The Weekly Sift

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Many journalists have fallen for the conspiracy theory of government. I do assure you that they would produce more accurate work if they adhered to the cock-up theory.

— Bernard Ingham, press secretary to Margaret Thatcher

In this week’s Sift:

• Quotations of Chairman Anonymous. American movies and novels and paranoid screeds love to imagine an anonymous oligarchy: some tiny cell of nameless freemasons or immortals or aliens who really pull the strings. Well, thanks to the Supreme Court we have a real one now: Through front groups, a few rich anonymous donors may decide our elections.
• Gaza Update. A UN report on the Gaza flotilla looks bad for Israel, but another report is still coming.
• Spending. Politicians get away with vague calls to “cut spending” because most Americans have no idea how much the government spends or what it spends on. If you go down the list of sacred-cow programs, you don’t get far before you run out of revenue.
• Rick Sanchez. The stupid thing he said about Jews got all the press, but the point his interviewer couldn’t hear about class is more interesting to me.
• Short Notes. Bill Gates’ dad gets soaked and likes it. Donald Duck listens to Glenn Beck. Social networking as a political tool. Defending the stimulus. Latest polls. The phony ACORN pimp’s strange new scheme goes awry. And more.

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American pop culture is full of anonymous oligarchies: vampires, cyborgs, aliens, immortals, ascended masters of some mystical discipline — we can’t get enough of the idea that a tiny class of powerful beings is secretly living among us and pulling the strings. Sometimes the motif jumps out of our fiction and becomes an actual hallucination: Opus Dei, Elders of Zion, Freemasons, the Trilateral Commission — they must be the ones who really run things.

Well, this year the holes the Supreme Court has punched in campaign finance law (and Congress’ inability to fill them) have given us a real, live anonymous oligarchy. We can point to their actions, but we can’t say who they are.

Blue Oregon reports what is happening in one congressional district:

In Oregon this week … the Concerned Taxpayers of America began an ad blitz in Southern Oregon, threatening to spend unlimited amounts of money to defeat US Congressman Peter DeFazio. Though commercials will air in heavy rotation, voters will have no idea who is paying to try to influence their decisions.

Thursday Rachel Maddow did a marvelous job fleshing this story out. Concerned Taxpayers of America is front organization headquartered in a house in Washington, D.C. When Rep. DeFazio went to the house (camera crew in tow), the man living there claimed to know nothing about CTA. You can’t find CTA’s web site on Google, and when Rachel did manage to track it down, it contained no mention of rallies, members, events, or even a request to contribute. The site contained only a mission statement and purchased clip art of models who are supposed to represent “concerned taxpayers”.

CTA has already put $165,000 into ads attacking DeFazio, with more presumably to come. (DeFazio told Rachel that a complete campaign in his district typically costs about $500,000.) Given that CTA is so hard to find and isn’t soliciting contributions publicly, it’s a fair bet that their money doesn’t come from ordinary citizens of Oregon’s 4th district. So where, then? Maybe from aliens or vampires, for all we know. CTA doesn’t have to say.

Billionaires are a more likely possibility. Or corporations. News Corp., the parent company of Fox News, just gave $1 million to the U.S. Chamber of Commerce, which has been running attack ads against Democratic Senate candidates (including Paul Hodes here in New Hampshire). (The Chamber also advertised against the DISCLOSE Act, which would have made it harder to campaign anonymously through dummy organizations.) Which candidates is Fox telling the Chamber to target with its money? They don’t have to say.

When the Citizens United decision was announced, many knowledgable people assured us it was no big deal. “Corporations cannot afford to alienate customers by overt election campaigning,” Columbia law professor Henry Monaghan told the Columbia Law School Magazine.

But what if the customers — like the voters — never find out? If Exxon-Mobil advertises against an environmentalist candidate under its own name, voters at least have a chance to consider the source and discount the ads’ claims accordingly. Offended drivers could boycott Exxon stations rather than have their own money used against them politically. But if the oil is laundered out of Exxon’s money by some front organization that didn’t exist two weeks ago, what then?

Blackwater might balk at openly campaigning for a new war — and even if it did, it might create a backlash. But if it could hide behind some bogus Committee for a Non-Nuclear Iran, then why not? Political advertising could be an effective way to promote new business.

It’s easy to spin these nightmare scenarios about future campaigns, but just think about where we already are. If Peter Defazio loses to Republican Art Robinson, Robinson will owe his seat in Congress to the small number of oligarchs who put up the money for the Concerned Taxpayers of America ad blitz. Oregon voters won’t know who those people are. But Robinson will.

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Cartoonist Mark Fiore lauds “Cashocracy: taking the guesswork out of democracy, one million dollars at a time.”

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Think Progress points out an odd contradiction: People who identify with the Tea Party are against free trade agreements, believing that they have helped send American jobs overseas. But candidates who identify with the Tea Party strongly support free trade. Maybe the billionaires who fund the Tea Party are calling the shots, not “We the People”.

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Monday, the UN’s Office of the High Commissioner on Human Rights released its report on the Gaza flotilla incident. (Recall: On May 31, Israel seized six ships that were trying to bring aid to Gaza, which Israel is blockading. Violence broke out on one ship: Nine of that ship’s passengers were killed and seven Israeli commandos were injured.)

The report looks bad for Israel. The worst is on page 27:

Forensic analysis demonstrates that two of the passengers killed on the top deck received wounds compatible with being shot at close range while lying on the ground: Furkan Doğan received a bullet in the face …

Dogan was a 19-year-old Turkish-American. His death and five others are described on page 37 as “extralegal, arbitrary and summary executions”.

The pro-Israeli group CAMERA critiques the report here. The objections boil down to:

• If any other country did the same thing, no one would care. (“It is, after all, nothing less than bigotry and injustice to consistently judge one country by a particular set of standards while failing to apply those standards to the rest of the world.”)
• The UN report relied largely on eye-witness testimony. And since Israel was not cooperating with the investigation, that testimony was primarily from the flotilla passengers, who are anti-Israel activists. In particular, because the Israelis confiscated all video of the raid and released only carefully edited segments, the OHCHR considered the Israeli-approved videos suspect.

