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Wrecking Crew: Notes on Republican Economic Policy

News A grand old cult Recommended Books Small government smoke screen Free Markets Newspeak Starving the beast fraud
Fake fiscal conservatism Ayn Rand and Objectivism Cult Invisible Hand Hypothesys: The Theory of Self-regulation of the Markets Corporatism Mayberry Machiavellians Super Imperialism
Neoclassical Pseudo Theories and Crooked and Bought Economists Think Tanks Enablers of Casino Capitalism Wall Street Propaganda Machine Chicago School of Market Fundamentalism and Milton Friedman Supply Side or Trickle down economics Numbers racket
American Exceptionalism Support of Militarism Media-Military-Industrial Complex Over-consumption of Luxury Goods as Market Failure The Iron Law of Oligarchy  Systemic Fraud under Clinton-Bush Regime
Support of Predatory National Security State Neo Trotskyism aka Neoconservatism Tea Party and right wing rage History of Casino Capitalism Financial Humor Etc
 

 

I. Thou shalt talk about Christian principles, but not live by them

II. Thou shalt attack opponents personally when you can't win on policies

III. Thou shalt call yourself pro-life, but be in favor of the death penalty

IV. Thou shalt call yourself pro-life, and put guns in the hands of school children

V. Thou shalt give lip service to democracy while taking away civil liberties

VI. Profit is the Lord Thy God, thou shalt not put the people's interest above those of your corporate contributors

VII. Thou shalt make sure fetuses have health coverage, but leave children and babies behind

VIII Thou shalt bear false witness against your opponents and liberals, and demonize them

IX. Thou shalt run on a moderate platform, then enact right-wing policies as soon as possible

X. Thou shalt call the media liberal, so that people forget that the media is owned by corporations with a conservative fiscal agenda.

Rebecca Lauer

The Ten Commandments of  Compassionate Hypocrisy

Republican Party, the party of Abraham Lincoln, Theodore Roosevelt and Dwight Eisenhower changed dramatically since mid 60th. For many Americans Republican party is now closely associated with the wrecking crew. Like Bolsheviks in Russia, Bush II operated in Washington like the head of a small occupying army of  financial oligarchs. The recent stance on extending unemployment benefits while pegging for the extension of Bush tax cuts unmasked them to the extent that the real agenda is difficult to conceal.

the share of income earned by the top 1 percent has increased from around 8 percent in 1974 to more than 18 percent in 2007 (the last year covered by the data)—a more than twofold increase. If you include capital gains like investment and dividend income, the share of the top 1 percent has gone from just over 9 percent to 23.5 percent. The only time since 1913 (the first year of the data) that this share has been higher was 1928, on the eve of the stock market crash that ushered in the Great Depression, when it tickled 24 percent.

As Thomas Frank put it (The wrecking crew):

...There are plenty of good conservative individuals, honorable folks who would never participate in the sort of corruption we have watched unfold over the past few years. Hang around with grassroots conservative voters in Kansas, and in the main you will find them to be honest, hardworking people.

But put conservatism in charge of the state, and it behaves very differently. Now the “values” that rightist politicians eulogize on the stump disappear, and in their place we can discern an entirely different set of priorities—priorities that reveal more about the unchanging historical essence of American conservatism than do its fleeting campaigns against gay marriage or secular humanism. The conservatism that speaks to us through its actions in Washington is institutionally opposed to those baseline good intentions we learned about in elementary school. Its leaders laugh off the idea of the public interest as airy-fairy nonsense; they caution against bringing top-notch talent into government service; they declare war on public workers.

They have made a cult of outsourcing and privatizing, they have wrecked established federal operations because they disagree with them, and they have deliberately piled up an Everest of debt in order to force the government into crisis. The ruination they have wrought has been thorough; it has been a professional job. Repairing it will require years of political action.

... ... ...

There are, of course, bullies from every walk of life and every political persuasion, but on the right bullying holds a special, exalted position. It is no accident that two of the movement’s greatest heroes—Tom DeLay and Oliver North—had the same nickname: “the Hammer.”

There was time when Republicans were a welcomed change from Democratic overuse of government .  As DAVID LEONHARDT noted in NYT on Oct 6, 2009 (Bruce Bartlett’s Argument to Improve His Republican Party)

Successful economic ideas usually end up being taken too far.

Democrats dominated the middle part of the 20th century, thanks in part to their vigorous response to the Great Depression. They used the government to soften the effects of the Depression and to build the modern safety net. But they failed to see the limits of the government’s ability to manage the economy and helped usher in the stagflation of the 1970s.

Ronald Reagan then came to power promising to cut taxes and unleash the forces of the market. And the Democrats spent the next dozen years struggling to absorb the lessons of their failures.

More than a few people believe the Republican Party is in a similar place today.

But, like most poisons, libertarian doctrine is useful only in very small doses and during a limited period of time. The Christian theologian Reinhold Niebuhr in Moral Man & Immoral Society pointed out the blatant hypocrisy inherent in the fiction peddled by the Libertarian-Austrian-Neoliberal axis:

Thus, for instance, a laissez faire economic theory is maintained in an industrial era through the ignorant belief that the general welfare is best served by placing the least possible political restraints upon economic activity. The history of the past hundred years is a refutation of the theory; but it is still maintained, or is dying a too lingering death, particularly in nations as politically incompetent as our own. Its survival is due to the ignorance of those who suffer injustice from the application of this theory to modern industrial life but fail to attribute their difficulties to the social anarchy and political irresponsibility which the theory sanctions. Their ignorance permits the beneficiaries of the present anarchic industrial system to make dishonest use of the waning prestige of laissez faire economics….

When economic power desires to be left alone it uses the philosophy of laissez faire to discourage political restraint upon economic freedom. When it wants to make use of the police power of the state to subdue rebellions and discontent in the ranks of its helots, it justifies the use of political coercion and the resulting suppression of liberties by insisting that peace is more precious than freedom and that its only desire is social peace.

There is a good argument that most actions based on pure greed are counterproductive both to the person and the society in the very long run. Of course, in the very long run, we’re all dead; so if a person dies before the counterproductive consequences of  excessive greed manifest themselves, it's kind of a win.

When we speak of the Republican doctrine  it is a eclectic mix of three pseudo-theories in this case

When their theories are put in practice and everything blows up, which it always does, they always point the finger at each other, kind of like the metaphysical debates between the scholastics and nominalists that Erasmus famously described as “higher lunacy.”

But basically, republican economic doctrine is the combination of policy prescriptions rolled out in Chile in the 1970s which gain in popularity in the USA in a form of Reaganomics in early 80th.  It includes but not limited to:

  1. Tax cuts as a universal remedy under the sauce of supply side nonsense. Or should we call it a smoke screen?
  2. A fetish for monetary control, with monetary policy taking on talismanic qualities
  3. Extreme fiscal austerity when democrats are in power along with starve the beast policy in the opposite case.
  4. Disdain for government. Attempt of privatization of state-owned enterprises, functions (education, military) and properties
  5. Deregulatory absolutism, promotion of financial oligarchy
  6. Free trade and free capital flow absolutism
  7. Hypocritical usage of supply side or trickle-down economics as a smoke screen for extreme rise in economic inequality.
  8. Disdain for the common man, democracy and democratic processes (pro aristocracy stance). That includes the desire to repeal the inheritance tax, the most sure way to establish aristocracy in the country.
  9. Disregard for national sovereignty

As far as putting a face on the Libertarian-Austrian-Neoliberal constellation, there are no better example than the policy prescriptions for Chile in the 1970s.

But this is only a half of the story. The second part is a growing view that many right wing republicans are simply authoritarian psychopaths (this view was pioneered by John Dean in Conservatives Without Conscience )  and dead-enders who will jump from the cliff just to uphold their favorite (stupid) doctrine. In pure form this view is too simplistic but there are some worrying correlations if we assume that not 100% but say 60% of  republicans (with higher percentage on the top ranks) belong to this category.

Extreme and unreasoning partisanship on behalf of a group to which one belongs, especially when the partisanship includes malice and hatred towards a rival group is usually called Chauvinism. We can call republicans "economic chauvinists"

Yes they are a new and dangerous breed of “tough, coldblooded, ruthless authoritarians” who have “co-opted” conservatism.  But at the same time they want your money poor Pinocchio and do not want to die for the idea (can you point out any prominent Republicans who have sons serving in Afghanistan?). They just want to enjoy and enhance their ill-gotten gains accumulated under Raigan-Bush-1-Clinton-Bush-II regimes wealth.

The core of Republican economic policy is protecting interest of big business. But was wrapped in the flag was a pretty sophisticated set of tools for manipulation of public opinion with the primary one being an ugly thing called victim blame. This set of  manipulations proved to be quite effective and  attracted a lot of people whom republican economic policy wants to harm (What's the matter with Kansas is a classic book that stated the obvious). They polished deception into an art form (Karl Rove, etc). 

Read more at: http://www.huffingtonpost.com/robert-scheer/obamas-presidency-isnt-to_b_288196.html

These interests are much more important than their "free market' propaganda and if necessary "free market" principles are easily sacrificed (like in case of bank bailouts by Bush administration). It is, essentially, socialism for the rich.

Also contrary to free market propaganda, mechanisms like tariff walls, public subsidies, monopolies, no-bid contracts or patent protections, will be adopted without any resistance if they enhance profits.

I would suggest Klein's "Shock Doctrine" if you want a well-structured, well-thought out analysis of the underlying motives and subsequent formulations of the post-war corporatist world order. If you're looking to keep poking the dead carcass of the Reagan Revolution with maniacal, childish  then Thomas Frank "wrecking Crew" is a good source. 

Some elements of Republican economic doctrine

Prime elements of this approach include the following.

As I live in suburban DC, I know much of what he speaks. Frank insists that Loudon County, VA is one of the richest counties in the country. (My wife thought it was Fairfax County, VA--for which I used to work, in a regulatory capacity! Nope. It seems that county is second!) "Conservatives" insist that this is true because of the bloated federal bureaucrats, those overpaid sycophants who just drain you and me of our entrepenurial skills, right? Actually, among the wealthiest, Frank describes, are lobbyists, those overpaid lumps who influence the government at the expense of you and me, you know, those who can't afford people like my former Congressman who left for a lobbying firm after losing the primary to a far better person.

Frank brings up at several times during the text how much the "lobbying" organizations are making off their "causes." Now, truth be told, I've worked for some lefty groups that got on my nerves a little as they were not too much more than trendy fundraisers. But they made a living, and performed something. Some of the right wing groups make tens of millions, a small fraction of which ever gets to the causes the organizations allegedly endorse. And their founders are living in Washington suburbs...see above, Re: Loudon County, Fairfax County...

If there's a star of the book, that role probably goes to Jack Abramoff. We think of him as an abberation. Frank indicates that Abramoff is more typical of the lobbying realm than we'd like to think--and he's in jail now so the problem's been fixed, right? Wrong.

A partcicularly poignant portion of the book described a lobbying organization in Washington, the IFF, International Freedom Foundation. Frank was having trouble researching that organization, which warned us of evil, foreign influence, the terrible, Commie Sandinistas in Nicaragua, and on and on. The frosting on the cake of that group--- and the reason its roots were difficult to find -- is that it was a baby of Apartheid South Africa's military intelligence apparatus! (Leave it to them, though. After apartheid had dissolved, the IFF found some other causes to endear, and make $$$ money off of, some of them the opposite of those they'd endorsed in their earlier incarnation!)

Well, Frank's fine work was released before the deregulatory nightmare through which we're all suffering now. You might want to read it just to explain to yourself the roots of the nightmare.

Am I getting the wrong impression, but it seems a majority of the commentators to this blog are devotees of the "minimal government" concept. Any dollar spent above the "minimal government" amount is necessarily a dollar not spent by free, always much more productive private agents.

Forgetting for a moment that few people can actually agree on what's minimal, I'd like somebody to explain to me why Europeans manage to spend less and get more health care? Is it just that we are all putzes on this side of the Atlantic?

I also notice that Europeans have higher taxes, or at least I am told they do. And they don't spend anywhere near what we do on the military either. Why aren't they rioting in the streets? Am I missing something here? Are they the putzes not us?

Finally, I consider my taxes a bill to be paid. You know, for some service or another. I may think I'm overpaying, but I notice that thought doesn't pop up when I need or use the service.

I wonder what a Dell would cost if it was made by a non profit?

by: beezer August 28, 2009

Here is one insightful review  from Amazon.com The Wrecking Crew How Conservatives Rule (9780805079883) Thomas…

 A Depressingly Compelling Review of Conservatives' Philosophy of Government in Practice, August 15, 2008
By Steve Koss (New York, NY United States) - See all my reviews
(TOP 500 REVIEWER) (VINE VOICE) (REAL NAME)

Following up on his masterly examination of the paradox under which Red Staters consistently vote Republican against their own economic self-interest (WHAT'S THE MATTER WITH KANSAS?), Thomas Frank sets out to trace the present-day conservative Republican approach to government in THE WRECKING CREW. What he demonstrates is deeply disturbing even though it has remained on display virtually every day of the entire Bush II administration.

According to Frank, the conservative worldview is totally committed to "the ideal of laissez faire, meaning minimal government interference in the marketplace, along with hostility to taxation, regulation, organized labor, state ownership, and all the business community's other enemies. " The conservative movement promotes the interests of business exclusively over all else in accordance with the motto, "More business in government, less government in business." So-called "big government," also tagged as the liberal state, is the enemy; in fact, virtually all government is the enemy, other than the national defense.

Mr. Frank follows the conservative movement from the turn of the Twentieth Century through the Depression and New Deal, focusing most heavily on the movement's rebirth under Ronald Reagan and on into the new millennium. Along the way, he discusses the growth of lobbying as a major force in converting the nation's capital into a massive feeding ground for corporate special interests. Frank also highlights the manner in which conservatives have repeatedly run the country into huge spending deficits in order to "defund the left" while simultaneously politicizing government management positions by favoring ideology over competence. The end result under Republican conservative stewardship is government that demonstrates itself as ineffectual and incompetent, offering but further proof that big government is inherently incapable of working and needs to be outsourced to private, professional concerns who can do the job correctly (and then inevitably failing to do so).

THE WRECKING CREW is filled with fascinating side observations, such as its note that the movement has always lionized bullies, from Joe McCarthy to Bill O'Reilly, from Jack Abramoff and Tom DeLay to George Allen and Michelle Malkin (whom Frank describes hilariously as "a pundit with the appearance of a Bratz doll but the soul of Chucky"). The book's most effective and outrage-generating section has to be its chapter on the Marianas Island of Saipan. Frank casts Saipan, with all its corruption, nepotism, income inequity, slave labor sweatshops, and local political control exercised in the name of big business as the perfect and ultimate model of the conservative movement ideal, a truly horrific prospect. He also notes, properly, that the morass that is today's Iraq is equally a product of the attempt to force fit these same free market ideals to a foreign country, implemented (so the Bush Administration hoped) by inexperienced, wet-behind-the-ears young idealogues, home-schooled ultra-Christians with college degrees from the likes of Patrick Henry College, Jerry Falwell's Liberty University, and Pat Robertson's Regent University. Saipan and Iraq constituted "laboratories of liberty," modern-day "capitalists' dreams" whose realizations are (or at least should be) shameful American nightmares.

There is little good news in THE WRECKING CREW. Author Frank shows that our national government has been hollowed out under Republican conservative control, savaged into an ineffectual husk. Furthermore, he illustrates clearly that this was no mistake, that it is part of a deliberate process not just to privatize government and eradicate government regulation but to make these changes permanent by destroying the liberal left (and with it, of course, the Democratic Party). Frank demonstrates well that present day politics has truly become, to invert von Clausiwitz's famous maxim, "a continuation of war by other means." Regrettably, one side of the battle continues to play the game as politics, as elections won or lost and citizens swayed or not, while the other side approaches it as an act of war, a no-holds-barred contest in which the only goal is the complete and utter destruction of the other side.

THE WRECKING CREW is compelling and informative even as it paints a bleak picture of an America being driven rightward and increasingly toward the excesses and inequities of the pre-New Deal era. We all know how that era ended in October, 1929.


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Republicans are a tribe of evolutionary throwbacks. They are in his words, "foot-dragging, knuckle-dragging Neanderthals."

Congressman Grayson

Absurdity: A statement or belief manifestly inconsistent with one's own opinion.

-- Ambrose Bierce

[Dec 08, 2013] How to Be President in a Fact-Free America

December 16, 2010 | The Nation

Gary Younge:

I am black and British. This is not a lifestyle choice. My parents were part of the great migration from the global South when the empire, demographically speaking, struck back. It's the historical hand I was dealt. And it's not a bad hand. These are not the most interesting things about me. But at certain moments in the eight years I've lived in the United States, they have been the most confusing to others.

Shortly before I first came here some fifteen years ago, I asked a local how people would react to a black man with a British accent. "When they hear your voice, they'll add twenty points to your IQ," he said. "But when they see your face, they won't."

With some white conservatives, I've noticed, the gulf between what they see and what they hear can widen into an unbridgeable chasm. The affect of Englishness—hauteur, refined behavior and aristocracy (none of which I possess)—is something they aspire to, or at least appreciate. Blackness, on the other hand, is not.

And so when I introduce myself as a journalist from England I occasionally prompt a moment of synaptic dysfunction. The overwhelming majority get over it. But every now and then they say, "Really? I don't hear an accent."

"If you beat your head against the wall," the Italian Marxist Antonio Gramsci once wrote, "it is your head that breaks, not the wall."

To avoid an almighty headache I try to shut the conversation down: "Well, I can't explain that. But let's get on with the interview."

But they won't let it go. "Where in England?" "Were you born there?" "How long have you been here?"

The sad truth is that even when presented with concrete and irrefutable evidence, some people still prefer the reality they want over the one they actually live in. Herein lies one of the central problems of engaging with those on the American right. Cocooned in their own mediated ecosystem, many of them are almost unreachable through debate; the air is so fetid, reasonable discussion cannot breathe. You can't win an argument without facts, and we live in a moment when whether you're talking about climate change or WMD, facts seem to matter less and less.

I'm not referring to false consciousness here (insisting that people don't know what's best for them, which doesn't seek to understand but to infantilize them) but instead the persistent, stubborn, willful refusal to acknowledge basic, known, verifiable facts and the desire to make misinformation the cornerstone of an agenda.

The examples are legion. Most of those who believe that Obama is a Muslim (roughly one in three Republicans) also loathe his former pastor, the Rev. Jeremiah Wright. But Muslims don't have pastors. They also claim that Obama's 1981 trip to Pakistan as a student is evidence of his Islamic militancy and his dubious beginnings: he must have used a foreign passport, since the country was on a "no-travel list" at the time. It wasn't. In fact, in August that year the US consul general in Lahore encouraged Americans to visit, and before that, on June 14, the New York Times Travel section had run a 3,400-word piece explaining that Americans could get thirty-day visas at airports and border crossings.

That these falsehoods are proxies for racism is true but beside the point. After all, the right Swiftboated John Kerry and Whitewatered the Clintons before him. Obama's race and ethnicity merely provide an easier target, and the growing strength of Fox, the web and talk-radio mean that these slings and arrows travel faster and farther. But if Obama can't convince the right of these basic facts, what hope does he have of persuading them to support his economic and foreign policies?

The principle of compromise is fine and, given the recent election, inevitable. But you can negotiate only with those who engage in good faith. In the absence of that, Obama should expend less effort trying to win the right over and more trying to win us back.

For these fabrications gain currency only when real change proves elusive. The number who believe Obama is a Muslim has leapt 50 percent since before his election, during which time the economy has lagged. Meanwhile, whatever the inadequacies of the healthcare reform, once it passed all talk of "death panels" ceased.

Faced with the option of believing something that's not true or gaining tangible benefits like a job or healthcare, most people will take the latter. However petulant, ignorant or gullible people might be, most would prefer to hold on to their jobs, homes and health than their illusions. The problem is that Obama's failure to deliver gives little incentive to exchange fiction for fact.

Now more than ever the only way for Obama to bring about progressive change is by mobilizing his base. If the right can surge when Democrats have the presidency and both houses of Congress, there is no reason the left can't just because the GOP has the House. Indeed, now that Republicans have some power, they're easier to expose. That's what makes Obama's "compromise" on tax cuts such a strategic blunder. There will rarely be a better opportunity to lay bare the GOP's class priorities (let alone the sketchiness of its deficit-busting credentials).

"We are all capable of believing things which we know to be untrue," wrote George Orwell in his essay "In Front of Your Nose." "And then, when we are finally proved wrong, impudently twisting the facts so as to show that we were right. Intellectually, it is possible to carry on this process for an indefinite time: the only check on it is that sooner or later a false belief bumps up against solid reality, usually on a battlefield."

Obama needs to get out there and fight.

jedi_mindtrick:

American Roadkill

“…as much as I admire The Nation magazine for so many important contributions to the needed dialogue, I am deeply disappointed by the lack of an organized, orderly resistance to the sort of “Mind-F#ck” that we are being subjected to as American citizens, including by a largely complicit Democratic Party establishment.”

Interesting post by “drjz” at 1:46pm.

