Today's Stories

February 13 - 15, 2009

Joshua Frank
The Myth of Clean Coal

George Cicarriello-Maher
Venezuela's Term Limits

February 12, 2009

P. Sainath
Neo-Liberal Terrorism in India: The Largest Wave of Suicides in History

Jean Bricmont
French Echoes of the Israeli-Palestine Conflict

Michael Hudson
Trying to Revive the Bubble Economy: Obama's Awful Financial Recovery Plan

Peter Lee
Pakistan, Not Afghanistan, is the Main Event

Dave Lindorff
Judges Nabbed, Jailing Kids for Kickbacks

February 11, 2009

Neve Gordon
Few Peacemakers in the New Israeli Knesset

Peter Morici
Anatomy of a Hemorrhage

Andy Worthington
Who's Running Guantánamo?

Marjorie Cohn
A Call to End All Renditions

Fred Gardner
Change We Can Smoke?

Niranjan Ramakrishnan
The G & O (Geithner and Obama) Bank

Zoe Blunt
Vancouver Island Hippies: Top Security Threat for 2010?

Belén Fernández
Politics on the Panamericana

Martha Rosenberg
Don't Breathe the Meat

Website of the Day
George Dyson on Project Orion

Blues of the Day
David Vest on the CBC

February 10, 2009

Kathy Kelly
How Do People Keep Going?

Nikolas Kozloff
The Stimulus Imbroglio

Uri Avnery
Dirty Socks

Michael J. Berg
Will South Carolina be the Center of the Nuclear Revival?

Russell Mokhiber
Et Tu, Atul?

Joe Bageant
A Commodity Called Misery

Gareth Porter
Petraeus' Subterfuge

Dave Lindorff
Seek Truth, But Prosecute Liars

Rannie Amiri
The Implications of Recognizing Israel's "Right to Exist"

Harvey Wasserman
Nukes and the Stimulus

Niranjan Ramakrishnan
What We Didn't Learn at Obama's Press Conference

Website of the Day
RIAA Takes Over DoJ Under Obama

February 9, 2009

Vicente Navarro
Why Sanjay Gupta is the Wrong Man for Top US Health Job

Paul Craig Roberts
Driving Over the Cliff

Julio Sanchez /
Feliz de Bedout
The Threat of Peace in Colombia: an Interview with Hollman Morris

National Lawyers Guild
Strong Indications of Israeli War Crimes

Jonathan Cook
Israeli University Welcomes "War Crimes" Colonel

Alana Smith
The Nightmarish Case of Fahad Hashmi

Binoy Kampmark
Taking the Bong

Sam Bahour
End the Occupation First

Nicole Colson
Can You Afford College?

Ron Jacobs
Remembering the Second Intifada

Website of the Day
The Legacy of Ed Grothus and the Black Hole

February 6-8, 2009

Alexander Cockburn
Obama's First Bad Week

Ishmael Reed
Saint Thelma's Book

James Abourezk
Obama, Mitchell and the Palestinians

William Blum
Obama and the Empire

Patrick Cockburn
Maliki's Triumph

Henry A. Giroux
Educating Obama

Manuel Garcia, Jr.
Darwin's Living Legacy

Mouin Rabbani
A New Low on Gaza?

David Yearsley
Ein Volk, Ein Reich, Ein Springsteen!

Saul Landau
The Wrestler: an American Tragedy

Jules Rabin
Israel's Disproportionate Responses

Raymond J. Lawrence
A Country Awash in Money But Going Broke

Janette Habel
Castro's Socialism in Crisis

Dave Lindorff
Economy on a Thread

Missy Beattie
Blackout at the Gaza Zoo Massacre

Dale Gieringer
The Opium Exclusion Act of 1909: Marking 100 Years of Failed Drug Prohibition