While the first point is probably true, it is not exactly a refutation of the report’s conclusions. The second problem is something the Israeli government brought on itself. It could have fully cooperated and released all the video. (Here’s the IDF video. The incident also launched dueling music videos: The pro-Israeli “We Con the World” and the anti-Israeli “Internet Killed Israeli PR” to the tune of “Video Killed the Radio Star”.)

A second UN investigation was announced by the Secretary General in August. Israel is reported to be cooperating with this probe. We should soon see what that cooperation amounts to and whether the resulting report comes to any different conclusions.

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See update at the end of the article: It’s worse than I said.

The surest way for a candidate to get applause this season is to promise to “cut spending”. Spending is one of those words that just sounds bad. Spending is the unfortunate half of buying. We all like to get stuff, but we hate to spend.

Just about everybody can remember opening a credit card bill and saying, “I’ve got to stop spending so much.” It feels virtuous to say that, and it costs nothing. But a resolution to cut spending doesn’t leave the realm of fantasy until it starts getting specific. Until you start picking out things you can spend less on — things that you spend more than nickels and dimes on now — you haven’t gotten serious.

One reason we have such a low-quality national conversation about the federal government’s spending is that most of us have no idea how much money the government spends or what it spends it on. So people can promise to “cut spending” while simultaneously promising not to cut just about everything we actually spend money on.

So let’s lay out the basic facts with as little editorializing as possible.

First, the totals. These estimates were made in May and probably won’t match the exact numbers for fiscal year 2010, which ended Thursday. But they’re probably reasonably close.

Fiscal Year 2010.

Revenue: $2.333 trillion. Spending: $3.591 trillion. Deficit: $1.258 trillion

Now let’s drill down into the spending part, starting with the stuff that would have been hardest to cut: interest on the national debt. The only way not to spend that $136 billion would have been to declare bankruptcy.

Next come the sacred cows, most of which you can find on Table S-4 of the link above: Defense, Homeland Security, Veteran’s Benefits, Social Security, and Medicare. It’s not that there’s nothing to cut here, but when a candidate pledges to “cut spending”, he or she usually doesn’t start talking about yanking troops out of Afghanistan or making Grandma pay for her own hip replacement. (The Republicans’ Pledge to America refers to “common-sense exceptions for seniors, veterans, and our troops” before promising to “roll back government spending”.) Complaints about Homeland Security are usually that we aren’t doing enough in terms of keeping out illegal immigrants or stopping drug smuggling. I haven’t heard anybody pledge to cut down on border patrols.

Defense: $707 billion. Homeland Security: $39 billion. Veterans: $124 billion. Social Security: $696 billion. Medicare: $452 billion.

Total so far: $2.018 trillion. If we stop here and zero out everything else, we’ve got a surplus of only $315 billion. (Which is fictitious, of course. Without that additional spending the economy would have shrunk further and revenue would have dropped. But ignore that for now.) For comparison, the surplus recorded in FY 2000 under the Clinton administration was $230 billion.

Next come the relatively uncontroversial payments to people in need: disaster relief, unemployment compensation, and children’s health insurance (SCHIP). Again, it’s not that it’s impossible to cut these programs, but it’s hard to classify them as “waste”. We all want the helicopters to come if we’re stranded by a flood. Unemployment is paid out of a fund that workers and their employers paid into when they had jobs. And SCHIP takes care of sick kids whose parents can’t pay.

disasters: $11 billion. unemployment: $158 billion.  SCHIP: $10 billion.

That’s $179 billion more, so we have $136 billion left.

But we still haven’t taken care of all the sick kids, because many of them get coverage under Medicaid ($290 billion). And the rest of Medicaid is also hard to classify as “waste”. You may object to handing poor people cash that they might spend on drugs or guns, but do you really want to let them die when they get sick?

So there we are: We’ve already got a $154 billion deficit.

And there’s still nearly a trillion dollars we haven’t accounted for: It did stuff like build interstate highways and maintain the national parks, plus thousands of other things that may or may not be wasteful, depending on your point of view: NASA, NSF, EPA, CDC, food stamps, foreign aid, farm subsidies, non-veteran education, and so on. If you don’t want a deficit, you have zero all that stuff out. Not just cut the waste — zero out the whole program.

Summing up: If you were going to balance the 2010 budget without raising taxes, you’d have to cut $154 billion out of interest on the debt, Defense, Homeland Security, Social Security, Medicare, veterans’ benefits, disaster relief, SCHIP, Medicaid, and unemployment compensation. And zero out everything else the government does.

So when candidates tell you they’re going to “cut spending”, don’t let them handwave about earmarks, foreign aid, bridges to nowhere, or any other unpopular-but-trivial expense. Any serious attempt to balance the budget without raising taxes is going to involve serious cuts in programs most Americans believe in.

Update: After listing the interest on the debt, I then forgot to add it in. So the total after Defense, Homeland Security, veterans benefits, Social Security and Medicare is $2.154 trillion, leaving only $179 to spend. Then the $179 billion for disasters, SCHIP and unemployment spends all the remaining revenue. (Not a coincidence, BTW. That was my original calculation, which I then thought I found a mistake in.)

So the gist is that the revenue is gone before you spend a dime even on Medicaid.

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The story of CNN firing Rick Sanchez is getting plenty of coverage. You’ve undoubtedly already heard that he called Jon Stewart a bigot and then said this:

I’m telling you that everybody who runs CNN is a lot like Stewart, and a lot of people who run all the other networks are a lot like Stewart, and to imply that somehow they — the people in this country who are Jewish — are an oppressed minority? Yeah.

It got him fired and I have no argument with that. He should have known how close that is to an Elders-of-Zion, Jews-run-the-world conspiracy theory that a lot of dangerous people seriously believe.

Listening to larger chunks of the interview, though, I’m hearing an aspect of the story that isn’t getting any coverage: The conversation turns to race and ethnicity only because the interviewer (Pete Dominick) can’t hear the point Sanchez is trying to make about class prejudice.

