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Morning Reading

Scott Jagow Jul 21, 2009

Among this morning’s items: explaining that $23 trillion figure I mentioned yesterday… Helicopter Ben says his choppers move quickly and smoothly… an argument for taxing the rich immediately… and was Walter Cronkite a Jon Stewart fan?

Fed Chairman Ben Bernanke seems to be everywhere. He testified before Congress this morning — from the New York Times:

Testifying before the House Committee on Financial Services, Mr. Bernanke said in his prepared comments that despite positive signs of an improvement in the economy, “the job loss rate remains high and the unemployment rate continues its steep rise.” The weak job market, coupled with falling home prices and tight credit, he said, are putting downward pressure on households, undermining “the recent stabilization in household spending.”

And Bernanke writes about inflation in a Wall Street Journal editorial:

My colleagues and I believe that accommodative policies will likely be warranted for an extended period. At some point, however, as economic recovery takes hold, we will need to tighten monetary policy to prevent the emergence of an inflation problem down the road. The Federal Open Market Committee, which is responsible for setting U.S. monetary policy, has devoted considerable time to issues relating to an exit strategy. We are confident we have the necessary tools to withdraw policy accommodation, when that becomes appropriate, in a smooth and timely manner.

In other words, Bernanke is expressing his supreme confidence that the Fed can adapt quickly and efficiently if inflation becomes a problem. I hope he’s not overestimating the Fed’s capacity to do that or underestimating the amount of money that’s out there and how quickly it could avalanche into the economy.

As for yesterday’s report from TARP watchdog Neil Barofsky, the New York Times points out that Barofsky’s projection that the financial system rescue could cost $23.7 is an extreme worst case scenario:

It includes estimates of the maximum cost of programs that have already been canceled or that never got under way.

It also assumes that every home mortgage backed by Fannie Mae or Freddie Mac goes into default, and all the homes turn out to be worthless. It assumes that every bank in America fails, with not a single asset worth even a penny. And it assumes that all of the assets held by money market mutual funds, including Treasury bills, turn out to be worthless.

It would also require the Treasury itself to default on securities purchased by the Federal Reserve system.

In an interview Monday evening, Mr. Barofsky said he did not view his testimony as misleading.

“We’re not suggesting that we’re are looking at a potential loss to the government of $23 trillion,” he said. “Our goal is to bring transparency, to put things in context.”

Asked what he thought the maximum total cost could be, he replied that it was not his job to estimate that, and declined to give a figure.

It’s true. He didn’t say potential loss. He said “potential support.” But I don’t see much usefulness in the figure he gave.

At The New Republic, John Judis argues now is the perfect time to tax the rich:

If the Obama administration were to tax the rich, and then use the money to pay down the deficit, or keep it in the proverbial social security “lock box,” then taxing the rich would probably damage an economy in recession by reducing consumer demand–whether it is for necessities or luxuries. But if the administration were to take the revenue from a tax increase on the very rich and give it to the less well-to-do through government spending or a tax cut, then the result would be a net increase in consumer demand, because the less well-to-do are more likely to spend rather than save what they earn.

This is the same John Judis who says we need a second stimulus package, so between the two columns, it’s pretty easy to discern his economic philosophy.

Gwen Ifill at PBS’s NewsHour has a couple of enjoyable interviews about Walter Cronkite. She asks Columbia University journalism professor Todd Gitlin how Cronkite might’ve viewed today’s media:

I don’t know that Walter Cronkite would have looked askance at Jon Stewart. After all, before he anchored the CBS News, Walter Cronkite stood up in front of a show called “You Are There” and tried to convince Americans playfully that he was present at the battle of Waterloo, the signing of the truce of the Appomattox end of the Civil War and so on.

I think that he, I think, would have wondered, what’s wrong with the rest of the news business, that it doesn’t purport to be doing fake news, but is doing, instead, trivial news, gullible news.

Jon Stewart, I think, is the least of our problems.

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