But as Iowa Democrats criticize the video’s “Nighttime in America’ pessimism, Slate’s David Weigel notes something else about the spot: The inclusion of New York Times columnist Paul Krugman.

Aside from Pawlenty, Krugman is one of only two people shown in the video; “Washington has given up on the jobs picture,” he says. But Weigel notes that Krugman is an odd inclusion, because he’s not on “the same page as Pawlenty when he talks about the economy.” He offers the full context of Krugman’s statment (emphasis his):

I would just say that the aftermath of a terrible financial crisis, and this was the worst financial crisis since the 1930s, is always a prolonged period of weak growth. And the tragedy is that Washington has given up on the jobs picture. It’s not that — it’s not a failure of policy. I think the policies that we have undertaken made things less bad than they would have been. But here we are with still terrible unemployment rate, 37 weeks the average unemployed person is unemployed. And no interest in Washington about doing anything to create jobs.

In a post called Pawlenty “Accidentally Endorses Keynesian Economics,” Weigel notes what an “odd” choice the excerpt is for Pawlenty: “When [Krugman] says ‘Washington’ has given up he is criticizing Obama but he’s criticizing him for conceding the House Republicans’ argument that a massive spending cut, not more stimulus spending, is what’s needed right now.”

Meanwhile, Democrats in Iowa, America’s first caucus state, are quick with a response. “’Nighttime in America’ is a lousy idea for a bumper sticker and an
even worse idea of leadership,” says Iowa Democratic Party Executive Director Norm Sterzenbach in a statement. Given his record of debt and failure in Minnesota it’s not surprising that Tim Pawlenty has a gloomy and pessimistic outlook for our country and doesn’t think we can win the future. The American people, on the other hand, don’t just believe we can win the future but that with the leadership of President Obama, we already are beginning to do so.”

Watch it:

With most pundits predicting a GOP takeover, cue the debate about whether a divided government will produce some much-needed compromise or grind things to a halt. In the New York Times op-ed pages today, David Brooks argues that “the road map for his recovery is pretty straightforward,” while Paul Krugman’s main takeaway is, “Be afraid. Be very afraid.”

A lot of the debate rests upon the rhetoric of Rep. John Boehner (R-Ohio), who’s pretty much a shoo-in to assume the role of Speaker of the House, Senate Minority Leader Mitch McConnell (R-Ky.), who recently said, “The single most important thing we want to achieve is for President Obama to be a one-term president.” If this is truly the plan, notes Krugman, then there’s little incentive for Republicans to work with the president on any issue that might make him look like an effective leader.

Brooks, on the other hand, thinks Obama can regain the high ground with independents if he keeps pushing the message that Republicans’ calls for spending cuts are half the answer. “Instead, he will have to go out and do his own thing,” Brooks writes. “That means every day reinforcing the following narrative: the Republicans are only half right. They want to cut things; I want to cut but also replace things. They want to slash government; I want to restructure it. They want destruction; I want renovation.”

The x factor, it seems, is the Tea Party. Will it mount new campaigns and challenges against Republicans in Congress willing to reach across the aisle? And will Republicans cave to its demands at the first signs of discontent? Krugman certainly thinks so, and he predicts a government shutdown as early as next spring.

Correction: This post initially attributed the quote about making Obama a one-term president to Rep. John Boehner. It was actually spoken by Sen. Mitch McConnell. We regret the error.

I continue to think the United States clearly has both problems. The entire economy — basically, every state, every city, every business, everywhere — is suffering because sales are down. That problem is primary. On top of that, workers in certain shrinking sectors — most notably construction — need to find new trades.

Here’s a chart showing employment in various major economic sectors. (The x-axis is years, starting in 2005, and the y-axis shows the number of jobs relative to 2005.) Most sectors have declined, but some are much worse off than others — demonstrating the unemployment as cyclical and structural.

In an interesting related post, Mike Konczal shows that a lot of the United States’ structural unemployment is due to the housing crisis — more than due to skills mismatch. Workers that cannot sell their houses cannot move to new, better jobs. That means that those workers tend to stay unemployed for longer. Indeed, Konczal cites an IMF study showing that the country’s housing woes cause two or 2.5 times more unemployment than the skills-mismatch problem does.

Economists such as Paul Krugman have recommended aggressive policy maneuvers to bring down unemployment and aid the recovery. Ben Bernanke, the head of the Federal Reserve, himself has said the central bank might consider less conventional policies. The Fed could raise the inflation target. It could make additional asset purchases. It could make harder statements about its commitment to recovery. It could pay banks less to keep money at the central bank.