Let’s start at the beginning: Dumb things that Sanchez says or does on the air are regularly lampooned on the Daily Show. That’s part of what Stewart does, and he does it to lots of news anchors — but maybe Sanchez more than most.

Early in the interview, Sanchez is trying to say that it’s way too easy for people like Stewart who grew up in educated households to dismiss everybody else as ignorant — not because those people are actually stupid, but because they haven’t been schooled in how educated people are supposed to act and sound.

So Sanchez contrasts Stewart’s father (a physics professor) with his own (a Cuban immigrant who used to “work in a factory, wash dishes, drive a truck, get spit on”). Dominick seems to have no idea what point Sanchez could be trying to make (and Sanchez isn’t very articulate about setting him straight), and can only hear the Jew/Hispanic difference. Dominick argues that Jews and Hispanics are both minorities, so Stewart’s Jewish experience gives him insight and empathy with Sanchez’s Cuban experience.

That ticks Sanchez off — for good reasons, I think. Flustered, he starts trying to explain the difference between Stewart’s career experience and his own, and screws it up.

Here’s the point he should have made: Jon Stewart never had to be a trail-blazer for other Jews; Mort Sahl and Lenny Bruce established the Jewish-comedian-doing-edgy-social-commentary thing half a century ago. And he didn’t have to break ceilings; wherever he went, Jews had already been higher up in the organization.

Sanchez had to do both. So no, for both class and ethnic reasons, Stewart’s life experience gives him no insight into Sanchez’s life.

Anyway, Sanchez wasn’t able to think that through on the spot and say it properly, so instead he blurts something stupid that gets him fired. That’s probably also how he said the stupid things that got him skewered on the Daily Show to begin with.

Here’s my take-away point: Class prejudice is so ingrained in the professional class that a lot of people (like Dominick) can’t see it even when someone points to it. Forget whether or not it’s true that Stewart’s criticism of Sanchez was classist — Dominick couldn’t even understand the question.

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A lot of criticism of the Tea Party has a classist element, which I am constantly filtering out before quoting it on the Sift.

I’m against Tea Party candidates because they say things that are factually incorrect, they promote theories that bear no resemblance to the way the world works, and they don’t live up to the values they want to impose on the rest of us. But if Sarah Palin wants to say “refudiate” or write notes on her hand or give her children funny names, let her. Those are class markers, not evidence that she would be a bad president.

I’m reminded of what Jack Burden says in my favorite political novel All the King’s Men: “Graft is what he calls it when the fellows do it who don’t know which fork to use.”

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The best ad I saw this week: Bill Gates Sr. invites Washington voters to soak the rich.

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Rebellious Pixels shows us who Glenn Beck’s target audience is: Donald Duck.

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I was going to write about Malcolm Gladwell’s dismissal of social networking as a tool for political activism, but Sam Graham-Felsen said everything I wanted say with more authority. Short version: If you’re using technology instead of interacting with people, that’s bad. If you’re using technology to interact with people better, that’s good.

Or, from the user perspective: If you click a Like button and say, “Done now”, you’re not going to change the world much. But if clicking a Like button is the first tiny commitment that gets you moving towards larger commitments later, then maybe you will.

With all these new technologies, I think it’s useful to imagine what non-telephone users must have asked the first telephone users: “Why are you talking to that machine instead of talking to a real person?”

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Stephen Colbert skewers Justice Scalia’s interpretation of the Constitution. Scalia claims to be an “originalist”, which means that he wants the Constitution and its amendments interpreted the way they were at the time of ratification (unless you’re talking about corporate rights; those the Court can invent to its heart’s content).

Stephen spells it out:

Scalia must argue that the First Amendment only truly guarantees freedom of speech as it was spoken in 1791. If you don’t like his opinion, it’s his right to say, “Go bugger a Hottentot, you leprous octaroon.” If you’re offended by Scalia’s argument, perhaps you should defend your rights with force of arms. But remember, by this argument the Second Amendment gives you the right only to bear blunderbusses and flintlock pistols.

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For those few people who are paying attention to evidence this year, the stimulus was money well spent.

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Nate Silver’s current projections: Democrats will hold the Senate 52-48, but lose the House 224-211. As of this morning, TPM’s poll average for the generic congressional ballot has the Republicans up 2%. That margin has been dropping since late August.

In general, polls are weird this year: Different organizations poll the same races at more or less the same time and get wildly different results. You can get depressed every time you see a discouraging poll, or you can look around until you find a result you like better.

My advice: If you were planning to campaign or contribute or otherwise try to affect this election, don’t let a poll change your mind.

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I want to see more of these White House White Board talks. In this one, Council of Economic Advisors Chair Austan Goolsbee explains the difference between the Republican and Democratic plans to extend the Bush tax cuts. It’s simple and it’s clear.

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James O’Keefe — the guy whose carefully staged and edited videos brought down ACORN, and who is currently serving three years of probation for attempting to bug Senator Landrieau’s office — has finally jumped the shark.

In August, CNN correspondent Abbie Boudreau wanted to interview O’Keefe for the CNN documentary “Right on the Edge” about young conservative activists. O’Keefe attempted to lure her onto a boat filled with hidden cameras and sex toys, trying to provoke reactions that could be edited into an embarrassing video. (CNN’s version is here.)

Even O’Keefe’s former employer Andrew Breitbart (promoter of the similarly mis-edited Shirley Sherrod video) describes his plan as “patently gross and offensive“.

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Jay Bakker, son of disgraced evangelists Jim and Tammy Faye Bakker, preaches about gay marriage — and all the “amens” suddenly stop.

While researching Bakker, I mistyped and wound up reading the blog of Jay Baker, who reposted this marvelous piece about “the gay agenda”.

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Colorado Senate candidate Ken Buck’s plan to avoid the media is working so well that he’ s now stopped speaking in public at all.

The Weekly Sift appears every Monday afternoon. If you would like to receive it by email, write to WeeklySift at gmail.com. Or follow the Sift on Facebook.

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When a man tells you that he got rich through hard work, ask him: “Whose?”

