History's Lessons

Government spending accounts for about 20% of GDP in a given year, so curtailing government spending will detract from GDP growth, other things being equal. This is one reason why financial markets are nervous—much of the developed world is experiencing at best modest economic growth.

And yet, the U.S. and many European countries are launching into spending cuts and austerity programs aimed at reining in their debts. While this is desirable from the point of view of long-term economic health, austerity measures that curtail government spending will, by definition, detract from short-term GDP growth. Investors worry that this hit to growth is occurring at a time when the global economy is already weak and could tip us back into recession.

Indeed, University of California Berkeley economist Christina Romer, who was the Chair of the Council of Economic Advisors and a co-author of the Obama stimulus plan, once famously listed six lessons of the Great Depression for policymakers. One of these was “Beware cutting back stimulus too soon.” It is this dictum that the markets fear the government is violating with its newfound focus on austerity measures and fiscal discipline.

Federal Reserve Chairman Ben Bernanke, an expert on the Great Depression, once promised that the central bank would never repeat its 1937 mistake of rushing to tighten monetary policy too soon and prolonging an economic slump.

"Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again," Bernanke said back in 2002 at a conference honoring legendary economist Milton Friedman's 90th birthday.

He has been true to his word, keeping interest rates near zero since late 2008, but cuting government spending may end up having a 1937-type chilling effect on the economy, and there is little Bernanke can do to counter that.

Perry Announces Presidential Bid - Bachmann Wins Iowa Straw Poll

Introduced as the "jobs governor," Rick Perry threw his hat into the presidential ring with an economy-focused speech at the RedState convention in South Carolina.

"It is time to get America working again," he said. "That's why, with the support of my family, and an unwavering belief in the goodness of America, I declare to you today my candidacy for President of the United States."

Elsewhere, Michele Bachmann has prevailed in the Ames straw poll, an early though not necessarily determinative assessment of each campaign's organizational abilities. U.S. Rep. Ron Paul came in second place. Here's a breakdown of the results:

Rick Perry Says Social Security And Medicare Are Unconstitutional

Think Progress: Texas Gov. Rick Perry (R) has, to say the least, a very odd understanding of the Constitution.

He thinks Texas should be able to opt out of Social Security, and he believes that everything from federal public school programs to clean air laws are unconstitutional.

Yet in an interview with the Daily Beast’s Andrew Romano, Perry makes his most outlandish claim to date — Social Security and Medicare are unconstitutional:

The Texas Franchise Tax Cost-Recovery Fee Is Not A Tax

With the exception of sole proprietorship businesses, just about all types of companies doing business in Texas must pay a franchise tax. While commonly referred to as the “margin” tax, the formal name of Texas’ business tax is still the Texas Franchise Tax—a tax that Texas has levied in some form since the 1800s. The tax is typically assessed in return for the “privilege” of doing business in a state, similar to a fee (in fact, the U.S. Bureau of the Census in its recap of state finances classifies Texas’ franchise tax as a fee). As a part of its privilege, the owners of the business receive liability protections under state law—the business is a legal entity separate and apart from them.

Throughout most of the 20th Century, the franchise tax was calculated based on each corporation’s net taxable capital—total assets less debt. With the advent of modern accounting principles, the state’s definition of “debt” came under fire in the courts resulting in huge amounts of tax refunds in the 1980s. In 1991, the tax was rewritten to apply to “earned surplus”—essentially defined as corporate profits plus compensation paid to officers and directors. The taxable capital calculation was retained, but for all intents and purposes was relegated to being an alternative minimum tax.

In 2006, lawmakers enacted a sweeping overhaul of the franchise tax as part of their plan to change the way the state funds public school districts. School maintenance and operations property taxes were reduced, while the state’s franchise tax was revamped to replace those direct school property tax revenues. The state also contributed dollars from "excess" general revenues so the overall reforms appeared to be a net property tax cut, but property taxes soon returned to their upward trend. The franchise tax reform was in fact a massive tax cut for corporations doing business in Texas.

In addition to still paying higher property taxes, in the long run, businesses also pass their franchise tax cost on to their Texas customers.

Time Warner Cable is notifying its North Texas customers in monthly statements that a state Cost-Recovery Fee is being added to their monthly billing statements:

Notice on the TWC website: "Effective Friday, August 19, 2011, Time Warner Cable will begin collecting a new fee called State Cost-Recovery Fee to recover a portion of the costs imposed by the State of Texas on the company.

