Ezra Klein writes:

[I]magine if Congress is able to extend the deficit-busting Bush tax cuts but not unemployment benefits. But that, of course, is what most people think they're going to do. This will be a test for any politician who claims to care about the deficit. If they're willing to let the tax cuts expire -- a tough decision, given the politics of taxes -- it's good evidence that they're serious about cutting the debt. If they're not willing to let the cuts expire, it's irrefutable evidence that they're not.

(Emphasis supplied.) A test for everyone, not just the pols. The most famous "deficit hawk" is Peter J. Peterson. Does anyone think he will be opposing a tax cut for the rich? You think he'll have David Walker out there beating the drums against a tax cut for the rich? Me neither.

Speaking for me only

We are now, I fear, in the early stages of a third depression. It will probably look more like the Long Depression than the much more severe Great Depression. But the cost — to the world economy and, above all, to the millions of lives blighted by the absence of jobs — will nonetheless be immense.

And this third depression will be primarily a failure of policy. Around the world — most recently at last weekend’s deeply discouraging G-20 meeting — governments are obsessing about inflation when the real threat is deflation, preaching the need for belt-tightening when the real problem is inadequate spending.

[. . . This is] the victory of an orthodoxy that has little to do with rational analysis, whose main tenet is that imposing suffering on other people is how you show leadership in tough times. And who will pay the price for this triumph of orthodoxy? The answer is, tens of millions of unemployed workers, many of whom will go jobless for years, and some of whom will never work again.

(Emphasis supplied.)

The government lowered its estimate of 1st quarter GDP growth:

The government lowered its estimate of how much the economy grew in the first quarter of the year, noting that consumers spent less than it previously thought.Gross domestic product rose by an annual rate of 2.7 percent in the January-to-March period, the Commerce Department said Friday. That was less than the 3 percent estimate for the quarter that the government released last month. It was also much slower than the 5.6 percent pace in the previous quarter.

[. . . Going forward . . .] inventory restocking will provide less of a boost to GDP. Another factor inhibiting growth will be a reduction in government spending. The impact of the federal stimulus program is expected to fade toward the end of the year. Economists also warn that state and local governments are likely to rein in spending and raise taxes as they struggle to close budget gaps. That was apparent in the latest GDP estimate, which showed state and local governments reducing their outlays by about 4 percent.

Will we have a second dip? Krugman thinks we will have a lost decade:

BP has announced "Top Kill" has failed to stop the oil leak:

BP is expected to announce that it will move on to its next option, known as LMRP. The procedure involves cutting off the failed, leaking riser at the top of the Lower Marine Riser Package on the blowout preventer to get a clean-cut surface on the pipe.

Then the company will install a cap with a sealing grommet that would be connected to a new riser from the Discoverer Enterprise drillship, with the hopes of capturing most of the oil and gas flowing from the well.

More here.

Update 4:00 pm MT : News conference is minutes away.

NYTimes:

The American economy added an unexpectedly strong 290,000 jobs in April, while the unemployment rate rose to 9.9 percent, the government said Friday.

U6 is 17.1%. Hopefully, job growth will accelerate.

The Dow Jones Industrial Average dropped a whopping 1,000 points at one pointtoday, it's biggest intra-day drop ever. It later rebounded somewhat so that the final drop was 347.80 points.

Algorhithms may be the culprit.

High-speed trading, which uses sophisticated computer algorithms based on specific scenarios to automate transactions at speeds in the millionths of a second, now accounts for about 60 percent of U.S. equity volume.

"The potential for giant high-speed computers to generate false trades and create market chaos reared its head again today," Senator Edward Kaufman said in a statement.

Or, it might have been circuit breakers. Bloomberg has more here.

Poor Arizona Iced Tea. They are trending on Twitter, with questions about a boycott. But, the company is located in New York.

IS THE COMPANY HEADQUARTERED IN ARIZONA?
No, it is located in Lake Success, New York. (Long Island)

WHY DID YOU NAME THE PRODUCT ARIZONA?
John Ferolito and Don Vultaggio, the two owners of the Company looked at a map to see where it was hot. At first they thought of naming it Santa Fe, then they focused on AriZona and the rest as they say, is history.

Last year, they were in Arizona on May 5 for Cinco de Mayo related events. It's a privately held company and Chairman Vultaggio still goes to work every day. I wonder if they'll soon be sorry they didn't name the product Santa Ee.

