Monday, January 16, 2012

Insight: Rivals set to pounce on Santorum's past (Reuters)

ATLANTA (Reuters) ? Rick Santorum's last-minute surge in the Iowa caucus brought him neck-and-neck with Mitt Romney in the first contest of the 2012 race to select a Republican presidential candidate. But it came too late to attract the harsh scrutiny usually visited on front-runners.

Only in recent days have questions emerged about his stand on abortion, his votes in Congress, and his endorsements of Romney over John McCain in 2008, and Senator Arlen Specter over Pat Toomey in 2004.

If rival candidates decide to go negative on Santorum - as they have on Newt Gingrich and Ron Paul -- they have plenty of material with which to work.

Santorum is beloved among "values voters" for his stand on abortion, gay marriage and other social issues. But his record is rich in polarizing policy positions and questionable associations that support the charge of "Washington insider."

For example, his million-dollar-plus 2010 income included payments from a lobbying firm, an energy company engaged in controversial "hydrofracking" and a hospital conglomerate that was sued for allegedly defrauding the federal government.

"The spotlight is blinding, and if you squint or stumble even slightly, it gets even more intense," said Dan Schnur, a former Republican campaign consultant who now heads the Jesse M. Unruh Institute of Politics at University of Southern California. "Santorum hasn't faced it yet, but it's about to hit him in a huge way."

Santorum says he's ready. "This isn't my first rodeo. I've been in tough races," Santorum said Monday in Iowa. "I've had the national media crawling up anywhere they could crawl. ... It's not going to be fun."

EARMARKS

Texas Governor Rick Perry fired an opening salvo last weekend, charging that Santorum, 53, was a big spender in Congress who voted to raise the debt ceiling and approved such pork-barrel projects as Alaska's Bridge to Nowhere, a tea pot museum in North Carolina and an indoor rain forest in Iowa. (http://link.reuters.com/nug85s)

Santorum, a lawyer with working-class roots, was 32 when he was first elected to Congress in 1990 from a western Pennsylvania district. He served two terms in the House of Representatives before being elected to the Senate. He served two Senate terms from 1995-2007, before losing his seat in a landslide.

Santorum declined to comment for this article, but on other occasions he has defended his earmarks. "Congress appropriates money," Santorum told "Good Morning America" this week. "That is what Congress is supposed to do."

As a senator, Santorum went further, playing a key role in an effort by Republicans in Congress to dictate the hiring practices, and hence the political loyalties, of Washington's deep-pocketed lobbying firms and trade associations, which had previously been bipartisan.

Dubbed "the K Street Project" for the Washington street that houses most of these groups, the initiative was launched in 1989 by lobbyist Grover Norquist, whose sole aim, he said, was to encourage lobbying firms to "hire people who agree with your worldview, not hire for access."

But the rubric "K Street Project" came to encompass the entire climate of cozy cooperation between Republicans and lobbyists.

When Republicans won control of the House in 1994, House Majority Leader Tom Delay and others organized regular meetings with lobbyists that reviewed K Street job openings with an eye toward filling them with party loyalists, who would in turn steer support and donations to the members.

By 2001, Sen. Santorum was also holding one-hour breakfast meetings with lobbyists on alternating Tuesday mornings at 8:30 a.m.

In 2004 he denied being involved with Norquist's effort to staff K Street. But Santorum convened Senate Republicans to discuss the appointment of Democrat Dan Glickman as head the Motion Picture Association, according to Roll Call, a newspaper covering Capitol Hill.

"Yeah, we had a meeting, and yeah, we talked about making sure that we have fair representation on K Street. I admit that I pay attention to who is hiring, and I think it's important for leadership to pay attention," he told the paper at the time.

In 2006, as the influence-peddling scandal that sent lobbyist Jack Abramoff to jail unfolded, Santorum said he was ending the breakfasts in his conference room. However, his staff confirmed to Washington newspapers that they resumed almost immediately, on the same day and at the same time, at a location off the Capitol grounds.

Abramoff never attended Santorum's breakfasts. "I was focused on the House," he told Reuters. Yet the mushrooming scandal about Abramoff's activities cast a harsh light on all aspects of the lobbyist huddles on Capitol Hill.