— Don Marquis

In this week’s Sift:

• Jobs. It’s easier to understand which policies won’t create jobs than which ones will.
• Corporatism and Net Neutrality. The debate sounds technical, but it’s really about creating choke-points and collecting tolls.
• Short Notes. Can liberals draw a crowd in D.C.? Why does the media provide a free platform for corporate shills? Strippers protest an Ohio church. Two-year-olds on anti-psychotics. God is funding Joe Miller’s Senate campaign. David Brooks says something uncommonly insightful about Glenn Beck’s followers. Bad Christmas presents. And more.

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What better topic for Labor Day than jobs? Everyone seems to agree that there aren’t enough jobs. But they disagree about whether and how the government can do anything about it.

Where are we? I love a good graphic, and this one explains where we are in the current recession compared to all the previous ones since World War II.

We’re in an unusually long and deep drop. (The graphs show the percentage of jobs lost, which eliminates the effect of increased population.) In length it’s looking about the same as the previous recession (2001), when it took about four years to get all the jobs back. In depth, it’s the worst since the Depression.

We seem to be 6-8 months past the bottom, though the upward slope isn’t very steep yet. Temporary hiring for the census created an illusion (that things were getting better faster a few months ago and that they’re getting worse now) which is smoothed out in the dotted line.

Why? Popped bubbles lead to recessions that are fundamentally different from ordinary recessions, and recovery takes longer. Bubble-popping recessions include this one, the 2001 recession (the internet bubble), the Japanese “lost decade” of the 1990s (stock and real estate), and the Great Depression.

An ordinary recession is a normal part of the business cycle, caused by a temporary excess of production and inventory in an economy that is basically healthy. Businesses get over-optimistic during an expansion, so they build too many factories, open too many stores, and hire too many people. Eventually, some minor or accidental glitch causes consumers to slow down their spending. Then retailers cancel orders, factories lay off workers, and everything snowballs for a while, as each cutback causes more people to realize they’re over-extended. Eventually, though, the overstocked inventory gets sold, factories get orders again, and everything straightens out.

That’s what happens in the real economy. In the money economy, the ordinary recession produces a liquidity crisis — people have assets of long-term value, but they need (or think they need) cash. So they try to sell things, driving prices down, and causing other people to want to sell things in a panic. Eventually wiser heads realize assets are cheap and start buying. Then the markets snap back like a rubber band.

An asset bubble, on the other hand, is based on fantasy and fraud rather than excess optimism. (The Dutch Tulip Mania of 1637 is the classic example.) In an asset bubble, large numbers of people imagine that they’re rich — and borrow and spend accordingly — because speculators have bid asset prices up higher than any rationally foreseeable economic growth can justify. When the bubble pops, formerly “rich” people can’t pay their bills, then the people they owe can’t pay their bills, and so on.

In the financial economy, the asset bubble produces a solvency crisis. In a liquidity crisis, your creditors will get their money if they just wait until you can bring your long-term assets to bear. In a solvency crisis, you are actually broke; your debts exceed any rational valuation of your assets. The question in a liquidity crisis is “Who’s willing to wait to get their money?” In a solvency crisis it’s “Who’s going to take the loss?”

The government can solve a liquidity crisis just by extending credit. (That’s why the Federal Reserve was invented.) But extending credit during a solvency crisis just delays the day of reckoning. The books don’t balance, and somebody has to take the loss.

Kinds of unemployment. One of the big debates now is about whether our unemployment is cyclical or structural. That sounds technical, but it’s actually a pretty simple idea: Cyclical unemployment is the carpenter who will get back to work when the economy picks up and people start building houses again. Structural unemployment is the mechanic who sees gobs of want ads for nurses — there are jobs, but not for him.

Cyclical unemployment is fairly easy to solve: The government runs a big deficit, lowers interest rates, and just generally pumps money into the economy. Imagine what would happen if somebody started shoveling five-dollar bills out of a helicopter: Pretty quickly the ice cream shop would have to hire back the scoopers it laid off.

Structural unemployment is trickier, because workers need to retrain. Government can help a little, but only after people get desperate enough to start over.

Paul Krugman has been arguing that our current unemployment is mainly cyclical, and that the problem with the stimulus is that it wasn’t big enough. (He argued at the time it was proposed that it wasn’t big enough.) Slate’s James Ledbetter summarizes arguments that unemployment is increasingly structural. (The Economist is big on this idea and has been for months.)

The cyclical/structural distinction is related to the optimism/fantasy distinction: Bubbles distort the economy, and the jobs that go away when they pop don’t necessarily come back. We had an irrational number of real estate agents, mortgage brokers, and home rehabbers in 2007, and a lot of them will have to find something else to do.

Still, it’s obvious that unemployment isn’t entirely structural, because there aren’t any booming sectors screaming for qualified workers. My friends’ kids are entering college now, and I don’t know what they should study to be sure of getting a job.

What won’t work: extending Bush’s tax cuts. Few job-creating ideas are as delusional as extending the Bush tax cuts. Obama wants to let them expire for those making $250,000 or more (as he promised in the campaign). Republicans argue that restoring these Clinton-era rates will primarily raise taxes on small businesspeople, who are the primary creators of jobs. Keep their taxes low and they’ll create the jobs the economy needs.

Not exactly. According to the WaPo’s “5 Myths” column:

If the objective is to help small businesses, continuing the Bush tax cuts on high-income taxpayers isn’t the way to go — it would miss more than 98 percent of small-business owners and would primarily help people who don’t make most of their money off those businesses.

Plus, the small-business-creates-jobs myth is only sort of true. A small business that is breaking out — starting to franchise nationwide, say — hires a lot of people. On the other hand, your basic family-owned restaurant or proprietor-operated shop might give the part-time help more hours if business picks up, but they rarely launch major expansions. And when they do expand, the trigger is increased consumer demand, not lower taxes.

A local friend verified this by talking to a number of proprietors on our Main Street. (Here in Nashua, Main Street is not a metaphor.) How many new people would they hire if they got a tax cut? Invariably, the answer was none.

What won’t work: lower interest rates. Robert Reich takes apart the idea that lower interest rates will create jobs. In an ordinary recovery they will, but not in an asset-bubble recovery.