John Ross
Davos vs. Belem; Swine vs. Pearls

Richard Rhames
Jobs is a Four Letter Word

Bob Wing
Obama, Race and the Future of U.S. Politics

Robert Bryce
Corn Dog Update: Another Study Exposes Bio-Fuel Scam

David Macaray
AFL-CIO and Change to Win in "Re-Wed" Talks

James L. Secor
Inaugural Questions Nobody Asks: Notes from Kuala Lumpur

Jason Flom /
Anthony Papa
The Scourging of Michael Phelps

Norm Kent
Ten Reasons to Get High About Pot in 2009

Kim Nicolini
When Utopia Crumbles: Why Revolutionary Road was Shut Out of the Oscars

Lorenzo Wolff
Ridiculous Flow: How Cee Lo Green Sells Soul

Poets' Basement
Emily Dickinson (with Commentary by Daniel Wolff)

Website of the Weekend
S.J. Gould: Darwin's Untimely Burial

February 5, 2009

Michael Mandel
Self-Defense Against Peace

Saul Landau /
Philip Brenner
Killing the Monroe Doctrine

Ralph Nader
Tax the Speculators!

Robert Bryce
The Unraveling of the Ethanol Scam

Russell Mokhiber
Occupied Territory

Sameh Habeeb /
Janet Zimmerman
Innocents Lost

Dave Lindorff
Small Change

Carmelo Ruiz-Marrero
Beyond Green Capitalism

George Ochenski
A Blow to Big Coal in Montana

Website of the Day
Putting CEO Pay in Context

February 4, 2009

Arno J. Mayer
On Corruption

Paul Craig Roberts
The War on Terror is a Hoax

Patrick Cockburn
The Iraqi Elections

Jonathan Cook
An IDF Jihad?

Fred Gardner
Obama's Mixed Messages on Marijuana

Stan Cox
Slumwrecking Millionaires: India's Fragile New Temples

Margaret Kimberley
The Deepening Economic Crisis

Lawrence Velvel
Agony & Desperation: Madoff's Victims

Dave Lindorff
A Generals' Revolt?

Doug Giebel
A Helping of Bitter Beltway Baloney

Serge Quadruppani
Student Protests Sweep Italy

Website of the Day
The San Francisco 8

February 3, 2009

David Price
Counterinsurgency & Anthropology: Roberto Gonzalez on Human Terrain Systems

Bill Moyers
Obama's Wars: an Interview with Pierre Sprey and Marilyn Young

Kirkpatrick Sale
Obama's Lincoln Thing

Conn Hallinan
When Mind Wounds Don't Count

Peter Morici
The Slippery Slope of Stimulus

George Ciccariello-Maher
From Oakland to Santa Rita: "Fired Up, Can't Take It No More"

Muhammad Idrees Ahmad
The BBC's Nadir

Allan Nairn
What Does It Take to Get a Meal Here, an Earthquake?

Norman Solomon
Why are We Still at War?

David Macaray
The Late, Great UAW

Website of the Day
The Bloody Cove

February 2, 2009

Uri Avnery
Under the Black Flag: Israeli War Crimes

Ralph Nader
What to Do About Wall Street

Gareth Porter
Generals Move to Obstruct Obama's Iraq Withdrawal Orders

Paul Craig Roberts
The Death of American Leadership

Harvey Wasserman
The Nuclear Industry's Latest Money Grab

Rannie Amiri
Gaza and the Crimes of Mubarak

Cal Winslow
Stern's Gang Seizes UHW Union Hall

Steve Early
Checking Out of Stern's Hotel California

Alan Farago
Superbowl as Panopticon

Diane Farsetta
Banning Domestic Propaganda

January 30 / February 1, 2009

Alexander Cockburn
Obama and the Oddsmakers

Michael Hudson
Obama's New Bank Giveaway

Ismael Hossein-Zadeh
"Too Big to Fail:" a Bailout Hoax

Dave Lindorff
The Ugly Truth: the American Economy is Not Coming Back

Saul Landau
Freedom Fighters, Terrorists or Schlemiels?