He or she is on to the heart of the matter in many respects. We live in an age of advanced propaganda techniques and manipulation of public opinion essentially in the interest of a small clique of wealthy elites. It “worked” for a while when the liberal class functioned as a check on the powerful via a host of public and private institutions from unions and the universities to churches and a reasonably functioning free press. Those institutions have atrophied over the last several decades and the Democratic Party that was supposed to embody the aspirations of the common man and woman was co-opted beginning at least as early as the late 70’s and early 80’s with a final capitulation occurring under Presidents Clinton and now Obama.

jedi_mindtrick:

My purpose in blogging here at The Nation is in the hope of firing positive dialogue, or at minimum triggering some thoughtfulness in the minds of readers.

All is not lost of course, at this point, but we do appear to be entering the late stages of an American Empire collapse due to a toxic mixture of bureaucratic calcification, imperial hubris, and denial with a capital D.

I see an Age of Incoherence developing in our political landscape, and combined with the fact that too many American citizens are living in myriad, fragmented distraction bubbles pumped full with misinformation and tricked out with the latest video games and “social networking” devices, we are an entire society now transfixed in the headlights of a machine of our own making. We are destined for road kill status in short order if we do not snap out of it.

jedi_mindtrick:

Interestingly, there are occasional glimmers of hope that appear almost at random from day to day. For instance, yesterday I perused the comments section of this Yahoo! Lookout column regarding the new WaPo piece detailing the FBI’s rather haphazard database creation of selected American’s vital information “of interest”:

http://tinyurl.com/2d8tcv8

I was pleasantly surprised by the large volume of comments that seemed to intelligently understand very sharply the danger that is posed by our growing “security state”. Another less prominent but significant bit of hope arrived via a C-Span Book TV discussion moderated by Hendrik Hertzberg of a new book by Thomas Geoghegan, “Were You Born on the Wrong Continent?”, in which a pointed discussion of American capitalism in light of German and Chinese models cast light on how harsh and non-participatory—not to mention, cut-throat—our own economic system has become:

http://tinyurl.com/2bq9xl2

jedi_mindtrick:

In closing, as much as I admire The Nation magazine for so many important contributions to the needed dialogue, I am deeply disappointed by the lack of an organized, orderly resistance to the sort of “Mind-F#ck” that we are being subjected to as American citizens, including by a largely complicit Democratic Party establishment. This is the basic thrust of the main arguments in the latest must read book by Chris Hedges, “Death of the Liberal Class”-- http://tinyurl.com/2b7peko . Yet, The Nation apparently cannot find it in itself to even publicize the recent protest of our endless stupid wars at the White House—http://www.stopthesewars.org --, let alone publicize Hedges’ superb book.

Progressive readers here should demand more of The Nation. As it currently stands we can get nearly equal coverage of the causes that matter to us at common sites like Yahoo! or Google.

hotrod:

I give this article a C-

Just two facts (visit to pakistan and the muslim/wright thing, which isn't really a fact)
Last night, on the NPR show "the connection" out of WBUR in Boston, I heard T Friedman, the mighty columnist of the Times, complain about how the US is an irreplaceable force for good; his specific example was that China sends aid and money to bad guys like...Saudi Arabia (the connection host didn't pick up on the obvious absurdity of this, while we allow the saudis to buy arms, etc etc)

Darin_TBFRWOVF_Palin_Cuz_Shes_Hot:

Here's a point I've made repeatedly here, but our author has never read:

Facts and reason are tools one can use to achieve an objective or goal; however, politics is how groups of people choose between competeing objective or goals. The choise of goals is informed by values and opinions, not facts or logic.

Here's an example. If raising the US population's IQ was a goal, we could execute everyone with an IQ below, say, 75.

Now, that offends my values, and in my opinion, the benefit of a higher population IQ isn't worth the human cost of executing the dumb, but there can be absolutely no question that as a matter of FACT executing the dumb will without question increase the population IQ.

I doubt that politics will agree on this goal any time soon. So as you liberal mistakenly believe you have conered the market on facts, please realize that you are simply not smart enough to recognize where the debate on values ends and the use of facts start.

OneVote:

Gary - you ought to realize that the Republican Party is faith based, not a fact based organization. But, those who pass the collection plate around don't believe that God will provide - you've got to grease the wheels with real life flesh and blood, here and now - 'to get glory - you've got to give.'

dbtexas2010:

Mr. Pontificus, A simple question please? If the Republicans can take credit for shoving fiscal responsibility down the throat of a Democratic president, creating a balanced budget and a reduced deficit, how do you explain those items disappearing when the Republicans gained complete control with the election of a Republican president? Your commentary is fallacious at best, absolute comedy at worst.

drjz:

Freud and his French predecessor, Jacques Lacan expressed that a primary function of the ego is to lie and deceive, both others and oneself. Edward Bernays, Freud's nephew, came to Madison Ave. in the 30's and started the manipulations and deceptions of the ad industry, capitalizing on Freud's insights.

The republicans have institutionalized lies and deception.

Clearly listen to some of the republican "leaders," most of whom have illustrated their covert racism covered by screeching false statements about Obama's citizenship, Muslim connections and if this constitutional law scholar lacks the qualifications to be president.

Listen to folks like Haley Barbor actually defend his racist past. The disingenous deceit of Boener and McConnell, talking out of both sides of their mouths at the same time.

Listen to the deceitful, republican representative, Rohrabacher from California's right wing Orange County, expressing the usual false indignance when confronted with his use of political influence to award his friends by taking them on a junket to Honduras, when he is a vehement, racist, anti-immigrant whose words in Honduras sought to undermine Obama and the administration foreign policy inititiaves in that country, by creating his own "foreign policy."

He should be impeached and charged with treason. At the very least be charged with an ethics violation. But with the white republican takeover, nothing will be said, unless Eric Holder investigates. As a...

[Aug 05, 2013] 'Why is Free-Loading Now a Conservative Value?'

Good question:
...all those extra costs for the uninsured drove up premiums for everyone else, drove up hospital costs, giving them a reason to raise prices even further, and played a role in rendering healthcare unaffordable for many others.

What Obamacare does, like Romneycare before it, is end this free-loading.

The law is telling these young adults that if you want to go without insurance, you are not going to make everyone else pay for it if your risk-analysis ends up faulty. You have to exercise a minimum of personal responsibility to pay for your own potential healthcare. In other words, rights come with responsibilities in a liberal democracy. At least that is what I always understood the conservative position to be.

So why is an allegedly conservative organization actively encouraging personal irresponsibility? Why are they encouraging one sector of society – the young and the fearless – to rely on everyone else’s sacrifice to get bailed out if they have an accident, or contract cancer, or need a hospital to deliver a baby? This is not freedom as the Founders understood it; it’s recklessness, irresponsibility and short-sighted selfishness. Now, if the twentysomethings cannot afford it, it’s one thing – and part of our healthcare cost crisis. But now that Obamacare has removed that excuse and demands that every citizen actually contribute to the insurance pool, that completely defensible excuse is over. No more free-loading, in other words.

So I ask again: why is free-loading now a conservative value? ...

Social Security is similar. If people weren't required to contribute, many wouldn't (if for no other reason than the immediate financial demands for many families make it hard to save). But we, as a society, wouldn't let them starve and die when they are no longer able to work, and the rest of us would end up footing the bill. So we require people to contribute to their own retirement through withholding for Social Security. Like health insurance for the young, many people don't need Social Security to retire comfortably, but for those who do it's a lifesaver, one that is at least partially funded through their own contributions.

Posted by on Monday, August 5, 2013 at 10:48 AM

[Aug 05, 2013] Paul Krugman: Republicans Against Reality

Why is government so dysfunctional right now?:
Republicans Against Reality, by Paul Krugman, Commentary, NY Times: ...The sad truth is that the modern G.O.P. is lost in fantasy, unable to participate in actual governing. ... Consider what went down in Congress last week.

First, House leaders had to cancel planned voting on a transportation bill, because not enough representatives were willing to vote for the bill’s steep spending cuts. Now, just a few months ago House Republicans approved an extreme austerity budget... But ... a significant number of representatives ... balked at the details. ...

Then House leaders announced plans to hold a vote cutting spending on food stamps in half — a demand ... likely to sink the ... effort to agree with the Senate on a farm bill.

Then they held [a] pointless vote on Obamacare, apparently just to make themselves feel better. ... And then they went home for recess, even though the end of the fiscal year is looming and hardly any of the legislation needed to run the federal government has passed.

In other words, Republicans, confronted with the responsibilities of governing, essentially threw a tantrum, then ran off to sulk.

How did the G.O.P. get to this point? ... For a long time the Republican establishment got its way by playing a con game with the party’s base. Voters would be mobilized as soldiers in an ideological crusade, fired up by warnings that liberals were going to turn the country over to gay married terrorists, not to mention taking your hard-earned dollars and giving them to Those People. Then, once the election was over, the establishment would get on with its real priorities — deregulation and lower taxes on the wealthy.

At this point, however, the establishment has lost control. Meanwhile, base voters actually believe the stories they were told — for example,... government is spending vast sums on ... complete waste or ... don’t do anything for people like them. (Don’t let the government get its hands on Medicare!) And the party establishment can’t get the base to accept ... reality without, in effect, admitting to those base voters that they were lied to.

The result is ... a party that ... seems unable to participate in even the most basic processes of governing.

What makes this frightening is that Republicans ... have a majority in the House, so America can’t be governed at all unless a sufficient number of those House Republicans are willing to face reality. And that quorum of reasonable Republicans may not exist.

Posted by on Monday, August 5, 2013 at 12:24 AM

Vintage Krugman Stating the Obvious

Economist's View

Don't say you weren't warned. This is Paul Krugman, just a few days under 10 years ago:

Stating the Obvious, by Paul Krugman, Commentary, NY Times, May 27, 2003: "The lunatics are now in charge of the asylum." So wrote the normally staid Financial Times, traditionally the voice of solid British business opinion, when surveying last week's tax bill. Indeed, the legislation is doubly absurd: the gimmicks used to make an $800-billion-plus tax cut carry an official price tag of only $320 billion are a joke, yet the cost without the gimmicks is so large that the nation can't possibly afford it while keeping its other promises.

But then maybe that's the point. The Financial Times suggests that "more extreme Republicans" actually want a fiscal train wreck: "Proposing to slash federal spending, particularly on social programs, is a tricky electoral proposition, but a fiscal crisis offers the tantalizing prospect of forcing such cuts through the back door."

Good for The Financial Times. It seems that stating the obvious has now, finally, become respectable.

It's no secret that right-wing ideologues want to abolish programs Americans take for granted. But not long ago, to suggest that the Bush administration's policies might actually be driven by those ideologues — that the administration was deliberately setting the country up for a fiscal crisis in which popular social programs could be sharply cut — was to be accused of spouting conspiracy theories.

Yet by pushing through another huge tax cut in the face of record deficits, the administration clearly demonstrates either that it is completely feckless, or that it actually wants a fiscal crisis. (Or maybe both.)

Here's one way to look at the situation: Although you wouldn't know it from the rhetoric, federal taxes are already historically low as a share of G.D.P. Once the new round of cuts takes effect, federal taxes will be lower than their average during the Eisenhower administration. How, then, can the government pay for Medicare and Medicaid — which didn't exist in the 1950's — and Social Security, which will become far more expensive as the population ages? (Defense spending has fallen compared with the economy, but not that much, and it's on the rise again.)

The answer is that it can't. The government can borrow to make up the difference as long as investors remain in denial, unable to believe that the world's only superpower is turning into a banana republic. But at some point bond markets will balk — they won't lend money to a government, even that of the United States, if that government's debt is growing faster than its revenues and there is no plausible story about how the budget will eventually come under control.

At that point, either taxes will go up again, or programs that have become fundamental to the American way of life will be gutted. We can be sure that the right will do whatever it takes to preserve the Bush tax cuts — right now the administration is even skimping on homeland security to save a few dollars here and there. But balancing the books without tax increases will require deep cuts where the money is: that is, in Medicaid, Medicare and Social Security.

The pain of these benefit cuts will fall on the middle class and the poor, while the tax cuts overwhelmingly favor the rich. For example, the tax cut passed last week will raise the after-tax income of most people by less than 1 percent — not nearly enough to compensate them for the loss of benefits. But people with incomes over $1 million per year will, on average, see their after-tax income rise 4.4 percent.

The Financial Times suggests this is deliberate (and I agree): "For them," it says of those extreme Republicans, "undermining the multilateral international order is not enough; long-held views on income distribution also require radical revision."

How can this be happening? Most people, even most liberals, are complacent. They don't realize how dire the fiscal outlook really is, and they don't read what the ideologues write. They imagine that the Bush administration, like the Reagan administration, will modify our system only at the edges, that it won't destroy the social safety net built up over the past 70 years.

But the people now running America aren't conservatives: they're radicals who want to do away with the social and economic system we have, and the fiscal crisis they are concocting may give them the excuse they need. The Financial Times, it seems, now understands what's going on, but when will the public wake up?

Paul Krugman: Obstruct and Exploit

Republican obstructionism is real, and it's hurting the recovery:
Obstruct and Exploit, by Paul Krugman, Commentary, NY Times: Does anyone remember the American Jobs Act? A year ago President Obama proposed boosting the economy with a combination of tax cuts and spending increases, aimed in particular at sustaining state and local government employment. ... Macroeconomic Advisers estimated that the act would add 1.3 million jobs by the end of 2012. ... The Jobs Act would have been just what the doctor ordered.

But the bill went nowhere, of course, blocked by Republicans in Congress. ... Think of it as a two-part strategy. First, obstruct any and all efforts to strengthen the economy, then exploit the economy’s weakness for political gain. If this strategy sounds cynical, that’s because it is. Yet it’s the G.O.P.’s best chance for victory in November.

But are Republicans really playing that cynical a game? ... As anyone who was paying attention knows, the period during which Democrats controlled both houses of Congress was marked by unprecedented obstructionism in the Senate. The filibuster, formerly a tactic reserved for rare occasions, became standard operating procedure... In ... reality ... most of Mr. Obama’s time in office U.S. fiscal policy has been defined not by the president’s plans but by Republican stonewalling.

The most important consequence of that stonewalling ... has been the failure to extend much-needed aid to state and local governments. Lacking that aid, these governments have been forced to lay off hundreds of thousands of schoolteachers and other workers, and those layoffs are a major reason the job numbers have been disappointing. Since bottoming out a year after Mr. Obama took office, private-sector employment has risen by 4.6 million; but government employment, which normally rises more or less in line with population growth, has instead fallen by 571,000.

Put it this way: When Republicans took control of the House, they declared that their economic philosophy was “cut and grow” — cut government, and the economy will prosper. And thanks to their scorched-earth tactics, we’ve actually had the cuts they wanted. But the promised growth has failed to materialize — and they want to make that failure Mr. Obama’s fault.

Now, all of this puts the White House in a difficult bind. Making a big deal of Republican obstructionism could all too easily come across as whining. Yet this obstructionism is real, and arguably is the biggest single reason for our ongoing economic weakness.

And what happens if the strategy of obstruct-and-exploit succeeds? Is this the shape of politics to come? If so, America will have gone a long way toward becoming an ungovernable banana republic.

[Jan 19, 2011] Paul Krugman The War on Logic

Economist's View

The key to understanding the G.O.P. analysis of health reform is that the party’s leaders are not, in fact, opposed to reform because they believe it will increase the deficit. Nor are they opposed because they seriously believe that it will be “job-killing” (which it won’t be). ... As I tried to explain in my last column, the modern G.O.P. has been taken over by an ideology in which the suffering of the unfortunate isn’t a proper concern of government, and alleviating that suffering at taxpayer expense is immoral, never mind how little it costs.

Given that their minds were made up from the beginning, top Republicans weren’t interested in and didn’t need any real policy analysis — in fact, they’re basically contemptuous of such analysis, something that shines through in their health care report. All they ever needed or wanted were some numbers and charts to wave at the press, fooling some people into believing that we’re having some kind of rational discussion. We aren’t

Ralph Musgrave:

Contrary to Krugman’s suggestions, the G.O.P. has shown great concern for the “unfortunate”: look at all those “unfortunate” crooks, criminals and incompetents on Wall Street who have been bailed out with the odd trillion of taxpayers’ money. And please note – the fact that some of this bailout money is then used to fund the election campaigns of G.O.P. politicians is entirely coincidental.

ilsm:

The GOP is the party of militarist [as well as financial] corporate welfare as well.

Add to their charitable welfare rolls all the unfortunate shareholders of Lockheed, Boeing General Dynamic, Northrop, Blackwater and so forth whose engineers cannot design anything the first time on the federal dime and whose useless products would not be paid for without similar ignoring data, abuse of logic, fear mongering and empirial delusions in DC.

And 20% of federal outlays there is only a trillion bucks a year no sense looking at cuts here.

Granny can eat cat food.

Lee A. Arnold:

The GOP has two long-term problems: Reaganomics has imploded intellectually, while their most reliable voters are far to the right. The GOP made an enormous political mistake in not supporting Obamacare and claiming half of its provisions as Republican ideas. Why did President Bush propose to privatize Social Security? Because he presumed he had the Democratic votes in Congress to do it -- otherwise such a proposal would be politically suicidal.

Similarly, the Dems figured that a half-Republican health proposal would garner enough bipartisan votes to be uncontroversial. The Dems gained their senses at the last minute and realized that Social Security can be a political banner for the party.

The difference now with healthcare is that Republicans have decided to distinguish themselves politically by taking a moral position AGAINST universal coverage and the safety-net. That alone is terribly ill-advised -- but they don't even have economic theory or reality to back them up!

[Jan 18, 2011] Winner-Take-All Politics

See also Books Winner-Take-All Politics Excerpts
CSMonitor.com

Ever wonder how it came to this: Republicans and Democrats behaving like Sunnis and Shiites in Iraq, ever more gridlocked and unable to address national problems in a rational, bipartisan way? Or why the middle class is treading water, at best, while the super-rich wax inexorably richer? Here’s another poser: Why would the Republican Party, which lost the last two elections in dramatic fashion, react by continuing to grow, as it has for decades, ever more conservative and obstructionist, rather than giving moderation a chance?

In their bicoastal narrative, Winner-Take-All Politics: How Washington Made the Rich Richer – And Turned Its Back on the Middle Class, Jacob S. Hacker, Yale professor of political science, and Paul Pierson, the same at the University of California, Berkeley, tackle these and other questions in a well-researched, albeit occasionally repetitive, analysis. They build their ideological edifice brick by brick, pointing out things that most Americans, including this reviewer, may not fully grasp – at least at the level of historical and economic detail that the two authors provide.

The numbers they cite are arresting. Take 2009, for example. It was a simply awful year for almost all Americans – “almost” being a key qualifier. It was, in fact, a very good year on Wall Street, where the 38 top firms earned a total of $140 billion. Goldman Sachs had its best year since 1869, the authors write, paying its minions an average of $600,000 per person. Rather than melting down, GS somehow melted up, with some help from Uncle Sam.

The authors continue to pound away with economic data to prove the old saw that the rich get richer, with a nuanced twist that it is the über rich who are doing surreally well: “The share of [national] income earned by the top 1 percent of Americans has increased from around 8 percent in 1974 to more than 18 percent in 2007.... The only time since 1913 ... that this share has been higher was 1928.” That, of course, was the year before the Great Depression commenced.

Now there is rich, and then there’s filthy rich. The top 1/10th of 1 percent of Americans has done even better: In constant 2007 dollars, the 15,000 American families in this rarified bracket enjoyed an average income in 1974 of about a $1 million – and $7.1 million in 2007. Want richer? The top .01 percent of us, or one in 10,000 households, soared in annual income from $4 million in 1974 to $35 million on average in 2007.

All of the above raises the questions: Did these unfathomably wealthy people earn all that additional income and are they satisfied with where they are, plutocratically speaking? No and no, insist the authors. The wealthy, whether their assets derive from inheritance, big business accomplishments, or working in the financial sector, have allied enthusiastically with the Republicans since the late 1970s to reduce their levies dramatically (whether on income, estate, or capital gains). They have also worked together to suppress the labor movement and to decimate government attempts to regulate the environment and fancy financial transactions like those subprime mortgage derivatives that brought the world to the brink of economic collapse.

The Republicans, according to Hacker and Pierson, by marrying populist rhetoric to elite action, have been able to stitch together a constituency that includes moderate income supporters – Christian conservatives, tea partyers, and elite-wary blue-collar workers – while pursuing policies catering almost exclusively to business and moneyed elites. If the middle class, and below, is getting the short end of the economic stick from Washington, the Republicans blame it on the “tax and spend” Democrats, whose policies are actually more in tune with Middle America.

If there currently is gridlock in the Capitol because a super-majority of 60 senators in the Senate is needed to move reform legislation, the voters, the polls show, seem to be blaming the current Democratic majority rather than the obstructionist Republican minority. How can this be? Because, according to the authors, the GOP, in league with the wealthy and big business, has mastered the art of political organization and fundraising since this “30 Years War” began in earnest circa 1980. “Banks are organized; their customers are not,” they write, citing one example of the uneven political playing field.

America, they insist, is turning into “Richistan.” A nation that threw off the tyranny of hereditary aristocracy in 1776 is in danger of falling prey to a new economic aristocracy that dictates laws, regulations, and tax rates from on high while insisting it is all being done in the interest of the nation.