Citizens for Responsibility and Ethics in Washington, a liberal government watchdog group, named Santorum among three "most corrupt" senators in 2005 and 2006, accusing him of "using his position as a member of Congress to financially benefit those who have made contributions to his campaign committee and political action committee." (Link to 2006 report: http://link.reuters.com/wug85s)

LIFE AFTER CONGRESS

The blowback from the K Street Project contributed to Sen. Santorum's crushing 18-percentage-point defeat in his 2006 reelection bid. His image as a conservative firebrand who made polarizing comments about abortion, gays and single mothers played a role as well, as did Santorum's full-throated support of the war in Iraq.

A few weeks after he left Congress, although his law license had expired, Santorum landed a job in the Washington office of Pittsburgh-based law firm Eckert Seamans. Lawyers at the firm had given Santorum 45 political contributions totaling $24,400 while he was in Congress, according to data compiled by the Center for Responsive Politics.

As senator, Santorum "was a friend of the firm," said Timothy Ryan, Eckert Seamans' chief executive officer. Santorum helped make introductions and did other "relationship work," including providing Eckert Seamans' clients with business and strategy counseling, Ryan said.

Since then, thanks to his political contacts, Santorum has cobbled together a comfortable living as a political pundit, policy advocate and corporate consultant. His 2010 financial disclosure form shows that the self-described "grandson of a coal miner" earned at least $900,000 that year.

* Fox News paid him $239,153 to appear as an occasional contributor;

* Radio Salem paid him $83,999 to serve as a guest host on "Bill Bennett's Morning in America" radio show;

* The Philadelphia Inquirer paid him $23,000 as a freelance columnist.

* The Ethics and Public Policy Center, a conservative advocacy group, paid him $217,385 as a senior fellow.

Santorum also collected a total of $332,500 in consulting fees from three corporations:

* $65,000 from the American Continental Group lobbying firm

* $142,500 from Consol Energy

* $125,000 from the Clapham Group, a Virginia-based corporation started by longtime Santorum staffer Mark Rodgers. On its website, Clapham says its mission is to "influence culture upstream of the political arena."

"Rick's been around Washington for quite some time," American Continental president David Urban said. "When he looks at the tea leaves he may see things differently than others. We'd chat about which way different pieces of legislation might be heading. He is a very bright guy so I paid for his insight, and he's a friend, someone whose advice I could trust."

American Continental represents Microsoft, the American Gaming Association, Monsanto and the Association of Mortgage Investors among others.

A spokesperson for Consol Energy said that they "engaged Senator Santorum to provide strategic counsel on a variety of public policy-related issues."

The most high-profile issue for the company recently has been the gas mining technique called hydrofracking, which critics allege has in some places polluted ground water.

Santorum sang the technique's praises at a campaign stop in Iowa, saying that in Pennsylvania "we are drilling, baby, drilling."

In addition, Santorum served on the board of a for-profit hospital chain, Universal Health Services (UHS), where he received $341,000 in compensation from 2007 to 2010.

During Santorum's four years on the board, UHS's McAllen, Texas, hospital group was sued for defrauding Medicare through "illegal compensation to doctors in order to induce them to refer patients to hospitals within the group," according to a Justice Department press release in 2009. The McAllen group agreed to settle the lawsuit by paying $27.5 million.

The next year, the Justice Department sued a Virginia UHS facility that caters to boys ages 11 to 17 alleging that the facility "billed Medicaid for inpatient psychiatric care that was not provided, in violation of federal and state Medicaid requirements, and falsified records to cover up their serious violations."

When asked about the Virginia case. Santorum told Yahoo News, "Any investigation, you obviously engage and fully cooperate with it, and that's what we did.. that's part of the responsibility of directors."

He resigned from the UHS board in June 2011. During the third quarter of 2011, UHS reached a tentative financial settlement of the Virginia case. Allen Miller, president and CEO of UHS, is a longtime supporter of Santorum, who has contributed $6,850 to his campaigns and $11,000 to his leadership PAC since 1999.

America's Foundation is a leadership PAC, or political action committee, affiliated with Santorum since 1998. Leadership PACs were created so that congressional leaders could raise money for less senior candidates of their party, and they are not as closely monitored as other PACs by the Federal Election Commission (FEC).

Since 1998, America's Foundation has raised $11.8 million and given $1.1 million - or 9 percent to candidates, according to the Center For Responsive Politics. Most of the money has been spent on direct mail fundraising appeals on various issues.