Usually, low interest rates create jobs in both a supply-side and a demand-side way. On the supply side, a business that wants to expand is more likely to do so if it can get a cheap loan. But, once again, if there’s a shortage of demand, businesses aren’t going to want to expand. Why build on to your restaurant if you can’t fill the tables you have?

On the demand side, lower interest rates encourage people to borrow money to buy stuff. But:

Individuals aren’t borrowing because they’re still under a huge debt load. And as their homes drop in value and their jobs and wages continue to disappear, they’re not in a position to borrow.

Reich sees two main results of lowering interest rates: First, a new wave of corporate acquisitions, which will have the effect of eliminating redundant jobs in the merged companies. And second, investment in new equipment that will replace workers rather than increase production. Net result: fewer jobs, not more.

What about Germany? Germany is often cited as an example of an economy that is recovering without a major government stimulus. Interesting story there: So far, Germany’s recovery is better than ours in terms of employment, but worse in terms of GDP.

Two things are different about Germany: First, they didn’t have a housing bubble, though their banks did get in trouble from investing in our worthless mortgage-backed securities.

Second, in the US, we let companies fire people and then paid them unemployment. Germany subsidized employment directly. NPR’s Marketplace explains:

Workers are building fewer trucks because demand has dropped in half this year. But MAN says it hasn’t had to lay off any of its permanent staff. That’s because it’s signed up for a government program called kurzarbeit, or short work. Workers take a cut in their hours and their pay. But the German government reimburses them for a chunk of their lost wages.

MAN spokesman Dominique Nadelhofer says employees may work as little as half time. But they still make 90 percent of their salary.

It’s hard to say what lesson we should draw from that, other than maybe what we should do next time.

Conclusion: More stimulus would help some, but it’s not clear how much, and besides, the political mood is very hostile. Democrats will do well to resist deflationary spending cuts. If the graph is right, employment should be back to 2007 levels in another year and a half.

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In August, private employment went up by 67,000 jobs, but government employment dropped by 121,000 as temporary census jobs ended and the effects of the stimulus diminished. And this isn’t encouraging: “while corporate profits were generally robust in the second quarter, many companies improved their revenues by cost-cutting.”

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Evidence of conservative framing success: The stimulus is often described (even in places like the NYT) as $800 billion of “federal spending”. Actually it was about $500 billion of spending and $300 billion of tax cuts.

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Slate explains where Labor Day comes from: After suppressing the Pullman strike, President Cleveland wanted to curry favor with workers. But the obvious May 1 holiday would have commemorated the Haymarket Riot.

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DailyKos’ Thutmose V posted a nice net-neutrality-for-dummies piece Monday.

Net neutrality is a good example of how corporatism works. Internet-providing corporations like Verizon and Comcast know why they care about the issue, and so they’re relentless in lobbying for their interests. Most of the public doesn’t know why they should care, and the eyes of the non-geek majority quickly glaze over when someone tries to explain.

As Thutmose makes clear, there is a legit reason why some internet traffic (like live video) would benefit if there were a high-priority lane on the internet, while other traffic (like email) wouldn’t suffer if it were shunted to a low-priority lane and arrived a second or two later.

Regulations could be written to do this without fundamentally altering the nature of the internet. The Post Office, for example, has multiple classes of mail, but they don’t deliver pro-Post-Office magazines faster than anti-Post-Office magazines.

But if the regulations are too loose, the internet corporations will gain vast new powers to prioritize however they like:

Imagine if Ford bought the Interstate Highway system, and announced that any car that was not a Ford would have to pay a high toll to use the highways. The Comcast NBC merger invites a similar situation with the Internet.  Does anyone think that Comcast might be tempted to give NBC priority on their network, and maybe charge anyone else providing [competing] content a high price to get on the net?

Comcast has disturbing history here.

Google was supposed to be a corporation whose interests coincided with consumers, but the Electronic Frontier Foundation isn’t happy with the proposal Google worked out with Verizon. Google’s interests are protected, but (according to MSNBC):

Skype would not have a chance to compete with any video telephony service Verizon might develop in the near future. And Netflix would be at a disadvantage trying to move high-quality video over Verizon’s fiber-optic pipes if Verizon decides to offer its own service.

Even if the corporations decide to play fair with each other, a fast-lane-slow-lane structure motivates them to keep the slow lane slow. The point here is to create many new choke-points where toll booths can be set up. That — and not innovation and competition — is how big corporations make big money.

For a trivial example of how corporate toll booths work, consider unlisted phone numbers. The LA Times’ David Lazarus reports that the monthly cost of an unlisted number varies from $1.25 (ATT) to $1.99 (Time Warner Cable) per month — in exchange for changing a bit in their database and then not publishing your number:

Time Warner and other telecom companies are charging for a service that consists of them basically not doing anything. And because they continue not to do anything month after month, they keep charging you on the grounds that it’s a recurring service.

He points out that Time Warner Cable doesn’t even publish a phone book — it just distributes information to whoever has the local phone book contract. So the “service” is purely a toll TWC can charge because it happens to be the gate-keeper.

Kevin Drum elaborates:

phone companies are regulated monopolies. If I want phone service, I have no choice but to contract with a tiny number of suppliers who then have privileged information about me. Should I also pay them protection money for withholding my Social Security number or my date of birth from their phone books?

The job every corporation really wants is Gate Keeper. You do nothing, employ nobody, and collect tolls. Wait, I’m wrong, you do employ some people: lobbyists who help you create new choke-points where new gates can be installed.

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I can’t make it to D.C. on October 2. Can you?

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We used to mourn when the independent bookstores were driven out of business by Barnes and Noble. Now we mourn when the Barnes and Noble closes.

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The NYT had a “Room for Debate” feature on the great egg recall and what’s wrong with the egg industry. Rather than discuss the issue, though, I want to step back and look at the contributors: a food safety activist, some university professors in relevant fields, and then a guy from the Cato Institute, a libertarian think-tank funded by the Koch brothers.

