October 16, 2010

NYT Japan Write-up Downplays Decades of Stimulus, Fails to ID Causes of Malaise

Only the New York Times could burn through 2,500 words about Japan’s economy and not use the word “stimulus.” The Old Gray Lady’s Martin Fackler did refer to Fed Chair Ben Bernanke’s just-announced second attempt to “stimulate” economy, but dodged the central lesson: The government created the Japanese people’s malaise, and our government, despite Japan’s experience, seems determined to do the same to us.

The Times item is the first in a series, so I suppose Fackler may get around to it in subsequent reports, but it doesn’t seem likely.

Here are some paragraphs from Fackler’s report that show how intent he and the Times were on not getting to the real root causes of Japan’s nearly two-decade malaise (bolds are mine):

Once Dynamic, Decline Leaves Japan Disheartened

Few nations in recent history have seen such a striking reversal of economic fortune as Japan. The original Asian success story, Japan rode one of the great speculative stock and property bubbles of all time in the 1980s to become the first Asian country to challenge the long dominance of the West.

But the bubbles popped in the late 1980s and early 1990s, and Japan fell into a slow but relentless decline that neither enormous budget deficits nor a flood of easy money has reversed. For nearly a generation now, the nation has been trapped in low growth and a corrosive downward spiral of prices, known as deflation, in the process shriveling from an economic Godzilla to little more than an afterthought in the global economy.

… Even as the Federal Reserve chairman, Ben S. Bernanke, prepares a fresh round of unconventional measures to stimulate the economy, there are growing fears that the United States and many European economies could face a prolonged period of slow growth or even, in the worst case, deflation, something not seen on a sustained basis outside Japan since the Great Depression.

Many economists remain confident that the United States will avoid the stagnation of Japan, largely because of the greater responsiveness of the American political system and Americans’ greater tolerance for capitalism’s creative destruction. Japanese leaders at first denied the severity of their nation’s problems and then spent heavily on job-creating public works projects that only postponed painful but necessary structural changes, economists say.

“We’re not Japan,” said Robert E. Hall, a professor of economics at Stanford. “In America, the bet is still that we will somehow find ways to get people spending and investing again.”

Still, as political pressure builds to reduce federal spending and budget deficits, other economists are now warning of “Japanification” — of falling into the same deflationary trap of collapsed demand that occurs when consumers refuse to consume, corporations hold back on investments and banks sit on cash.

… Just as inflation scarred a generation of Americans, deflation has left a deep imprint on the Japanese, breeding generational tensions and a culture of pessimism, fatalism and reduced expectations. While Japan remains in many ways a prosperous society, it faces an increasingly grim situation, particularly outside the relative economic vibrancy of Tokyo, and its situation provides a possible glimpse into the future for the United States and Europe, should the most dire forecasts come to pass.

… And the future looks even bleaker, as Japan faces the world’s largest government debt — around 200 percent of gross domestic product — a shrinking population and rising rates of poverty and suicide.

But perhaps the most noticeable impact here has been Japan’s crisis of confidence. Just two decades ago, this was a vibrant nation filled with energy and ambition, proud to the point of arrogance and eager to create a new economic order in Asia based on the yen. Today, those high-flying ambitions have been shelved, replaced by weariness and fear of the future, and an almost stifling air of resignation. Japan seems to have pulled into a shell, content to accept its slow fade from the global stage.

The clear evidence is that the budget deficits and the easy money, instead of failing to prevent Japan’s decline, have instead extended it.

The quoted Robert E. Hall can say, “We’re not Japan” all he wants, and try to claim we’re in better shape to absorb economic stress. But in some important ways, we’re in worse shape. No one can credibly deny that the U.S., like Japan, “at first denied the severity of their nation’s problems and then spent heavily on job-creating public works projects that only postponed painful but necessary structural changes.” But a lot of our spending also went to direct transfer payments with no future value, especially in the beginning, as the president himself has admitted that his core early-2009 contention that there were all kinds of shovel-ready projects just waiting to be funded was a load of rubbish.

Additionally, our savings rate is nowhere near Japan’s, meaning that a shift to intense frugality might be have a more negative effect here than it did in Japan, where many people were always quite frugal.

The point at which our deficit hits 200% of GDP is not that far away, but because of our relatively low savings rate, America’s point of malaise may be much lower than that. No, Martin Fackler didn’t deal with that topic, although I suppose he might go there sometime during the rest of his series. But don’t count on it.

Cross-posted at NewsBusters.org.

Hinchey in a Pinch: National Press Ignores Thursday Pre-Debate Pushing Incident (See Update)

To the national establishment press, this appears to be another one of those “It’s at the Politico, so we can ignore it” incidents.

Thursday night, before a debate with GOP opponent George Phillips, nine-term New York Democratic Congressman Maurice Hinchey “had a heated exchange with a local reporter … that became physical.” Quite physical, in fact, to the point where Hinchey “pushed … (the reporter) backwards into Phillips himself.”