Also during his 2006 reelection bid, Santorum's supporters created a different sort of political action group they named Softer Voices. As a "527" organization under Internal Revenue Service rules, Softer Voices was able to accept unlimited contributions from a small group of wealthy donors.

Because Santorum was struggling with women voters, the group created a website with testimonials from women. The FEC then chided the group for not registering as a political operation, and Softer Voices chose to cease operations.

IT TAKES A FAMILY

A devout Catholic with seven children, Santorum has taken positions on many social issues that may not play well with moderate voters and others that may trouble the conservative base.

He has vowed to reinstate the Don't Ask Don't Tell policy on gays in the military and annul all gay marriages, which are legal in New Hampshire, the site of the next Republican primary.

He opposes legal abortion, yet he supported a bill that allows it in the case of rape or incest or danger to the mother, telling David Gregory on Meet the Press last week that this was a calculated compromise to move toward the greater goal of ending abortion.

Similarly, he endorsed fellow Pennsylvanian, Sen. Arlen Specter, who is pro-choice, over anti-abortion primary challenger Pat Toomey in 2004. That move became even more offensive to conservatives when a victorious Specter went on to switch parties and cast a crucial vote for President Obama's health care plan.

Santorum has said his was a "political decision" based on his calculations of how to best influence upcoming Supreme Court appointments.

Santorum presents family values as the cornerstone of his political convictions. But here, too, his behavior might alienate as many voters as it attracts.

In 1996, after his wife, Karen, gave birth to a child who lived just two hours, the Santorums brought the dead baby Gabriel home to meet the other children, which Karen subsequently described in a book.

The Santorums are also proud homeschoolers. They moved to a Virginia suburb of Washington DC as soon as he was elected to the Senate in 1995, but still cost their Pennsylvania school district more than $100,000 because their children were enrolled in an online charter school based there from 2001-2005.

The district was required to pay the tuition of students who attended this type of school via the Internet. The state of Pennsylvania eventually covered some of these education costs. Santorum's defense was that he still owned a house in the district and paid property taxes. But this issue, too, became a factor in his ill-fated 2006 reelection campaign.

In that race, against Democrat Bob Casey, Jr., the attacks were coming so fast and furious that Santorum decided to issue a pamphlet, titled "50 Things You May Not Know About Rick Santorum." (http://link.reuters.com/gyg85s)

In an effort to soften his image as a hard-line social conservative, it touted Santorum's efforts to raise the minimum wage, expand stem-cell research, battle AIDS, guarantee Social Security benefits, protect Food Stamps, and increase funding for the Head Start preschool program. It also advocated passing tough new lobbying laws

The pamphlet no longer appears on any of Santorum's websites, and its claims often appear at odds with his behavior in Congress - where, for example, he advocated privatizing social security and condemned federal funding for stem cell research.

But in the overheated climate of today's opposition research, it is likely to provide ammunition to Santorum's opponents on both his left and his right.

(Editing by Lee Aitken and Derek Caney)

Source: http://us.rd.yahoo.com/dailynews/rss/gop/*http%3A//news.yahoo.com/s/nm/20120115/pl_nm/us_campaign_santorum

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9 Ways to Reduce Breast Cancer Risk | Care2 Healthy Living

There are many great anti-cancer foods and lifestyle changes that can reduce your risk of getting breast cancer, but here are some simple ones you can incorporate into your life right away:

1. Increase the fiber in your diet since high fiber diets have been shown to decrease breast cancer risk by up to 54 percent. That could be because fiber binds to harmful substances in the intestines and escorts them out of the body.? Increasing fiber in your diet is easy: sprinkle flax seeds on your toast or cereal, choose whole grains over refined, add beans to soups and stews, and snack on almonds through the day.

2.? Add sea vegetables to your diet.? Research by Jane Teas, Ph.D., of the Harvard School of Public Health shows that rats fed kelp had less breast cancer than rats who were not fed kelp.? Kelp and other forms of seaweed are full of nutrients, reduce radioactive waste in our bodies, and strengthen the glands.