The State Cost-Recovery Fee is not a tax. While TWC is not required to recover these costs by law, we are allowed to recover them as a cost of doing business.

According to a State of Texas Comptroller notice, Texas businesses may charge customers a cost-recovery" fee in order to recoup the Texas franchise tax the State of Texas collects from businesses owners. While businesses who charge customers a Cost-Recovery fee must be careful to use specific "recovery fee" wording, so as to not imply the charge is a direct state tax on consumers, they are, in effect, passing along the Texas franchise tax the state collects from them.

Texas Raids Fund For The Poor To Cut Taxes For The Rich

We have a little break from the heat in north central Texas today, but over the past two months the temperature hit triple-digits 41 times in 42 days. We will likely see some more triple-digit temperature days before this Texas summer ends.

CBS News correspondent Mark Strassmann reports Texas has a fund to help the poor pay their electricity bills. But somewhere between the fund and the people who need it, the money hit a short circuit.

In scorching Dallas, overheated seniors sought relief at an air conditioned Catholic charities center. Mary Ann Torres was also looking for financial relief. She can't afford to power the two window air conditioners that struggle to keep her house bearable.

"I don't think we've ever had it this hot before," Torres says. On a fixed monthly income of $791 her electric bill can top $200.

Texas utility customers pay a little extra on their bills that is supposed to go into a fund to help the poor cover their own utility payments. But in a year of record heat, less than half the fund is being paid out, forcing people to do without air conditioning in triple-digit temperatures.

CBS News - August 12, 2011.

CBS reports that Texas legislators, eager to avoid a tax increase, approved setting aside the Lite-Up Texas money to balance the state's checkbook during the 2011 legislative session. This isn't the first time.

The legislature has repeatedly approved raiding the fund in order to balance its budget without raising taxes.

By 2013, there will be $900 million sitting unspent, with no plans to ever pay it out.

And not only are the poor being shortchanged, but members of the middle class who pay utility bills are being charged that extra fee which does nothing but subsidize keeping taxes low on the wealthy. It's a crisis with life and death consequences. Last month an 81-year-old man was found dead in his hot home - his air conditioner turned off. Relatives say he couldn't afford his electric bill.

Democrats Not Eager For An Obama Challenger

Despite speculation that the Democratic base has become increasingly disillusioned with Barack Obama, rank-and-file Democrats are not eager to see other candidates challenge him for their party’s nomination in 2012, according to a new Pew Research Center poll. Just 32% of Democrats and Democratic-leaning independents say they would like other Democrats to take on Obama for the nomination, while 59% say they would not.

There has been little change in Democrats’ views about whether Obama should face a nomination challenge since last fall. In November, shortly after the midterm election, 38% of Democrats and Democratic leaners favored a primary challenge to Obama while 59% were opposed.

Texas Ag Commissioner "Pray for Rain"

(TX KERA Bill Zeeble 1 day ago) - Texas Agriculture Commissioner Todd Staples says farmers and ranchers in the state have been devastated by one of the worst droughts ever, and it's not over.

Agriculture Commissioner Staples says the state's worst single-year drought and hottest July ever, combined with one of the state's worst wildfire seasons in history, has been catastrophic to farmers and ranchers.

Staples: We've had enough acreage burn that it is equivalent to Delaware, Rhode Island, Washington, D.C. and one-third of Connecticut combined. Make no mistake, this drought has driven farming and ranching families out of business. It has decimated some of their livelihoods. With each passing day without rain, it's having a greater toll on Texas farming and ranching communities.
Full Article at KERA

Texas is in its worst-ever one-year drought, according to John Nielsen-Gammon, the Texas State Climatologist and professor of atmospheric sciences at Texas A&M University.

Central Texas has been in a drought since 1995-1996, with only brief respites in 2007 and 2010 from catastrophic, flooding rains. The 2011 record breaking heat wave and lack of rainfall is baking Texas desert dry, but 2011 is just a taste of Texas’ future.

Al Gore Calls ‘BS’ On ‘Crap’ Peddled By Climate Denial Machine

In a speech last week, Vice President Al Gore passionately excoriated climate skeptic propaganda of the conservative messaging machine, which is willingly forwarded by the American main stream media as, "bull shit!"

A study published in Nature [and ScienceDaily] says a gradual increase in atmospheric carbon dioxide (CO2) over the last half-century has accelerated the release of methane and nitrous oxide in the soil. These gases are respectively 25 and 300 times more effective at trapping radiation than CO2, the principal greenhouse gas by volume.

