What Happens When GOP Economic Fairy Tales are Applied to the Real World.
A piece in the New York Times this weekend compared the economic fates of Wisconsin and Minnesota, two states that were in roughly similar economic condition in 2012. Minnesota elected a Democratic government, while Wisconsin chose Republicans. And it was with this choice that the two neighboring states’ fortunes began to diverge.
Three years into Mr. Walker’s term, Wisconsin lags behind Minnesota in job creation and economic growth. As a candidate, Mr. Walker promised to produce 250,000 private-sector jobs in his first term, but a year before the next election that number is less than 90,000. Wisconsin ranks 34th for job growth. Mr. Walker’s defenders blame the higher spending and taxes of his Democratic predecessor for these disappointments, but according to Forbes’s annual list of best states for business, Wisconsin continues to rank in the bottom half.
Along with California, Minnesota is the fifth fastest growing state economy, with private-sector job growth exceeding pre-recession levels. Forbes rates Minnesota as the eighth best state for business. Republicans deserve some of the credit, particularly for their commitment to education reform. They also argue that Minnesota’s new growth stems from the low taxes and reduced spending under Mr. Dayton’s Republican predecessor, Tim Pawlenty. But Minnesota’s job growth was subpar during Mr. Pawlenty’s eight-year tenure and recovered only under Mr. Dayton.
Trust me, it sucks when your state is used as an example of economic failure. While Walker complains that previous higher taxes and spending are dragging the state down (a tough argument to make — the mechanics are so bad he doesn’t even bother to explain them), Minnesota has raised taxes and spending to great success. And that spending has been distinctly Keynesian. NYT reports that the “lion’s share of Minnesota’s new tax revenue was sunk into human capital.” Wisconsin, of course, has been anti-Keynesian, reaching into workers’ pockets to take pay and benefits away.
And that’s where conservative economic policies fail. One way of looking at Republican economic theories is to say that any government involvement in the economy is bad. Why? Well, I actually haven’t heard a good explanation of that. It just is. It seems to be less of a logical argument and more of a moral one — i.e., progressive taxation is unfair, as is providing some sort of even minimal safety net. Where they used to argue that taxation was metaphorical theft, they now argue that it’s literal theft. Taxation and social programs have been lifted out of the “good or bad for society” argument, because conservative can’t win that argument. History proves again and again that progressive taxation and social spending are to the common good. They “promote general the welfare,” to use a phrase from the preamble — i.e., the mission statement — of the Constitution.
If it’s “unfair” to tax the wealthy and corporations at a higher rate, in order to at least try to guarantee a bearable level of existence for those in need, then cry me a freakin' river, moneybags. If the right were really as objective as they claim to be, they'd argue that fair and unfair are irrelevant. What matters is “works” or “doesn't work.”
Of course, if they really were that objective, conservative economics would’ve died the first time Reagan raised taxes.
But Reaganomics lumbers, zombie-like, on — both dead and brainless. And it’s because the argument isn’t so much a recipe for a healthy economy — or even for basic fairness — but a rationalization for allowing a small number of very fortunate people to transfer wealth from the bottom to the top. In Wisconsin, that means cutting benefits for workers and the poor to pay for new goodies for the wealthy. What’s that gotten us? An economy in a downward spiral, as workers no longer have any money to spend and demand drops. And of course, cutting spending while you’ve made certain consumer demand will plummet is like drilling holes in an already sinking boat; you’ve already poked a hole in the hull by taking money away from workers and now you’re further reducing demand by cutting government spending.
In short, what Walker has done is a recipe for destroying an economy and — lo and behold — it’s working. We need to be more like those crazy lefties across the Mississippi, who care less about what whiny one-percenters think is “unfair” and more about what works for everybody
[photo by Nick Ares]
I guess, because guns are so safe and gun owners so overwhelmingly responsible.
"The impact is probably much higher than $16 billion since the years of life lost, disability, lack of productivity, societal well-being and emotional turmoil associated with such injuries is far-reaching," said Min Kyeong Lee, DMD… "This is one of the foremost reasons why health care costs in this country have gotten out of control and underlies the need for better preventive policies."
Deficit Falling at Fastest Rate Since WWII — And Not Because of Spending Cuts
Republicans like to say that you can’t spend your way to prosperity. Why that statement doesn’t get them laughed out of whatever room they’re in every time they say it remains one of life’s great mysteries. Of course you can spend your way to prosperity; ask any prosperous person. The only wealthy people who haven’t spent their way to prosperity are those who’ve inherited wealth. Even lottery winners spent something to gain all their riches, even if it wasn’t much. Wealthy people became wealthy by spending money — and even by borrowing money.