Seems like pretty big news, doesn’t it? Not based on the results of a Google News search on “Hinchey debate” (not in quotes) done at 8:30 this morning:

GoogNewsSearchOnHincheyDebate101610

Wow, 11 whole articles.

Clicking to get to the detail reveals that there are even fewer results than originally indicated:

GoogNewsSearchDetHincheyDebate101610

Clicking to find the sixth result revealed this report out of Binghamton, New York.

The reporter involved, William J. Kemble, is a correspondent for The Daily Freeman in Kingston, New York. In May, the paper’s Ariel Zangla began a report (HT Hot Air) about a development in nearby Saugerties as follows:

U.S. Rep. Maurice Hinchey has a financial interest in the Partition Street Project, which is to be constructed within the village for which he secured $800,000 in federal funding for a sewer infrastructure project his office called “critical to the village’s commercial future.”

Hinchey, however, says there is no connection between his official actions and the project and that he is not directly involved in the commercial development of the Partition Street property.

Zangla’s lengthy piece identifies a lot of questionably ethical smoke, and it appears to be what has aroused Hinchey’s ire.

Oddly, the Daily Freeman has no coverage of the incident involving its own reporter, who covered Thursday’s debate in this story.

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Update, Oct. 17: The Freeman has responded in a statement posted at Hot Air, saying, among other things, that “the Hinchey camp’s characterizations of the incident as either prompted by aggressive action by Mr. Kemble or by false accusations they claim he and the Freeman have made are untrue.”

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Imagine if New York Congressman Peter King, who has seniority equal to Hinchey’s, had pushed a reporter before a debate and told that reporter to “shut up!” Does anyone think that the New York Times or the Associated Press would have ignored it as they have clearly done in the Hinchey incident (as shown in searches on “Hinchey” at 9:30 a.m. here and here, respectively)? Neither do I.

Another angle: Why isn’t the HInchey-Kemble incident, which involved a push, getting anything resembling the attention the incident between Empire State GOP gubernatorial candidate Carl Palladino and New York Post reporter Fred Dicker, which as far as I can tell didn’t?

As noted earlier, if something adverse to a Democrat gets covered at the Politico, it appears to give the rest of the establishment press’s excuse to ignore it. “Been there, done that, olds news, everybody knows about it already.” Sure, guys. This also has the distinct aroma of, “Maybe if we ignore this, our guy will survive Phillips’s challenge,” which looks more formidable with each passing day.

Cross-posted at NewsBusters.org.

IBD: ‘Take VAT’ (My Suggestion: ‘Take This VAT and Shove It’)

Filed under: Economy,Taxes & Government — Tom @ 8:35 am

Good for the National Retail Federation for its preemptive strike in hiring Ernst & Young to study the effects of a value-added tax (VAT).

E&Y is a CPA firm, so unless someone shows evidence that it agreed to be steered to a conclusion, their objectivity shouldn’t be questioned.

Here, as described in an IBD editorial is what E&Y’s report preparers believe is likely to happen — and be sure to check out the final excerpted sentence in bold:

A new study warns that a value-added tax would kill 850,000 jobs in a year and cut retail spending by $2.5 trillion over 10 years. Sounds too bad for Washington to pass up.

An analysis for the National Retail Federation by Ernst & Young finds that adding a VAT to the U.S. tax system would reduce GDP for years, causing the loss of “850,000 jobs in the first year,” plus “700,000 fewer jobs 10 years later.”

A VAT imposed in such a way would also cause retail spending to drop by almost $260 billion — or 5% — in the first year alone, according to the study. As a result, “most Americans over 21 years of age when the VAT is enacted would be worse off,” and there would be “significant redistributional effects across generations, reducing real incomes and employment for current workers.”

Significantly, in this election year of the Tea Party, in which spending restraint has more resonance with voters than ever, the report, “The Macroeconomic Effects Of An Add-On Value Added Tax,” also found that reducing the deficit by cutting government spending, rather than adopting a VAT, would mean more economic growth.

Imagine that.

Positivity: Bishops of Chile thank God for successful rescue of miners

Filed under: Positivity — Tom @ 6:59 am

From Santiago, Chile:

Oct 14, 2010 / 05:51 pm

In an Oct. 14 statement, the Bishops’ Conference of Chile expressed their “immense joy” and gratitude to the Lord “for the successful rescue of the 33 miners who were trapped” in the San Jose copper mine.

The bishops noted that throughout the long ordeal, “We joined in prayer with millions in Chile and around the world. We especially thank Pope Benedict XVI for his special closeness and concern.”

The miners had been trapped under a half-mile of rock deep beneath Chile’s Atacama Desert since Aug. 5. Rescue workers originally projected that the miners would be free in late December, however they were all rescued on Oct. 13.

“We are happy to see and hear these miners, their loved ones, government officials and so many people all over Chile thanking God our Father for this gift, for this miracle that he has blessed us with. We appreciate the admirable efforts of the technicians, professionals and other workers, from home and abroad, who contributed to the preparation and execution of the rescue.”

Go here for the rest of the story.