The Cato guy, predictably, says that “The Panic Will Subside” and so there’s no need for new regulations. That’s because Cato’s mandate is not public health, but fighting government regulation of business. Every Cato article concludes that regulations are unnecessary, and the only mystery is how it will arrive at that conclusion. (This guy says that regulations will necessarily favor big egg producers over small ones. But of course Cato cares no more about small egg producers than it cares about public health. Whoever makes no-government-regulations a sympathetic position is Cato’s new best friend.)

Here’s my question: Why do we routinely let these guys into the room, even though they have no interest in solving the problem, whatever it is? Every well-rounded debate panel has to include a shill for our corporate overlords, who will argue in bad faith until he arrives at his pre-ordained conclusion. And we accept this without a second thought.

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Second City Network gives its explanation for Jan Brewer’s mental glitch during her opening statement at the Arizona gubernatorial debate.

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An Ohio church protests the local strip club on Saturday nights. Lately the dancers have been returning the favor on Sunday mornings.

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The Onion captures the spirit of bigotry perfectly in Man Already Knows Everything He Needs To Know About Muslims.

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Disturbing article in Thursday’s NYT about the growing number of very young children being prescribed anti-psychotic drugs. Given that my wife is a two-time cancer survivor and my parents swear by their anti-depressants, I’m usually unimpressed by articles about the evils of modern medicine. But this caught my attention:

A Columbia University study recently found a doubling of the rate of prescribing antipsychotic drugs for privately insured 2- to 5-year-olds from 2000 to 2007. Only 40 percent of them had received a proper mental health assessment, violating practice standards from the American Academy of Child and Adolescent Psychiatry.

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NYT columnists Gail Collins and David Brooks are mostly just fooling around during this conversation, but then Brooks lets loose the following bit of insight into the 8-28 Beck rally and the Tea Party mindset in general:

Every society has to engird capitalism in a restraining value system, or else it turns nihilistic and out of control. The Germans have a Christian Democratic set of institutions, enforced by law. The Swedes have their egalitarianism. Since the days of Jonathan Edwards, we have developed a quasi-religious spirituality that informally restrains the excesses of the market. God and Mammon are intertwined.

Many people feel that the values side of this arrangement is dissolving. Both the government and Wall Street are leaping into the void, to bad effect. … People like those at last weekend’s rally want the Judeo-Christian ethic back, which sweetened and softened life on the frontier (physical or technological). And so they march. They are only vaguely aware of this value system. It is so entwined into their very nature, they can not step back and define it. But they feel it weakening.

It might be possible for a responsible person to tap into this sense, but none has, so Glenn Beck has.

That’s why I find Brooks to be the most frustrating columnist in America today. He’ll write nothing but nonsense for months, and then off-handedly say something like that.

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Check out Vanity Fair’s look at Sarah Palin.

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As best I can tell, this is not a joke: Alaskan Senate candidate Joe Miller wants you to help God fund his campaign.

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It’s never too early to start thinking about what not to get your little girl for Christmas.

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If economists could manage to get themselves thought of as humble, competent people on a level with dentists, that would be splendid.

— John Maynard Keynes, 1931

In this week’s Sift:

• The Sift Bookshelf: ECONned by Yves Smith. The writer of the blog Naked Capitalism has a new book explaining the financial collapse. It’s comprehensive, readable, and not at all pretty or reassuring. She believes the lessons of the crisis were not learned, and won’t be learned until something even worse happens.
• It’s Important, But It’s Not News. Some of the most significant stories play out too slowly to get the news media’s attention. Here are two: A gene conferring antibiotic resistance on bacteria can jump from one strain to another, so many different diseases might soon be untreatable again. And global warming was supposed to increase plant growth, which would trap carbon and slow the process down. But it’s not working out that way.
• Short Notes. Disbelief in global warming is becoming a standard Republican position. Palin still doesn’t understand the First Amendment. The surface slick is gone, but the underwater oil plume is still there. The Ground Zero Church. And more.

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I’m still trying to figure out what happened in the financial collapse of 2008. In April I reviewed The Big Short by Michael Lewis, which gave a trader’s perspective and boiled the whole thing down to one problem: The Wall Street investment banks figured out how to trick the ratings agencies into giving AAA ratings to crap investments, and once that hole-in-the-system existed, they did the logical predatory thing and ran as much money through it as they could. Something-for-nothing deals have to collapse eventually, and the collapse of this one ate up trillions.

I still think that’s a true story, but it begs some larger questions: Such a story can only happen in a certain kind of world. How did we come to be living in that world? And why can’t we seem to get out of it?

Yves Smith’s ECONned: How Unenlightened Self Interest Undermined Democracy and Corrupted Capitalism provides a larger context for the collapse and explains why it is likely to happen again.

Economics. Rather than a single point of failure, Smith describes problems on many levels. She starts with economics — both the way it has developed and the way it has been popularized for political discussion.

Since World War II, economics research has become increasingly mathematical. An economist makes his/her name by expressing something economical in an equation, and then proving that equation from more abstract assumptions.

The problem is that economics is not really that kind of science; inherently it’s more like sociology than like physics. So turning an economy into a mathematical model involves making very unrealistic assumptions. (For a detailed criticism of those assumptions, see Eric Beinhocker’s The Origin of Wealth, which I reviewed last year.)

Several of those bad assumptions play a role in the 2008 collapse:

• Random distributions are normal distributions. Normal distributions are the easiest to deal with mathematically, but it’s well known that actual economic variables have much fatter tails than a normal distribution. In laymen’s terms: Extreme events that the model says happen every million years might in fact happen every ten or twenty years.
• Markets tend toward equilibrium. Engineers who design complex systems understand that there’s a trade-off between efficiency and stability: Things that work really well (when they work) have a disturbing tendency to blow up (when they don’t). But if you assume from the outset that markets are stable — that’s what this assumption boils down to — then you can ignore those nasty explosions and focus all your attention on efficiency.
• Perfect information. The easiest markets to model are the ones where everybody knows everything. But if some participants have inside knowledge and use it to exploit the others — that’s more like sociology than physics. It’s hard to put into an equation.
• Uncorrelated markets stay uncorrelated. In normal times, gold trading in Zurich has nothing to do with wheat trading in Chicago which has nothing to do with the price of houses in Las Vegas. But in a crisis all markets are correlated — because people who need to raise cash in a hurry sell everything they can.