3.? Eat more cruciferous vegetables like broccoli, Brussels sprouts, cauliflower, and cabbage.? They contain sulfur compounds called indoles, which help eliminate excess estrogen from the body and prevent it from triggering the growth of breast cancer. ?Indole-3-carbinol (I3C) is particularly powerful at inhibiting cancer cell development in the breasts. Cruciferous vegetables convert cancer-promoting forms of estrogen to protective forms according to Dr. Gaynor, author of Dr. Gaynor?s Cancer Prevention Program One particular indole, indole-3-carbinol (13C), inhibits the development of potentially cancerous cells in the breast.

Keep reading to learn about the fats that increase breast cancer risk and those that reduce risk?

Source: http://www.care2.com/greenliving/9-ways-to-reduce-breast-cancer-risk.html

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Sunday, January 15, 2012

Romney rivals seek SC theme, champion to stop him (AP)

CHARLESTON, S.C. ? With a week left to halt Mitt Romney from sweeping to a third straight victory, his GOP rivals are struggling in South Carolina for a theme, momentum and most crucially, one strong challenger to consolidate conservatives' misgivings about the front-runner.

The dynamics that lifted Romney to wins in Iowa and New Hampshire seem to be working for him here, even though South Carolina is often described as too evangelical and culturally southern for his background.

In some ways, the former Massachusetts governor is lucky, benefitting from a fractured opposition that has divided the anti-Romney vote for months. In other ways he is benefiting from shrewd and well-organized supporters. He uses TV ads to shore up his weaknesses and to batter the rivals he sees as most threatening.

In Iowa, the target was former House speaker Newt Gingrich, who plummeted under the barrage. In South Carolina, it's former Sen. Rick Santorum, a longtime champion of home-schooling, anti-abortion efforts and other social conservative causes.

Santorum nearly won the Iowa caucus, and some consider him the best bet for unifying the anti-Romney vote.

But a private group that supports Romney is pounding Santorum in South Carolina with TV ads and mailings. So is Rep. Ron Paul, the libertarian-leaning candidate who helped attack Gingrich in Iowa.

Paul's ads are especially harsh. They vilify Santorum for pushing pork-barrel projects as a Pennsylvania senator, and they portray him as an insincere conservative.

A group of social conservative leaders meeting in Texas voted Saturday to recommend Santorum as the Romney alternative. But a portion of them preferred Gingrich, who denied Santorum a two-thirds majority on their first head-to-head ballot, said Tony Perkins, president of the Family Research Council.

Perkins said the group's actions did not constitute an endorsement, adding that some participants will remain Gingrich supporters. He declined to say how he voted.

"Santorum was the preferred candidate by a significant majority," former presidential candidate Gary Bauer told The Associated Press by telephone from Texas. "They were all looking for the best Reagan conservative," he said. "It came down to things like, who do you most trust."

The Texas vote is obviously good news for Santorum. But it's unclear how much impact it will have in South Carolina's primary on Saturday.

The state is known for campaign surprises, and there's still time for twists and turns. Undercurrents of anti-Romney sentiment, perhaps fueled by his Mormonism, could be stronger than they seem.

But on the surface, at least, Romney is well-positioned with a week to go. If he wins South Carolina, only a seismic change in the campaign will keep him from becoming the nominee.

The next primary, on Jan. 31, is in Florida, a sprawling and expensive state where Romney's superior money and organization could essentially put the matter to rest, kicking off the general election against President Barack Obama.

"Romney is in good shape now, but the race is tightening," said LaDonna Ryggs, Spartanburg County GOP chairwoman.

There is little evidence that a barrage of ads depicting Romney as a heartless corporate raider is having much effect. He is airing a counter-ad defending his record at Bain Capital, which sometimes created jobs, and sometimes reduced them, when it restructured dozens of companies in the 1980s and `90s.

"That's what his job was, and he did it well," said Carleen Coffey, 51, who defended Romney even as she attended an event for Texas Gov. Rick Perry in Charleston.

The anti-Romney ad, aired by a group supporting Gingrich, has generated much comment in political and media circles. Many conservative leaders have condemned it, and Gingrich later back-pedaled, questioning the accuracy of the anti-Romney documentary film behind it.

For ordinary South Carolina Republicans, however, the ad risks being lost in an avalanche of TV commercials, which many voters say they ignore. Romney's campaign events run like clockwork, while his opponents often suffer glitches and modest crowds. Gingrich, in particular, has left people scratching their heads.