Hacker and Pierson make a compelling case. If Marie Antoinette were alive, she might aver of today’s great economically challenged masses, “Let them nibble on passbook-savings-account interest” – if they can manage to save anything, that is.

David Holahan is a freelance writer living in East Haddam, Conn.

[Jul 25, 2010] "The Monumental Hypocrisy of the Republican Party"

Economist's View

I'm behind today. While I try to catch up, first, from an interview with Bruce Bartlett:

Six questions for Bruce Bartlett, The Economist: ... DiA: More generally, which party do you find more credible when discussing America's fiscal challenges?

Mr Bartlett: The Republicans don’t have any credibility whatsoever. They squandered whatever they had when they enacted a massive UNFUNDED expansion of Medicare in 2003. Yet they had the nerve to complain about Obama’s health plan, WHICH WAS FULLY PAID FOR according to the Congressional Budget Office. The word “chutzpah” is insufficient to describe how utterly indefensible the Republican position is, intellectually.

Furthermore, Republicans have a completely indefensible position on taxes. In their view, deficits cannot arise from tax cuts. No matter how much taxes are cut, no matter how low revenues go as a share of GDP, tax cuts are never a cause of deficits; they result ONLY AND EXCLUSIVELY from spending—and never from spending put in place by Republicans, such as Medicare Part D, TARP, two unfunded wars, bridges to nowhere, etc—but ONLY from Democratic efforts to stimulate growth, help the unemployed, provide health insurance for those without it, etc.

The monumental hypocrisy of the Republican Party is something amazing to behold. And their dimwitted accomplices in the tea-party movement are not much better. They know that Republicans, far more than Democrats, are responsible for our fiscal mess, but they won’t say so. And they adamantly refuse to put on the table any meaningful programme that would actually reduce spending. Judging by polls, most of them seem to think that all we have to do is cut foreign aid, which represents well less than 1% of the budget.

Consequently, I have far more hope that Democrats will do what has do be done. The Democratic Party is now the “adult” party in American politics, willing to do what has to be done for the good of the country. The same cannot be said of Republicans, who seem unwilling to do anything that would interfere with their ambition to retake power so that they can reward their lobbyist friends with more give-aways from the public purse.

Unfortunately, I don’t think Democrats have the guts or the stamina to put forward a meaningful deficit-reduction programme because they know—as I do—that it will require higher revenues. But facing big losses in the elections this fall I can’t blame them.

That leaves us facing political gridlock between the sensible but cowardly party and the greedy, sociopathic party. Not a pleasant choice for those of us in the sensible, lets-do-what-we-have-to-do-for-the-good-of-the-country independent centre. ...

Next, as Brad DeLong notes, Martin Wolf "makes the case that America's future depends on the rapid destruction of the Republican Party and its replacement by an alternative opposition party to the Democrats":
The political genius of supply-side economics, by Martin Wolf: ...My reading of contemporary Republican thinking is that there is no chance of any attempt to arrest adverse long-term fiscal trends should they return to power. Moreover, since the Republicans have no interest in doing anything sensible, the Democrats will gain nothing from trying to do much either. That is the lesson Democrats have to draw from the Clinton era’s successful frugality, which merely gave George W. Bush the opportunity to make massive (irresponsible and unsustainable) tax cuts. In practice, then, nothing will be done. ...

To understand modern Republican thinking on fiscal policy, we need to go back to perhaps the most politically brilliant (albeit economically unconvincing) idea in the history of fiscal policy: “supply-side economics”. Supply-side economics liberated conservatives from any need to insist on fiscal rectitude and balanced budgets. ... It allowed them to promise lower taxes, lower deficits and, in effect, unchanged spending. Why should people not like this combination? Who does not like a free lunch?

How did supply-side economics bring these benefits? First, it allowed conservatives to ignore deficits. They could argue that, whatever the impact of the tax cuts in the short run, they would bring the budget back into balance, in the longer run. Second, the theory gave an economic justification – the argument from incentives - for lowering taxes on politically important supporters. Finally, if deficits did not, in fact, disappear, conservatives could fall back on the “starve the beast” theory: deficits would create a fiscal crisis that would force the government to cut spending and even destroy the hated welfare state.

In this way, the Republicans were transformed from a balanced-budget party to a tax-cutting party. This innovative stance proved highly politically effective...

The ... theory that cuts would pay for themselves has proved altogether wrong. ... Indeed, Greg Mankiw ... has responded to the view that broad-based tax cuts would pay for themselves, as follows: “I did not find such a claim credible, based on the available evidence. I never have, and I still don’t.” Indeed, he has referred to those who believe this as “charlatans and cranks”. ...

So, when Republicans assail the deficits under President Obama, are they to be taken seriously? ...[I]t is not deficits themselves that worry Republicans, but rather how they are caused: deficits caused by tax cuts are fine; but spending increases brought in by Democrats are diabolical, unless on the military. ...

What conclusions should outsiders draw about the likely future of US fiscal policy? First, if Republicans win the mid-terms in November, as seems likely, they are surely going to come up with huge tax cut proposals (probably well beyond extending the already unaffordable Bush-era tax cuts).

Second, the White House will probably veto these cuts, making itself even more politically unpopular.

Third, some additional fiscal stimulus is, in fact, what the US needs, in the short term, even though across-the-board tax cuts are an extremely inefficient way of providing it.

Fourth, the Republican proposals would not, alas, be short term, but dangerously long term, in their impact.

Finally, with one party indifferent to deficits, provided they are brought about by tax cuts, and the other party relatively fiscally responsible (well, everything is relative, after all), but opposed to spending cuts on core programs, US fiscal policy is paralyzed. ...

This is extraordinarily dangerous. The danger does not arise from the fiscal deficits of today, but the attitudes to fiscal policy, over the long run, of one of the two main parties. Those radical conservatives (a small minority, I hope) who want to destroy the credit of the US federal government may succeed. If so, that would be the end of the US era of global dominance. The destruction of fiscal credibility could be the outcome of the policies of the party that considers itself the most patriotic.

In sum, a great deal of trouble lies ahead, for the US and the world.

Where am I wrong, if at all?

[Jul 23, 2010] Paul Krugman: Addicted to Bush

Economist's View

Just say no:

Addicted to Bush, by Paul Krugman, Commentary, NY Times: For a couple of years, it was the love that dared not speak his name. In 2008, Republican candidates hardly ever mentioned the president still sitting in the White House. ...

The truth, however, is that the only problem Republicans ever had with George W. Bush was his low approval rating. They always loved his policies and his governing style — and they want them back. In recent weeks, G.O.P. leaders have come out for a complete return to the Bush agenda, including tax breaks for the rich and financial deregulation. They’ve even resurrected the plan to cut future Social Security benefits.

But they have a problem: how can they embrace President Bush’s policies, given his record? ... What’s a Republican to do? You know the answer. There’s now a concerted effort under way to rehabilitate Mr. Bush’s image on at least three fronts: the economy, the deficit and the war.

On the economy: Last week Mitch McConnell, the Senate minority leader, declared that “there’s no evidence whatsoever that the Bush tax cuts actually diminished revenue. They increased revenue, because of the vibrancy of these tax cuts in the economy.” ...

I guess it depends on the meaning of the word “vibrant.” The actual record of the Bush years was (i) two and half years of declining employment, followed by (ii) four and a half years of modest job growth, at a pace significantly below the eight-year average under Bill Clinton, followed by (iii) a year of economic catastrophe. In 2007, at the height of the “Bush boom,” such as it was, median household income, adjusted for inflation, was still lower than it had been in 2000.

But the Bush apologists hope that you won’t remember all that. And they also have a theory ... that President Obama, though not yet in office or even elected, caused the 2008 slump. You see, people were worried in advance about his future policies, and that’s what caused the economy to tank. Seriously.

On the deficit: Republicans are now claiming that ... the deficit is Mr. Obama’s fault. “The last year of the Bush administration,” said Mr. McConnell recently, “the deficit as a percentage of gross domestic product was 3.2 percent, well within the range ... most economists think is manageable. A year and a half later, it’s almost 10 percent.”

But that 3.2 percent figure, it turns out, is for fiscal 2008 — which wasn’t the last year of the Bush administration, because it ended in September of 2008. In other words, it ended just as the failure of Lehman Brothers — on Mr. Bush’s watch — ... caused the deficit to soar: By the first quarter of 2009 ... federal borrowing had already reached almost 9 percent of G.D.P. To some of us, this says that the economic crisis that began under Mr. Bush is responsible for the great bulk of our current deficit. But the Republican Party is having none of it.

Finally, on the war: ...Karl Rove now claims that his biggest mistake was letting Democrats get away with the “shameful” claim that the Bush administration hyped the case for invading Iraq. Let the whitewashing begin!

Again, Republicans aren’t trying to rescue George W. Bush’s reputation for sentimental reasons; they’re trying to clear the way for a return to Bush policies. And this carries a message for anyone hoping that the next time Republicans are in power, they’ll behave differently. If you believe that they’ve learned something — say, about fiscal prudence or the importance of effective regulation — you’re kidding yourself. You might as well face it: they’re addicted to Bush.

[May 21, 2010] Customer Reviews The Wrecking Crew How Conservatives Ruined Government, Enriched Themselves, and Beggared the Nation

Amazon.com

Edwin C. Pauzer(New York City): It's A Republic If You Can Keep It, May 21, 2010

This is a still unfolding story, a story about Americans waking up one day to find they have no rights, no living wage, and no liberties because the country was being changed into a plutocracy and they didn't even know it. That is what Thomas Frank, the author of "What's the Matter with Kansas" contends in this frightening story of America's path to its own destruction for the benefit of the few.

According to Frank, it began with the rebirth of conservatism after the last New Deal president left office, Lyndon Baines Johnson. Their goals were to create a market place that was unregulated and unfettered with safety practices, consumer protections, or tax burdens. This meant taking over government, dismantling it agency by agency, selling its functions to private investors, and marketing their whole plan to a somnambulistic and apathetic public. They have made great strides in taking over what they despise and blaming it when it fails.

The 1980's saw the rise of the Young Americans for Freedom and the Jack Abramoff's and the Karl Rove's who were committed to advancing this agenda by any means necessary. They made powerful friends, were elected to office, became lobbyists and were successful in getting contributors.

The next step was transforming government in two ways: selling it to private industry and appointing people to positions of power who were incompetent or bent on destroying it. People like John Bolton became America's ambassador to the very symbol he hated, and Elaine Chao to head the Department of Labor. She would advise employers that they could avoid paying their employees overtime by designating them as managers.

The real tour de force is the marketing campaign that Grover Norquist planned in detail years ago and refined ever since. It was important to point out government's incompetence, that private industry was far more productive, that the collapsing economy was due to government interference, not Wall Street greed. It was overregulation not a lack of regulation that contributed to the collapse. Seeking a fair wage now became class warfare. Under the pretense of protecting the citizen from shady trial lawyers from are the "cause of jury awards" that cause the increase of costs, these conservatives are really protecting the corporations from lawsuits and limiting the constitutional rights of the consumer. While the Republicans were reducing taxes and running up the debt, they were saying how it would stimulate the economy. The debt has only become a measure of fiscal irresponsibility when the Democrats are in power. Then, when austerity is called for, the debt becomes of paramount importance and the best form of debt reduction is elimination of entitlement programs. Mr. Frank believes that even social security is still not safe from the clutches of these zealots. Congress now dances to the tune of corporate interests and contributions, not of their constituents. They intend to remove our protections, and widen the gap between those who have and those who don't.

Mr. Frank's arguments are factual and powerfully presented. Seventy-four pages of notes add credibility to his argument. His writing style is persuasive and his presentation is easy to follow.

If things continue as they do, the Capitol Dome may not be the most dominant feature of the D. C. landscape. It might just be the Golden Arches.

Benjamin Franklin answered, when asked what kind of government we would have said, "It's a republic if you can keep it."

Also Recommended:

[Feb 22, 2010] Paul Krugman: The Bankruptcy Boys

It's time for Republicans to "put up or shut up":
The Bankruptcy Boys, by Paul Krugman, Commentary, NY Times: O.K., the beast is starving. Now what? That’s the question confronting Republicans. But they’re refusing to answer, or even to engage in any serious discussion about what to do.

For readers who don’t know what I’m talking about: ever since Reagan, the G.O.P. has been run by people who want a much smaller government. ... But there has always been a political problem with this agenda. Voters may say that they oppose big government, but the programs that actually dominate federal spending — Medicare, Medicaid and Social Security — are very popular. So how can the public be persuaded to accept large spending cuts?

The conservative answer, which evolved in the late 1970s, would be dubbed “starving the beast” during the Reagan years. The idea — propounded by many members of the conservative intelligentsia, from Alan Greenspan to Irving Kristol — was basically ... a game of bait and switch. Rather than proposing unpopular spending cuts, Republicans would push through popular tax cuts, with the deliberate intention of worsening the government’s fiscal position. Spending cuts could then be sold as a necessity rather than a choice, the only way to eliminate an unsustainable budget deficit.

And the deficit came. True, more than half of this year’s budget deficit is the result of the Great Recession... But even when the crisis is over,... rising medical costs will, unless something is done, lead to explosive debt growth after 2020.

So the beast is starving, as planned. It should be time, then, for conservatives to explain which parts of the beast they want to cut. And President Obama has, in effect, invited them to do just that, by calling for a bipartisan deficit commission.

Many progressives were deeply worried by this proposal, fearing that it would ... end up reviving the long-standing Republican goal of gutting Social Security. But they needn’t have worried: Senate Republicans overwhelmingly voted against legislation that would have created a commission with some actual power...

Why are Republicans reluctant to sit down and talk? Because they would then be forced to put up or shut up. Since they’re adamantly opposed to reducing the deficit with tax increases, they would have to explain what spending they want to cut. And guess what? After three decades of preparing the ground for this moment, they’re still not willing to do that.

In fact, conservatives have backed away from spending cuts they themselves proposed in the past. In the 1990s, for example, Republicans in Congress tried to force through sharp cuts in Medicare. But now they have made opposition to any effort to spend Medicare funds more wisely the core of their campaign against health care reform (death panels!). ...

What about Social Security? Five years ago the Bush administration proposed..., in effect means-testing retirement benefits. But in December, The Wall Street Journal’s editorial page denounced any such means-testing...

At this point, then, Republicans insist that the deficit must be eliminated, but they’re not willing either to raise taxes or to support cuts in any major government programs. And they’re not willing to participate in serious bipartisan discussions, either, because that might force them to explain their plan — and there isn’t any plan, except to regain power.

But there is a kind of logic to the current Republican position: in effect, the party is doubling down on starve-the-beast. Depriving the government of revenue, it turns out, wasn’t enough to push politicians into dismantling the welfare state. So now the de facto strategy is to oppose any responsible action until we are in the midst of a fiscal catastrophe. You read it here first.

vor:

A very good question. Republicans have pursued a starve the best strategy for decades yet can still convince a gullible public and media that they are fiscally responsible. They have learned that in modern America perceptions matter more than reality.

Bruce Wilder:

PK: "the G.O.P. has been run by people who want a much smaller government"

I've never understood the reason for accepting this cover story, that the Right has been seeking some abstraction in a "smaller government".

They've always been after the money -- upward redistribution of wealth and income. What keeps Krugman from saying so?

Nicolas:

You're probably right about the Republican party, but I think that a lot of American really consider the government to be either corrupt or incompetent in everything. "Starve the beast" is not just a pretext, it's a way to please to most of the G.O.P. base.

Is it a cultural trait of America? An ideology that started in the 70's with Ronald Reagan?

Was it fabricated by the mass media? Probably a mix of all of those answers.

Michael Turner :

"They've always been after the money -- upward redistribution of wealth and income. What keeps Krugman from saying so?"

Maybe he tired of repeating himself? I never tire of reading this essay of his, which makes the point at some length, and quite well:

http://www.pkarchive.org/economy/ForRicher.html

In the final section ("V. Plutocracy"), he quotes the relatively sensible Kevin Phillips as follows:

"Either democracy must be renewed, with politics brought back to life, or wealth is likely to cement a new and less democratic regime -- plutocracy by some other name."

The GOP just keeps getting nuttier and nuttier. Not long before Jack Kemp died, he railed against his own for their bizarre and baseless claim that the Community Reinvestment Act caused the financial crisis. He was an unrepentant supply-sider, but at least he had a heart, a brain and some courage. Now Dorothy has to face the Wicked Witch of the West on her own -- and in America, you don't get much farther west than Alaska.

ken melvin:

"Wicked Witch of the West". Love it.

Min:

"You're probably right about the Republican party, but I think that a lot of American really consider the government to be either corrupt or incompetent in everything."

That is largely the result of Republican propaganda. And practice. Why did FEMA fail after Katrina? It is not just that Bush dithered for days before it hit land. It is not just that Bush appointed an incompetent to head it up. The previous head that Bush appointed dismantled it as much as he could. Before Bush II, when did FEMA fail?

What caused our present financial crisis? There are many reasons, but the failure of regulation played a part. Alan Greenspan, one of the authors of the "starve the beast" strategy, not only failed to regulate, he believed that markets were self-regulating, and actively lobbied against the regulation of derivatives proposed by Brooksley Born. (Abuse of derivatives greatly amplified the effects of the mortgage crisis.)

And what about the response to the crisis? Paulson, ironically, relied upon the supposedly ineffectual government to bail out Wall Street. The bailout could have and should have had strings attached, but Paulson, showing selective incompetence, failed to request any. After Obama took office, the Republicans did their best to dilute the stimulus, and, thanks to the threat of filibuster, succeeded. As a result, it has been inadequate.

The Republicans held the White House for 20 out of 28 years before Obama. And when they did not, they engaged in obstructionism, as they are doing today. It is not hard to make government incompetent when you are a major political party and you hold power.

paine:

government is not a simple substance, its a compound

the repugs want free range for corpoartions domestically and globally. So that means dereg at home
armadas abroad. The repugs want to shift the tax burden to the middle class hence payroll taxes up
taxes on property income down upping the relative scale of the transfer system

-viewed as a complex social dividend system--

prolly increases wage share on balance by strengthening job class independence a safety net is also a place to go to resist excessive exploitation
bad thing !!!

hence the tear down that transfer system if not weaken it

notice no beast starving for it's own sake yet

deficits are a grand way to fund crusades. They appear to make the who pays party disappear

now deficits have a job class side use just like taxes and spending distributions but to use deficits to speeed up recovery is not corporate amerika's prefered path let alone method

-- note they prefered to let us joblings borrow our way out of the last job recession but we have no money mine like uncle ---

i think startve the beast dissolves into thin air apon examination as a goal in and of itself

the anti tax movement alone blocks spending if deficit fetish is trumpeted simultaneously

the ridiculous part is the dlc dem core took up fiscal soundness carter mondale the duke clinton gore kerry obama fiscal soundness as a campaign position plays well with deficit fetish and no new taxes
if you want to "govern" social spending

conclusion

the dlc is part of a very nice two headeed scam. Good cop bad cop, depending on which matters most lower taxes broader safety net. Each gets to promise one of these juicey gifts to the electorate
that's the bread.

And of course there's circus too the repugs kill arrest etc bad guys that is marvelously popular

the dem circus ??

err for the job class ?? nope. Going after rich folks has been in moth balls since truman

the goo goo side of the dems plays florence nightingale for the annes of the nation
but not too well ultimately since the global armada must be fiercely bi partisan

peacenikery gets the short straw among core dems and always has since the fall of 1939

clean gub ??
-- used to be a republican beat
now if anywhere it's a potemkin village effort
by certain dlc dems ---

the pwogs and the tea baggers get played like rubber balls by this two party tango
as the frustrated flanks expand and contract also well but if per chance the flanks this time refuse to toddle on home

who knows ???

cm:

"They've always been after the money -- upward redistribution of wealth and income."

And not only that. There is another current of replacing rule of law with govt institutions acting on the behest of the elites in every aspect. (And then of course you have to sell to people the idea that they are all part of the elite, or have a good shot at it - when they "work hard" and are virtuous.) Though one can argue this is all in the service of wealth redistribution/preservation. For historical reference you don't have to go back farther than the 19th/20th (pre WW2?) century company towns with their corrupt cops and local politicians.

bob mcmanus:

"So now the de facto strategy is to oppose any responsible action until we are in the midst of a fiscal catastrophe. You read it here first."

Actually I read it a long time ago in a Krugman column, sometime in 2002 I think, where he predicted that the Bush tax cuts and deficit financed war would inevitably result in massive social disruption. At that time he declared Republicans were revolutionaries rather than reformists, explaining that the difference was that revolutionaries are not focused on what comes after social upheaval.

And so we, liberals and progressives, have been forced into a revolutionary condition. This was not our choice, but neither can we return to process politics, reform, or negotiation. We are going to have a radically new social, political, and economic structure. Our only choice is which side gets to determine what it will look like.

Denial of reality will guarantee the other side wins.

Michael Turner:

"At that time he declared Republicans were revolutionaries rather than reformists ...."

I think Wm F Buckley of all people said much the same thing: Dubya was a conservative, perhaps, but not conservative.

Lafayette said...