Andy Worthington
Blame the Chef: How Cooking for the Taliban Can Get You Life in Gitmo

Subcomandante Marcos
Gaza Will Survive

Robert Jensen
Future Farming: an Interview with Wes Jackson

Ron Jacobs
Return of the Democrats

Gareth Porter
Is Gates Undermining Another Opening to Iran?

Allan Nairn
Hope for the Dump Cities?

Laura Carlsen
NAFTA's Dangerous Security Agenda

Rev. William E. Alberts
The Feelings of a Stranger

Christopher Brauchli
From Gitmo to Supermax?

Jules Rabin
Israel and the Bomb

Col. Dan Smith
Thoughts From an Inauguration Refugee

Missy Beattie
The US Garden of Evil

Tom Barry
Obama's Immigration Challenge

J. Michael Cole
The Downfall of an Academic

Manuel Garcia, Jr.
Burning the First Amendment

Dan Bacher
How Dam Removal Can Save the Klamath River

David Rosen
Last Gasp of the Culture Wars?

Don Monkerud
Religion in the American Bedroom

Binoy Kampmark
Updike: Apostle of the Middlebrows

Lorenzo Wolff
Playing Down a Bad Reputation: the Lovin' Spooful's Near Perfect Record

David Yearsley
When Orfeo and Euridice Lived Happily Ever After in Upstate New York

Poets' Basement
Valentine and Rihn

January 29, 2009

Peter Linebaugh
Tom Paine's Birthday

Paul Craig Roberts
Is It Time to Bail Out of America?

Riz Khan
The Future of Gaza: an Interview with Jimmy Carter

M. Reza Pirbhai
Pakistan: a New Cambodia?

Wajahat Ali
Obama's Al-Arabiya Interview

Gregory Vickrey
What About the Environment? Cap and Trade and Selling Out

Dina Jadallah-Taschler
Whither the Two State Solution?

Alison Weir
Killing Palestinians Doesn't Count: Fact-Checking Ceasefire Breaches

Alan Farago
Economy Without Escape Routes

Walter Brasch
Taxing a House of Cards

Website of the Day
Madoff Inc.

January 28, 2009

Norman Finkelstein
Behind the Bloodbath in Gaza

Noam Chomsky
Obama's Emerging Policies on Israel, Iraq and the Economic Crisis

Patrick Cockburn
Is Mitchell's Mission Already Doomed?

Rob Larson
The Clinton Foundation Donors

George Wuerthner
Who Will Speak for the Forests?

Allan Nairn
South-East Asian Groups Threaten Retaliation Over Gaza Invasion

M. Junaid
Levesque-Alam
A Muslim's Memo to Obama

Stefan Simanowitz
The Silent Trade

Charles R. Larson
The Autumn of the Patriot

Website of the Day
Veggie Love: PETA's Banned Superbowl Ad

January 27, 2009

Winslow T. Wheeler
Save the Economy by Cutting the Defense Budget

Yigal Bronner /
Neve Gordon
Fueling the Cycle of Hate

Joshua Frank
Obama's Neocon: the Curious Case of Richard Holbrooke

Jordan Flaherty
Torture at a Louisiana Prison

Ralph Nader
Access to Economic Justice

Rev. José M. Tirado
How Iceland Fell: a Hundred Days of (Muted) Rage

Benjamin Dangl
Bolivia Looking Forward

Russell Mokhiber
What If Israel Were in Your Neighborhood?

Martha Rosenberg
Who Says Technology Transfer Doesn't Pay?

C. G. Estabrook
The Inaugural Address: the Digested Read

Website of the Day
Who Profits From the Occupation?