Conservatives are dead wrong on this point and, indeed, the opposite is actually true — you can’t save your way to prosperity, since you’re never going to be able to save more than you make — or at least, figuring in interest, not much more. It’s a case of Republican talking points contradicting other talking points; you can’t spend your way to prosperity, but successful people are “risk takers” who put money on the line to get things done. One the one hand, conservatives praise entrepreneurs, on the other, they argue that entrepreneurial efforts are obviously doomed and only a fool would believe that you can spend money to make money. No wonder people who listen to talk radio make no sense at all when they start talking about economics. It’s all a muddled mess of contradictory propagandizing with no real connection to how things actually work.
All of this started bouncing around in my head when I read this:
The Hill: The federal budget deficit for fiscal 2013 was $680 billion, the Treasury Department reported Wednesday.
This is the first time that the deficit has fallen below $1 trillion during President Obama’s time in the White House.
The deficit has dropped $409 billion from 2012, when it was $1.089 trillion.
Is this a case of saving our way to prosperity? It’s not. It’s a case of bringing in more money. “Most of the change comes from higher tax receipts,” the report goes on. “Receipts rose to $2.77 trillion in 2013, up from $2.45 trillion in 2012. Spending was $3.45 trillion, down from $3.53 trillion in 2012.”
All those sequester cuts the Republicans love so much? Not doing a whole lot, other than slowing the rate of economic growth. You can’t save your way to prosperity. As the economy improves, revenues rise. As revenues rise, the deficit falls. Therefore, if you want to reduce the deficit, you worry about the economy, not the deficit. Work on the economy and the deficit will fix itself. What’s holding America back isn’t poor economic stewardship from the White House, it’s congressional obstructionism in service to an obsession with something that is simply not the problem. Deficit spending is a symptom, not the disease.
Republicans have everything bass-ackward here. You spend money when times are bad and save money when times are good. When the economy turns south, the last thing you want to do is cut back on government spending. It’s idiotic. The economy staggers when people stop spending money — so why would anyone think that this is the best time for the government to also stop spending money? All that does is make everything worse. I find it absolutely astonishing that this very, very obvious fact isn’t very, very obvious to everyone.
“As a percent of Gross Domestic Product (GDP), the deficit fell to 4.1 percent, representing a reduction of more than half from the deficit that the Administration inherited when the president took office in 2009,” said White House Budget Director Sylvia Mathews Burwell. “The deficit reduction since that point represents the fastest decline in the deficit over a sustained period since the end of World War II.” If deficit reduction were the key to economic prosperity, shouldn’t we all be rolling in the dough right now? Instead, we continue to live with a struggling economic growth. If austerity is such a great thing for the economy, why isn’t it working?
No, what we need to do is unchain the economy by eliminating the sequester cuts and abandoning any and all austerity measures. Economics hasn’t been suddenly reversed and the old cliché that it takes money to make money is as true as it’s ever been.
[photo via Wikimedia Commons]
Demand Drives Hiring. Period. End of Story.
Last week, we got one of those good news/bad news jobs reports we’re so used to seeing by now. The good news is very good news: new jobless claims are at a 6-year low, suggesting that employment has stabilized and that the days of massive layoffs are behind us. The bad news, according to the Associated Press:
[W]hile most companies have stopped cutting jobs, many remain reluctant to hire. That’s bad news for the roughly 11.5 million Americans who are unemployed and a major reason the unemployment rate is still so high four years after the recession officially ended.
“We have seen a disconnect between the level of hiring and firing,” said Bricklin Dwyer, an economist at BNP Paribas.
Ask any rightwinger what’s going on here and they blame Obamacare. Healthcare reform is creating the dreaded uncertainty and that uncertainty is keeping employers from hiring.
Thing is though, employers and capital investors aren’t panicky types who need hand-holding and therapy before they take a risk. If they were, they’d be in a different line of work. It turns out that, historically, periods of uncertainty have been moments of opportunity, when the opportunistic investors and employers actually have hired more workers in order to take full advantage.
So what’s slowing up the jobs recovery?
“Really not a mysterious question,” says Gerard McLean, CEO of a web applications company, told the AP. “We’re sitting here waiting for the promise of customers. With money. Really that simple.”