GIRDING FOR GRIDLOCK

{And President Obama has, in effect, invited them to do just that, by calling for a bipartisan deficit commission. }

It is difficult to understand what BO&Co is up to. After all, with the Hard Right using guerrilla tactics, shouldn't he be nuking them in return? Coming from 8 years of abuse by the Hard Right, the Hard Left thinks exactly along the same lines. "Give unto them what they gave unto us", which is the Golden Rule of DC-politics.

Of course, that sort of philosophy is the reason why gridlock developed. Furthermore, let's remember one aspect of Obama's experience, which was working in small, poor neighborhoods where nuking one another was often a way of life. His experience, even his training as a lawyer, is anchored in the belief that negotiation/debate, even adversarial -- as difficult as it may be -- is the way forward.

After all, throwing mindless brickbats at one another on the evening news is child's play for a politician. And our political class is all too often childish. Besides, who is really impressed by these TV duels.

In conference, however, once one has dropped their kimono as regards articulated points-of-view, they are a matter of public record. And, in politics, public record is ... uh, public. It is there to be seen and taken into consideration by the electorate. In fact, it weighs heavily upon their voting intentions, which is why the media tries to tweak public opinion-making.

Having one more blab-fest in LaLaLand on the Potomac is probably not going to correct America's lurch into long-term decline, aided and abetted by the Hard Right. But it will air the views that can help the public to understand who, indeed, is stalling the process of reform.

That sounds whimsical, evidently. But it's still a lot better than girding for gridlock in a Congress still stuck in the 20th century.

Frankly, it is high time that BO&Co starts getting their message out to the General Public by taking to the road with it -- much like the presidential election campaign two-years ago. It's a hard slog, yes, but the BO&Co Show is a powerful pedagogical tool.

And just what America needs now.

Robs:

I guess Krugman's moving along from hubris to blindness, assuming he's serious & not just being party political.

Hal:

And of course ending the imperial wars to save money is impossible, since those wars are what the US is all about.

A Meshiea:

Thats a surprising and glaring omission from Krugman's "...programs that actually dominate federal spending — Medicare, Medicaid and Social Security —"
Ahh er:
SS: 19.63%
Do Defense: 18.74%
Unemployment 16.13%
Medicare 12.79%

Seems obvious where the cuts can and should be made. Oh I forget America is a war machine first and foremost.

JohnH:

Agreed, why does Krugman consistently refuse to mention out of control military spending? It is one of the fastest rising spending areas, amounting to 250% of military spending in 2000.

Unlike Medicare and Social Security, the military has no revenue stream dedicated to support it. Its revenue comes from borrowing from China, Japan, petro-states, and Social Security.

When politicians start talking spending cuts, you'll know they're serious when military spending gets mentioned. Until then it's all just hot air.

Bill D:

When will Krugman stop being the Glen Beck of the left and go back to substantive economic analysis? (The same goes for you, Mark)

chriss1519,

I agree. Charging Mark (or even Krugman) with being "the Glenn Beck of the Left," especially without any specifics to back up such a claim, is just worthless nonsense. Mark is nothing if not ultra-reasonable.

Lafayette:

VOX POPULI

I see no way out of the classic problem of LaLaLand gridlock than the adoption of national referendums, by means of gathering signatures to place them on state ballots, to rid ourselves of the senselessness that is diminishing daily our democratic rights.

Congress has been so corrupted by BigMoney that it is terminally ill. The Congressionals have their got heads down a hole like scared ostriches.

Whilst the situation is seriously grave. Health Care will explode the budget if something is not done, particularly in terms of Prevention Care. The obesity epidemic will see to it that hospitals are flooded with the resulting illnesses of an eventually diabolic killer.

So either we get sane Health Care legislation or we raise the cost of food so drastically that people think twice about how much they eat ...

ken melvin:

It's not how much we're eating as much as what we're eating. On the MUNI in the AM I see mothers giving theirs Coke and Chips for breakfast while eating the same themselves.

Michael Turner said in reply to Fred Schwartz...

"Five years ago, Krugman wrote passionately against deficit spending. Today he praises it."

Five years ago, we weren't struggling out of the worst recession since WW II. Around five years ago, IIRC, Krugman called the housing bubble back when Greenspan was ignoring it, or strenuously denying that anything serious was happening. Dumb deficit spending during a bubble makes it that much harder to have smart deficit spending to help pull the economy out of the wreckage, after that bubble bursts.

Keynesians can be fiscal conservatives in better times and often are. There's no contradiction at all. For example, Marriner C. Eccles, a conservative Mormon banker from Utah who became FDR's fed chief, was one of the most ardent Keynesians of that administration. IIRC, Truman got Eccles axed because, in better times, he criticized the Truman administration for not turning more fiscally conservative, after the storm had passed. I'm fairly well acquainted with Krugman's thinking on such issues, and I can't really see where he'd diverge from Eccles on on that particular point.

You really are deeply ignorant of economics, aren't you?

"A libertarian leaning Independent."

Ah, that explains it. Back when I was a libertarian, I thought I knew everything an intelligent person needed to know about economics. It was this simple: Free markets. Free markets. And did I mention free markets?

You're a libertarian, but not an ideologue? That's like saying you're a Trotskyite but not an ideologue.

Fred Schwartz said in reply to Michael Turner...

Well if you re-read you'll see that I said Libertarian-leaning. I'm not a straight out Libertarian.

"You really are deeply ignorant of economics, aren't you?"

As I've mentioned my Masters is in Economics. My undergrad is in Elec. Engineering. Economics is not a hard science. It is like Psychology, it has several schools. Just because we disagree does not mean you need to resort to put-downs.

Look. I'm not really trying to pick a huge fight. I'm old enough to know that the current course may work. Perhaps it's the salve we need. I perfectly comprehend the theory that it's needed to stimulate economic activity or to prevent a credit seizure. We may be on the verge of a large technological breakthrough that will revitalize the economy.

That said, you should take into consideration alternate viewpoints without dismissing them out of hand. There is a very real chance that running these very large deficits could be more detrimental than beneficial in the long run.

Barkley Rosser said in reply to Fred Schwartz...

Reniam,

You would have had more credibility if you had actually criticized the content of Krugman's argument rather than merely indulging in name calling. While it is true that some of his positions have changed over time, it is also true that on many issues his positions have remained constant, including in a number of areas listed above by somebody (trade, rent control, etc.), where his position is not in agreement with most Dems or their political representatives.

Fred Schwartz said in reply to Barkley Rosser...

Thanks for your comment.

I wasn't name-calling. Glen Beck and Rush Limbaugh are ideologues too. They have maintained some positions and changed others as the winds of politics have dictated. That's fine. But, it should be understood so, as to remain objective.

For PK, there have been many positions he has taken that I agree with. The credit bubble and Bush's deficits. There was a good stretch of time when his writings revolved around the devastating consequences of deficit spending. Now, he is an advocate. It seems this turn-around was due to nothing other than a democrat taking office.

wjd123 said in reply to Barkley Rosser...

Barkley Rosser and Michael Turner,

I don't think Krugman has remained the same on trade. From his admission that as trade increases unemployment becomes more of a problem to developed countries, to his admission that protectionism does save jobs during recessions, to his recent blog on transportation costs I see Krugman as removing himself from the pitfalls of of comparative advantage.

A precursor of this move can probably be found in his work on countries competing for customers in one segment of the economy.

As for being out of step with the Democratic Party on free trade, I don't see it. If the Democratic Party wanted to change the way we trade it could do so but it keeps pushing forward in the same old way.

I think that you could make an argument that today it is the Democratic Party that is becoming increasingly out of step with Krugman as he retreats.

Why is this happening. The Democratic Party is beholding to the elites who have interests to protect and won't be honest while Krugman isn't beholding and will be honest.

Perhaps you mean that Krugman is out of step with the liberals in the Democratic Party. Krugman just wrote an article on why not to be afraid of China holding our debt; I've been waiting for Senator Schumer, supposedly a liberal, to do something half as constructive about our imbalance of trade with China for the last ten years.

Krugman may still favor free trade but with less and less gusto as the chickens comes home to roost.

Of course he could write a column stating where he stands on trade and save you, Michael Turner, and me from disagreeing.

Fred C. Dobbs:

It SEEMS to be a peculiar form of hypocrisy that permits Republicans (both politicos & pundits) to achieve hefty wealth & power while struggling to enfeeble the federal government. Excluding National Security, of course.

VG:

"Starve the Beast" is not a plan. Conservatives aren't smart enough to have a plan.

Starve the Beast is a meme. Cutting taxes is popular. Cutting services is unpopular. So that's it. That's the "plan". If you say you are going to cut taxes you have a good chance of getting elected. If you try to cut services you have a good chance of getting booted from office. So Republicans do the first and don't do the second.

The idea that starving the beast will bring about smaller government is just the rationalization that conservatives who were not [i]complete[/i] morons came up with to justify a policy that an eight year old could predict will end disastrously.

anne:

Paul Krugman was quite worried about about the creation of a structural budget deficit when the economy was healthy and there was need for a surplus or at least balance, which was the reason Krugman was so concerned about Governor Bush promising tax cuts through the 2000 election campaign. Similarly, Krugman was concerned about the assurance of a structural deficit through the lengthy Bush expansion when Bush policy was assuring there would be continual deficits.

Through a severe recession however, running a deficit was quite important and appropriate, and would have been so had there been no Bush expansion deficits. The problem now of course is not deficits but job creation. The problem that conservatives imagined through the Clinton years was curiously enough the declining deficits and increasing surplus which were immediately attacked when Bush became President.

Fred Schwartz said in reply to anne...

"Paul Krugman was quite worried about about the creation of a structural budget deficit when the economy was healthy..."

Then you state:
"- 27,140 x 109 months = - 2.96 million jobs lost in all"

Krugman was correct to worry about the deficit at that time. But, you are incorrect to state that the economy was healthy. It was quite sick then too. It was just covered up by debt.

Barkley Rosser said in reply to Fred Schwartz...

Reniam,

Um, in 2000 the government was running a surplus. Is forgetting that (or not knowing it at all) a sign of the quality of that masters degree in economics you claim to have received?

Fred Schwartz said in reply to Barkley Rosser...

If you have read all of my comments, you would see I was no fan of President Bush. Generally, Clinton did a decent job in his second term.

Surplus on the budget side - yes. But, losses in Intragovernmental Holdings was larger. So, the total public debt always increased.

anne:

"Paul Krugman was quite worried about about the creation of a structural budget deficit when the economy was healthy...."

Precisely so, where fiscal policy through the Clinton years had allowed for a government budget balance or surplus in healthy economic times though a deficit would be expected in unhealthy time, through the Bush years after dramatic changes were immediately made from Clinton policy only deficits could be expected no matter the health of the economy. The Bush years however even through the lengthy expansion from 2001 through 2007, were never quite healthy as the limited job creation should have clearly showed.

evagrius:

The State of Cal. government seems to be a starving beast. How it will act is predictive of how the Fed will act.

Also, I read that Colorado Springs, a "home-town" for "conservatives' is near total starvation. Perhaps in a year or so the bones will be showing through.

Michael Turner:

Gov. Schwarzenegger just dumped on his fellow Repubs about their hypocritical criticism of Obama's stimulus. Tell it, Arnie!

The Senate doesn't really like to shower money on states, because it makes governors look good, and then those governors run for the Senate. But there could be a backlash if GOP obstructionism goes too far. Maybe losing some seats in the Senate to the GOP in the mid-terms won't be so bad if, in states that already have GOP senators, the same elections bring in rational, moderate Republicans upstarts who listen to respectable moderate conservative economists like Mark Zandi and Bruce Bartlett -- both of whom understand the need for stimulus spending.

Fred C. Dobbs said in reply to Michael Turner...

If Gov. Schwarzenegger is appreciative enough, perhaps the US will replenish CA with $10-100B more stimulus, or whatever it takes to pull them out of their spin. Wouldn't want to be losing Democratic CA seats in the Congress, after all.

lonesome moderate said in reply to evagrius...

There are many differences between CA's budget problems and those of the feds. One important difference, not only when compared to the federal budget but that of most other states, is that most parts of the California budget are locked in because of past budget initiatives.

evagrius said in reply to lonesome moderate...

And those budget initiatives were created and pushed by those wish government to be small enough...etc;.The initiatives had quite a bit of money behind them.

Michael Turner said...

As Krugman also recognized. Much of that debt was on the household side, driven by the housing bubble he was already talking about five years ago.

http://www.nytimes.com/2005/08/08/opinion/08krugman.html

Michael Turner said in reply to Michael Turner...

The above being in response to Troop's "you are incorrect to state that the economy was healthy. It was quite sick then too. It was just covered up by debt."

Krugman had also predicted that the only way to yank the economy out of the early 2000's slump very quickly would be if Greenspan caused a housing bubble. Somehow, but only after that bubble had burst (it couldn't have been a bubble at the time because free markets are never wrong, you see), some libertarians found that comment of PK's and took it out of the context of almost all of his writing on the subject so that they could accuse him of *advocating* a housing bubble.

Libertarians being just as shameless, blinkered and hypocritical as most ideologues, I suppose it shouldn't have been surprising.

Fred Schwartz said in reply to Michael Turner...

"...it couldn't have been a bubble at the time because free markets are never wrong..."

What free market? I'm a bit older, but I do recall that Ron Paul and Paul Krugman were in simpatico on this issue at the time.

Michael Turner said in reply to Fred Schwartz...

Ron Paul and Paul Krugman, "Simpatico" on the housing bubble? Krugman might have felt that the Fed had the wrong policy at the time, but he's not fundamentally anti-Fed - he definitely believes in what you libertarians deride as "fiat money".

Ron Paul *is* in favor of abolishing the Fed. he believes that the credit bubble was caused by the abusing the ability to printing money, that the very existence of such an ability leads automatically to its abuse. (So, Sen. Paul: why did previous periods of low interest rates and easy money *not* lead to a colossal housing bubble?)

The credit bubble was caused by an unprecedented period of lax regulation, not by monetary policy. Krugman *might* have believed that Greenspan held rates too low, too long, but he *definitely* believed that, under Greenspan, the Fed shirked its responsibility for bank regulation and deflating bubbles.

Calling Paul Krugman and Ron Paul "simpatico" on this point is like saying that someone who believes that jet aircraft work is "simpatico" with someone who believe he can flap his arms and take to the air. Because, y'know, they both believe they can fly.

Fred Schwartz said in reply to Michael Turner...

They were in agreement that there was a housing bubble - not on the causes.

I take a wider view on the credit bubble and see it as a combination of poor regulation, fiscal policy, and monetary policy.

The Fed serves a purpose. After the Panic of 1907 it became clear that a lender of last resort is useful. But, it should be more transparent.

Ron Paul is a representative; not a senator.

Bruce Wilder :

The "conservatives" one sees on teevee are not thinking human beings -- they are characters in a badly written drama. It is all about modeling and mobilizing attitudes. Actual information is used sparingly; critical reason is actively blocked. Ideas? Maybe the ideas of Frank Luntz about which words are likely to evoke the desired emotional response.

Somewhere, though, in the shadows perhaps, lurk the smart people, who pay for, and run this puppet theatre.

I don't mean to invoke that ol' bugaboo of paranoid politics, the "conspiracy" -- I'm not talking about a conspiracy of a handful. Probably, something more like a conspiracy of conspiracies -- a political movement animated by the desires, and resources, of a coherent social class.

The mindless obstruction of the Republican Right -- modeled by the antics Glen Beck, Sarah Palin or veteran entertainers like Rush Limbaugh and Anne Coulter -- aren't the only component of our malaise.

Our sober, oh so "serious" centrists -- politicians and commentators alike -- are just as mindless and incoherent as Beck. David Broder? Tom Friedman? The Sunday Public Affairs programs so desperate to hear from John McCain about the evils of earmarks?

Policy proceeds, without any rational input from Right or Left -- the Right, because they are heard, and the Left, because they are ignored.

The Treasury's and Fed's actual economic policy, for example: what is it? Does its animating ideas even have a name? It is not Keynesian -- the stimulus spending too small, too scattered by compromise, to be any more than a nominal gesture in the Keynesian direction. What is it?

Did anyone vote on the billions to be funneled through Fannie and Freddie and AIG? (No obstruction, no filibuster there; funny how that works.)

What's the logic of this policy?

I don't propose to discuss it, per se, in this particular thread. I'm not trying to hijack the discussion. My point is on topic. I'm drawing attention to the ways in which our attention in diverted; open, democratic processes pre-occupied with distractions.

On this blog, we observe various schools of opinion contend over principles and proposals. Does anyone advocate for the actual policy? Does the actual policy have the backing of any academic faction? Is it Keynesian? Or, classical? Is the actual policy even opposed?

Other commentators have commented on Krugman's partisan or ideological inclinations. But, look at how easily he is diverted on to this course! Can we step back to gaze on this column, and not say, fairly, that he's been baited? Baited and hooked into rehearsing an old, almost ritualized fight, that is, in fact distant and disconnected from any actual issue of policy or governance?

And, discussion of actual policy? Met always with the objection that good policy design is not politically practicable. Instantly marginalized. Meaning, I guess, that Power can not be met with Ideas -- that Power is not even interested in Ideas, that Power would prefer not to be bothered with rational discussion.

So, calm, rational discussion of issues of governance is blocked at the door, and we are invited into the circus theatre of Glen Beck? Or, the calmer, boring, but just as reality-challenged theatre of, say, Washington Week in Review and politico.com?

Government has not stopped. Governing, as a process, goes on. We're just not seeing it. (Maybe, we're not allowed to see it; maybe, we've just been successfully distracted.) None of the issues is open for public discussion.

john c. halasz said in reply to Bruce Wilder...

"The "conservatives" one sees on teevee are not thinking human beings -- they are characters in a badly written drama."

WWE!

julio said in reply to Bruce Wilder...

In another thread, the idea of "guard labor" was brought up. I see this distraction, and our press and its role in it, as "guard labor" too.

Bruce Wilder said...

VG: "Starve the Beast" is not a plan.

"Starve the Beast is a meme. . . ."

"The idea that starving the beast will bring about smaller government is just the rationalization . . ."

Good points. The "plan" -- to the extent there could be one -- is lost in the fog of the "communications strategy". I don't think it is an accident that so many of the most prominent Republicans are sexy spokes-model politicians, cast for the role, like they were appearing in commercials for under-arm deodorant.

hollywood said in reply to Bruce Wilder...

"I don't think it is an accident that so many of the most prominent Republicans are sexy spokes-model politicians..."

Who did you have in mind :)

Bush II, McCain, Bush, Dole?

McConnell, Cheney, Gingrich, Huckabee ?

Review the press comments on the physical appearance and persona of - oh just at random - Obama - and any of these guys. Makes a tingle run down your leg, right?

Bruce Wilder said in reply to hollywood...

Sarah Palin;
Mitt Romney;
Scott Brown;
Eric Cantor;
John Boehner;
John Roberts

Some wag had it, that politics was show business for ugly people, but there's been a definite, none too subtle shift in the Republican Party, particularly in Congress. And, it isn't just casting, though that's highly visible. The Republicans in Congress really do not see any role for themselves in actually governing or legislating -- many are literally spokes-model politicians.

Some of the old guard, like Mitch McConnell or Lindsay Graham, may enjoy the exercise of power, and understand it, but their number is diminishing rapidly.

Fred C. Dobbs said in reply to Bruce Wilder...

A strategy then. If you shrink revenues with tax cuts, and let the military budget grow, because
both parties agree that National Defense is top priority, then *eventually* entitlement budgets
will be curtailed, even though 'unthinkable'.

anne said...

Though analysts may talk about a shortage or even an absence of credit in corporate markets, since March 2009 interest rates have shown no such shortage. The private credit problem developed as the liquidity trap formed from March 2008, but looking to corporate interest rates was essentially gone a year later:

https://personal.vanguard.com/us/funds/vanguard/all?sort=name&sortorder=asc#hist::upperTB=pyldTBI|lowerTB=dailyTBI

February 22, 2010

The 3 month Treasury interest rate is at 0.10%, the 2 year Treasury rate is 0.92%, while the 10 year is 3.78%.

The Vanguard Aa3 rated short-term investment grade bond fund, with a maturity of 3.1 years and a duration of 2.3 years, has a yield of 2.35%.

The Vanguard A1 rated intermediate-term investment grade bond fund, with a maturity of 7.0 years and a duration of 5.3 years, is yielding 4.16%. The Vanguard A1 rated long-term investment grade bond fund, with a maturity of 23.4 years and a duration of 12.1 years, is yielding 5.95%. *

The Vanguard Ba3 rated high yield corporate bond fund, with a maturity of 6.3 years and a duration of 4.6 years, is yielding 7.67%.

The Vanguard A rated high yield tax exempt bond fund, with a maturity of 11.0 years and a duration of 7.2 years, is yielding 4.01%.

The Vanguard GNMA bond fund, with a maturity of 3.8 years and a duration of 3.5 years, is yielding 3.17%.

The Vanguard inflation protected Treasury bond fund, with a maturity of 8.6 years and a duration of 5.0 years, is yielding 0.74%.

* Remember, the Vanguard yields are after cost. The Federal Funds rate is no more than 0.25%.

Fred Schwartz said in reply to anne...

One thing that was accomplished with record setting liquidity and various swap arrangements was to free up the corporate bond market so that corporations were able to roll over debt cheaply. This saved many corporations that would have failed. Whether they should have failed or not is the crux of the argument.