If all these bad assumptions led economists to conclude that we should confiscate wealth and distribute it to the poor, the powers that be would see through them instantly. But conveniently, they lead to a result that is attractive to the kind of corporations and plutocrats who hire economists and support business schools: Business should be free to do what it wants, and the invisible hand of the market will make it all come out right.

So procedural bias has aligned with patron bias — the technique you want to use gives you the answer that your sponsor wants to hear. Why question it?

This creates economic “common sense” that is actually nonsensical. And that’s why regulators like Alan Greenspan decided that they didn’t need to intervene in the housing bubble or the debt explosion, and why the Clinton administration went along with leaving credit default swaps unregulated. Their common sense told them to trust the market.

The same economic common sense told people that greed is good; the market would sort it out and impose whatever moral discipline was necessary. And so everyone discounted the problem that Nobel Prize winner Amartya Sen illustrates with this little story:

”Where is the railway station?” he asks me. “There,” I say, pointing to the post office, “and would you please post this letter for me on the way?” “Yes,” he says, determined to open the envelope and check whether it contains something valuable.

In other words, if everyone looks for selfish advantage in every interaction, nothing works. Every-man-for-himself competition only makes sense as a small component carefully constrained inside a system of honesty and cooperation.

Wall Street corporate culture. Wall Street investment banks increasingly have adopted the total-selfishness model Sen was criticizing. Traditionally, the goal of an investment bank was to have long-term relationships with large, profitable corporations — and to help them become larger and more profitable. (You can see this same attitude in the ad agency of Mad Men. Don Draper is no saint, but he sees his interests as aligned with his clients’ interests.)

Over the last few decades, investment banks have shifted from a long-term relationship model to a short-term trading model, where the goal is to make as much money as possible on every transaction. That means taking advantage of the client whenever possible — buyer beware — even if it destroys the relationship and even if it destroys the client altogether.

The result was predictable to anyone who understood Sen’s point: A banker who sees his clients as prey will soon start seeing his stockholders as prey too. The trader who cares nothing for his long-term relationship with the client will also not care about his long-term relationship with his firm. And so trades that create short-term profits (and bonuses) but put the firm in long-term danger — those are good trades from the perspective of a short-term predator.

The final stages of the financial collapse — the ones that made even masters-of-the-universe like Goldman Sachs insolvent without a government bailout — involved complex transactions that tricked internal accounting systems into booking future profits as current profits (and paying bonuses on them), even though those future profits would ultimately turn into losses. The pirates pillaged their own firms.

Smith is one of the few authors to call this what it is: looting.

Bailout and reform. By the time things unraveled in 2008, the government had to do something and it was going to cost the taxpayers money. The economy would have collapsed otherwise.

But what the government did — under both Bush and Obama — was to replace the looted money and otherwise leave the system untouched. They treated the collapse as a glitch, not as a structural problem that needed a structural solution. (And not as incompetence that required a wholesale housecleaning of every bailed-out firm.)

What’s more, the same policy-makers who watched it all happen and made excuses for Wall Street as the looting unfolded — Tim Geithner, Ben Bernanke and others — are overseeing the reform process, such as it is.

Smith concludes:

We have not built enough checks into the process to assure that the banking class will not go out and create the same train wrecks again on a grander scale. In fact, as things stand now, they are almost guaranteed to do precisely that.

If this were just corruption, it would be bad enough. But Smith points to a deeper problem she calls “cognitive regulatory capture”: The Geithners and Bernankes share the economic common sense that created the disaster, and they don’t know how to look at the world differently.

To a lesser extent, the American people share this economic common sense as well. So although the public would relish sending a few bankers to jail, free-market rhetoric is still popular and there is little political support for any alternate financial vision.

And finally, there is a truth no one wants to face up to: Economic growth used to be based on increased employment and increased wages — which led to increased consumer spending and increased production in a virtuous cycle. Recent booms have been based on asset bubbles that created collateral for increased debt. Consequently,

no one seems prepared to accept that healthier practices will result in much more costly and less readily available debt.

At the moment, no one has painted a convincing picture of how we get the economy moving again without another debt-based asset bubble. Until the public has such a picture firmly in mind, it will look at a future without cheap debt the way that an addict looks at a future without drugs.

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Rolling Stone’s Matt Taibbi shares Smith’s skepticism about the post-crisis reforms in his article Wall Street’s Big Win:

During the yearlong legislative battle that forged [the Dodd-Frank] bill, Congress took a long, hard look at the shape of the modern American economy – and then decided that it didn’t have the stones to wipe out our country’s one dependably thriving profit center: theft.

He also sees regulatory capture:

Throughout the negotiations over the bill, in fact, Geithner acted almost like a liaison to the financial industry, pushing for Wall Street-friendly changes on everything from bailouts (his initial proposal allowed the White House to unilaterally fork over taxpayer money to banks in unlimited amounts) to high-risk investments (he fought to let megabanks hold on to their derivatives desks).

And the underlying problem:

In a sense, the failure of Congress to treat the disease is a tacit admission that it has no strategy for our economy going forward that doesn’t involve continually inflating and reinflating speculative bubbles. Which sucks, because what happened to our economy over the past three years, and is still happening to it now, was not an accident or an oversight, but a sweeping crime wave unleashed by a financial industry gone completely over to the dark side.

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Both ECONned and The Big Short make a point that bears repeating: The financial sector makes so much money because it is so inefficient.

In the standard Econ 101 capitalist fantasy, that statement makes no sense. The whole justification for profit is that entrepreneurs add value to the system either by enabling people to do new things or do the same things more cheaply. On the surface profit looks like money taken out of the system, but in fact it’s just a small slice of the value entrepreneurs put into the system.

Take Henry Ford, for example. His combination of assembly line production and mass marketing made it possible for middle-class people to afford cars. He made $100 million in a single year in the 1920s, but so what? Even after subtracting his profit, he added value to the American economy.