Over and over and over we see the same story; Republicans argue that employers are like skittish rabbits and any sort of new regulation or lack of a 100%, iron-clad guarantee to make profits will scare them off. That they need huge tax cuts and subsidies, because employers hire people whenever they can afford them, not just when they need them. That growth is the bottom line of every business, when the truth is that bottom line is profit.
And then you ask businesses what they need and they say demand. Not getting tucked in with a nightlight on and reassurances that the big, bad monster of uncertainty isn’t hiding under their bed. They need to see rock-solid, real-world demand. And who is it who is the enemy of demand at the moment?
That’d be Republicans. It was Republicans who celebrated the sequester, which is the largest assault on demand in my lifetime. They’re slashing state budgets with no concern for the economic carnage they’re creating. And they demand the ability to do more damage, with insane cuts to food stamps and entitlements. Wherever consumer demand rears it’s ugly head, Republicans are right there with an ax to cut it off. The party that practically worships “the job creators” is busy doing everything in their power to see to it that the conditions of job creation are undermined. On matters of economic and monetary policy, Republicans are as credible as Todd Akin talking about the ways a rape victim’s body has of shutting down a pregnancy.
It’s all crazy horse-crap, wishful thinking, and pseudo-psychological mumbo-jumbo straight out of some ’70s self-help book. At this point, I don’t care whether or not they actually believe this ridiculous nonsense, because whether they’re lying or just ignorant, the result is the same: going after demand with a meat cleaver, then blaming economic problems on everyone but themselves.
If Republicans were really interested in helping the economy and their supposed “job creators,” they’d do a 180 on their attacks on demand. Employers aren’t job creators, consumers are. If you’ve ever doubted that, scroll back up and read McLean’s statement again: “We’re sitting here waiting for the promise of customers. With money.”
Not certainty, not tax cuts, not someone to hold their hand and whisper in velvet tones that everything’s going to be OK — just customers, with money.
Now, if only Republicans would stop trying to take that money out of customers’ hands.
[photo by MIKI Yoshihito]
Turns out that drastically reducing demand is a drag on job growth. The principle of supply and demand hasn’t suddenly reversed after all.
Reality Drives the GOP Off the Rails.
The House Republican caucus went fullblown clown show yesterday, as they tried — and failed — to fit their ideological square peg into reality’s round hole. At issue was the THUD bill — a bill to fund both the Departments of Transportation and Housing and Urban Development. This resulted in utter failure and the bill was pulled. It this was a tremendous embarrassment for the House GOP.
What happened was simple: House GOP applied their fiscal flateartherism to a bill that would genuinely affect their own constituencies. It’s fine when the cuts are to abstract groups in other people’s districts — welfare queens and lazy jobless folks and those leeches living the sweet life on food stamps — but when the big sequester-level cuts have to be applied in terms of anything other than empty rhetoric, they look all too real and all too suicidal. Brian Beutler explains:
…In normal times, the House and Senate would each pass a budget, the differences between those budgets would be resolved, and appropriators in both chambers would have binding limits both on how much money to spend, and on which large executive agencies to spend it.
But these aren’t normal times. Republicans have refused to negotiate away their budget differences with Democrats, and have instead instructed their appropriators to use the House GOP budget as a blueprint for funding the government beyond September.
Like all recent GOP budgets, this year’s proposes lots of spending on defense and security, at the expense of all other programs. Specifically, it sets the total pool of discretionary dollars at sequestration levels, then funnels money from thinly stretched domestic departments (like Transportation and HUD) to the Pentagon and a few other agencies. But that’s all the budget says. It doesn’t say how to allocate the dollars, nor does it grapple in any way with the possibility that cutting domestic spending so profoundly might be unworkable. It’s an abstraction.
So basically, Republicans tried to get Paul Ryan’s budget numbers to survive in the wild and they died immediately. The idea that the federal spending can be slashed so deeply is complete fantasy. Beutler writes that realists “have long suspected that [GOP] votes for Ryan’s budgets were a form of cheap talk. That Republicans would chicken out if it ever came time to fill in the blanks. Particularly the calls for deep but unspecified domestic discretionary spending cuts.”
And that’s exactly what happened. They pretended the Ryan Budget was a real thing, they colored within its lines, and they couldn’t get it to work. It’s all BS. “It turns out that when you draft bills enumerating all the specific cuts required to comply with the budget’s parameters, they don’t come anywhere close to having enough political support to pass,” Beutler reports. “Even in the GOP House. Slash community development block grants by 50 percent, and you don’t just lose the Democrats, you lose a lot of Republicans who care about their districts. Combine that with nihilist defectors who won’t vote for any appropriations unless they force the President to sign an Obamacare repeal bill at a bonfire ceremony on the House floor, and suddenly you’re nowhere near 218.”