Junk bonds spreads have been widening in the last month. High grade corporate spreads are widening as well and bank credit is still contracting; and at an accelerating pace.

Bruce Wilder said...

Reniam Troop: "There is a very real chance that running these very large deficits could be more detrimental than beneficial in the long run."

It's not the deficits, per se, that should worry us -- it is what we are spending the money on.

We are running these huge deficits for no particular good purpose. We aren't running them to put people to work. Unemployment is north of 10%. (not-seasonally-adjusted)

We aren't doing much to change the structures of the economy, which demonstrably do not work.

We are "spending" vast sums, in order to replace bad financial securities with government paper. We are spending vast sums to fight a war in a distant, desperately poor country. etc.

Reining in the deficits in the short-term would cause immediate financial collapse. But, failing to address unemployment, failing to address structural issues, and continuing to feed the parasitic beasts of Finance and Health Care and the Military . . . not a good plan.

Fred Schwartz said in reply to Bruce Wilder...

Yes, I agree. This was my argument in the "We Need Jobs, not Deficit Cuts" forum. I was childishly chastised as a "winger", "dumbarse", or as knowing nothing on economics.

It does make a large difference on how money is spent. Military adventures and propping up failed systems is disastrous. I'm not against deficit spending in theory but, my philosophy at this time is that government is so corrupted it will not make it to where it needs to go and will put our credit in pawn.

Bruce Wilder said in reply to Fred Schwartz...

"I was childishly chastised . . ."

People do get into ruts, rehearsing ritualized, partisan or ideological differences of opinion. You might consider that you are using phrases or terms, and expressing attitudes, which provoke such ritualized responses. Applying the "libertarian" label to yourself -- even hedged about with qualifications ("leaning") -- probably doesn't help. "Libertarian" is synonymous with "idiot" in American politics. Not your fault, perhaps. Not my fault, certainly.

Comment threads are a lot like the bidding rounds of a card game -- poker or bridge come to mind.

If you ante in with an unsupported line, like "Krugman is an ideologue", you should expect others will see your bet and raise you, in kind. If you don't have the cards to back up that statement, or if you don't like the chips being bet, you probably shouldn't play. Your sensitivity to sarcasm and the slightest of slights is not a valuable currency (you complain about being referred to by the abbreviated, "Troop"??? That's pretty lame).

Krugman calls his blog, "Conscience of a Liberal", so his subscribing to an "ideology", or more politely, a philosophy is hardly news you can use. Someone might think calling Krugman's political philosophy and values, an "ideology" is a rhetorical tactic, chosen to diminish him and devalue his writing, a kind of "childish" slight, even. ymmv

anne:

The traditional conservatism of Alan Greenspan was marked by a wish to limit social service spending by advising that a government surplus be quickly countered by tax cutting to limit possible spending. Greenspan did not think that a surplus could be responsibly accumulated before there would be increased spending, so tax cutting was the solution. That social service spending such as for universal health care could have be preferable to tax cutting and even supported the budget was of no evident concern to Greenspan.

Michael Turner:

"Probably, something more like a conspiracy of conspiracies -- a political movement animated by the desires, and resources, of a coherent social class."

If I had to pick such a "coherent social class", I'd say it was the press -- left, right and center.

An independent press is essential to democracy. But now we have an independent press with ever-diminishing credibility, increasingly straining at the bit for a shrinking pool of revenues. This could be a race to the bottom -- the creeping tabloidization of practically everything in media.

Take the feeding frenzy around some supposed debunking of AGW in the Anglo-American press these days. It really doesn't take much digging into the facts behind the blaring headlines to see how trumped up those charges always were. But blaring headlines are the *point*, now. Digging takes time, time is money, money has to come from subscriptions and ads, and those revenue sources are drying up. Making a circus is the only stopgap. And it can be done so cheaply!

It started quite some time ago. In a Columbia Journalism Review piece I read in the mid-90s (when the growing general distrust of the press was already well under way), a journalist asked: why didn't we journalists spot and highlight the S&L crisis *before* it turned into a ravening monster? We could have saved a lot of people a lot of time and trouble, said this troubled soul-searcher. The answer: it just wasn't a very sexy story. It was a story of guys in small Sun Belt communities, with AA degress in accounting, who dressed like Arnold Palmer on the golf course, getting talked into dumping money into strip mall development that they used to loan out only to small businesses and aspiring home-owners. It could dislocate reader's jaws with the yawns evoked. Run away, run away!

So, no -- it doesn't take a conspiracy, but there is something like class interest at work here. Rupert Murdoch isn't really much of an ideologue. I don't believe he thinks very hard about politics at all. He just saw a growing pie-share in a shrinking market -- American Rightwing Yahoo Demographic -- and picked some money off the table that other, tonier, more reputable publishers and broadcasters didn't like the smell of, couldn't quite stomach. Yet.

I read a poll of employees at broadcasting outfits. Sure, Faux News had a higher proportion of conservatives than ABC, NBC, CNN. But its staffers were still *majority-liberal.* That's class interest, isn't it? When you go to work for people whose opinions stink to high heaven because, well, it's a job in your chosen profession? And in New York! Why, in the face of all those bright lights, in that big city, it would be petty to assert your shabby little scrap of integrity, wouldn't it? Think of your kids, and the private schools you need to get them into. It's really about their future, so that they can stay even at their class level, maybe get a shot at moving up, right?

Bruce Wilder said in reply to Michael Turner...

I think we have both a corporate Media, and a plutocrat's hobby Media, and the two sort of blend together. The so-called mainstream Media is entirely the creature of corporate Media conglomerates. That homogenization of business models and ownership, and the economic interests driving control, has completely overwhelmed the weak "professional" standards of journalism.

I think it is a mistake to concede, even for a moment, to any degree, that what we see in mainstream Media, is driven by consumer sovereignty, serving exogenous viewer preferences expressed in a competitive marketplace.

What we see is more akin to an ecology overgrown by a single noxious weed, an abandoned Southern plantation choked by kudzu.

Too many liberals just don't seem to understand just how this Media, as conservative propaganda machine, got built, or what holds it together. Too many keep pleading for journalistic ethics (boy, is there a contradiction in terms!).

There's never been an Eden of "independent" political journalism in America. There was a long period, still in the memory of old farts like me, during which individuals or wealthy families focused their ambition on the possibility of political statesmanship funded by monopoly rents, in a dominant local newspaper, or later, newspaper-tv-radio combo. There was a degree, or a kind of publisher "independence" then, though it would be easy to exaggerate or mischaracterize it, and that business model cum status-seeking, in turn, found value in promoting a journalism, which had "credibility" and added a certain civic, tribune-of-the-People luster to the exercise of local power.

Henry Luce would make Rupert Murdoch look moderate in his politics, but Luce made a big show of separating Church and State (aka editorial and publishing-ad-sales), because integrity had value in a more diversely competitive market, where the partisan house organ newspapers, and yellow-journalism-dinos were dying off. But, Luce, empire-builder though he was, didn't own a chain of newspapers, or a movie studio, or tv network or a cable net, or satellite broadcaster or cable system or . . . or . . . Nor, though he might have wanted to promote the odd Manchurian candidate, he didn't need to use his news outlets to promote his own sports teams or his own books or his own movies. It would never occur to Luce to use the publisher's advance on a book, to buy a politician in order to secure a tighter IP regime, to enhance Blu-Ray sales of some old movies. The exploitation of those kinds "network control" rents, which are the foundation of Media conglomerate business practice, were the sought, but unrealized "synergies" of the 1960s and 1970s. Removing the obstacles was the point of Media deregulation in the 1990s.

And, Murdoch is the odd man in this brave new world, an identifiable personality and pocket, in a world entirely dominated by "the suits". I think Murdoch is, personally, pretty right-wing, but his Empire runs on the same logic as all Media conglomerates, and, basically, it is the logic of "the suits" with only a few idiosyncratic bits of risk-taking commitment and throttling of the looting, thrown in.

The Chandlers and Bancrofts and McCormacks are gone, Ted Turner is gone, the corporate Media conglomerate business model dominates, transforming the WaPo or, even, the NYTimes.

And, there's very little effective "competition" from diversity of business models, which might introduce some space for making "credibility" valuable in the marketplace.

I marvel at politico.com, Robert Allbritton's institutionalization of the journalism that got Clinton impeached. He literally hired the reporters from the NY Times and the WaPo, who perfected the long-running Whitewater pseudo-scandal narrative, and then, by making promotional alliances with other "outlets", he's made them, and their style, a permanent fixture on cable news networks and public television, displacing any possibility of diversity or competition of voices. CNN, Meet the Press, Charlie Rose, Washington Week -- the politico.com
guys and gals are there, peddling their distinctive brand of journamalism.

That kind of "network" strategy is typical of corporate Media conglomerates. It's the same kind of "thinking" and business strategies that make movie "franchises" out of comic books, drive a parade of book and tv and movie promoters through talk shows, and serves up "concept" shows like "American Idol" and "Big Brother" in numerous national markets, year after year, and puts out Blu-Ray and Hulu. And, it is based on entangling alliances, legal thickets (such as IP claims) and owning both sides of the table in a negotiation: own the syndicator, the channel, the production company, the distribution rights, . . .

Fred Schwartz said in reply to anne...

Greenspan always knew which way the wind blew:

http://www.nytimes.com/2003/02/12/us/greenspan-throws-cold-water-on-bush-arguments-for-tax-cut.html

Later:
http://www.nytimes.com/2005/03/16/politics/16fed.html

Barkley Rosser said in reply to Fred Schwartz...

Of course, Greenspan supported the Clinton tax increases, which were unsupported by a single Republican in the Congress, many of whom loudly forecast a recession due to them that did not happen, although they managed to take control of the Congress on the strength of such actions.

Bruce Wilder said in reply to Fred Schwartz...

Rubin and Clinton lobbied Greenspan very, very hard. I vividly remember Clinton's first(?) SofU, when Greenspan was seated in the center of the gallery, next to Hillary.

Anonymous said...

The fiscal catastrophes don't start with Congress, they start with local first, then state bankruptcies. As we watch California, Illinois and New jersey go through the process, we will get better at it. By the time bankruptcy rolls up to Congress, the political system will have adapted. All politics is local.

Barkley Rosser said in reply to Anonymous...

It needs to be kept in mind that officially every state except Vermont has a rule that the current account budget must be balanced. The problem in CA is that they have disobeyed their own rules thanks to the hamstringing of their legislative process due to referenda mandating that tax increases can only come from a 2/3 vote. In other states, we shall see moves to balance budgets, one way or another, with many of those likely to be very painful, given the apparently impending end of federal stimulus aid to the states and their budgets (and the possibility that health care reform will stupidly put mandates on them to increase medicaid spending without any assistance to do so).

Bruce Wilder said in reply to anne...

I am going to briefly mount one of my soapboxes, to point out that this is exactly how the economist's habit of using counterfactual projections as "evidence" plays out.

Look at the stimulus. The projections were wildly off. And, a year later, the same economists wonder why no one believes them, when they arrogantly argue on the basis of counterfactuals, about how "worse" it "would" have been. They didn't know the future, when it was right in front of them, but they expect special credibility for a counterfactual past the shape of which they failed moments before, to predict.

Greenspan, who was, in practice, as a professional economist, a very, very data-driven guy -- legendary for this grasp of indicative detail about the current state and momentum of the economy -- is saying that he cannot be blamed, because, having had his ideology projected into a "model", he acted on his ideology, and his ideology, as reified in a model, turned out to be wrong. Way to revise your priors!

Economists really need to re-think this whole business of getting right with facts.

Goldilocksisableachblond said in reply to Bruce Wilder...

"Greenspan, who was, in practice, as a professional economist, a very, very data-driven guy ..... is saying that he cannot be blamed, because, having had his ideology projected into a "model", he acted on his ideology, and his ideology, as reified in a model, turned out to be wrong. Way to revise your priors!"

And slow to revise , at that. Remember this quote from him , circa 2001 , made with a straight face :

“The Fact that our econometric models at The Fed, the best in the world, have been wrong for fourteen straight quarters, does not mean they will not be right in the fifteenth quarter”

It brings to mind this unrelated but similar quote , with the difference being the author understood how ridiculous it would sound :

"And let that be a lesson to you all. Nobody beats Vitas Gerulaitis 17 times in a row"

– after finally beating Jimmy Connors at the 1979 Masters following sixteen straight losses.

[Nov 25, 2009] "America's Broken Politics"

Was not Jeffrey Sachs the guy who helped to rape Chile and Russia with his absurd economic recipes ?

Jeffrey Sachs says government is broken:

America's broken politics, by Jeff Sachs, Project Syndicate: ...The difficulties that Barack Obama is having in passing his basic program, whether in healthcare, climate change, or financial reform, are hard to understand at first glance. After all, he is personally popular, and his Democratic party holds commanding majorities in both houses of Congress. Yet his agenda is stalled and the country's ideological divisions grow deeper.

Among Democrats, Obama's approval rating in early November was 84%, compared with just 18% among Republicans. ... Only 18% of Democrats supported sending 40,000 more troops to Afghanistan, while 57% of Republicans supported a troop buildup. ...

Part of the cause for these huge divergences ... is that America is an increasingly polarized society. Political divisions have widened between the rich and poor, among ethnic groups (non-Hispanic whites versus African Americans and Hispanics), across religious affiliations, between native-born and immigrants, and along other social fault lines. American politics has become venomous as the belief has grown, especially on the vocal far right, that government policy is a "zero-sum" struggle between different social groups and politics.

Moreover, the political process itself is broken. The Senate now operates on an informal rule that opponents will try to kill a legislative proposal through a "filibuster"... To overcome a filibuster, the proposal's supporters must muster 60 of 100 votes... This has proved impossible on controversial policies...

An equally deep crisis stems from the role of big money in politics. Backroom lobbying by powerful corporations now dominates policymaking... The biggest players, including Wall Street, the automobile companies, the healthcare industry, the armaments industry, and the real-estate sector, have done great damage to the US and world economy... Many observers regard the lobbying process as a kind of legalized corruption...

Finally, policy paralysis around the US federal budget may be playing the biggest role of all in America's incipient governance crisis. The US public is rabidly opposed to paying higher taxes, yet the trend level of taxation (at about 18% of national income) is not sufficient to pay for the core functions of government. ... Powerful resistance to higher taxes, coupled with a growing list of urgent unmet needs, has led to chronic under-performance by the US government and an increasingly dangerous level of ... government debt. ...

Obama so far seems unable to break this fiscal logjam. To win the 2008 election, he promised that he would not raise taxes on any household with income of less than $250,000 a year. That no-tax pledge, and the public attitudes that led Obama to make it, block reasonable policies. ... America, in fact, needs a value-added tax,... but Obama himself staunchly ruled out that kind of tax increase during his election campaign.

These paralyzing factors could intensify in the years ahead. ... A breakthrough will require a major change in direction. The US must leave Iraq and Afghanistan, thereby saving $150bn a year for other purposes and reducing the tensions caused by military occupation. The US will have to raise taxes in order to pay for new spending initiatives, especially in the areas of sustainable energy, climate change, education, and relief for the poor.

To avoid further polarization and paralysis of American politics, Obama must do more to ensure that Americans understand better the urgency of the changes... Only such changes – including lobbying reforms – can restore effective governance.

The opportunity cost of the spending on the war effort doesn't receive enough attention -- Democrats are still worried about the weak on defense label and that has allowed the right to dominate policy -- so it's nice to see the issue raised. But on another topic, I like the filibuster when George Bush is president (even though it wasn't enough to stop all of the right's damaging policies from being passed into law), but dislike it now (we did manage to get health care by the filibuster, but at what cost?). So, here's a question: Is it time for the filibuster to be reformed or eliminated entirely, or does it provide a useful check on the political process? I find myself hesitant to get rid of it, but I can't fully justify that position.

km4:

Jeff Sacks nails it and hope 'extend and pretend' will bring a populist 3rd party to power ( perhaps by 2016 ) since the mostly bought and paid for assclown politicians in Congress ( on both sides of the aisle ) continue to kick the can down the road.

The U.S. National Debt Clock http://www.usdebtclock.org/ will go from $12 Trillion today to a projected $20 Trillion before 2020 so by then the USA will likely be BIGGEST banana republic in the world.

anne:

http://www.cepr.net/documents/publications/military_spending_2007_05.pdf

May, 2007

The Economic Impact of the Iraq War and Higher Military Spending
By Dean Baker

Executive Summary

There has been relatively little attention paid to the Iraq War's impact on the U.S. economy. It is often believed that wars and military spending increases are good for the economy. This is not generally true in most standard economic models. In fact, most models show that military spending diverts resources from productive uses, such as consumption and investment, and ultimately slows economic growth and reduces employment.

In order to get an approximation of the economic impact of the recent increase in military spending associated with the wars in Iraq and Afghanistan, the Center for Economic and Policy Research commissioned Global Insight to run a simulation with its macroeconomic model. It produced a simulation of the impact of an increase in annual U.S. military spending equal to 1 percent of GDP, approximately the actual increase in spending compared with the pre-war budget. We selected the Global Insight model for this analysis because it is a commonly used and widely respected model. Global Insight produced a set of projections that compared a scenario with an increase in annual military spending equal to 1.0 percent of GDP (current about $135 billion) relative to its baseline scenario. This is approximately equal to the increase in defense spending that has taken place compared with the pre-September 11th baseline.

The projections show that:

• After an initial demand stimulus, the effect of higher defense spending turns negative around the sixth year. After 10 years of higher defense spending, payroll employment would be 464,000 less than in the baseline scenario. After 20 years the job loss in the scenario with higher military spending rises to 668,100 compared to the baseline scenario.

• Inflation and interest rates would be considerably higher in the scenario with higher military spending. In the first five years, the annual inflation rate would be on average 0.3 percentage points higher in the scenario with higher military spending. Over the full twenty year period, inflation averages approximately 0.5 percentage points more in the high defense spending scenario. After five years, the interest rate on 10-Year Treasury notes is projected to be 0.7 percentage points higher than in the baseline scenario. After ten years, this gap is projected to rise to 0.9 percentage points, and after twenty years to 1.1 percentage points.

• Higher interest rates are projected to lead to reduced demand in the interest sensitive sectors of the economy. After five years, annual car and truck sales are projected to go down by 192,200 in the high military spending scenario. After ten years, the drop is projected to be 323,300 and after twenty years annual sales are projected to be down 731,400.

• Annual housing starts are projected to be 17,900 lower in the high military spending scenario after five years, 46,200 lower after ten years, and 38,500 lower after twenty years. The cumulative projected drop in housing starts over the twenty year period is 530,000. The drop in annual existing home sales is projected to be 128,400 after five years, 247,900 after ten years and 286,500 after twenty years.

• Higher interest rates are projected to raise the value of the dollar relative to foreign currencies. This makes imports cheaper, causing people in the United States to buy more imports and makes U.S. exports more expensive for people living in other countries, leading to a drop in exports. The model projects that in the high military spending scenario, high imports and weak exports causes the current account deficit to increase (become more negative) by $90.2 billion (2000 dollars) after five years, compared to the baseline scenario. The current account deficit is projected to be $72.5 billion higher after ten years and $112.8 billion higher (both in 2000 dollars) after twenty years. The cumulative effect of higher imports and weaker exports over twenty years is projected to add approximately $1.8 trillion (in 2000 dollars) to the country’s foreign debt.

• Construction and manufacturing are the sectors that are projected to experience the largest shares of the job loss. While construction is projected to have a net gain of 8,500 jobs after five years, it is projected to lose 144,200 jobs after ten years and 211,400 jobs after twenty years in the high military spending scenario. Manufacturing is projected to lose 44,200 after five years, 95,200 jobs after ten years, and 91,500 jobs after twenty years in the high military spending scenario. Two-thirds of the projected job loss is in the durable goods sector....

Lavrenti Beria:

"So, here's a question: Is it time for the filibuster to be reformed or eliminated entirely, or does it provide a useful check on the political process? I find myself hesitant to get rid of it, but I can't fully justify that position."

Is the filibuster really the problem here or is it a one party, two faction state that is owned and/or frightened to death by financial, arms drug, and Middle East policy interests? Polarization is a straw man aimed at diverting attention from the unanimity of the ruling coterie and the fact the their "out" faction operates solely to funnel public anger into a black hole. Brownshirt, "tea party" populism is about as oppositional as Obama's resistance to Bibi Netenyahu's settlements. If you are looking for a way to end the costs of the wars in Iraq, Afghanistan and Pakistan, then find a way to break the power of AIPAC and the munitions industries. And that, sir, simply will not happen via parliamentary devices; we're quite beyond those. What is needed to restore our democracy are mass demonstrations and strikes on the order of the Solidarity protests in Poland in the 1980s. Our problem is quite that bad. So who cares if the someone in the Regime fillibusters? It has about as much meaning as whether or not you plan to include cranberry sauce on your plate at Thangsgiving dinner.

paine :

"find a way to break the power of AIPAC and the munitions industries'
the motivational roots
of modern trans nat limited liability empire
go deeper comrade
you'll have to take out well lots more outfits like ...coca cola too

Lavrenti Beria:

You are right to point to the complicating factor of ancillary interests, paine. It makes the job more difficult. But if you proceed effectively with the principal actors, those with the bit parts will get the message. And a sea of angry faces on every street and mall in Washington, D.C. ought bring a certain sobriety to the way the whores in residence there relate to their paymasters, eh?

anne:

http://www.juancole.com/2009/11/iraq-accuses-baathists-election-law.html

November 23, 2009

Blair Misled Parliament, Interfered with Military Preparedness

Leaked British documents show that then Prime Minister Tony Blair had secretly agreed to go to war against Iraq with George W. Bush and had begun operational planning in February, 2002, but lied to parliament about it, claiming that disarmament was the issue, not regime change. * Blair ordered the British military not to engage in proper preparations for the war, since such steps would be observed by parliament and the representatives of the people might get a clue as to what was really going on. He therefore sent his troops, ill-equipped and unprepared, into battle. They also had no instructions or training as to post-war security and reconstruction, for which they were nevertheless made responsible. As a result of their unpreparedness, Iraq fell into chaos with the fall of the government and Basra was looted. The University of Basra lost most of its equipment and its entire library was stolen or burned, under the tender mercies of Mr. Blair's civilizing mission.

