It's apparently hard to find out about the state of the U.S. economy in the nation's capital. That is the only way to explain the fact that in their articles on the budget passed by the Senate last night, neither the NYT or Washington Post said one word about how the budget would affect the economy over the next decade.

This one should have been pretty basic and simple. As tens of millions of graduates of intro economics classes know, GDP is equal to the sum of consumption, investment, government spending and net exports. Currently, annual GDP is close to $1 trillion below its potential according to the estimate from the Congressional Budget Office because private sector demand plunged following the collapse of the housing bubble.

While conservative politicians run around yelling mumbo jumbo about making the job creators happy, there is no plausible story that private sector demand will rise enough to fill this gap any time soon. That means that government has to fill the gap by running large deficits. Its failure to do so has meant that the economy is down almost 9 million jobs from its trend growth path and millions of people are needlessly suffering from unemployment.

However, neither the NYT or Post could be bothered mentioning the millions who are suffering unemployment as the direct result of government policy. Instead the NYT told us in the first sentence that the budget will:

"trim spending gingerly and leave the government still deeply in the debt a decade from now."

Yes, that is important for readers to know -- by the NYT's criteria the country will be "deeply in debt" a decade from now. What ever happened to the distinction between news and opinion pages?

The Organization of American States (OAS) is set to take up proposed reforms to the Inter-American Commission on Human Rights (IACHR) today at 11:00am EDT (live feed here). While arguments against the reforms have received column space in major U.S. media outlets, little attention has been granted to some of the criticisms laid out by the Ecuadorean government, which has been leading the effort for IACHR reform.

In a presentation [Spanish PDF here; English PDF here] to OAS members in Guayaquil on March 11, Ecuadorean President Rafael Correa pointed out that Ecuador is one of seven countries to have “subscribed in absolute terms” to all of the Inter-American human rights instruments, noting that:

Here, torture is not allowed, there is no death penalty, we have not invaded anyone at all, no drone and selectively killing terrorism suspects without trials, along with "collateral damage" as family, neighbors, etc. In Ecuador, as in all true State of Law, we pursue crime, not people, but precisely because it is already a real State of Law, and no one can be above the Law, which disturbs the supremacy powers.

Correa noted that only 24 of 34 states have ratified the “fundamental document” of the American Convention on Human Rights – the “San Jose Pact” that led to the creation of two bodies, the Inter-American Court of Human Rights and the Inter-American Commission on Human Rights. Consequently, he states, only for those 24 countries are the organizations’ decisions binding.

The strong asymmetry between countries attached to the Convention versus those who finance and manage, has come to a completely perverting tool that was initially developed for the benefit of each and every American. Instead of this, some countries plan to intervene in other countries, while judges hide behind immunity by not being under the jurisdiction of the system and especially of the Court.

Correa pointed out a number of contradictions within the Inter-American system, such as that the Inter-American Commission is based in “a country that is not a part of the Inter-American Human Rights System, and that has ratified none of the inter-American human rights instruments” – the United States.

One of the reasons that many proponents give for supporting a financial transactions tax (FTT) is that it will reduce trading volume in financial markets. This can be considered good for two reasons.

First it may reduce the likelihood of erratic fluctuations that have no basis in the fundamentals like the flash crash in the spring of 2010. The existence of a huge amount of rapidly traded assets can create this sort of sudden divergence from fundamental driven prices. Reducing trading volume may reduce the probability of similar occurrences.

The other reason that a reduction in trading volume is desirable is that it would reduce the amount of resources wasted in the financial sector. The labor and capital absorbed in trading are resources that could in principle be used productivity elsewhere in the economy. If greater trading volume does not in some way result in the better allocation of capital then we should be pleased to the extent that an FTT reduces trading volume in various markets.

For this reason, a paper published by the CATO Institute last summer showing that a FTT would lead to a sharp decline in the trading of futures should not be seen as negative from the standpoint of proponents of FTTs.[1] Unfortunately, the paper did not accurately measure the decline in trading volume that would result from a tax, leading to an overstatement of the actual decline that would be implied with the tax rate and elasticities assumed in the paper. This mistake wrongly leads the paper to conclude that several major future markets would disappear even with a low tax rate. When a correct calculation is done, it can be shown that this is not true.