Credit at least one Republican leader with accepting reality after it kicked his ass. “With this action, the House has declined to proceed on the implementation of the very budget it adopted three months ago,” appropriations chair Hal Rogers said. “Thus I believe that the House has made its choice: sequestration — and its unrealistic and ill-conceived discretionary cuts — must be brought to an end.” The Ryan plan simply can’t dig up enough money to fund government. Period.
And this means that the long predicted coming budget fight may already be over. “If House Republicans can’t establish a position of their own,” we’re told, “then the Senate will drive the whole process (its Transportation/HUD bill will probably pass on a bipartisan basis this week) and appropriations will be extended past September one way or another on the strength of Democratic votes.”
About the Senate; Republicans are defecting from Mitch McConnell’s extremist wing. While he’s trying to whip No votes for the Senate version of THUD, he appears to be failing. Mitch still wants some sort of budget based on Ryan’s imaginary numbers, so he’s trying to filibuster the Senate’s THUD. The problem is, what could possibly pass that would satisfy Ryan deadenders?
It can’t work, so nothing. When it comes time to put up or shut up, shut up wins by default, because put up doesn’t exist. If they pass a bill that sticks to the Ryan rules, they wind up with cuts they can’t live with. If they don’t pass any bill at all, it’s the same result. It’s a game that can’t be won, no matter how long you play it.
McConnell’s desperation is based in one simple fact: if they pass THUD, they admit that the GOP agenda is unworkable and that the Republican Party can’t govern. Meanwhile, abandoning Ryan’s pretend budget means alienating the base, who don’t care about reality. They’ve been told over and over — by many of these same Republicans, as well as talk radio and Fox News — that if we just slap the lobster claws and caviar out of poor people’s mouths, we’ll have plenty of money to fund whatever we want to fund. They’re not going to like finding out that this argument is ridiculous horsecrap and there’s real danger of primary battles between Tea Party anger-junkies and veterans of reality, where even if the incumbent comes out on top, the Tea Party voters stay home in November.
That’s not how you take over the Senate and that’s not how you set up a credible White House bid for 2016. But McConnell and Boehner and the ‘baggers are up against a powerful enemy.
[photo via Wikimedia Commons]
Govt. shutdown increasingly unlikely — which isn’t entirely good news.
Sen. Ted Cruz is despairing of the chances his little band of deadenders have of using a hostage-taking scheme to defund Obamacare.
Political Wire: Said Cruz: “The problem right now is we don’t have Republicans willing to stand up and do this. We need 41 Republicans in the Senate or 218 Republicans in the House, to stand together, to join me, to join Mike Lee, to join Marco Rubio, all of whom have said, we will not vote for a single continuing resolution that funds even a penny of ObamaCare.”
He added: “The current continuing resolution, which funds the government, expires Sept. 30. So now is the window: if we’re going to defund Obamacare, now is the time we can actually get it done.”
So that’s the good news. The problem is that it defaults us back to the previous position, which is bad news:
Atlantic Wire: Though several Republicans have been threatening a big showdown over the debt limit and government funding with President Obama this fall, it’s possible that maybe we won’t approach total fiscal calamity this time. In an interview with The National Review's Robert Costa, Senate Minority Leader Mitch McConnell sounds tough, but outlines what could be the outlines of a deal. And top Obama aides have been meeting with eight Senate Republicans to figure out a compromise on these issues, The Wall Street Journal's Peter Nicholas and Kristina Peterson report. But there probably won’t be a longer-term “grand bargain.”
McConnell warns Democrats, “The tax issue is over.” But he suggests Republicans are open to preventing a second year of the sequester. “You want sequester relief? Then let’s talk about a reduction in entitlement spending,” he says. “I think a place to talk is on things like chained CPI.” Obama has already said he’d support chained CPI, which is a less generous way of calculating the cost-of-living adjustments to Social Security benefits. McConnell also floats raising the age of eligibility for Medicare, which Democrats do not like. McConnell says, “In return for that, we could trade less spending reduction on the discretionary side, because we all know the biggest challenge is actually not on the discretionary side, but on entitlements. To me, that’s a better place to go in the fall than signaling that you’re open to raising taxes.”
I’m not sure which is worse. But I can tell you one thing: a government shutdown would last for a few weeks, tops. Chained CPI is forever.