He spoke at a home-ownership rally Thursday in Columbia that appeared to be dominated by Democratic speakers and attendees. Gingrich got a big introduction at a GOP barbecue Friday in Duncan, but he inexplicably didn't show up for many minutes. Santorum jumped into the void, working the room and getting valuable one-on-one time with voters.

Then on Saturday, Gingrich's scheduled telephone conference with voters never took place. The dial-in number was invalid.

Perry has faded. Once seen having a good chance to beat Romney in South Carolina, the drawling Texan is drawing small crowds at cafes and restaurants. Saturday morning in Mount Pleasant, about half the people at Page's Okra Grill didn't bother to stop eating or talking while Perry spoke in a corner.

The TV attack ads in South Carolina skip Perry. It's a sign of his perceived insignificance, although he could benefit if the others slice each other up.

Former Utah Gov. Jon Huntsman is getting even less attention.

Some people think Santorum is rising, but the attack ads might slow him. Santorum's boyish looks have always boosted his image as a principled crusader for unborn children and other causes. But the ads being aired by Paul's campaign and the pro-Romney group depict him as a conniving, old-fashioned politician who grabbed federal money for his state whenever possible.

"Some people are going to be swayed," said Alexia Newman, a South Carolina GOP activist and Santorum supporter. "If you know about his records, you know the ads are false," she said. But that requires Santorum to break through the noise and clutter of political commercials flooding the airwaves.

The pro-Romney PAC, Restore Our Future, is running $1 million in ads in the state this week, and more than $800,000 next week. Not all of them target Santorum, however. Santorum's campaign and a PAC that backs him are running pro-Santorum ads.

No single issue is dominating the primary. That makes it harder for any one Romney opponent to catch fire.

Religion and the military play bigger roles here than in Iowa, and especially New Hampshire. Romney has worked hard to address both.

He has built several events around military service, starting with his Veterans' Day trip to South Carolina last November. He has been campaigning lately with Sen. John McCain, the 2008 presidential nominee and Vietnam War hero.

As for religion, Romney has tried to portray himself as a moral and faithful man, without going into details of Mormonism. On Friday, a woman in Hilton Head asked him, "Do you believe in the divine saving grace of Jesus Christ?"

"Yes, I do," Romney replied, adding: "Our nation was founded on the principle...of religious tolerance and liberty in this land, and so we welcome people of other faiths."

Romney's campaign has produced a Web ad in which an anti-abortion activist endorses him. Romney supported abortion rights as Massachusetts governor.

Romney's main worries might involve currents he can't see. South Carolina has a reputation for dirty campaign tricks, although many Republicans here say it's mostly a thing of the past.

Whatever the case, an anonymous group has sent a text message purporting to be a Romney campaign item. But callers hear Romney being criticized on abortion.

___

Associated Press writers Julie Pace, Jim Davenport, Kasie Hunt and Philip Elliott contributed to this report.

Source: http://us.rd.yahoo.com/dailynews/rss/topstories/*http%3A//news.yahoo.com/s/ap/20120115/ap_on_el_pr/us_gop_campaign

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Image of 13-Ton Russian Spacecraft As It Falls to Earth—Impact As Early As Tomorrow [Space]

The Fraunhofer Institute for High Frequency Physics and Radar Techniques has taken this hot picture of the Russian Mars 13-ton probe Phobos-Grunt as it falls to planet Earth. It may hit tomorrow, but we still don't know where. More »


Source: http://feeds.gawker.com/~r/gizmodo/full/~3/0TGjhga1Ys4/falling-russian-spacecraft-photographedimpact-as-early-as-tomorrow

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Saturday, January 14, 2012

World stocks waver as China inflation disappoints (AP)

BANGKOK ? World stock markets wavered Thursday amid inflation data in China that failed to meet expectations and fears of a possible recession in Europe.

Benchmark oil rose above $101 per barrel while the dollar fell against the euro but rose against the yen.

Stocks failed to find firm direction early in Europe. Britain's FTSE 100 fell marginally to 5,668.61 while Germany's DAX rose 0.2 percent to 6,167.10 and France's CAC-40 gained 0.4 percent to 3,218.37. Wall Street braced for a lower opening, with both Dow Jones industrial futures and the broader S&P 500 futures down less than 0.1 percent to 12,381 and 1,287.30 respectively.

