See here.

Think it’s got a chance? It’ll take a miracle.

My, my, my. Everybody seems to be just full of questions for Federal Reserve Chairman Ben Bernanke. The questions I linked to yesterday were just the tip of the iceberg.

Barry Ritholtz

5) Do you think Fed policy could be having a perverse impact on the economy as the dollar weakens, food and energy prices increase, causing real wages and consumption to fall leading to weaker economic growth and deflation in other goods and services?

and

10) What do you think would have happened if the Fed had not taken the extraordinary steps it did during the financial crisis?

Dylan Ratigan is “crowdsourcing” questions. Yves Smith follows suit. There are scads of questions, mostly loaded and politically based, in the comments.

David Merkel:

5) How are you regulating banks differently now than you were in 2005?

and

10) Are you concerned that the Fed’s balance sheet is a record 16-17% of US GDP? If you begin to shrink your balance sheet, what will the effect be on the banks, lending and the general economy?

As I noted yesterday that’s a lot of attention being lavished on a guy who holds a job that our grandparents probably had never heard of. Yet more evidence that the financial sector has grown beyond any reason, counter-productively, and that the Federal Reserve should have some of the responsibilities that have accreted onto it over the years trimmed back.

When did the “common good” come to be synonymous with the specific good of a sizeable bloc of voters?

Andrew Samwick notes that today’s Republicans routinely reject proposals that were mainstream Republican policy positions twenty years ago and outlines a budget strategy I could get behind:

I would start my budget policy changes with letting the Bush-era tax cuts expire for everyone and cutting defense spending by at least 10%. I would then move to the entitlement programs, phasing in increases in eligibility ages and other benefit reductions linked to income. The small piece of the federal budget that’s “non-defense discretionary” would also see reductions, but that’s not where the heavy lifting can be done. I wouldn’t stop until the budget was in balance on average over the business cycle and the debt-to-gdp ratio was projected to remain steady at a number not larger than about 60 percent.

but I think he gives the president a little too much credit here:

Transported to a different era, Obama would have been a Rockefeller Republican — actively using the government’s powers to try to solve public policy problems and willing to go to the voters to get more revenues to do so.

Leaving the political strategery part aside (would Obama have been a Republican 30 years ago?), I’m skeptical that President Obama is “willing to go to the voters to get more revenues”. This is the Barack Obama who pledged not to increase taxes for those with incomes below $250,000, right? If it were so, why didn’t he seize the opportunity of letting the “Bush tax cuts” lapse? I know, I know. Fragile recovery. If the reduction in tax rates then didn’t produce economic stimulus, why would reversing those reductions produce dis-stimulus now? I don’t think you can have it both ways.

The Obama of the imagination continues to flourish. To my mind he’s just a guy who, like all the other guys, wants to be re-elected and has largely followed the lead of the last guy. I think it’s calculation, not conviction.

I think that Dr. Samwick is on target here:

What was not wildly successful was the impact of the 1990 budget deal on President Bush’s re-election campaign. If politicians are not rewarded at the polls for the choices they make, don’t expect other politicians to make similar choices.

Add to that the importance of the vast amounts of money that are needed to run a modern campaign for federal office and you’ve got our problems in a nutshell. The most highly motivated contributors and voters also tend to be the most radicalized.

This morning I took a table of GDP figures from the BEA and worked out the real year on year GDP growth in the United States from 2001 through 2010. I won’t bother posting my results here—they’re pretty boring. Someday I may stumble across some good charting software but even that wouldn’t help much with the presentation of this information—it’s still boring however presented. These aren’t identical to my figures but they’re pretty close.

The bottom line is that (using the BEA figures) we’ve averaged 1.8% real GDP growth for the last ten years and growth has ranged from right round 3% to less than -3%. Let’s get right to my observations and questions.