The paper’s mistake is a simple one. Elasticities are usually calculated as point elasticities, which relate the change in quantity that would result from a small change in price. For most questions we ask, where we consider price changes that are relatively small (say under 20 percent) using a point elasticity will give us a reasonably good approximation of the change in quantity that would result from the change in price being considered.

However for large changes of the type considered in this paper (all the changes in the price of transactions resulting from the FTT are far more than 100 percent of the current cost of transactions) it is necessary to be more careful in the calculation.

According to reports on Twitter yesterday, the United Nations independent expert on the human rights situation in Haiti, Michel Forst has resigned for “personal reasons,” even though his mandate was supposed to continue for another year. In one of his last acts, Forst’s report for the U.N. Human Rights Council was presented yesterday, recommending to Haiti and the international community that they “throw light” on the cause of the cholera outbreak and “respond to any compensation requests”. The cholera outbreak has killed at least 8,050 and sickened over 650,000 more.

In his report Forst notes that the “question of what caused the outbreak of the epidemic in Haiti remains a burning issue that has attracted significant public controversy.” Over the last few years, a number of scientific reports have identified U.N. troops as the source of cholera’s introduction. Forst’s report, which was issued before the U.N.’s denial of victims’ compensation claims, notes “that silence is the worst response.”

The U.N. broke their “silence” on the issue by rejecting the victims’ claims, yet they have continued to stonewall on the issue of responsibility. While Forst “deplores” the exploitation of the issue by “certain organizations…for political ends,” he recognizes the “need that victims or their families have expressed to know the truth and perhaps even to be given compensation.”

In addition to recommending shedding light on the cause of the outbreak, Forst also calls on the international community and Haitian government to, “Secure international assistance to combat the spread of the cholera epidemic.” The claim against the U.N., in addition to seeking damages, also asks for the U.N. to fund the needed infrastructure to eradicate cholera from Haiti. A 10 year, $2.2 billion eradication plan has been announced, but thus far the funding for it remains in doubt. The plan for the first two years notes that “The total cost for implementation of the Action Plan for 2013–2015 is estimated to be US$443,723,100.” So far, little more than half of that - $238 million - has been secured, most of it from existing funds.

On Sunday, the New York Times editorial board added their voice to those critical of the U.N.’s immunity claim, noting that the U.N.’s “handling of cholera is looking like a fiasco.” The Times adds:

While it insists that it has no legal liability for cholera victims, it must not duck its moral obligations. That means mobilizing doctors and money to save lives now, and making sure the eradication plan gets all the money and support it needs.

Its record so far is dubious. A U.N. appeal last year for $24 million for cholera programs ended the year only 32 percent financed, and in December, the U.N. said it would contribute $23.5 million to the new 10-year plan — about 1 percent of what is needed.

Mark Weisbrot Al Jazeera English, 17 de março, 2013Em inglês | Em espanhol

An important new investigative report from the Associated Press’ Alberto Arce describes the apparent ongoing activities of death squads within the Honduran police, reporting that:

In the last three years, the AP has learned, Honduran prosecutors have received as many as 150 formal complaints about death squad-style killings in the capital of Tegucigalpa, and at least 50 more in the economic hub of San Pedro Sula. The country's National Autonomous University, citing police reports, has counted 149 civilians killed by police in the last two years, including 25 members of the 18th street gang.

The AP report also describes a now-infamous and disturbing video (posted here) that appears to show the extrajudicial, cold-blooded murders of two young men in city streets “by masked gunmen with AK-47s who pulled up in a large SUV” – consistent with the police death squad modus operandi as described in the article.