Equity markets in Asia lost ground earlier in the day.

Japan's Nikkei 225 Index fell 0.7 percent to close at 8,385.59, while Hong Kong's Hang Seng drifted 0.3 percent lower to 19,095.38. Australia's S&P ASX 200 fell 0.2 percent to 4,181.

Mainland Chinese shares also fell, with the benchmark Shanghai Composite Index down marginally to 2,275.01 and the smaller Shenzhen Composite Index shedding 0.4 percent to 876.81. Shares were hurt by data released Thursday that showed China's inflation eased only slightly in December to 4.1 percent, from November's 4.2 percent. Analysts had hoped to see more improvement.

The decline in Chinese inflation "is less than expectations, so the market is a little disappointed that it did not fall below 4 percent," said Francis Lun, managing director of Lyncean Holdings in Hong Kong. "I think we can say the worst of inflation is over for now, but what looms over the horizon may not be good."

Politically sensitive food costs accelerated to 9.1 percent from November's 8.8 percent, making it problematic for Beijing to take steps to stimulate slowing economic growth. The December rise in Chinese food costs was driven by a 21.3 percent jump in the price of pork, the country's staple meat, and a 6.9 percent jump in grain prices.

Analysts blame the price surge on strong consumer demand and the flood of money from Beijing's multibillion-dollar stimulus that helped China rebound quickly from the 2008 global economic crisis.

Meanwhile, growth problems in Europe continued to spook investors. Germany reported Wednesday that its economy shrank slightly at the end of last year. And the European Union revised its figures for economic growth in the third quarter to 0.1 percent, its slowest pace in more than two years.

A recession on the continent could slam many export-reliant Asian companies, which are already battered by weak global demand. In Japan, Toyota Motor Corp. fell down 1.2 percent and Nissan Motor Corp. lost 1.5 percent. Electronics giant Sharp Corp. dropped 3.1 percent. Panasonic Corp. gave up 2.5 percent.

China's export growth has fallen steadily since August, raising the threat of more bankruptcies and job losses among struggling exporters. Industry indicators show manufacturing and export orders contracted in November and December and growth in China's imports of raw materials showed an unexpectedly sharp decline in December.

Shares of Indian outsourcing giant Infosys fell 7.6 percent, after the company said the global economic slowdown and chaos in Europe would hurt growth.

On Wall Street, the Dow Jones Industrial Average dropped 13.02 points, or 0.1 percent, to close at 12,449.45. The S&P 500 gained marginally to 1,292.48. The tech-heavy Nasdaq composite index rose 0.3 percent to 2,710.76.

In energy trading, benchmark crude for February deliver rose 68 cents to $101.56 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.37 to end at $100.87 per barrel on the Nymex on Tuesday.

The euro rose to $1.2718 from $1.2697 late Wednesday in New York. The dollar rose to 76.95 yen from 76.87 yen.

Source: http://us.rd.yahoo.com/dailynews/rss/asia/*http%3A//news.yahoo.com/s/ap/20120112/ap_on_re_as/world_markets

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MMP Blog #31: FUNCTIONAL FINANCE: Monetary and Fiscal Policy ...

New Economic Perspectives: MMP Blog #31: FUNCTIONAL FINANCE: Monetary and Fiscal Policy for Sovereign Currencies

MMP Blog #31: FUNCTIONAL FINANCE: Monetary and Fiscal Policy for Sovereign Currencies