January 26, 2009

Paul Craig Roberts
Speaking the Truth is a Career-Ending Event

Deepak Tripathi
The BBC's Day of Shame

Vijay Prashad
The India Lobby: Drunk with the Sight of Power

Peter Lee
Geithner's Pop Gun Volley at China

Allan Nairn
The Torture Ban That Doesn't Ban Torture

Uri Avnery
On the Wrong Side of History

John Sayen
The Next Shoe to Drop

Dave Lindorff
Afghanistan is No Threat to America

Lawrence R. Velvel
Investing with Madoff

David Macaray
Obama vs. Labor

Roger Burbach
Winds of Change in Cuba

Norman Solomon
The Ghost of LBJ

Website of the Day
Landscapes of Occupation

January 23 / 25, 2009

Alexander Cockburn
The Ghosts at Obama's Side

P. Sainath
The Freefalling Economy

Patrick Cockburn
In Israel, Detachment From Reality is the Norm

Saul Landau
Reasons for War?

Sasan Fayazmanesh
Our Current Economic Crisis: the Monks' Cure

Alan Farago
The Problem with the Stimulus

Christopher Brauchli
When Due Diligence is a One-Way Street

Andy Worthington
Return to Law?

Ron Jacobs
Obama's Pentagon: Bowing to the Masters of War?

Lawrence Velvel
Investing with Madoff: My Experience (Part Four)

Henry A. Giroux
The Audacity of Educated Hope

David Yearsley
The Music That Wasn't There: Chamber Music for Obama's Masses

Raymond F. Gustavson
Here We Go Again: General Shinseki and Veterans

Dave Lindorff
The Way Forward

Roberto Rodriguez
Fighting for Migrant Justice in the Desert

Dina Jadallah-Taschler
The Struggle of an Un-People

Fidel Castro
Meeting Cristina

J. Michael Cole
Can Obama's Shift on Terror Succeed?

Bob Fitrakis /
Harvey Wasserman
It's Time to Free Leonard Peltier

Ramzy Baroud
Breaking Gaza's Will

Mohammad Ali Shabani
The Aftermath of the War on Gaza

Richard Rhames
Panning for Pyrite on a Cold Day at the Mall

Stephen Martin
Voices in the Mirror

Lorenzo Wolff
Jurassic Radio

Kim Nicolini
Katrina's Endless Loop

Poets' Basement
Fleming, Henson, First, Jaramillo and Glendinning

Website of the Weekend
Cartoon Love

January 22, 2009

Paul Craig Roberts
Another Real Estate Crisis is About to Hit

Kathy Kelly
Worse Than an Earthquake

Allan Nairn
US Intel Nominee Lied About Church Murders

Lawrence Velvel
Investing with Madoff: My Experience (Part Three)

Andy Worthington
Halting the Gitmo Trials

Peter Morici
How to Fix the Banks

Joseph G. Davis
The First MBA Presidency and the Business Academy: a Damage Assessment

Adriana Kojeve
The Democrats on Israel: a Brief Oral History

Benjamin Dangl
Bolivia Poised for Historic Vote

Website of the Day
Support the Gaza Community Mental Health Program

January 21, 2009

Gabriel Kolko
Understanding Gaza

Harry Browne
Obama's Work Ethic

Michael Colby
Ready. Aim. Organize.

Lawrence R. Velvel
Investing with Madoff: My Experience

Audrey Stewart
Starting Over in Gaza

Wajahat Ali
Obama and the Muslims

Binoy Kampmark
The Marketing of Hope

David Kεr Thomson
Abolition

John Ross
In My Own Bones

Allan Nairn
Killer in Chief: Will This President Murder Civilians?

Sheldon Richman
The Peaceful Transfer of Violent Power

Website of the Day
Globistan

January 20, 2009

Chuck Spinney
Hosing Obama Israeli Style

Kathy Kelly
The Strongest Weapon of All

Raymond Deane
The EU, Gaza and the Lisbon Treaty

Ralph Nader
State Terrorism Against Gaza

Audrey Stewart
Why I am in Gaza

Jonathan Cook
Israel's Doctrine of Destruction

Harvey Wasserman
A Ten-Point Solar Agenda for Obama

Christopher Ketcham
Inauguration Ad Nauseam

Robert Jensen
A Citizen's Oath of Office

Dave Lindorff
Commie Chorus on the Mall: This Land Really is Made for You and Me

David Macaray
SAG Watches It All Slip Away

Weekend Edition
February 13 - 15, 2009

Why Obama's Red Ink is Different From Reagan's

Deficit Nonchalance

By PAUL CRAIG ROBERTS

Who remembers economists’ hysteria over the “Reagan deficits”? Wall Street was in panic.  Reagan’s fiscal irresponsibility was bringing the end of the world.

