Archive for the ‘Fiscal policy’ category

Serious People…

February 17, 2013

It’s getting sad, really, watching Senator Graham twist and turn as he tries to find some way of avoiding being Lugared next election.

Here he is on how to avoid the damage of the sequester:

“Here’s my belief: let’s take Obamacare and put it on the table,” he said. “If you want to look at ways to find $1.2 trillion in savings over the next decade, let’s look at Obamacare. Let’s don’t destroy the military and just cut blindly across the board.”

Here’s the Congressional Budget Office on what the budget would look like without the health care reform measure that is the signature accomplishment of President Obama’s first term:

Assuming that H.R. 6079 is enacted near the beginning of fiscal year 2013, CBO and JCT estimate that, on balance, the direct spending and revenue effects of enacting that legislation would cause a net increase in federal budget deficits of $109 billion over the 2013–2022 period. Specifically, we estimate that H.R. 6079 would reduce direct spending by $890 billion and reduce revenues by $1 trillion between 2013 and 2022, thus adding $109 billion to federal budget deficits over that period.

So forget the fact that there is exactly zero chance that the President or his party would acquiesce in this latest ham-fisted South Carolinian attempt at the nullification of duly passed federal law. Pass over in silence the fact that this kind of nonsense is exactly what is needed to continue to paint the GOP as the party of rigidity, incapable of anything other than fighting the last war…

Matthias_Robinson_Charge_of_the_Light_Brigade_1864

…and ignore all of the reasons that the utterance of this crap may play great on Fox News — and that such theater is exactly what (some) Republicans themselves have noticed constrains the party’s ability to speak past its dwindling core.

Instead, do what is sadly laughable in our politics today:  pay attention to the actual policy.

If you do, you’ll notice that a sitting, senior senator just proposed deficit reduction by increasing the deficit.*

That this fact doesn’t earn immediate ridicule from the mainstream media — and not just us DFH bloggers — is a pretty precise measure of how deep is the sh*t in which our polity now wallows.  To be sure, this is hardly the most risible, or most corrosive of Graham’s recent performances; nor that of the GOP at large.  But the sheer bald obviousness of the big lie here gets my goat. Does he think we’re that stupid?

Don’t answer that.

*I do know that Graham’s statement could suggest something other than the repeal examined in the CBO analysis cited above.  But every GOP proposal on health care that I can recall that calls for something other than a total reversal of Obamacare makes the fiscal picture worse.  So unless and an until Sen. Graham advances a specific plan, I’ll default to the existing corpus of Republican “ideas” on the matter.

Image: Matthais Robinson, Charge of the Light Brigade, 1864.

Putting Out Fires With Gasoline

August 18, 2012

[Blogger's note:  The following is a penetrating glimpse of the obvious, at least to this readership.  But consider this one more in the cataloque of facts useful for dealing with your wingnut contacts]

If you care about federal deficits,* then, of course, the Republican Party is the last one you want to trust with the budget.

Those of us with a capacity for memory better than that of goldfish may remember the simplest confirming instance:  Bill Clinton raised taxes, created a surplus, and famously presided over peace and prosperity.  George W. Bush (remember him ?– Mitt Romney doesn’t)…not so much.

But now, we are told, we have the new improved Republican Party, in which the very serious man of numbers and ideas, Paul Ryan, will lead us to fiscal sanity and the promised budgetary land of liberty-induced-prosperity.

Or not.

Over to you, KThug:

So if we look at the actual policy proposals, they look like this:

Spending cuts: $1.7 trillion
Tax cuts: $4.3 trillion

This is, then, a plan that would increase the deficit by around $2.6 trillion. [over the first ten years]

How, then, does Ryan get to call himself a fiscal hawk? By asserting that he will keep his tax cuts revenue-neutral by broadening the base in ways he refuses to specify, and that he will make further large cuts in spending, in ways he refuses to specify.

And this is what passes inside the Beltway for serious thinking and a serious commitment to deficit reduction.

The Republican Party is not simply a bunch of kleptomaniac sociopaths; they really will gut the Untied States of America.  They are the party of decline and fall.  For Romney, read Romulus Augustulus.

Factio Grandaeva Delenda Est.

Image: Pierre-Paul Prud’hon, Innocence Preferring Love To Wealth1804.

*And one would be reasonable to do so, sort of, under some time horizon.  But not in the midst of the Great Recession…

You Can Always Tell A Harvard Man (And Woman)…

September 16, 2011

…You just can’t tell how much damage they will do.