By L. Randall WrayThis week we begin a new topic: functional finance. This will occupy us for the next several blogs. Today we will lay out Abba Lerner?s approach to policy. In the 1940s he came up with what he called the functional finance approach to policy. In one of those amazing historical coincidences, Lerner happened to teach at UMKC when he published one of his most famous papers, laying out the approach. Maybe there is something special in the air in Kansas City?Lerner?s Functional Finance Approach. Lerner posed two principles:First Principle: if domestic income is too low, government needs to spend more. Unemployment is sufficient evidence of this condition, so if there is unemployment it means government spending is too low.Second Principle: if the domestic interest rate is too high, it means government needs to provide more ?money?, mostly in the form of bank reserves.The idea is pretty simple. A government that issues its own currency has the fiscal and monetary policy space to spend enough to get the economy to full employment and to set its interest rate target where it wants. (We will address exchange rate regimes later; a fixed exchange rate system requires a modification to this claim.) For a sovereign nation, ?affordability? is not an issue?it spends by crediting bank accounts with its own IOUs, something it can never run out of. If there is unemployed labor, government can always afford to hire it?and by definition, unemployed labor is willing to work for money.
Lerner realized that this does not mean government should spend as if the ?sky is the limit??runaway spending would be inflationary (and, as discussed many times in the MMP, it does not presume that government spending won?t affect the exchange rate). When Lerner first formulated the functional finance approach (in the early 1940s), inflation was not a major concern?the US had recently lived through deflation in the Great Depression. However, over time, inflation became a serious concern, and Lerner proposed a form of wage and price controls to constrain inflation that he believed would result as the economy nears full employment. Whether or not that would be an effective and desired way of attenuating inflation pressures is not our concern here. The point is that Lerner was only arguing that government should use its spending power with a view to moving the economy toward full employment?while recognizing that it might have to adopt measures to fight inflation.Lerner rejected the notion of ?sound finance??that is the belief that government ought to run its finances as if it were like a household or a firm. He could see no reason for the government to try to balance its budget annually, over the course of a business cycle, or ever. For Lerner, ?sound? finance (budget balancing) was not ?functional??it did not help to achieve the public purpose (including, for example, full employment). If the budget were occasionally balanced, so be it; but if it never balanced, that would be fine too. He also rejected any attempt to keep a budget deficit below any specific ratio to GDP, as well as any arbitrary debt to GDP ratio. The ?correct? deficit would be the one that achieves full employment.