At The Washington Post, Neil Irwin describes the likeliest measures:

One substantive option on the table — and which has the highest likelihood of actually being taken, though it is no sure thing — would be to state that the Fed will maintain the current size of its balance sheet, $2.3 trillion, by buying new assets as the mortgage backed securities in its portfolio mature. That would have only a moderate impact in terms of increasing the money supply, but would be a signal that the Fed has entered a more dovish mode.

Similarly, the Fed could strengthen its statement that economic conditions “are likely to warrant exceptionally low levels of the federal funds rate for an extended period.” One fairly significant change would be to state how long an “extended period” is, such as two or three years. Another aggressive change would be to state that low interest rates are likely to be warranted until certain economic conditions are met, such at an 8 percent unemployment rate and core inflation above 2 percent.

Another possibility would be to cut the interest rate on excess reserves that banks park at the central bank, currently 0.25 percent, to zero.

Still, most expect the Fed to do nothing — despite the slow recovery. For good additional background, here is a piece by Reuters.

Do unemployment benefits reduce the incentive to seek work? Yes: workers receiving unemployment benefits aren’t quite as desperate as workers without benefits, and are likely to be slightly more choosy about accepting new jobs. The operative word here is “slightly”: recent economic research suggests that the effect of unemployment benefits on worker behavior is much weaker than was previously believed. Still, it’s a real effect when the economy is doing well.

But it’s an effect that is completely irrelevant to our current situation. When the economy is booming, and lack of sufficient willing workers is limiting growth, generous unemployment benefits may keep employment lower than it would have been otherwise. But as you may have noticed, right now the economy isn’t booming — again, there are five unemployed workers for every job opening. Cutting off benefits to the unemployed will make them even more desperate for work — but they can’t take jobs that aren’t there.

But in an interview for the article, economist Heidi Shierholz of the Economic Policy Institute made an interesting further argument: The United States’ unemployment benefits are inadvertently lowering the unemployment rate. “When you’re in a downturn like this, the logic gets flipped on its head,” she explains. “To receive unemployment benefits, you need to be looking for work. You are actually required to be looking for a job, whereas if you aren’t getting unemployment insurance, and there aren’t any jobs, you might lose your incentive to look for work.”

To unpack that a bit: In the United States, you need to be actively seeking work — sending out resumes, etc. — to receive your UI checks. (The government does not tap your phone to make sure, of course, but it does check in.) Once your UI ends, so does the requirement to keep looking for a job. You’re on your own. An enormous body of people — at least one million of them — have graduated from their unemployment benefits into further joblessness, rather than work. Many of those people, rather than continuing to look for a job, have given up because the labor market is so bad. Those people are lowering the unemployment rate, because they are not in the labor force anymore. And were they still seeking jobs — which many would be, if their unemployment insurance lasted for longer — the unemployment rate would be in the double digits.

Paul Krugman writes another patronizing column Monday morning in the New York Times, accusing deficit hawks of not understanding a simple proposition: “Spend now, while the economy remains depressed; save later, once it has recovered. How hard is that to understand?” He says that we need just a couple more years of stimulus through deficit spending and then we’ll be ready to start saving to pay down the debt. [...]

Krugman himself looks at CBO projections of deficits declining from 10 percent of GDP now to four percent in 2014 before starting to rise again, and concedes that this is “not enough.” Then he cavalierly says that all you need to solve the problem is (a) to bring health costs under control, and (b) a five-percent value added tax. Oh, is that all? I have no doubt that if Paul Krugman were economic dictator, we could impose these or other solutions. In the real world (or should I say “unreal world”) of current American politics, either one of these partial solutions is unthinkable without a catastrophic crisis to force our hand.

In fairness to Krugman, he has good reason to be patronizing: Right now, few economists would challenge the notion that deficit cutting is harmful during a recession, and that further spending is necessary in a sluggish economy with unemployment hovering near double digits. President Obama has pressed for additional stimulus, and deficit fears notwithstanding, the public is receptive to further congressional action on unemployment. But even with the wind at their backs, legislators have been extremely reluctant to do anything further for the economy. What’s more, a growing number of columnists and opinion makers are calling for austerity measures that would slow growth and exacerbate the unemployment crisis.