* http://www.telegraph.co.uk/news/newstopics/politics/defence/6625415/Iraq-report-Secret-papers-reveal-blunders-and-concealment.html

-- Juan Cole

2slugbaits:

We don't have filibusters; we have the threat of filibusters. I'm okay with a filibuster because it gives the minority power to effectively veto something over which the minority has a strong, principled objection. But Democrats shouldn't be shy about actually making the Republicans prove their principled objections by having to physically stand in Congress and miss their precious Thanksgiving break, Xmas break, New Year's break, etc. Congress is only in session three days a week most times. Why not make the old men of the Senate stand there with their weak prostates and Depends diapers? Go ahead and read from the phone book. That's how you cut through the crap and force the Republicans to distinguish between principled objections and just political posturing.

julio:

Agreed. And I like the part about the diapers. Product placement, anyone?

I think a televised filibuster would go a long way to getting people to understand what this is for.

I understand, however, that there a number of other recondite Senate "rules" or "traditions" that allow individual members to prevent legislation from moving forward.

[Oct 6, 2009] Bruce Bartlett’s Argument to Improve His Republican Party By DAVID LEONHARDT

Oct 6, 2009 | NYTimes.com

Successful economic ideas usually end up being taken too far.

Democrats dominated the middle part of the 20th century, thanks in part to their vigorous response to the Great Depression. They used the government to soften the effects of the Depression and to build the modern safety net. But they failed to see the limits of the government’s ability to manage the economy and helped usher in the stagflation of the 1970s.

Ronald Reagan then came to power promising to cut taxes and unleash the forces of the market. And the Democrats spent the next dozen years struggling to absorb the lessons of their failures.

More than a few people believe the Republican Party is in a similar place today.

When I asked Dale Jorgenson, the eminent expert on productivity (and a Republican), what had been the positive aspects of President George W. Bush’s economic policy, Mr. Jorgenson said, “I don’t see any redeeming features, unfortunately.” After Republicans opposed the stimulus package this year, The Financial Times, not exactly a liberal organ, called the party’s ideology harebrained. When Olympia Snowe was recently explaining why she might be the only Republican senator to vote for health reform, she suggested it was because her party had moved so far to the right.

But perhaps the most persistent — and thought-provoking — conservative critic of the party has been Bruce Bartlett. Mr. Bartlett has worked for Jack Kemp and Presidents Reagan and George H. W. Bush. He has been a fellow at the Cato Institute and the Heritage Foundation. He wants the estate tax to be reduced, and he thinks that President Obama should not have taken on health reform or climate change this year.

Above all, however, he thinks that the Republican Party no longer has a credible economic policy. It continues to advocate tax cuts even though the recent Bush tax cuts led to only mediocre economic growth and huge deficits. (Numbers from the Congressional Budget Office show that Mr. Bush’s policies are responsible for far more of the projected deficits than Mr. Obama’s.)

On the spending side, Republican leaders criticize Mr. Obama, yet offer no serious spending cuts of their own. Indeed, when the White House has proposed cuts — to parts of Medicare, to an outdated fighter jet program and to subsidies for banks and agribusiness — most Republicans have opposed them.

How, Mr. Bartlett asks, is this conservative? How is it in keeping with a party that once prided itself on fiscal responsibility — the party of President Dwight Eisenhower (who refused to cut taxes because the budget wasn’t balanced) or of the first President Bush (whose tax increase helped create the 1990s surpluses)?

“So much of what passes for conservatism today is just pure partisan opposition,” Mr. Bartlett says. “It’s not conservative at all.”

He became well known several years ago for attacking the younger Mr. Bush, in a book called “Impostor.” But Mr. Bartlett has turned out to be more interesting than most people who publicly break from their own party. In a series of columns for Forbes and in a book that comes out next week, “The New American Economy,” he has started to describe a new conservatism. He is, in effect, laying intellectual groundwork for a Republican Bill Clinton — the politician who curbs his party’s excesses.

You can argue that this sort of reassessment should not make conservatives feel insecure. In many ways, they have won. Mr. Obama, like Mr. Clinton, has proposed raising the top marginal tax rate to a level that’s lower than it was for most of the Reagan administration. Most Democrats now acknowledge the central idea of supply-side economics: tax rates matter.

The best parts of supply-side economics have been “completely integrated into mainstream economics,” Mr. Bartlett writes. “What remains is a caricature — that there is no problem that more and bigger tax cuts won’t solve.”

His conservatism starts with the idea that high taxes are no longer the problem, even if complaining about them still makes for good politics. This year, federal taxes are on pace to equal just 15 percent of gross domestic product. It is the lowest share since 1950.

As the economy recovers, taxes will naturally return to about 18 percent of G.D.P., and Mr. Obama’s proposed rate increase on the affluent would take the level closer to 20 percent. But some basic arithmetic — the Medicare budget, projected to soar in coming decades — suggests taxes need to rise further, and history suggests that’s O.K.

For one thing, past tax increases have not choked off economic growth. The 1980s boom didn’t immediately follow the 1981 Reagan tax cut; it followed his 1982 tax increase to reduce the deficit. The 1990s boom followed the 1993 Clinton tax increase. Tax rates matter, but they’re nowhere near the main force affecting growth.

And taxes are supposed to rise as a country grows richer. This is Wagner’s Law, named for the 19th-century economist Adolf Wagner, who coined it. As societies become more affluent, people demand more services that governments tend to provide, like health care, education and a strong military. A century ago, federal taxes equaled just a few percent of G.D.P. The country wasn’t better off than it is today.

Modern conservatism, Mr. Bartlett says, should therefore have two main economic principles. One, it should prevent government from getting too big. There is no better opportunity than health reform, given that the current bills don’t do nearly enough to slow spending growth. Instead of pushing the White House to do better, however, Congressional Republicans are criticizing any effort to slow spending as an attack on Grandma. They’re evidently in favor of big Medicare, just not the taxes to pay for it.

The second goal should be to keep taxes from being increased in the wrong ways. Supply-side economics is based on the idea that higher tax rates discourage work and investment, two crucial ingredients for economic growth. But higher taxes on consumption don’t have nearly the same effect as taxes on incomes or companies. If anything, consumption taxes encourage savings, which lifts investment.

So Mr. Bartlett advocates a value-added tax — a federal sales tax — which most other rich countries have. Canada has a value-added tax that raises revenue equal to 2 percent of its G.D.P., and its economy has grown faster than this country’s over the last decade. Britain raises 6 percent of its G.D.P. through such a tax and Sweden raises 9 percent, and their economies have grown as fast as the American economy.

I don’t agree with everything Mr. Bartlett says, and you probably don’t either. Maybe you don’t like a national sales tax because you think it will inevitably hurt the poor. Maybe you have specific ideas for cutting hundreds of billions of dollars from the federal budget to keep taxes from rising much.

But you don’t have to agree with all the specifics to see that he has a larger point. One of the country’s two political parties has no answer to an enormous economic issue — the fact that the federal government cannot pay for its obligations. This lack of engagement is a problem, just as it was a problem when Democrats were saying that welfare was working, teachers’ unions were always right and stagflation couldn’t happen.

For now, there is little reason to think the Republicans are on the verge of a Clinton-like reform. But it is hard to see how they can ultimately stick to their current platform. At some point, the government will have to figure out how to pay for the baby boomers’ retirement. “Trends that can’t continue,” as Mr. Bartlett says, “don’t.”

E-mail: leonhardt@nytimes.com

The Wrecking Crew How Conservatives Rule

Amazon.com

5.0 out of 5 stars The Rosetta Stone of the George W. Bush Administration , October 1, 2008

By R.G. Troxler MD,MPH - See all my reviews

This is a fascinating, extremely well referenced work about the neocon rule book. It explodes all the rumors that Bush is not smart. He has actually just been following this rule book.

Rule One: Government services are bad and business services are good. Attack big government.

Rule Two: Weaken government services so you can declare them incompetent and subcontract out the government services to private businesses.

Rule Three: Replace personnel in key government service positions with your friends, whether or not they are qualified to do the job.

Rule Four: Run up the debt, declare a crisis and cancel social services.

Rule Five: Demonize and demoralize the liberals. Blame them for whatever goes wrong.

Rule Six: Strengthen the ties between businesses and government by hiring only "business-friendly" people and by encouraging business to help write the bills to be passed by the congress.

5.0 out of 5 stars A Depressingly Compelling Review of Conservatives' Philosophy of Government in Practice , August 15, 2008 By Steve Koss (New York, NY United States)

Following up on his masterly examination of the paradox under which Red Staters consistently vote Republican against their own economic self-interest (WHAT'S THE MATTER WITH KANSAS?), Thomas Frank sets out to trace the present-day conservative Republican approach to government in THE WRECKING CREW. What he demonstrates is deeply disturbing even though it has remained on display virtually every day of the entire Bush II administration.

According to Frank, the conservative worldview is totally committed to "the ideal of laissez faire, meaning minimal government interference in the marketplace, along with hostility to taxation, regulation, organized labor, state ownership, and all the business community's other enemies. "The conservative movement promotes the interests of business exclusively over all else in accordance with the motto, "More business in government, less government in business." So-called "big government," also tagged as the liberal state, is the enemy; in fact, virtually all government is the enemy, other than the national defense.

Mr. Frank follows the conservative movement from the turn of the Twentieth Century through the Depression and New Deal, focusing most heavily on the movement's rebirth under Ronald Reagan and on into the new millennium. Along the way, he discusses the growth of lobbying as a major force in converting the nation's capital into a massive feeding ground for corporate special interests. Frank also highlights the manner in which conservatives have repeatedly run the country into huge spending deficits in order to "defund the left" while simultaneously politicizing government management positions by favoring ideology over competence. The end result under Republican conservative stewardship is government that demonstrates itself as ineffectual and incompetent, offering but further proof that big government is inherently incapable of working and needs to be outsourced to private, professional concerns who can do the job correctly (and then inevitably failing to do so).

THE WRECKING CREW is filled with fascinating side observations, such as its note that the movement has always lionized bullies, from Joe McCarthy to Bill O'Reilly, from Jack Abramoff and Tom DeLay to George Allen and Michelle Malkin (whom Frank describes hilariously as "a pundit with the appearance of a Bratz doll but the soul of Chucky"). The book's most effective and outrage-generating section has to be its chapter on the Marianas Island of Saipan. Frank casts Saipan, with all its corruption, nepotism, income inequity, slave labor sweatshops, and local political control exercised in the name of big business as the perfect and ultimate model of the conservative movement ideal, a truly horrific prospect. He also notes, properly, that the morass that is today's Iraq is equally a product of the attempt to force fit these same free market ideals to a foreign country, implemented (so the Bush Administration hoped) by inexperienced, wet-behind-the-ears young idealogues, home-schooled ultra-Christians with college degrees from the likes of Patrick Henry College, Jerry Falwell's Liberty University, and Pat Robertson's Regent University. Saipan and Iraq constituted "laboratories of liberty," modern-day "capitalists' dreams" whose realizations are (or at least should be) shameful American nightmares.

There is little good news in THE WRECKING CREW. Author Frank shows that our national government has been hollowed out under Republican conservative control, savaged into an ineffectual husk. Furthermore, he illustrates clearly that this was no mistake, that it is part of a deliberate process not just to privatize government and eradicate government regulation but to make these changes permanent by destroying the liberal left (and with it, of course, the Democratic Party). Frank demonstrates well that present day politics has truly become, to invert von Clausiwitz's famous maxim, "a continuation of war by other means." Regrettably, one side of the battle continues to play the game as politics, as elections won or lost and citizens swayed or not, while the other side approaches it as an act of war, a no-holds-barred contest in which the only goal is the complete and utter destruction of the other side.

THE WRECKING CREW is compelling and informative even as it paints a bleak picture of an America being driven rightward and increasingly toward the excesses and inequities of the pre-New Deal era. We all know how that era ended in October, 1929.

5.0 out of 5 stars An evangel for corruption, August 19, 2009
By Luc REYNAERT (Beernem, Belgium) - See all my reviews
(TOP 500 REVIEWER) (REAL NAME)
This review is from: The Wrecking Crew: How Conservatives Ruined Government, Enriched Themselves, and Beggared the Nation (Paperback)

Based principally on the DeLay-Abramoff affair with its muddy torrent of graft, Thomas Frank denounces highly emotionally but limpidly the agenda of the conservative right concerning the State and its government, as well as their ideology of selfishness and greed.

The core of US conservatism is the interests of business. These interests are mightily more important than their `free market' evangel. Mechanisms like tariff walls, public subsidies, monopolies, no-bid contracts or patent protections, will be adopted without any resistance if they enhance profits.

The conservative right sees the liberal State as a perversion, as a corruption of private interests (taxes), not as an instrument to service the population as a whole.

When they took power, they sabotaged the working of the government by appointing ferocious opponents of State agencies (EPA, FDA, SEC) at their head. They even created anti-agencies (OIRA, Council on Competitiveness).
For them, all public services should be subjected to the market system, because that is the most efficient way of ruling. In other words, those services have to be managed by private interests.
For Thomas Frank, the result of these policies was a rip-off. The institutions created for the protection of the population became institutions for the exploitation of the population (arms industry, anti-terrorism, administration of Iraq, recovery of hurricane Katrina ...).

One of the main targets of the conservatives is the Welfare State. The money flows of the welfare programs should be privately managed, thereby generating colossal commissions for a bunch of Wall Street managers, while in the meantime `defunding the left'. For Thomas Frank, this is a sure way for turning US politics into a plutocracy and concomitantly a `bought' government.

Through lobbyism and pure propaganda for the agenda of the Right, conservatism itself became a business with monster fees for the preachers.

A US senator asked a few years ago: `Have you missed the government?'
If the government had not intervened heavily in the huge banking crisis of the last years, the whole capitalist system would have been turned into a desert, an enormous Great Depression for many years to come. The other side of the coin would have been an astonishing handover of all political, economic and financial world powers to the East (China).

This book is a must read for all those who want to understand the world we live in.

N.B. James K. Galbraith treated the same all important issues in a more theoretical way in his formidable book `The Predator State'.

Are Republican-Conservative economic policies as stupid as they appear

"Thanks, but no thanks" to Conservative Economics by Mary Bell Lockhart Page 1 of 1 page(s) www.opednews.com Conservative economic policies have us slip-sliding down that old rocky slo... "Thanks, but no thanks" to Conservative Economics

by Mary Bell Lockhart Page 1 of 1 page(s)

www.opednews.com

Conservative economic policies have us slip-sliding down that old rocky slope. The mantras of that vision are well known to us all, as we've heard them over and over for the last 2 or 3 decades:

The fundamental problem with this vision is that it ignores one simple, indisputable fact: WE'RE ALL IN THIS TOGETHER. This is true whether we are talking about the economy, the environment, towns and cities, states and nations, social groups, or our overall existence in space and time. If, we're all in this together, then the "Golden Rule" that we care for others as we care for ourselves is our best strategy, not just for mere survival, but to thrive and live lives of purpose and meaning.

From the 1940s to the 1970s, based upon our collective understanding that we are all in this together, this country built up a social safety net, consisting of things such as disability insurance, retirement systems, minimal income support (welfare), health care access for the elderly and the poor, worker safety and benefit programs. In the 1980s, conservatives began efforts to systematically dismantle those. Remember when we heard the calls to "end welfare as we know it" because "there's no free lunch" and "everyone must work for their living?" Government was too big, they said, and was "redistributing wealth" by taxing the rich to spend it on the poor (especially poor people of color). It was that evil socialism!

Remember when conservatives demonized welfare as money down the drain, given to ne'er-do-wells who blew it on luxuries like the most famous nonexistent object in history, the "welfare Cadillac?" They refused to listen to those of us who warned that welfare money was not being given to the recipients alone, but to all of us, to our society in general. They refused to hear that the welfare "giveaway" went from hand to hand through the economy building jobs and income repeatedly and even generated tax income back for the government. They could not see that we are all in this together.

These were the same people who were telling us that the profit motive (ie., greed), unrestrained capitalism and free trade would solve all our problems. They proudly busted up unions so that working folk had no advocates and then they shipped the jobs overseas. These were the same folk who actually believed that the investment house Smith-Barney earned their money "the old-fashioned way" when, in fact, they never earned a single dime that way.

There were some voices in the wilderness who warned where all this was heading. But progressives didn't have many strong voices to present the alternative views and, most important, they did not have control of the government and the media. Some, who might have stood stronger against this madness, like Bill Clinton, were suppressed by a conservative Congress and by their own political missteps.

Over the years, middle class economic power, the engine that drives our economy, was eroded. Not surprisingly, people stopped saving. They didn't have any choice but to spend every dime they earned. As savings were exhausted, to keep them spending, the financial powers opened up credit available at exorbitant and rising interest rates. This soak-the-middle scheme could only go on so long. The Bush administration added to the burden by engaging in a war of aggression paired with further tax cuts for the wealthy. Those who benefited most of this war--the Haliburton profiteers, the oil companies who now have control of Iraqi oil--got this war booty at the expense of Middle America.

The coup de grace was deregulation that allowed rampant speculation in the oil market and creation of fictitious investments ("toxic assets") for rich people to swap among themselves. In recent years, as speculation drove gas prices up (which in turn drove up the price of just about everything else) who do you supposed was hurt the most? It wasn't the Wall Street wizards; it was the millions upon millions who were driving the trucks, growing the food, manufacturing the goods, driving to and from work and school. It was the small and mid-sized businesses where the bulk of our jobs are created and the majority of our real goods and services are produced.

So wham! We hit that brick wall; now we ALL are waking up with the same headache. Once again we see clear evidence that we're ALL in this together. Well, some of us see that anyway. Some still don't get it; they're looking everywhere for someone to blame when the mirror would be the most logical place to look. When John Q. Public couldn't keep paying those "adjustable-rate-upward-only" mortgages because he'd lost his job or had a health care crisis (there's a whole other story), Mr. Moneybags in the loan industry turned to that former "enemy" he'd been busily trying to starve to death, the mean ole big US government. "Help us, please, or we'll stop making the loans everyone depends on now!" I guess they don't consider it socialism when they are the recipients of the "welfare."

The financial institutions got their money and continued merrily along on their same old ways in secrecy. There's little indication that they are using it to help out the folks who were really in distress. If that money had been directed to assist those in foreclosure, instead of their financial "captors" it would have benefited everyone including the big financials. Then here comes the auto industry asking for LOAN assistance of $15 billion--about the same as a few weeks of the war in Iraq. It was termed a bailout, but it was a very different kind of bailout that genuinely would help middle and lower income folk across the country. Conservative Republican Senators killed the deal unless the auto industry busted their unions and cut worker pay (when worker pay was not the problem). Better to hold to their ideology than, Heaven forbid, help middle America. They just don't get it that we're all in this together.

It's not only here in America that conservative economic principles have been wrecking havoc. Please read The Shock Doctrine by Naomi Klein in which she details how economic shock has been applied to countries all over the globe to force them into unregulated capitalism. And this recession now is worldwide.

Conservative economic myopia sees only what is right under its nose. There are voices out there right now who still attack the American safety net and are trying to blame our economic downturn on it. They denigrate as "entitlements" and "giveaways" Social Security, Medicare, and Medicaid, and hold them responsible for our budget deficits now and in the future. Yet, another word more accurately describes these programs: Investments! Unlike our spending on things like war, spending for social programs is a "rising tide that lifts all boats." No PhD in economics is necessary to follow the logic. If poor person A gets medical care they would not otherwise get, where does the money go? Doctors, hospitals, nurses, drugs--and right now too much also goes to the private corporations managing that money. If elderly person B has a minimal income support of Social Security, where does the money go? Those receiving those funds in turn spend them on their needs. These "investment" moneys get spent and re-spent and most of it right here in America. Jobs are generated and taxes on the earnings are paid back to the government. Most important, money is spent, not on death and destruction, but on positive social goals.

Furthermore, if we can keep from falling from deep recession into deep depression, we will have those pesky "entitlement" programs to thank for it. We'll remember why we created them in the first place.

There is more that we need to do to rebuild the economy via investment. Universal access to health care will benefit not just those who get the care, but also the American businesses who cover their employees and the providers of the care and all the people they support in the economy. Similarly, government spending to promote energy efficiency and environmental protection will build middle class jobs to replace the industrial base we've lost while saving costs throughout the economy that are now based on fossil fuels. Education produces both the wizards and the working folk who will take us into the future.