If the bankers were doing something similar, if they were just siphoning off a portion of the value they add to the financial system, who could grudge it to them? They’d be matching up lenders and borrowers more efficiently; creating a payments system that got money from buyers to retailers with less overhead; writing more transparent, more accessible insurance policies that helped people insure exactly what they needed to for less money. We’d all benefit from their actions.

But they’re not doing any of that. None of the new financial products concocted during the bubble years created value for ordinary people. Instead, they invented confusing products precisely so that they could sell people things they didn’t need, get them to take risks they didn’t understand and couldn’t afford, and trick them into paying large fees that weren’t obvious when the contracts were signed.

This is not the everybody-wins capitalism of Econ 101. The huge salaries and bonuses of the bankers are simply a drain on the economy. We get nothing back from them.

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News is whatever has happened since the last time we talked. So CNN thinks of news in minute-to-minute terms, newspapers day-to-day, and Time week-to-week. Only at high school reunions are multi-year processes considered news.

But important things do happen on a five-year or twenty-year or hundred-year timescale. When should CNN tell you about them? To their credit, CNN and other news outlets sneak them in once in a while (if they can be tied to something that happened since the last time you tuned in). But if you blink, you miss them.

Here are two that crossed my radar screen recently:

New antibiotic-resistant bacteria. Somewhere in the back of your mind you probably already know about drug-resistant bacteria like MRSA (staph) or XDR-TB (tuberculosis) or C-DIFF. Well, those pesky bugs are just the overture. It’s going to get a lot worse over the next 10 years or so.

The underlying problem is that overuse of antibiotics creates an environment where drug-resistance can evolve. Every time we rain antibiotic hell down on some population of bacteria, the germs that are less susceptible to that antibiotic get an advantage over their competition. Over time, the bugs pick up one resistance after another.

We used to think about resistance in terms of individual strains of bacteria, but now researchers have discovered the NDM-1 gene

which passes easily between types of bacteria called enterobacteriaceae such as E. coli and Klebsiella pneumoniae and makes them resistant to almost all of the powerful, last-line group of antibiotics called carbapenems.

So NDM-1 is not just a small step for a germ, it’s a giant leap for germ-kind. It works like this:

The gene is carried on a plasmid, a small section of DNA that can move from one bug to another, passing on drug-resistance as it goes. These have, according to the paper [in the current issue of Lancet], “an alarming potential to spread and diversify among bacterial populations.”

The gene’s discoverer, Professor Tim Walsh of Cardiff University, comments:

Even if scientists started work immediately on discovering new antibiotics against the threat, there will be nothing available soon. We have a bleak window of maybe 10 years, where we are going to have to use the antibiotics we have very wisely, but also grapple with the reality that we have nothing to treat these infections with.

NDM-1 bacteria apparently are already widespread in India. Medical tourism — Brits saving money by getting their surgeries done in India — is bringing it back to the United Kingdom. From there, who knows?

The potential problem isn’t just plague-like infections that so far haven’t surfaced. Antibiotics provide the foundation on which the rest of modern medicine has been built. Without effective antibiotics, organ transplants are impossible and every abdominal surgery is life-threatening.

Plants aren’t keeping pace with global warming. A few years ago scientists thought that as the Earth got warmer, the total planetary plant mass would increase too. It seemed to make sense: warmer weather, longer growing seasons, more and bigger plants.

Plants capture carbon out of the air and hold it in their bodies, so plant growth would be a stabilizing factor: People putting more carbon into the atmosphere would lead to more plants taking it out.

It’s not happening.

Global plant growth is now overall declining and this is because, while some areas are still benefiting from an increased growing season, other areas are starting to be retarded by drought and water deficits

If an extended growing season would help anywhere, it would be someplace with long winters and good soil. Someplace like, say, Russia. See the problem?

So it turns out that plants (like shrinking polar icecaps) are a de-stablizing factor in global warming: The more carbon in the atmosphere, the hotter it gets, and the more the deserts expand, leading to plants taking less carbon out of the atmosphere.

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At a debate among New Hampshire Republican Senate candidates, all six agreed that man-made global warming is unproven. When the Milwaukee Journal Sentinel asked Wisconsin Republican Senate candidate Ron Johnson about global warming, he said “I think it’s far more likely that it’s just sunspot activity.”  Asked what he thinks CO2 does in the atmosphere, Johnson said, “I think it’s sucked down by trees and helps trees grow.”

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Sarah Palin continues to have no idea what the First Amendment says. She thinks it means that she and the people who agree with her shouldn’t be criticized for saying crazy things — and she’s been remarkably consistent about that interpretation for the last two years.

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The BP oil slick may be gone from the surface, but there’s a mile-wide, 20-mile long plume about 3600 feet down. A Florida State oceanographer told Congress:

I expect the hydrocarbon imprint of the BP discharge will be detectable in the marine environment for the rest of my life. The oil is not gone and is not going away anytime soon.

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A lot has been made of the poll showing that increasing numbers of Americans (18% now) think President Obama is a Muslim, but I think they’re missing the real point: How would you know — not just suspect, but objectively know — if the media were biased and that one side or the other had a propaganda advantage?

Well, it’s obvious, isn’t it? If people were getting biased information, they’d believe false things that slanted in one direction. Like “Obama’s a Muslim” or “Obama wasn’t born in this country“. Crazy crap like that.

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Jon Stewart demonstrates how the same techniques Fox uses to connect the imam behind the Ground Zero Mosque to terrorism can also connect Rupert Murdoch..

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And what’s up with that church near Ground Zero that Fox cares so much about? Is it getting worse treatment than the mosque? No. The hold-up is about whether it will get a public subsidy to rebuild, an issue that doesn’t apply to the mosque.

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Each story I hear about the Christianization of our armed forces is a little more outrageous than the last one. Here, Chris Rodda reports about a company being marched out to attend a Christian rock concert, with those who opt out being put on maintenance duty instead.

The Weekly Sift appears every Monday afternoon. If you would like to receive it by email, write to WeeklySift at gmail.com.