Given all of this, is it any wonder that Krugman sounds short and a little exasperated? In his (and others’) assessment, the United States is staring at a “Japanese-deflationary trap,” with millions stuck in long-term unemployment, never to return to the workforce. But instead of rushing to prevent a “lost decade,” policymakers are turning away from stimulus, and many elites are cheerleading for austerity. Politically feasible or not, mainstream commentary on the economy hasn’t been, well, very economically sound.

That said, I’m not so sure that Krugman’s proposed solutions are politically unfeasible in the absence of a “catastrophic crisis.” The last two significant attempts at deficit reduction occurred in 1993 with President Clinton’s budget and this year with the Affordable Care Act. In both instances, Congress acted despite the fact that crisis was on the horizon. And indeed, given that more than 50 senators voted for the extension of unemployment benefits, it’s not unreasonable to think that Congress would take action on unemployment and the long-term deficit, if not for routine filibustering by Republicans.

1. The Community Reinvestment Act of 1977 was irrelevant to the subprime boom, which was overwhelmingly driven by loan originators not subject to the Act.

2. The housing bubble reached its point of maximum inflation in the middle years of the naughties:

Robert Shiller

3. During those same years, Fannie and Freddie were sidelined by Congressional pressure, and saw a sharp drop in their share of securitization:

FCIC

while securitization by private players surged:

FCIC

Of course, I imagine that this post, like everything else, will fail to penetrate the cone of silence. It’s convenient to believe that somehow, this is all Barney Frank’s fault; and so that belief will continue.

Sen. Jeff Bingaman (D-N.M.) makes his opening statements before a hearing Tuesday on the accident in the Gulf of Mexico involving the offshore oil rig Deepwater Horizon. (Pete Marovich/ZUMApress.com)

On the surface, the two accidents couldn’t have been more different. The first occurred in the rugged mountains of Appalachia; the second was more than a thousand miles away in the Gulf of Mexico. One was miles underground; the other thousands of feet underwater. One happened in pursuit of coal; the other in the unending search for domestic oil.

[Environment1]Yet last month’s deadly explosion at the Upper Big Branch coal mine in southern West Virginia, and the more recent fatal blast on the Deepwater Horizon oil rig off the coast of Louisiana, have at least this much in common: Both were likely preventable, according to a growing number of lawmakers and workplace safety experts — if only federal regulations designed to prevent such disasters had been enforced.

“I don’t believe it is enough to label this catastrophic failure as an unpredictable and unforeseeable occurrence,” Sen. Jeff Bingaman (D-N.M.), chairman of the Senate Energy and Natural Resources Committee, said during a Tuesday hearing on the Deepwater Horizon disaster. “If this is like other catastrophic failures of technological systems in modern history … we will likely discover that there was a cascade of failures: technical, human and regulatory.”

The message is clear: Regulations are only as good as the people enforcing them. And Congress, some experts are warning, would do well to recognize that trend as lawmakers contemplate reforms as diverse as those governing coal mines, oil rigs and Wall Street.

Along those lines, Paul Krugman, Nobel Prize winning economist for the New York Times, noted this week that the problems at the Interior Department are by no means unique. Instead, they represent “a broader pattern that includes the failure of banking regulation and the transformation of the Federal Emergency Management Agency … into a cruel joke.” The common thread, Krugman argued, “is the degradation of effective government by antigovernment ideology.”

Krugman targeted the Bush administration in particular. But many work safety experts are quick to note that the lax enforcement over the extraction industries represents a much broader trend, beginning well before Bush took office, and extending well beyond his exit. Along the way, federal enforcement agencies have been stacked, at times, with anti-regulation regulators — many of whom still remain. And the industries have showered millions of dollars on Congress in order to persuade lawmakers that, when it comes to protecting workers, business knows best. The results have been predictable.

“We have a strong anti-regulatory bent in this country,” said Celeste Monforton, former work-safety official in the Labor Department who’s now at George Washington University, “Regulation is like a four-letter word.”

In the case of the Deepwater Horizon, which is leased by BP, the Interior Department is now under a microscope on several fronts. For one thing, the Minerals Management Service granted the rig a “categorical exclusion” from a federal law designed to protect the environment from significant spills. (The agency simply didn’t believe that such a spill was possible from that project.) And quite separately, the MMS has spent the last decade transferring most of its safety-enforcement duties to the industry, in effect allowing the drillers to police themselves. The trend has led lawmakers, in the wake of last month’s deadly accident, to accuse the agency of being too close to those it’s charged with regulating.

“Clearly, stronger, more independent oversight of oil company activities is needed,” Sen. Barbara Boxer (D-Calif.), who heads the Senate Environment Committee, said during a separate hearing on the spill Tuesday afternoon.