Similarly the ?correct? debt ratio would be the one consistent with achieving the desired interest rate target. This follows from his second principle: if government issues too much debt, it has by the same token issued too few bank reserves and cash. The solution is for the treasury and central bank to stop selling bonds, and, indeed, for the central bank to engage in open market purchases (buying treasuries by crediting the selling banks with reserves). That will allow the overnight rate to fall as banks obtain more reserves and the public gets more cash. Essentially, the second principle just says that government ought to let the banks, households, and firms achieve the portfolio balance between ?money? (reserves and cash) and bonds desired. It follows that government bond sales are not really a ?borrowing? operation required to let the government deficit spend. Rather, bond sales are really part of monetary policy, designed to help the central bank to hit its interest rate target. All of that is consistent with the modern money view advanced previously.Functional Finance versus Superstition. The functional finance approach of Lerner was mostly forgotten by the 1970s. Indeed, it was replaced in academia with something known as the ?government budget constraint?. The idea is also simple: a government?s spending is constrained by its tax revenue, its ability to borrow (sell bonds) and ?printing money?. In this view, government really spends its tax revenue and borrows money from markets in order to finance a shortfall of tax revenue. If all else fails, it can run the printing presses, but most economists abhor this activity because it is believed to be highly inflationary. Indeed, economists continually refer to hyperinflationary episodes?such as Germany?s Weimar republic, Hungary?s experience, or in modern times, Zimbabwe?as a cautionary tale against ?financing? spending through printing money.Note that there are two related points that are being made. First, government is ?constrained? much like a household. A household has income (wages, interest, profits) and when that is insufficient it can run a deficit through borrowing from a bank or other financial institution. While it is recognized that government can also print money, which is something households cannot do, these is seen as extraordinary behaviour?sort of a last resort. There is no recognition that all spending by government is actually done by crediting bank accounts?keystrokes that are more akin to ?printing money? than to ?spending out of income?. That is to say, the second point is that the conventional view does not recognize that as the issuer of the sovereign currency, government cannot really rely on taxpayers or financial markets to supply it with the ?money? it needs. From inception, taxpayers and financial markets can only supply to the government the ?money? they received from government. That is to say, taxpayers pay taxes using government?s own IOUs; banks use government?s own IOUs to buy bonds from government. This confusion by economists then leads to the views propagated by the media and by policy-makers: a government that continually spends more than its tax revenue is ?living beyond its means?, flirting with ?insolvency? because eventually markets will ?shut off credit?. To be sure, most macroeconomists do not make these mistakes?they recognize that a sovereign government cannot really become insolvent in its own currency. They do recognize that government can make all promises as they come due, because it can ?run the printing presses?. Yet, they shudder at the thought?since that would expose the nation to the dangers of inflation or hyperinflation. The discussion by policy-makers?at least in the US?is far more confused. For example, President Obama frequently asserted throughout 2010 that the US government was ?running out of money??like a household that had spent all the money it had saved in a cookie jar.So how did we get to this point? How could we have forgotten what Lerner clearly understood and explained?In a very interesting interview in a documentary produced by Mark Blaug on J.M. Keynes, Samuelson explained: ??????????????? "I think there is an element of truth in the view that the superstition that the budget must be balanced at all times [is necessary]. Once it is debunked [that] takes away one of the bulwarks that every society must have against expenditure ??????????????? out of control. There must be discipline in the allocation of resources or you will have anarchistic chaos and inefficiency. And one of the functions of old fashioned religion was to scare people by sometimes what might be regarded as myths into behaving in a way that the long-run civilized life requires. We have taken away a belief in the intrinsic necessity of balancing the budget if not in every year, [then] in every short period of time. If Prime Minister Gladstone came back to life he ?? would say "uh, oh what you have done" and James Buchanan argues in those terms. I have to say that I see merit in that view."The belief that the government must balance its budget over some timeframe is likened to a ?religion?, a ?superstition? that is necessary to scare the population into behaving in a desired manner. Otherwise, voters might demand that their elected officials spend too much, causing inflation. Thus, the view that balanced budgets are desirable has nothing to do with ?affordability? and the analogies between a household budget and a government budget are not correct. Rather, it is necessary to constrain government spending with the ?myth? precisely because it does not really face a budget constraint. The US (and many other nations) really did face inflationary pressures from the late 1960s until the 1990s (at least periodically). Those who believed the inflation resulted from too much government spending helped to fuel the creation of the balanced budget ?religion? to fight the inflation. The problem is that what started as something recognized by economists and policymakers to be a ?myth? came to be believed as the truth. An incorrect understanding was developed. Originally the myth was ?functional? in the sense that it constrained a government that otherwise would spend too much, creating inflation and endangering the dollar peg to gold. But like many useful myths, this one eventually became a harmful myth?an example of what John Kenneth Galbraith called an ?innocent fraud?, an unwarranted belief that prevents proper behaviour. Sovereign governments began to believe that the really could not ?afford? to undertake desired policy, on the belief they might become insolvent. Ironically, in the midst of the worst economic crisis since the Great Depression of the 1930s, President Obama repeatedly claimed that the US government had ?run out of money??that it could not afford to undertake policy that most believed to be desired. As unemployment rose to nearly 10%, the government was paralysed?it could not adopt the policy that Lerner advocated: spend enough to return the economy toward full employment. Ironically, throughout the crisis, the Fed (as well as some other central banks, including the Bank of England and the Bank of Japan) essentially followed Lerner?s second principle: it provided more than enough bank reserves to keep the overnight interest rate on a target that was nearly zero. It did this by purchasing financial assets from banks (a policy known as ?quantitative easing?), in record volumes ($1.75 trillion in the first phase, with a planned additional $600 billion in the second phase). Chairman Bernanke was actually grilled in Congress about where he obtained all the ?money? to buy those bonds. He (correctly) stated that the Fed simply created it by crediting bank reserves?through keystrokes. The Fed can never run out ?money?; it can afford to buy any financial assets banks are willing to sell. And yet we have the President (as well as many members of the economics profession as well as most politicians in Congress) believing government is ?running out of money?! There are plenty of ?keystrokes? to buy financial assets, but no ?keystrokes? to pay wages.That indicates just how dysfunctional the myth has become.Next week, we?ll show that some Kansas City air might have drifted northeast to the bastion of free market economics: the University of Chicago

Source: http://neweconomicperspectives.blogspot.com/2012/01/mmp-blog-31-functional-finance-monetary.html

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Friday, January 13, 2012

Dr. Pepper Killed Dr. Pepper [Wtf]

When Dr. Pepper sued Dr. Pepper, we joked that real life was imitating Coke Zero commercials, where a company sues itself as marketing humor. This deal with Dr. Pepper ain't no marketing joke. Dr. Pepper, the parent company, just killed off Dublin Dr. Pepper, the best version of Dr. Pepper there is. What the hell! More »


Source: http://feeds.gawker.com/~r/gizmodo/full/~3/3LyiokSaJZY/dr-pepper-killed-dr-pepper

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