Let's hope so:

“I don’t think there’s much doubt that there will be a bank tax,” Senate Finance Committee Chairman Max Baucus told POLITICO. And more than ever, the Montana Democrat signaled that Congress will also crack down on wealthy hedge fund and private equity partners who shelter their income as capital gains — taxed at half the top 35 percent rate.

So say Sens. Sherrod Brown (D-OH), Bob Casey (D-PA), Ted Kaufman (D-DE) and Sheldon Whitehouse (D-RI):

Sens. Sherrod Brown, Ted Kaufman, Robert Casey and Sheldon Whitehouse are introducing a new financial-reform bill, the Safe Banking Act of 2010, to limit the size of the banks -- and, in the process, break up existing firms.

[. . .] The bill's central points:

* Imposing a strict 10 percent cap on any bank-holding-company’s share of the United States’ total insured deposits
* Reducing the maximum amount of non-deposit liabilities at financial institutions (to 2 percent of United States GDP for banks, and 3 percent of GDP for non-bank institutions)
* Setting into law a 6 percent leverage limit for bank-holding companies and selected non-bank financial institutions

These steps would require several of the largest banks to, in effect, break themselves up to come in under the limits that this law would create.

I fully endorse this proposal. It is precisely what is needed.

Speaking for me only

Goldman Sachs earnings:

Beset by accusations of securities fraud, Goldman Sachs nevertheless showed Tuesday that it was still very good at what it does best: making money. Earnings for the Wall Street giant rose 91 percent in the first quarter of 2010, to $3.46 billion [. . .] In addition, Goldman said it had set aside 43 percent of revenue in the first quarter for employee salaries and bonuses, down from 50 percent for the period a year ago.

(Emphasis supplied.) Let's do the math 0.43 X 3.46 billion = $1,487,800,000. [NOTE: The article states that 43% of revenues was set aside,which actually amounts to $5.5 billion set aside in compensation.] FOR ONE QUARTER!! To put this in perspective, you know that huge progressive win Chris Bowers at Open Left likes to talk about in the health bill? The money for community clinics? Well, the money to be spent for community clinics in one year is $478 million LESS than Goldman bonuses in six months (more likely, given my mistake between revenues and earnings, the amount paid to Goldman employees exceeds by more than double the amount spent yearly on community health clinics, the "great progressive victory" of the health bills).

Maybe, just maybe, the rich can afford to pay a few percent of the money the get to help sustain a government that saved their bacon. Just a thought.

Speaking for me only

I missed Simon Johnson and James Kwak appearing on Bill Moyers' show, but the transcript is available and well worth reading. I have been focused on the question of the regulatory state, Presidential power and the opportunity of populist outrage and will quote from the transcript to further explore these issues:

BILL MOYERS: What should be the purpose of reform? Should it change the behavior of Wall Street, or should it change the regulation of Wall Street? And there is a difference, is there not?

SIMON JOHNSON: Absolutely. Look, I don't know if this will work or not. I don't know if at the end of the day, we will end up supporting the bill. I hope we will, okay? But whatever happens, this is one legislative cycle. Theodore Roosevelt did not change the mainstream consensus in this country with regard to power and monopoly and the dangerous side effects of big business overnight. [. . .] The consensus has to change, Bill. And regulation, the role of regulation or understanding of regulation with regard to finance has to change. The regulation is there to limit the downside to society and to make sure that all of these activities have as much as possible of the positive effect on the economy without generating these massive negative shocks. And we're a long way from that point.

(Emphasis supplied.) Johnson focuses on the power of the Presidency in changing the consensus, but it should be noted that TR's power went beyond the bully pulpit to actual control of the Executive Branch.This circles back to my argument that the conventional (non-Bushian)unitary Executive theory may be vital to a strong regulatory state. More . . .

Christina Romer, chair of the president’s Council of Economic Advisers, says:

The overwhelming weight of the evidence is that the current very high—and very disturbing—levels of overall and long-term unemployment are not a separate, structural problem, but largely a cyclical one. It reflects the fact that we are still feeling the effects of the collapse of demand caused by the crisis. Indeed, at one point I had tentatively titled my talk “It’s Aggregate Demand, Stupid”; but my chief of staff suggested that I find something a tad more dignified

Does Deficit Hawk Tim Geithner know? Romer continued:

It doesn’t have to be this way, she argued, essentially making the case for more government stimulus to help the economy. “We have the tools and the knowledge to counteract a shortfall in aggregate demand. We should be continuing to use them aggressively.”

Does anyone else in the Obama Administration agree? See also Brad DeLong and Matt Yglesias.

Speaking for me only