The fiscal year 2009 federal budget deficit that Obama is inheriting, and adding to, will be ten times larger in absolute terms than Reagan’s biggest and a much larger share of GDP in percentage terms.  Yet, economists are sending up no alarms.

Paul Krugman, for example, couldn’t damn Reagan’s puny deficits enough.  But today he thinks the deficit can’t be large enough!  

The central issue of the stimulus and bailout plans is how to finance the massive budget deficit. This issue remains unaddressed  by economists and policy makers. 

As far as I can tell, the government, its advisers and cheerleaders think financing the deficit will be a cakewalk, like the Iraq War.

I am tempted to claim that economists’ nonchalance about the massive deficit is an indication that Krugman and the whole lot of them are converts to supply-side economics--”deficits don’t matter.”  I triumphed, and economists have become my acolytes. The Nobel Prize will arrive tomorrow.

Only we supply-side economists never said that deficits don’t matter.  We said that deficits have different causes and consequences.  Some are problematic.  Some are not, or are less so.

Obama’s deficit is problematic.  It is a massive deficit, far beyond anything ever before financed on planet earth. It is arriving at a time  when pressures on the dollar as reserve currency have mounted from decades of rising trade deficits. The deficit is hitting the financial markets when the rest of the world is in turmoil from ingestion of toxic Wall Street financial instruments. The US must service massive debt when the US economy is hollowed out from the offshoring of manufacturing and professional service jobs. The Obama deficit is a far more serious deficit than the “Reagan deficits.”

As President Reagan’s first Assistant Secretary of the Treasury for Economic Policy, my job was to find and implement a cure for “stagflation.”

“Stagflation” was the word used to describe the worsening “Phillips curve”  trade-offs between inflation and employment.  The postwar policy of Keynesian demand management relied on easy money to expand employment and GNP and used recession and unemployment to cool down inflation when inflation got out of hand. Over the years, the trade-offs worsened.  It took more inflation to get the economy going, and more unemployment to cool down the inflation.  

This problem worsened during Jimmy Carter’s presidency.  Reagan used the “misery index,” the sum of the unemployment and inflation rates, to boot Carter from office.

Keynesian economists concluded from the Great Depression that the way to maintain full employment was for the government to manage aggregate demand.  If the sum of consumer and investor demand was not sufficient to maintain full employment, government would step in.  By running a deficit in its budget, economists thought that government could add enough additional demand to bring employment up to full.

The way this policy was implemented was to use easy monetary policy to stimulate demand and high tax rates to restrain excessive consumer spending that could push up inflation.  The Keynesian economists did not understand that the high tax rates contributed to inflation by restraining the output of goods and services, while the easy money drove up prices.  

Keynesians had no solution for the problem their policy had caused, so Congress and President Reagan turned to supply-side economists who offered a solution: restrain demand with tighter monetary policy and increase supply with greater after-tax rewards.
Supply-side economics reversed the policy mix of demand-side economists.  Instead of easy money and high tax rates, there would be tighter money and lower tax rates.

This change caused consternation.  Keynesian economists, who sat atop of the profession, bitterly resented the de-throning of their orthodoxy.  They turned on supply-siders with a vengeance.  We were “voodoo economists,” “trickle-down economists,” “tax cuts for the rich economists.”  Keynesians had been the great defenders of budget deficits, but Reagan’s were intolerable.  They forgot their own Kennedy tax rate reductions. Supply-siders were bringing the end of the world.  

