawed. Eventually, internal contradictions cause the independents to go against them. The Presidential election in 2008 was a perfect example. When the financial system fell down and practically collapsed, the independents looked and said that the Republicans didn't know what they were doing and elected President Obama and lots of Democrats to Congress. I've continued to read Paul Krugman and he argues that there are no miracles in store, that we are headed to a lost decade scenario if we follow the path that we clearly have to follow. Based on this, it will be interesting to see what the reaction of the independents is. It would seem that, if the economy springs back, it will be to President Obama's benefit. And if it doesn't, that he would lose. I don't know. But before we get there, we have two years of political conflict ahead of us.

I've just been reading a bunch of recent columns by Robert Reich. It seems to me that his overall analysis, that the super rich are being given so much money that it is impoverishing everyone else, makes basic sense. The thing I wonder about is how to ever change this scenario. It seems like the Republicans and the Tea Partiers will certainly win. And he is correct that part of it is that the Democrats cannot put up a fight. As he pointed out, the Democrats wanted a four week continuation of the continuing resolution. The Republicans only wanted two weeks. Two weeks it is. As he points out, what is the basis upon which the Democrats won't give the Republicans and the Tea Partiers everything they demand? What is the basis under which they would ever go to the mat with them? The next question becomes how far the Republicans will go. It will be something to see what they come up with for demands for FY12. Because, after all, even if they got the $61B that they demand for FY11, this is a drop in the bucket compared to the annual deficit. Presumably, they will get it, though. But then what for FY12?$500B, a trillion? Who knows? We know that tax increases for the rich are off the table because of the two year deal. And unemployment runs out at the end of one year. But in the meantime, the rich get richer and the middle class (not to mention the poor) gets poorer. The temptation is to simply assume that this is it. Of course, that is what I was thinking going into the 2006 election. I never would have believed that 2006 or 2008 would ever have happened. But for now, the big question is what happens after March 18? Does the government shut down for good?