"This feedback to our changing atmosphere means that nature is not as efficient in slowing global warming as we previously thought," said Kees Jan van Groenigen, a professor at Trinity College Dublin and the paper's lead author.

The soil and the ocean are being weakened as buffers against global warming, in a vicious circle with long-term implications for the climate system, say two new investigations.

In Aspen, Gore calls "BS" on climate skeptics. Former Vice President Al Gore attended a forum on world poverty at the Aspen Institute this week. On Thursday, he dropped by a communications and media seminar, expressing outrage at how the issue of climate change has been manipulated. KDNK's Brent Gardner-Smith reports. Warning: audio contains explicit language.


Former U.S. Vice President Al Gore plans to hit the climate crisis hard with a day of organized global action on Sept. 14. Gore announced his “Climate Reality Project” in this video. The day
of action aims to use 24 speakers to broadcast 24 straight hours of climate activism, encouraging others to get up and undertake climate mitigation efforts as well.

But a few professional climate skeptics affiliated with conservative think tanks, partially to largely funded by fossil energy corporation executives such as Charles and David Koch, publish pseudo-science articles and papers refuting the work of the many thousands of worldwide climate scientists like Kees Jan van Groenigen.

Even though those professional climate skeptics are lawyers, political strategists, or people from professional disciplines unrelated to climate science, the mainstream media reports on their pseudo-science articles and papers as legitimate science.

This reporting of junk science has caused Americans to doubt the research findings of legitimate climate scientists. (see Conservative Think Tank Trys Climate Skeptic Damage Control)

Appearing at the Aspen Institute’s Forum on Communications and Society, Gore described the story told in Merchants of Doubt, how corporate interests have manipulated scientific institutions and the news media to defend everything from cigarettes and acid rain to global warming pollution.

Texas - Hottest Ever Summer, Drought Worse Than 1930's Dust Bowl

Texas is now in its worst-ever one-year drought, according to John Nielsen-Gammon, the Texas State Climatologist and professor of atmospheric sciences at Texas A&M University.

Texas is the second-largest agricultural state in the United States, accounting for about 7 percent of the total U.S. agricultural income, with an economic impact of about $100 billion on the Texas economy.

Agriculture is the second-largest resource-based industry in Texas employing one out of every seven working Texans and producing about 9 percent of the state's gross product.

But in 2011 the record breaking heat wave and lack of rainfall is baking Texas dry, leaving the nation’s second largest agricultural producer with catastrophically reduced crop and livestock yields.

This will further impact the state's already struggling economy, likely increasing unemployment in the coming months and further reducing revenue the state needs to fund government and public education. The drought is also damaging Texas' infrastructure, which could cost billions of dollars the state does not have to repair.

S&P Does Not Believe The Bush Tax Cuts Will Expire In 2012

Rep. Allen West (R-FL), a favorite among tea party Republicans, insisted Monday during an appearance on the conservative Fox News Channel that a refusal to increase government revenues through taxes had "nothing" to do with Standard & Poor's dropping America's credit rating last week. Many other conservatives are making the same claim running from responsibility to for S&P's downgrade and the world wide market turmoil it wrought on Monday.

Those claims are patently false, according to S&P's own press release announcing the ratings drop. A line in S&P's full report, wherein it downgraded the sovereign debt of the US from AAA to AA+, states:

"Compared with previous projections, our revised base case scenario now assumes that the 2001 and 2003 tax cuts, due to expire by the end of 2012, remain in place. We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues, a position we believe Congress reinforced by passing the act."

First, it's correct that that the GOP is rigidly anti-revenue, and would resist any measure that would raise revenue. Second, S&P notes, the 2001 and 2003 Bush tax cuts cuts are due to expire, meaning no measure is needed to get rid of them. They'll just go away unless congress votes to renew the cuts. They clearly conclude that Republicans will once again roll Democrats into accepting a continuation of the Bush tax cuts - like the did last December.

This chart comes from Barrie McKenna’s great article on US tax rates, and pretty much speaks for itself. While the rest of the developed world has seen its tax rate rise as it got richer, the US stands out as the one country where tax rates have been going down. In the OECD, only Chile and Mexico have lower tax burdens, and neither of them have been decreasing: both have relied very much on state-owned commodity wealth to stand in for tax revenue.