Progressive economics is based upon the understanding that we are all in this together and that our society is no richer than it's poorest member. It supports capitalism but not laissez-faire capitalism. It knows that there is no such thing as a pure economy and a mix of regulated capitalism and socialism seems best. It understands the difference between government spending and government investment and calls for progressive, not regressive, taxation. Yes, in fact that DOES mean that the rich pay more. They should; they benefit more! Progressive economics involves balancing the power of the employers and workers through unions, safety regulation and benefits. Instead of either the unrealistic isolationist stance against foreign trade or the promotion of free trade (which doesn't exist), progressive economics supports fair trade with environmental and worker safety controls and incentives to boost American businesses.

Obama appears to be getting ready to apply some of these principles. It can't come a moment too soon because, even if implemented on day one of his administration (which is unlikely) it will take months and years for this rebuilding of our economy to occur. We will have learned our lesson; let's hope that it sticks for a longer time than the previous learning did.

I'm a retired public health worker focused these days on supporting a variety of progressive issues, such as criminal justice reform, energy efficiency, environmental protection, universal health care, civil rights, and worldwide peace and respect.

[Sep 10, 2009] The Lasting Legacy of the Bush Tax Cuts

September 1, 2009 | Econbrowser

From The 2009 Budget Deficit: How did we get here? by John Irons, Kathryn Edwards, and Anna Turner:

This Issue Brief examines the details and causes of the current budget deficit and the role the current recession has played. The years between 2001 and 2007 saw a large deterioration in the budget balance, which was driven chiefly by legislated policy changes. The Bush-era tax cuts are the largest contributors to this period of policy-induced increases to the federal budget deficit. . . .

lastingleg1.gif
Chart C: from Irons, Edwards and Turner (2009).

Posted by Menzie Chinn at August 31, 2009 07:38 PM

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Comments

Way to go, Menzie, show those hypocrite Republicans who is really responsible for the budget mess the Obama administration has to fix. Looks like some pretty awful management over the last 8 years, that's for sure. I see the GOP faithful still can't accept the truth by the first comments, but their failures will haunt this country for many more years, long enough time for everyone to realize without doubt who drove this country into the ground. We can thank Bush and his capital worshiping sheep who have no idea what fiscal management is (or fiscal responsibility or even ethical regulatory management-lots of failures in that bunch of fools). We'll never forget you.

Posted by: GOP failed at September 1, 2009 05:08 AM

algernon,

It is hardly an established fact that budget imbalances are only "pernicious" when induced by spending increases. The Bush tax cuts, in themselves, were enough to turn surplus into deficit. His spending increases made there on contribution to the structural deficit, but the tax cuts alone would have caused a structural deficit.

That, and the fact that they skewed after-tax income toward more heavily toward the rich, seems pernicious enough to me.

One reason to stay on the topic of Bush tax cuts is that there remains an effort to leave them in place, rather than allow them to expire. They are not just a bit of political history. Another reason is that, when we discuss the magnitude of budget effects, it is good to have a benchmark. There was plenty of cheering for tax cuts that have a larger negative budget consequence over time than any medical reform proposal currently receiving serious consideration, but the argument is made that the medical reform proposals are too expensive. If one asks "too expensive, compared to what?" a reasonable answer is "well, if the Bush tax cuts weren't too expensive, then why is health care?"

Posted by: kharris at September 1, 2009 06:01 AM

algernon,

I thought tax cuts were the be all end all, so why in the hell did we have a recession that began under Bush? Even a simpleton should understand guns AND butter. Bush pulled the same shit as Reagan and it didn't work, again. Zero private sector jobs created in a decade and the market lower as well.

Posted by: me at September 1, 2009 07:23 AM

B.B., just to start with the single most egregious mistake you make: social security is properly funded.

your second most egregious mistake is to assume that a householder and the US government are the same.

as for CoRev, i can't call them egregious mistakes on CoRev's part: it's simply CoRev's willful obtuseness. in 2000, bush insisted that we could "afford" his tax cuts and still maintain the "lockbox;" translated into english, that means that it's not acceptable to count the prepayment of social security against the deficit, since bush specifically promised that the social security surplus would be maintained. so the percentage of gdp numbers that CoRev provides us are...crap.

more broadly, given that the bush administration pushed through medicare D without a funding source and the war in iraq without a funding source (indeed, they proudly opposed funding the war), i have no idea what in the world CoRev is talking about here.

Posted by: howard at September 1, 2009 08:31 AM

heterosexual: Yes, capital gains tax cuts are widely viewed as positive.

Clinton bombed Iraq in 1998; his administration did not invade and occupy not one but two countries. Clinton could have tried to persuade the Israelis to unilaterally disarm their nuclear arsenal as well as respect the spirit of the failed Oslo Peace Accords (as opposed to continually expanded the illegal settlements) and perhaps the Sept. 11th terrorist attacks on NYC might have been avoided but he didn't.

Love the way you whip yourself into a partisan fury. Do you find learning easier in that state of mind or more difficult? Just curious.

Posted by: GNP at September 1, 2009 09:15 AM

Not being an economist, the way the piece was written it makes it sound like President Bush just enacted tax cuts to benefit the wealthy. They were enacted to bring us out of a recession he inherited. Where there no baseline projections based upon this and the 9-11 bombing?

President Clinton also balanced the budget on the backs of the military. The spending remained relatively flat for 8 years. Yes congress was involved and could have increased the spending, but his administration submitted the initial proposals.

Lastly the reports mentions the Freddie and Fannie debacle. President Bush requested congress reform the agencies, but was blocked. I am not sure why this did not play into the analysis.

Posted by: MikeMainello at September 1, 2009 09:55 AM

A bit of the attempted slippery reasoning here is to just claim that nothing matters but right now. If Bush created a very large structural deficit, we should ignore that, say the Bush apologists. The fact that Obama is undertaking a Keynesian policy response that partially addresses a recession is the bad thing.

No kids. Running a structural deficit is bad. Bush tax cuts assured that the US would have a structural deficit, no matter what else might have happened. That is simple fact. Will Obama worsen the structural deficit? Quite possibly, and that would be a bad thing, too. One way to reduce the odds of increasing the structural deficit is to allow Bush's "temporary" tax cuts to expire.

Is there anybody here who really doesn't understand the difference between a structural deficit and a stimulus-induced cyclical widening in the deficit? Cause if you don't you really need to be asking question, not making misguided statements. Anybody who does understand the difference, and writes comments which willfully ignore the difference, is simply being dishonest.

Posted by: kharris at September 1, 2009 09:57 AM

Professor, pull your hands from over your eyes and ears.

Obama is running things now, and into the ground.

Amping up the military presence in Afghanistan, still shipping out prisoners to terrible countries, Gitmo still open, turning a blind eye to outrageous pay and practices on taxpayer-saved Wall Street.

Quit using Bush as a bogeyman, and straighten out your President, sir.

Otherwise, you and the other Madisonites are in for a very long 3 1/2 years.

Posted by: jg at September 1, 2009 10:07 AM

Take a look at the Board of Directors for the EPI and who they represent - a who's who from the labor movement - wtih 29% of their funding from labor unions. But I'm sure that the policy analysis is strictly non-partisan, unlike anything from those ideologues at the Heritage Foundation.

I don't defend everything Bush did. But I fail to see how taking reckless fiscal policy and putting it on steroids is somehow going to save us.

Posted by: GWG at September 1, 2009 10:43 AM

There will be no peace dividend to save Obama's "_ss", the way Clinton's bacon was saved. Since we did not have the chance to finish the war by 4 more years of Republican governance and Obama has decided to fight in Afghanistan the way Johnson fought in Vietnam, we are going to deal with very high inflation and a loss in the Middle East. The good news is it only took 12 years to undo the mess Carter caused, so we should be good to go by 2024. It's deja vu all over again. The Bush tax cuts were and are wonderful, to bad they are going away. Remember 1931 went down hill after the interest rates went up, well 2010, as tax rates go up, equals 1931. Watch out, better get the wife and the baby in the house, the storms coming!!!

Posted by: Steve at September 1, 2009 10:52 AM

Johnson, "That was the point, the tax cuts create the revenue for that spending(wow, is it hard for some people)"

It takes many years, probably a couple decades, before economy grows enough for revenue to cover previous shortfalls from a cut. IIRC, a 2% tax cut (assuming taxes are about 20%) that result is about .25% one time bump in GDP growth converging to .125% higher gdp growth long term would take over 40 years for payback.

Posted by: aaron at September 1, 2009 10:56 AM

Revenues

2000 2,025.5
2001 1,991.4
2002 1,853.4 First Bush Tax Cut (Keynesian)
2003 1,782.5
2004 1,880.3 Second Bush Tax Cut (Supply Side)
2005 2,153.9
2006 2,407.3
2007 2,568.2
2008 2,523.6

Outlays

2000 1,789.2
2001 1,863.2
2002 2,011.2
2003 2,160.1
2004 2,293.0
2005 2,472.2
2006 2,655.4
2007 2,728.9
2008 2,978.5

Year 2000 was the highest tax receipts up to that time. Tax revenues started to decline the last two Clinton budgets. The first Bush tax cut, a Keynesian redistribution of wealth, was passed in 2001 becoming effective 2002. The second Bush tax cut, a supply side tax cut designed by Rep. Bill Thomas, passed in 2003 becoming effective in 2004. Tax receipts increased every year after the second Bush supply side tax cut.

Notice that, while revenues declined from 2001 through 2003, government outlays increased every year. So I will let you guess whether it was outlays or revenues that increased the deficit.

BTW, this foolish spending is why the Republicans lost the House and Senate.

Facts are stubborn things.

Posted by: DickF at September 1, 2009 11:34 AM

kharris,

We have a great experiment here. There is massive spending planned in 2010 (mid-year election bribes?). The Democrats are also planning to allow the Bush tax cuts to expire. Now if things go as anticipated if 2010-11 tax receipts increase it will be because of the stimulus, not taxes, but if tax receipts decline it will be because of tax increases (Bush taxes decline). Believe me I will remind you of this post.

Posted by: DickF at September 1, 2009 11:40 AM

Aaron,

Johnson is under the deranged assumption that we are on the right side of the "Laffer Curve". Unfortunately, as it has been shown time and again, we are now on the left side of the "Laffer Curve"...any tax cuts will result in lower revenue!

Keep praying to Reagan GnOPe'rs and maybe one day the country will have a 0% tax rate and the country will have revenue coming out of its ears!

Posted by: Gridlock at September 1, 2009 12:18 PM

Call the Bush tax cuts as evil and irresponsible as you want -- but Obama has said he's renewing the bulk of them ($2 trillion worth), and has explicitly promised
even more.

So they are the "Obama tax cuts" now. As has been pointed out repeatedly by Diane Lim Rogers...
~~~~
... left-leaning commentators are reiterating their disdain towards the Bush tax cuts ...
but are failing to recognize that almost all of the tax cuts that President Obama has proposed --and in fact all of the deficit-financed tax cuts President Obama has proposed -- are in fact the old Bush tax cuts, which will now become the Obama tax cuts as soon as President Obama signs the extension into law before the end of next year.

And while those who have hated the Bush tax cuts but love President Obama would like to believe that President Obama is letting the worst part of the Bush tax cuts (those "for the rich") expire, the truth is that the Obama tax cuts will still go disproportionately to the rich, even with the upper tax brackets expiring.

Yep. The Bush/Obama tax cuts are a sad truth that all of us (Reagan supply-siders, Clinton fiscal conservatives, and even the most liberal of Obama supporters) don't want to believe our new President who stood for "change" could let happen.
~~~~

The Democrats have the White House and 60% of both the Senate and House.

If they keep these tax cuts as they are planning to do, then say: "Obama tax cuts".

There will be nobody to blame for the damage they do going forward into the future from there but them.

There comes a time when those who are in full control have to take responsibility for what they do -- and stop pretending that those they ejected from the house are still running things.

Posted by: Jim Glass at September 1, 2009 12:26 PM

"B.B., just to start with the single most egregious mistake you make: social security is properly funded".

Social Security requires a near 2% of GDP revenue increase by 2030 to finance trust fund operations, via income taxes (as they are what finance T-bonds).

That's so the govt can repay itself, with money collected from taxpayers, for spending the Social Security payroll taxes previously collected from taxpayers on items other than Social Security.

This near 2% of GDP tax increase amounts to a 15% across-the-board income tax increase on everybody (individuals and businesses) at the same time when another revenue increase twice as large will be needed for Medicare and Medicaid.

If that sounds "properly funded" to you, fine.

Posted by: Jim Glass at September 1, 2009 12:34 PM

When dollar shock arrives, owing ten or twenty trillion bucks won't seem like such a big deal. Of course, the asians who subsidized this will be pretty pissed off, and the 20% U6 will be a bummer. But the federal debt will really seem like the gigantic scam perpetrated on foreign and domestic savers that it is.

Posted by: John Law at September 1, 2009 01:07 PM

jim glass, we'll start with you. yes, the bush tax cuts become the obama tax cuts if he keeps them in place. what's your point?

as for social security: i have no idea what you're talking about. presumably, it has something to do with the fact that bush claimeed that he could cut taxes and preserve the lockbox and didn't. what does that have to do with the funding of social security? (i mean, i get the game you're trying to play, but it doesn't wash: the problem you're discussing is a general fund problem, not a social security funding problem).

and then we have DickF, who also wants to play the game. to provide us an honest discussion, DickF, what you need to do is provide us a general fund discussion. i already know how that will come out, and it's not favorable to your perspective.

(let us also note that your so-called "supply side" tax cut spectacularly failed on it's primary justification: job creation. you do remember the 5M new jobs that tax cut was supposed to create between july 1, 2003 and december 30, 2004? you don't remember the jobs, of course, because no where close to that total was created in that span. but i digress.)

MikeMainello, it's fine not to be an economist, but at least you need to be informed. Bush did not "inherit" a recession; the short recession of 2001 took place entirely on his watch.

9/11 didn't create or contribute to a recession, for the simple reason that the recession was over a month later.

military spending under Clinton averaged, in real terms, higher than military spending throughout the cold war. perhaps you can explain to us how this amounts to balancing the budget on the back of the military; perhaps you can explain what it is in the post-cold war era that required cold war level spending.

and your understanding of bush's so-called reform of fannie and freddie is quite incomplete, my good man.

in short, you're not only not an economist, you're not an informed citizen.

Posted by: howard at September 1, 2009 02:11 PM

@DickF.
You wrote:
"We have a great experiment here. There is massive spending planned in 2010 (mid-year election bribes?). The Democrats are also planning to allow the Bush tax cuts to expire. Now if things go as anticipated if 2010-11 tax receipts increase it will be because of the stimulus, not taxes, but if tax receipts decline it will be because of tax increases (Bush taxes decline). Believe me I will remind you of this post."

We already ran that experiment. During the Korean War we increased both government spending and tax rates and the economy boomed (tax revenues soared):

http://econ.ucsd.edu/~vramey/research/IdentifyingGovt.pdf

Posted by: Mark A. Sadowski at September 1, 2009 03:30 PM

Menzie - A very useful and interesting graph. Puts things in perspective. Thanks.

Posted by: don at September 1, 2009 03:36 PM

Professor,

The EPI brief never gave any numbers to categorize the Bush tax cuts, nor did it specify where in the attached chart those were accounted for, so I have to assume that they were included in "other legislative revenue" changes.

At a glance, it would appear that this is the 3rd largest contributor to the current deficit, behind economic/technical (puzzilingly including the Fannie/Freddie support as a "technical" change?) and legislative spending.

I think the intent behind those words is to say "the largest single contributor," but surely it's inconsistent to lump a number of tax cuts together as one item (the "Bush Tax Cuts") to call it the largest contributor, but to look at spending increases (which together were a larger contributor to the deficit) as separate line-items.

If all tax cuts are to be lumped together, why not lump all spending items together? Clearly they aren't, as [All Spending] > [All Tax Cuts] while the opposite point is made in the quote you cite above. Is there a functional reason for this disparate treatment, or is it simply to create a talking point?

Posted by: renowiggum at September 1, 2009 03:39 PM

Howard. Yes, the 2001 recession happened entirely during Bush's term. To be exact, it began in March of 2001. So you are suggesting with less than two months in office Bush caused the recession? I suppose the fact that the NASDAQ was down almost 29% in December of 2000 had nothing to do with it. Perhaps you should be a little more careful about calling others uninformed. Of course I do not really expect civility from those blinded by hatred.

Posted by: GWG at September 1, 2009 03:53 PM

DickF, look at tax receipts as a percentage of GDP.

Receipts in 2005 were 17.6% of GDP. outlays were 20.2% of GDP. In 2000, outlays were 18.4% of GDP and revenue was 20.9% of GDP.

We would have had a surplus in 2005 under Clinton's rates.

Facts are stubborn, I agree.

Posted by: Joe at September 1, 2009 04:46 PM

Howard, I'll forever remember your excellent people skills. Now to quote from About.com

A good example was the stock market crash and subsequent economic downturn in 2000. This was not a recession in technical terms because GDP growth was negative in Q3 2000, Q1 2001, and Q3 2001, none of which were consecutive. However, anyone who lived through it knows that it felt like a recession during all that time. And in fact, GDP growth did not reach over 3% until Q3 2003.

So the market crashed and the economy slowed down, but technically it was Bush's fault that the economy went into a recession. Do you teach at a college? Just wondering.

Now as pointed out by others, revenues continued to grow and congress continued to spend even more. Yes the republicans were voted out by there base because they didn't listen.

At least President O and his Obamascare plan is exposing his party as the worse of both evils. Who knows hopefully the republicans have learned and will listen to the tax payers.

Posted by: MikeMainello at September 1, 2009 04:50 PM

Bush is not remembered fondly by fiscal conservatives. Not a few take exception to the expansion of health benefits and the Iraq war and the return to deficit financing.

On the other hand, Clinton looks a resounding success in terms of fiscal policy: he reformed welfare, stuck to pay-go, reducing govt's share of GDP by 3-4%, and balanced the budget.

If Clinton is the template for the Obama administration, a lot of us would support it. But for the Obama administration to propose a deficit projection of what--6% of GDP--as far as they eye can see? This is well into banana republic territory: Italy, Hungary, or Argentina.

If you are arguing that deficit reduction should be the primary goal of the current administration, say so. If not, why are you bashing Bush for a fiscal policy that makes him look like a fiscal hawk compared to the Obama administration?

I have been scathing in my criticisms of economists in the run up to this crisis. I have been so because I have had opportunity to do some of the analysis ex-post and been appalled by the lack of 'sentries', of professional public servants guarding the public interest. One of the key causes of this absence is an increasingly politicized bureaucracy with tendency for information to be processed through a political lens. It's not what is said, it's who says it. If a Republican president proposed a $9 trillion deficit for 10 years, you would be all over it. But if a Democrat proposes it, I have to read about it from Jim Hamilton. And yet the outcome will be the same: it will end badly, regardless of ideology. Economists need to say that.

Posted by: Steve Kopits at September 1, 2009 05:46 PM

Howard, I would like an explanation of how that Ole "Lock Box" would work. Please inform us which laws would need to be changed to make it even legally possible. BTW, once the lock box was started to be filled, where would that money go? Invested? If invested, in what safe investment? US treasuries, perhaps?

Posted by: CoRev at September 1, 2009 05:57 PM

@Steve Kopits,
You wrote:
"If a Republican president proposed a $9 trillion deficit for 10 years, you would be all over it. But if a Democrat proposes it, I have to read about it from Jim Hamilton. And yet the outcome will be the same: it will end badly, regardless of ideology. Economists need to say that."

Separate the standardized (acyclical) budget deficit from the rest. (That is to say perhaps at least $4 trillion is due to the fact we are in a very serious recession.) Then you might understand our situation. Then you might start questioning why Bush only only added to the problem, by adding trillions to the deficit when unemployment was very low, and in so doing did absolutely nothing to further our long term solvency.

Posted by: Mark A. Sadowski at September 1, 2009 06:38 PM

Menzie, great post as always.

Too bad about the freak show that is your commenters these days.

Some of the people should learn something about economics. They might enjoy it.

Posted by: RN at September 1, 2009 06:39 PM

MikeMainello, revenues did not "continue to grow." Real revenue increased 500 billion between 96-2000. Real revenue decreased 50 billion between 2001-2005.

According to treasury, under Clinton's rates, tax revenue would have exceeded 2.5 trillion dollars in 2005. We would have had a surplus even with the increased spending.

Bush's tax cuts caused the deficits. Facts are stubborn.

Posted by: Joe at September 1, 2009 07:22 PM

Mark A. Sadowski on September 1, 2009 03:30 PM

"We already ran that experiment. During the Korean War we increased both government spending and tax rates and the economy boomed (tax revenues soared)"

This is the 21st Century. The world is an entirely a different place with different inputs and stimulus than existed in the mid 20th Century.

Posted by: Babinich at September 2, 2009 02:42 AM

Just for my education...

What's the law as of right this second? The Bush tax cuts expire next year, right? And there has been no Congressional movement to prevent that from happening, right?

So, being betting men, what's the chances that those tax cuts expire?