Both the Ryan and Obama (revised) budgets assume growth a lot higher than the growth we’ve experienced for the last decade. We’ve been in a bubble for the last decade. In fact it was during a bubble that had followed hard on the heels of a previous bubble. IMO bubbles do lasting harm to the economy via deadweight loss.

What level of GDP growth do you expect over the next few years? What level of real GDP growth do you expect over the next few years? If you expect real GDP growth in excess of 1.8%, where will it come from and why will it exceed the average level over the last decade?

What got me thinking along these lines was John Taylor’s graph of the differing budget plans independent of GDP (it’s the second graph down in the post). That’s a pretty fair analog of the the plans under a zero growth assumption, too.

Zero Hedge has twenty questions (plus two bonus questions) for Federal Reserve Chairman Ben Bernanke. Some of the questions are clearly rhetorica but some I’d genuinely like answers for. For example:

1. The rescue packages in 2008-2009 were all aimed at restoring CONFIDENCE to the financial system. Yet from 2001 to 2011 the DXY is down 41.5 and gold is up 473%. Does this not equate to a loss of confidence in the US monetary system? If not how would you explain this phenomena?

and

6. You have stated that you believe high food and fuel prices to be transitory. Can you define transitory? And define what you believe to be a return to normalcy for food and fuel prices.

Read the whole thing.

David Paul Kuhn at RealClearPolitics points to a study of Americans’ approaches to balancing the budget that calls the prevailing wisdom, that our collective views are childish and contradictory, into question. The short version is that

1. Majorities of both those who professed to be Republicans and Democrats found themselves able to bring the federal budget more closely into balance through a combination of tax increases and cuts to federal programs including entitlement programs.
2. Commonsense reforms to Social Security and Medicare, e.g. raising the eligibility ages, raising FICA max, were supported
3. Republicans had a more difficult time balancing the budget because they were more reluctant to increase taxes
4. Independents cut the deficit the most

Read the whole thing.

It ain’t what you don’t know that will hurt you. It’s what you do know that just ain’t so.

I’ve just published a foreign policy-related post at Outside the Beltway:

NYT: Put Boots on the Ground in Libya

The mission in Libya is creeping right along and today the New York Times editorializes in favor of U. S. advisors and military air traffic controllers on the ground in Libya. I find their reasoning confused.

TaxProf notes that the large law firms have laid off roughly 2,900 lawyers in 2010:

The NLJ 250, The National Law Journal’s annual survey of the nation’s largest law firms, shows that Big Law continued to shed lawyers at a brisk clip in 2010. Nearly 2,900 fewer lawyers worked for the 250 top firms last year. That’s in addition to the approximately 6,600 attorneys who departed in 2009. In the 34 years the NLJ has been surveying large firms to gather headcount numbers, there have never been multiyear declines of this magnitude.

I began comparing total number of lawyers employed in by the big firms in Chicago in 2008 to see if I could ferret out what was really happening. Among the Chicago law firms some Baker McKenzie has added 100 lawyers, DLA Piper has laid off 400, Mayer Brown has laid off 150, Sidley Austin more than 200, and so on.

However, it’s when you turn to the large New York firms that you see really substantial numbers of layoffs (400 from Latham &Watkins, 400 from Skadden, and so on) andthe big LA firms show a similar pattern, this despite the Chicago firms being significantly larger to start with.

It appears to me that in the cases of the LA firms the declines reflect the general softness in the California economy while in New York the layoffs undoubtedly reflect the fortunes of the financial sector, particularly some of the large investment banks. Remember Lehman?

What I’m suggesting is that I think we should be cautious about over-interpreting the decline in the bullpens at these large firms. I’m sure it’s shocking to the young lawyers with a half million in education debts—they’re never going to make the kind of money at a smaller firm or in a sole proprietorship that they would have as partners at these big firms.

But I’m not sure that we can conclude that the continuing layoffs reflect some kind of sea change in the fortunes of the practice of law, generally. Rather we may be seeing the decline whether temporary or permanent of New York and Los Angeles.