Arce writes that “Even the country's top police chief has been charged with being complicit,” going on to summarize charges against Juan Carlos “El Tigre” Bonilla, now the National Chief of Police, for involvement in extrajudicial killings and disappearances back in 2002. Arce notes that “Last year, Bonilla was chosen to lead the national police force despite unanswered questions about his past. The U.S. Congress decided to withhold State Department funding to the police while they investigated the 2002 internal affairs report.”

A confidential 2003 State Department cable made available by Wikileaks reveals that State Department officials wanted Bonilla (then a fugitive) arrested at the time, and also were concerned with “extra-judicial killings of youth” – in which Bonilla was implicated:

¶12. (C) In his meeting with Minister of Public Security Oscar Alvarez, [Western Hemisphere Affairs Deputy Assistant Secretary Dan] Fisk urged Alvarez to take action against corrupt police, to send a strong signal about impunity by arresting fugitive policeman Juan Carlos "Tiger" Bonilla, and to act carefully against whistle-blowers, such as ex-Chief of Police Internal Affairs Maria Luisa Borjas. He also encouraged Alvarez to address the problem of extra-judicial killings of youth and trafficking in persons.

On Saturday March 16^th, a weekly newspaper from Spain, Cambio16, published an interview with jailed former Argentine dictator Jorge Rafael Videla. Videla is serving two life sentences, another 50-year sentence, and continues to stand trial, for crimes against humanity, kidnapping, torture, and the unlawful appropriation of babies (that were taken from female prisoners who gave birth in captivity before they were murdered). These were crimes that he and fellow junta leaders committed following the 1976 coup d’état that they directed and that was responsible for the kidnapping, torture and deaths of an estimated 30,000 Argentines. 

When his interviewer, Ricardo Angoso, whom Página/12 points out is a stated opponent of the Kirchner government and far-right journalist, asked him what he would say to his “comrades” also serving time in prison for similar convictions, he stated:

I want to remind each one of them, especially the younger ones, who today on average fall between the ages of 58-68, and are still physically capable of combat, that in the case that this unjust imprisonment and slandering of the republic’s basic values continues, you reserve the duty of arming yourselves again in defense of the republic’s basic institutions, which are today being trampled upon by the Kirchner regime, led by president Cristina and her henchmen.*

According to Página/12, Videla also accuses the current government of wanting to turn towards a “failed communism of the Cuban sort.” He then declares that “it will again be the security and armed forces who, along with the people –from which they [the security and armed forces] originate- will impede it”. 

An op-ed in Bloomberg Businessweek yesterday lays out the case for USAID reform, highlighting the case of contractors in Haiti (and citing this blog) as an example. The piece, by Charles Kenny of the Center for Global Development, also examines the politi

Dean Baker
Truthout, March 18, 2013

David Brooks has trouble with issues of logic and arithmetic as he frequently demonstrates in his column. His criticisms of the Congressional Progressive Caucus (CPC) budget suffer badly from this problem.

The piece begins by telling readers that the CPC has broken with past liberalism by seeing the government, rather than the private sector, as the engine of growth. His basis for this argument is that the CPC proposes a large program of public investment to restore the economy to full employment. Brooks distinguishes this spending from prior efforts at stimulus:

"liberals have always believed in Keynesian countercyclical deficit spending. But that was borrowing to brake against a downturn when certain conditions prevail: when the economy is shrinking; when debt levels are low; when there are plenty of shovel-ready projects waiting to be enacted; when there is a large and growing gap between the economy’s current output and what it is capable of producing.

"Today, House progressives are calling for a huge increase in government taxing and spending when none of those conditions apply. Today, progressives are calling on government to be the growth engine in all circumstances. In this phase of the recovery, just as the economy is finally beginning to take off..."

Let's see, Keynes advocated large amounts of spending when the debt to GDP ratio in the United Kingdom was well over 100 percent. (FWIW, our interest to GDP ratio is extraordinarily low.) He also advocated this spending when the economy was not shrinking, it was just stagnant or growing slowly at a time when there was mass unemployment and the economy was far below its potential. Maybe Brooks doesn't consider Keynes a Keynesian.

March 2013, Dean Baker and Nicole Woo