Posted by: Buzzcut at September 2, 2009 05:59 AM

@Babinich,

I really don't think there's any merit to that argument. No one in the research community has ever criticized Ramie's paper on those grounds.

Ramie's paper focused on the spending side and so when estimating the effects of a spending change failed to take into account the large tax increase that took place. This probably understated the effects of the spending increase, and it's worth noting that the spending increase exceeded the tax increase.

There is a recent paper by David and Christina Romer that focuses on tax changes. Nevertheless it effectively corroborates what Ramie found.

Their paper identified all significant legislated tax changes in the period 1947 to 2006 (is that recent enough for you?). What was revolutionary about the paper was that it classified tax changes according to their intended purpose. A tax cut was classified as "endogenous" if it spending driven (done to accomodate a change in spending) or countercyclical (designed to be stimulative in a downturn, and so a tax cut). All other tax changes were classified as "exogenous." Here is a passage that I think is relevant (page 22 of the March 2007 version):

"Following a spending-driven tax increase, real GDP on average rises moderately, reaching a maximum of 0.7 percent after two quarters (t = 1.5). Thereafter the effect fluctuates irregularly around zero and is always far from significant. Thus looking at how the economy behaves after tax changes driven by spending changes yields estimates of the effects of tax changes that are starkly different from those based on exogenous tax changes."

http://elsa.berkeley.edu/~cromer/RomerDraft307.pdf

In short tax increases coupled with spending increases (fully one for one) yielded no statistically significant effect on the economy, and in fact, on average, at least temporarily, they increased GDP.

In the final analysis, Romer's working paper found that, with the exception of countercyclical tax changes (possibly because there were too few, or because the economic downturn obscured their effect), the only tax change that had a statistically significant effect on GDP were those that reduced the federal budget balance. (And in fact, in most cases, this increased an existing budget deficit.)

Theoretically, it is possible that the methods employed in Romer's paper could be applied to spending policy changes. The implication is of course that "exogenous" spending changes would have a much larger multiplier than the value estimated by Valerie Ramey for example.

Posted by: Anonymous at September 2, 2009 06:38 AM

@Babinich,
That last anonymous would be me (I'm still drinking my morning coffee).

Posted by: Mark A. Sadowski at September 2, 2009 06:55 AM

By contrast, the CBO says it is the recession that is responsible: (August 2009 Budget Update, available at www.cbo.gov).

"The dramatic expansion of the deficit in 2009 (up from 3.2 percent of GDP in 2008) results from a projected rise in outlays of 24 percent (the largest percentage increase since 1952) and a drop in revenues of 17 percent from last year's levels (the largest percentage drop since 1932).
Those changes have largely been the result of the severe economic downturn and the fiscal impact of federal policies enacted in response."

Roger

Posted by: RogerClemens at September 2, 2009 07:21 AM

Mark A. Sadowski wrote:

"We already ran that experiment. During the Korean War we increased both government spending and tax rates and the economy boomed (tax revenues soared):"

Mark,

I don't normally question data presented here because usually it is accurate. Your statement is simply wrong.

A tax cut was passed in 1947 but vetoed by Truman and the veto was upheld. In 1948 the tax cut was reintroduced and passed into law. Economic growth in the 6 years following the tax cut averaged 4.6% (1947-1953). From 1953 through 1960 growth averaged 2.4%.

The Korean war marked the beginning of an economic decline that continued through the Eisenhower administration and up until the Kennedy-Johnson tax cuts. Eisenhower took the conservative Keynesian position that is still common in the Republican party that we must first balance the budget before tax cuts. The result was economic malaise during the Eisenhower administration.

Posted by: DickF at September 2, 2009 08:34 AM

$9 trillion-- what, me worry

Econbrowser

During the Reagan years it was tax cuts for the rich and rising deficits. The conservatives said that deficits don't matter. Then during the Clinton years they demanded PayGo and fiscal discipline. Suddenly they again reversed track during the GW Bush years with more tax cuts for the rich and an unnecessary, off-budget war, doubling the debt in just 8 years. Cheney's famous quote was "Reagan proved that deficits don't matter." But with Obama in the White House, the deficit scolds are again demanding PayGo.

Where was JDH's deficit scolding during the Bush administration? If Bush hadn't frittered away those trillions in tax cuts and wars in the last few years we wouldn't be in the difficult position we are now. Where was JDH's voice then?

Truth be told, conservatives are fine with deficits if it means transforming social security taxes on workers into tax cuts for the rich. Deficits only seem to be a problem when liberals try to reverse the process. Funny how that works.

Posted by: Joseph at August 28, 2009 02:34 PM

Matt Young:

Were the last two paragraphs in your post written by Will Wilkinson?

Interesting. Maybe American conseratives just have more trouble than others saying "NO" to special interests. Canada's "Trust me I'm an economist" Prime Minister Stephen Harper cut the value-added federal sales tax (GST) twice during the height of this last out-of-control commodity-driven bull cycle, and put Canada on the road to a structural deficit.

Posted by: GNP at August 28, 2009 03:47 PM

spencer:

For over a decade we have known that social security and health care spending was going to create large budget problems in the future.

The responsible fiscal policy was to run surpluses over the past to prepare for those problems and to be able to use deficit spending in case of a severe recession.

But Republicans did not do that, they supported the deficits creation under Bush.

Now, all of a sudden you have discovered that we have a deficit problem.

I'm sorry, I can not take your crocodile tears seriously now.

You supported fiscal irresponsibility under Bush,
so do not expect me to be fooled by your suddenly getting religion about fiscal responsibility.

Posted by: at August 28, 2009 02:18 PM

spencer

The dollar fell sharply under the Nixon, Reagan and Bush deficits.

I do not remember republicans complaining about the falling dollar under these regimes.

So why are you worried about it now?

Actually, a weak dollar may be exactly what we need to revive manufacturing and generate solid growth.

Posted by: spencer at August 28, 2009 02:06 PM

Mike25

I'm tired of these Partisan attacks on Keynesian policy.

Here's a new rule, next time you bring up Keynesian policy, also bring up Your Solution to Depression Economics, and how it has No track record of success. Unlike this year with a successful avoidance of a Depression.

Also, these Bank Bailouts were caused by Republicans and Republican sellouts to UBS. Corporate takeover of Democracy. You solve that first. Corporate Deregulation or Unregulation, and Management Capitalism where Short Term Profit came before all else. The Management Paycheck comes first ahead of shareholders, workers and the Nation. That's the primary problem.

Posted by: Mike25 at August 30, 2009 07:22 PM

ZackAttack

With $27.3 trillion in overall federal backing for the US financial system (via TARP, PPIP, monetization of Frannie debt, commercial paper facility, etc), the distinction between public and private debt is almost meaningless.

Posted by: ZackAttack at August 31, 2009 11:17 AM

IdahoSpud

The situation of the US vis-a-vis its economic competitors is vastly different now than it was following WWII.

After WWII most of the US trading partners had no factories. All the major european and asian countries had remaining was ragged, war-ravaged economies and depleted populations.

The fact that the US was able to climb out of the WWII debt is probably attributable to being the only intact industrial base at the end.

That is not the case right now. We are in a post-industrial economy and what industry remains is in deep deep trouble. We will never be able to repay this debt in a FIRE economy. Too much of the FED's liquidity is concentrated in to few hands, and US wages are dropping. This is precisely the opposite of the post-WWII situation.

Posted by: IdahoSpud at August 29, 2009 10:46 AM

Albert

I like how people keep saying world war II spending was coming to an end. How many bases do we have in Europe still? How many bases did we have in the Pacific after the war? If you count that spending as Cold War spending, then you can add in The Marshall Plan spending. World War II has been done for a while but I am sure there are many ways to count that we are still paying for it, including the many veterans of WWII

Posted by: Albert at August 29, 2009 09:03 AM

antoniusb

In bringing the 1950's into the discussion, Krugman fails to mention the tax increases during the Korean War (after tax decreases in the immediate aftermath of WWII).

Tax receipts as a percent of GDP went from 14.5% in 1949 all the way up to 19% at the height of the war and averaged 17.8% for the period of 1952-1960.

If Krugman had said the $900 trillion was not that big a deal because we will also increase the tax burden by 23% like we did during the 1950's (without any impact to GDP or employment) then it would be a fair argument.

It seems odd that he leaves this part out since I cant recall very many articles over the past 9 years where he hasnt mentioned increasing taxes as our only way out of avoiding fiscal catastrophe.

Posted by: antoniusb at August 29, 2009 05:30 AM

Seth

The real problem with Krugman's argument -- though I generally agree with him -- is that our post-WWII prosperity was in major part the result of that military conflict. The war destroyed all of the industrial competition. We (the US) then began to collect rents from the rest of the world.

These rents are steadily diminishing as (for example) China climbs the value chain. They have been eroding for a long time of course. But now that world transportation and communication networks have made it so easy for developing nations to bring their vast labor pools to world markets, the pace of erosion is accelerating.

The US is in a continuing process of *relative* (NOT yet absolute) decline. Our economic ruling class are profiting mightily from the labor arbitrage and simply treating globalization as a big "portfolio rotation". No sweat, really. What's the fuss about? Unfortunately for the average American making a living from not-really-so-world class skills, this is a bit like trying to make ends meet in the rich folks' neighborhood. You might not be *poor* in absolute terms, but you sure feel shabby and deprived in comparison to your wealthy neighbors.

In this we're not dissimilar to post-WWII Britain. But there's this important difference: our political culture hesitates to cushion the decline with social spending. Where a Churchill could enthusiastically support the creation of the NHS, an Obama feels he has to apologize -- over SIXTY YEARS LATER -- for any minor resemblance between his soft-soap reform proposals and the NHS.

Posted by: Seth at August 29, 2009 12:04 AM

q

> A quarter trillion dollars worth of those loans we've guaranteed are currently nonperforming. That's just Fannie and Freddie

Why bring this up? It's negligible.

Ok, so $250B of loans are non-performing. Pessimistically, half of them will default. The loans the GSE have are 80% LTV or better so it would be quite extraordinary if they suffered loss rates greater than 50%. So we are down to $62.5B. That's under .5% of GDP, ie noise.

The GSEs have or soon will have reserves which could cover this. These reserves include the money lent them by the govt (at 10% interest -- govt making about $10B/year on interest alone here), but there is absolutely no reason to believe that absent a large collapse (say another 20% leg down) the losses will exceed what the govt has already lent to the GSEs.

On the other hand, the government now owns the GSEs (ie has warrants which could be exercised to get 80% of the stock) and the GSEs own the US prime mortgage market. This is a very profitable market in normal times. Given time, if the government wants these entities on its books, it will make money for taxpayers. Alternatively in time the GSEs can repay the government and then be sold off to private stockholders.

The implicit government guarantee on GSE issued debt is another issue but this guarantee holds equally for all large financial institutions (lesson of this crisis for sure) so that is no reason to shut them down.

Posted by: q at August 28, 2009 06:05 PM

Recommended Books

Conservatives Without Conscience

4.0 out of 5 stars

Read It in Good Conscience,

August 1, 2006 By  !Edwin C. Pauzer (New York City)

In "Conservatives Without Conscience," author John Dean makes the observation that seemingly good people will do unconscionable even criminal acts, and put their consciences aside without guilt. Dean wants to know why, and he provides a hypothesis to explain why some will lead people in this direction, and explain why others are willing to follow them.

The author may be well-suited for such a task. As White House Counsel to President Richard M. Nixon, and an admitted Barry Goldwater conservative, he was surrounded by the Watergate Investigation, in which White House staffers conducted burglary, perjury, obstruction of justice, and other crimes, or knew of them, or concealed them, all in the name of their leader, Richard Nixon.

John Dean relies heavily on the work of a social psychologist, Dr. Altemeyer of the University of Manitoba, who has done much work on the theory of authoritarianism. According to Dean, Altemeyer's work in this area has been officially recognized, and he is considered an expert in the field.

Dr Altemeyer categorizes authoritarians as followers and leaders to varying degrees. What he also found was that authoritarians are likely to maintain certain beliefs about themselves which include a deep belief in God, patriotic, conservative, and see themselves as being more moral, ethical, honest, and better people than others in general. Their behavior however, is likely to be less honest, loyal or ethical than others.

Dean attempts to apply this to our modern day politicians of whom he is very selective. He finds a match between Altemeyer's theories and list of traits in people like Dick Cheney whom he contends is the real president, George W. Bush, Newt Gingrich, Bill Frist, Tom Delay and others.

The author provides plenty of anecdotal evidence to support his hypothesis: the president's signing statements, the secret meetings that are withheld from the public because of national security, George Bush's comments: "A dictatorship wouldn't be bad, just so long as I'm the dictator," or "I'm the decider." Newt Gingrich's ability to discard friends once he no longer finds them useful, and of course, Tom Delay who changed the rules of congress, where subterfuge and heavy-handed tactics have replaced debate, discussion, and compromise.

Because of the abiding belief in their leaders, authoritarian followers will put their scruples aside, for the greater good. Examples of these followers were: Attorney General, John Mitchell, G. Gordon Liddy, Paul Ehrichman, H.R. Haldeman, and Charles Colson during the Nixon administration. According to Dean, their modern day counterparts are members of Congress, cabinet secretaries who serve at the pleasure of the president, and millions of others who believe that patriotic Americans are leading them.

The reader should keep in mind that the author is attempting to prove a thesis here but offers no scientific evidence. It does not prove that all the people described earlier fit neatly in this authoritarian theory, nor can it explain their behavior with any certainty.

The one part of this book that is unquestionable is Dean's assertion that Americans must participate in their democratic form of government if it is to succeed. It cannot be simply observed or ignored. If it is, authoritarians will pick it up and take it away. Dean warns that we haven't lost it yet, but we are losing it day by day.

I recommend this book (after the first chapter) because it provided another way for me to look at family members and acquaintances whose rabid or knee-jerk loyalty for anything conservative I could not explain.

At least, now I have an explanation.

Cool, analytical and devastating,

November 17, 2008
By Jean E. Pouliot (Newburyport, MA United States) - See all my reviews

This review is from: Conservatives Without Conscience (Hardcover)

John Dean, the conscience of Watergate, continues to chronicle the strange turns the Republican party has taken since his days in power in the Nixon Administration. "Conservative Without Conscience" is not an indictment of all conservatives. Indeed, Dean is still fond of his days as a Goldwater Republican and his friendship with Barry Goldwater, godfather of what seems like a long-dead sector of that party. Dean turns his lawyerly, analytical mind to understand where his party has gone wrong. He provides a history of American conservatism, from the monarchial leanings of Alexander Hamilton to the more recent shenanigans of Newt Gingrich, Jack Abramoff and Pat Robertson. He distinguishes the various branches of conservatism -- from libertarian to cultural, social, economic and neocon conservatisms. Dean also goes to lengths to try to define conservatism, a surprisingly difficult task.

His most devastating and worrying chapters center on the work of social psychologist Robert Altemeyer, who has made a career studying authoritarian personalities. Altemeyer identifies people using two scales, classifying them as RWAs or SDOs. RWAs, or Right Wing Authoritarians, tend to be followers -- they are politically conservative and religious. People with a Social Domination Orientation (SDO) are the natural leaders that RWAs and others looks up to. SDOs seek personal power, are self-righteous and amoral, despite whatever religious affiliation they might have. God help us from the double high scorers, who are both RWAs and SDOs. Dean sees some of our more troubling conservatives -- Tom Delay, Dick Cheney, Gingrich, Robertson and Abramoff as exhibiting the traits of double highs. Neocons and religious conservative groups seems especially attractive to authoritarian personalities.

In spite of his wariness and bluntness about some of the right's leading lights, in "Conservatives without a Conscience" Dean seems to retain and even take pride in his conservative credentials. Dean hopes to bring a measure of reflection to a crowd not naturally good at it. Written just prior to the 2006 election, which resulted a slim majority of Democrats in Congress, it is a plea for Americans to be more careful about the leaders they pick. A fine book that helped this old liberal look at conservatives more clearly and even sympathetically.

 An interesting dissection of some of our nation's leaders,

October 26, 2008
By Newton Ooi (Phoenix, Arizona United States) - See all my reviews

This review is from: Conservatives Without Conscience (Hardcover)

This book serves four purposes. First, it provides a short, but well-referenced history of political conservatism in the Anglo-American conscious over the past 500 years with major emphasis on the 20th century. Second, the book examines how Watergate was a watershed movement in conservatism, and how the reaction to it helped lead to the neoconservatives of the early 21st century. Third, the book shows how certain ideas and ideals of the conservative movement have attracted a certain personality type into its ranks, specifically an authoritorian personality.

Last, the book examines the lives and careers of key authoritarian individuals, all Republicans, in positions of authority or influence. The latter include Pat Robertson, Senator Bill Frist, ex-Congressmen Newt Gingrich and Tom Delay, and G. Gordon Liddy.

The portrait painted by the author is of a bunch of spoiled white boys with strong streaks of egotism, sexism and cunning. Overall, quite a scary picture of some of the leaders of the Republican party, and how they have changed the culture of Washington for the worse.

The author also places himself in context, showing how he was part of the authoritarian Nixon White House. All in all, a good book to read that provides a unique angle on the past 2 decades.

No Kid Glove Treatment for Authoritarian Conservatives,

March 28, 2008
By Obi "Obi wan liberali" (SLC, UT) - See all my reviews

This review is from: Conservatives Without Conscience (Hardcover)

Former Watergate figure John Dean wrote a compelling critique of the conservative movement in the United States in his book "Conservatives Without Conscience". The author starts out explaining why the book was necessary and how it had been his hope to refrain from serious political commentary. He then discussed events where conservative hacks made attacks against him and his wife that were unfounded, and that he became the victim of slanders from former Nixon henchmen, G. Gordon Libby and Charles Colson. These events led him back into the public spotlight and convinced him that there had been a fundamental, and authoritarian change in conservatism from the Goldwater conservatism that had initially inspired John Dean.

Dean also mentions that this book was inspired by Barry Goldwater and was intended to be a collaboration with him, had he lived.

In the book, John Dean looks at various efforts to define conservatism within the United States and the disparate ideologies that have somehow been embraced and coalesced into modern conservatism. Dean analysis the modern conservative movement and very pointedly takes aim at the authoritarian evolution of that movement and psychological efforts to understand both "authoritarian followers" and "social dominators" within conservative authoritarianism. He also defines different factions within the conservative movement and outlines their differences and their commonalities.

Dean pulls no punches in his examination of "social dominant authoritarians." Guys like Tom Delay, Newt Gingrich, Pat Robertson, and particularly, Dick Cheney are hammered with a searing white hot examination of their careers and characteristics. Cheney, as our nation's most dominant Vice President to a weak-minded and shallow President, is seen in the book as deliberately fundamentally changing the United States towards more central control within the Executive Branch.

Though Dean's book is a couple of years old, what he wrote makes sense of alot of what has happened since he first published it, and in this regard, Dean's analysis is helpful in predicting future administration actions and why they will engage in their behavior. The constant cries of "executive privilege" to hide administration misdeeds will not go away in an era dominated by "conservatives without conscience."

Authoritarians, driven by power, rather than principle, will do anything they can get away with to keep that power. Democrats and libertarian leaning Republicans should take heed and warning, that these authoritarians will not be going away any time soon. Even if they receive temporary setbacks, they see their role as permanent and fore-ordained.

If you could criticize Dean's book, it would be the harshness and anger that seethes under the surface in his analyses. However, Dean seems to have a real sense of just how dangerous, "conservatives without conscience" are to our Republic and seems to, through a bit of "shock and awe", trying to awaken us from our slumber, to let us know exactly what is at stake.

The extreme Right.,

February 2, 2008 By Scripture Studier (WI,USA)

"Conservatives Without Conscience" was written after "Worse Than Watergate". I prefer the first book over this one. This book had some boring material about the different factions in conservatism.

John Dean educates the reader on the neo-conservative ideas. They moved from the Left in the 60s and 70s. They differ from other conservatives with these ideas;an American empire is plausible,promotion of American values around the globe by military force if necessary,the U.S. should enforce peace around the world,and military-imposed nation building.

Another interesting topic was the mixing of religion and politics. This grew from the Carter election sparking the birth of Jerry Falwell's Moral Majority and eventually giving way to Pat Robertson's Christian Coalition.
Cal Thomas is quoted saying "the marriage of religion and politics almost always compromises the Gospel,for politics is all about compromise."page 98.

"While authoritarian conservatism was growing in force in Washington for a decade before Bush and Cheney arrived at the White House,their administration has taken it to it's highest and most dangerous level in American history."-page 117.

"Conservatives Without Conscience" is an indictment of the Republican party's corruption like the K-Street Project and Jack Abramoff. Dean's criticism of Cheney is followed by a particular quote that validates concern. "....given the world that we live in, that the president needs to have unimpaired executive authority"-Dick Cheney.

I believe that John Dean has accurately depicted both the president and vice-president's relationship and their personalities.

The author goes a little too far when he validates the Clintons' claim of a "vast Right Wing conspiracy" though. That's a well known Clinton cop-out that gets trotted out whenever they back themselves into a corner.

Overall "Conservatives Without Conscience" is a good source for understanding the many facets of conservatism in the Republican party, some of the Figures, and the history and changes of the movement.



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The Last but not Least


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Last modified: September 03, 2017