Acknowledging that problem, Interior Secretary Ken Salazar announced Tuesday that the agency plans to split the MMS into two separate entities: One would be charged with inspecting rigs and enforcing safety measures; the other would be responsible for managing leases and collecting royalties.

Similar regulatory questions have dogged the Mine Safety and Health Administration, particularly following the April 5 blast in Raleigh County, W.Va., that killed 29 miners. In the days and months leading up to the explosion, federal investigators had cited the mine for a long list of safety violations. Ultimately, though, they didn’t take any steps to close the operation down. A number of mine-safety experts have charged that MSHA leaders simply didn’t want to confront the powerful mining industry, even in the name of miner safety.

Ken Hechler, former West Virginia congressman and lead sponsor of a 1969 law that overhauled mining safety, said that his bill gives MSHA officials all the authority they needed to close down the troubled mine — if they had chosen to exercise it.

“The legislation is there on the books. You can tell in black and white precisely what it means,” Hechler said in a recent phone interview. “This is why I regard MSHA as partially responsible [for the tragedy].”

Most observers are quick to caution that the cause of neither the Gulf spill nor the West Virginia blast have yet been discovered — and might not be learned for months to come. Indeed, investigators in West Virginia haven’t been able to enter the UBB mine yet, due to the accumulation of toxic gases. And emergency workers around the Deepwater Horizon are still concentrating all of their efforts on stopping the gusher, which is still spewing crude oil into the Gulf at a rate of 5,000 barrels per day.

There’s also a strong sense that the companies themselves should bear most of the blame if it’s discovered that they simply ignored existing safety measures. Peter Galvin, a former MSHA official, noted that both BP and Massey Energy, which owns the UBB mine, have troubling safety records. “In both cases, we have a large and very wealthy parent corporation with a history of ignoring worker safety and health risks until it is too late,” he said in an email.

Still, when companies fail to protect their employees, then it falls on regulators to intervene. And if they’re not doing it, Hechler said, then Congress needs to step in to force their hands.

“This process of writing good laws that are not enforced,” he said, “somehow has to be toughened to require the enforcement.”

But as Paul Krugman notes: “We’re still in a liquidity trap, with Fed policy constrained by the zero lower bound. And a liquidity trap world is a paradox-of-thrift world, in which the virtuous individual decision to save more is a vice from the point of view of the economy as a whole. For now, it’s actually a good thing that consumers are behaving irresponsibly.”

Recall, for example, the GOP outcry when the Democrats proposed to trim some payments (many say overpayments) to the private insurance companies that cover Medicare patients. Or the reaction when the White House proposed to cut a defense project from Sen. Richard Shelby’s (R) Alabama. The message is clear: Republican leaders might defend the virtues of smaller government in theory, but if it threatens popular programs or jobs in their districts, they suddenly don’t want to see that theory realized. Particularly in an election year.

That conflict of ideology hasn’t been lost on Sen. Bernie Sanders. The Vermont Independent, who caucuses with the Democrats, pointed out yesterday that a Tea Party takeover of the Republican Party would be “extraordinarily good for the Democrats.”

“When you analyze and you go beyond the rhetoric,” Sanders told CNN’s Joy Behar, ”what you find out is that these guys want to abolish Medicare and Social Security and Medicaid and the Veterans’ Administration. There really is not a whole lot of policy substance to what they are saying.

“When the American people learn that behind the anger there’s not a whole lot to be said, I think it works to the Democrats’ advantage.”

Sanders argues that the source of the public’s anger isn’t government spending, but a decades-long trend of of middle-class jobs moving overseas for the sake of corporate profits — the trickle-down theory of corporate protection that hasn’t quite trickled down to many working-class folks.

“People in this country, especially men, are extremely angry because the middle class is in the process of collapsing,” Sanders said. “You have guys who are working 40, 50, 60 hours a week, and they’re making less money than they did 10 or 20 years ago. What they are perceiving is there is a gap between the very rich and everybody else. Their jobs are going to China and they are angry.”

Sanders isn’t the only one to call out the GOP recently on their claims of small-government advocacy. Last week, New York Times columnist Paul Krugman also took the Republicans to task, arguing that the GOP tax cuts of the last decade have produced the inevitable deficits that were designed to shrink government.

“The beast is starving, as planned,” Krugman wrote. “It should be time, then, for conservatives to explain which parts of the beast they want to cut.”