Federal Reserve chairman Paul Volcker was part of the problem.  Volcker had limited economic understanding.  He did not understand the worsening boom-bust cycle that the Keynesian policy had set the Fed upon.  He viewed the Reagan tax rate reductions as a Keynesian stimulus to consumer spending that would worsen the inflation, the subduing of which he saw as his responsibility.  He feared that the tax rate reductions would cause inflation and that he would be blamed.

At the Treasury we had weekly meetings with Paul, attempting to bring him into an understanding of what it meant to reverse the policy mix. We patiently explained  the importance of the Fed bringing money growth down slowly as the tax rate reductions came into play in order to avoid a monetary shock to the system.  

Volcker just couldn’t get it.  He thought the Reagan Treasury consisted of dangerous inflationists.  He went home to the Fed and turned off the money supply, reasoning that if there was no money growth he couldn’t be blamed for the inflation that Reagan’s fiscal policy would cause.

Volcker’s fears were reinforced by his advisors.  As the Treasury’s representative at the Fed’s meeting with its outside advisors, I heard Alan Greenspan, Volcker’s successor, tell Paul that in view of the Reagan tax rate reductions (which Greenspan also saw as a demand stimulus) “monetary policy was a weak sister that at best could conduct a rear-guard action.”

It was amazing to us at Treasury that the Federal Reserve chairman could not understand that monetary policy controlled inflation and that fiscal policy, or the right kind of fiscal policy, helped control inflation by increasing the output of goods and services. 

But this was over Volcker’s head.  Instead of giving us the gradual reduction in the growth of the money supply, he slammed on the brakes.  The economy went into a serious recession just as Reagan’s tax cuts passed.

The embittered Keynesians wanted to blame the recession on the tax cuts, but that was inconsistent with their own analysis. So they seized on the deficits that resulted from the recession and blamed the tax cuts.  This was also inconsistent with Keynesian analysis. However, they used writings by people who had popularized supply-side economics. Some of these people made claims that “tax cuts pay for themselves.”  In other words, there would be no deficits.

No supply-side economist ever said this.  And neither did the Reagan administration.  The Reagan administration used static tax analysis and forecast that every dollar of tax cut would lose a dollar of revenue.

The forecast went wrong for an entirely different reason. The Keynesian orthodoxy of the time was that it was impossible for the economy to grow without paying for it with a rising rate of inflation. Yet, the supply-side position was that by reversing the policy mix, the economy could grow while the rate of inflation fell, which is in fact what happened during the 1980s and 1990s. 

As economic forecasting was locked into the “Phillips curve”--the belief that inflation was the price of full employment, and that unemployment was the price of lower inflation--the Reagan administration’s budget forecast was restrained by the “Phillips curve.”  Orthodoxy would not permit us to forecast the extent to which a supply-side policy would bring down inflation as the economy grew.  Even if we had been able to disregard forecasting orthodoxy, our forecast would have been off as Volcker brought money growth in below target.

The “Reagan deficits” thus resulted from the unanticipated collapse of inflation.  As inflation came in below forecast, nominal GNP came in below forecast.  Thus, tax revenues were less.  But appropriation bills are in nominal dollars, which meant that real spending was greater than intended because inflation was less than forecast.  

Wall Street believed that the “Reagan deficits” would cause inflation, but, of course, they did not cause inflation as they were the consequences of the collapse in inflation.

This shows how totally wrong conventional opinion can be even when it tries to think.  Today no policy maker or establishment economist is thinking at all.  

The “Reagan deficits” were neither financed by printing money nor dependent on recycling of surplus dollars by trading partners. The deficits were no threat to the dollar, which was thought to be too strong. The increased after-tax return on investment reduced the flow of US capital abroad, and we financed our own deficit.

This brings us back to the original question:  How is the Obama deficit going to be financed?

Paul Craig Roberts was Assistant Secretary of the Treasury in the Reagan administration. He is coauthor of The Tyranny of Good Intentions.He can be reached at: PaulCraigRoberts@yahoo.com

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