The reality-based community took it on the chin again this week in a whole bunch of ways.  One that caught my eye came in this exchange, reported in TPM:

“[I]f you want a role that has benefit programs for older Americans, like the ones we’ve had in the past, and that operate for the rest of the government like the ones we’ve had in the past, then more tax revenue is needed than under current tax rates,” [Congressional Budget Office chief Doug]Elmendorf said. “On the other hand, if one wants those tax rates, then one has to make very significant changes in spending programs for older Americans” or all the rest of the government’s functions.

Given where Congress finds itself — a separate story that began over a year ago — that’s the debate Democrats want to be having. Should we roll back safety net programs in order not to increase taxes on the wealthy?…And it’s precisely the debate Republicans do not want to have. So they spent Tuesday trying to reorient the conversation: instead of arguing in favor of their preferred and informed decisions about the future of the country, they posited a scenario where crisis is upon us already and the only plausible way to avert fiscal catastrophe and help the country end its economic slump is to cut, cut, cut right now.

“There’s a recent report by Alberto Alesina of Harvard University,” noted Sen. Rob Portman (R-OH), “showing that the most successful and pro-growth deficit reduction took place in countries that relied chiefly on austerity programs, spending cuts. And nations that relied more on tax increases were less successful in reducing the deficits and had slower economic growth.”

Ah, one more zombie lie — or rather an error, or failed analysis turned into a public lie by those who repeat it.

Alberto Alesina and Silvia Ardagna published this paper in 2009.  Portman accurately described what it claimed to demonstrate.  To say, as Brian Beutler does in the TPM piece, that this work is controversial is surely true — just as remarking that a blue whale is large is a valid statement.  Here’s Krugman discussing it shortly after publication, capturing the flavor of informed (as in, statistics-competent) criticism.  There are, of course, a wealth of other takes a google’s length away.

But the real problem is that Krugman’s and others’ initial questions of the work, were, of course correct.

To put it in the way natural scientists do when confronted by similar challenges to well-established knowledge, extraordinary claims require extraordinary proof.  Here, if you want to say something contrarian about experiences as empirically well documented as the effects of fiscal austerity on economies, you need to nail every facet of the argument.  You don’t just get to say the speed of light in a vacuum in the early universe was different from that speed now (a real claim).  You gotta prove it.  So far, eighty years of trying to do so for both the tired light hypothesis and the anti-Keynsian fairy-dusters have been unsuccessful.

This latest attempt to assert (spherical) cows are (spheroidal) chickens is no different.  The most recent analysis of Alesina and Ardagna’s claims comes  in this report from the IMF research shop.  Essentially, the new work shows, the Harvard team constructed their data universe in way that led them into a fundamental mistake, as Krugman’s describes:

…results purporting to show economic expansion following spending cuts and/or tax increases were based on a statistical illusion: an expanding economy can often lead to rising revenue and/or falling spending (e.g. because safety-net spending falls or because the government cuts back in an attempt to cool off inflationary pressures). And as a result, what the Alesina-Ardagna results capture is muddle by reverse causation.

The IMF authors say something similar with proper professional decorum r — which makes their conclusion yet more rhetorically devastating:

Estimation results based on measuring discretionary changes in fiscal policy using cyclically-adjusted fiscal data––a practice often used in the literature––suggest that fiscal consolidation stimulates private domestic demand in the short term, providing support for the hypothesis. This result is consistent with a literature that finds that fiscal contractions can be expansionary. However, our analysis suggests that using cyclically-adjusted data to estimate the effects of fiscal consolidation biases the analysis toward overstating expansionary effects.

In contrast, estimation results based on fiscal actions identified directly from contemporaneous policy documents provide little support for the expansionary austerity hypothesis. In particular, we compile an international dataset of fiscal policy adjustments motivated by a desire to reduce the budget deficit and not in response to current and prospective economic conditions using the Romer and Romer (2010) historical approach. Based on the fiscal actions thus identified, our baseline specification implies that a 1 percent of GDP fiscal consolidation reduces real private consumption by 0.75 percent within two years, while real GDP declines by 0.62 percent. The baseline results survive a battery of robustness tests. Our main finding that fiscal consolidation is contractionary holds up in cases where one would most expect fiscal consolidation to raise private domestic demand. In particular, even large spending-based fiscal retrenchments are contractionary, as are fiscal consolidations occurring in economies with a high perceived sovereign default risk.

Put that more simply:  you need to look at what really happened during the actual events you want to understand if you are going to make any sense of the situation.  When you look at a derived model of those events, you miss what people actually said and did, and you are vulnerable to a whole host of methodological traps to which any act of model-making is subject — and hence you screw up.  Which is what the Harvard pair appears to have done.

I don’t know what Alesina and Ardagna will say to all this, or about the use of their conclusions by Senator Portman.  But, of course, once it’s out there, they could issue mea culpas from the balcony in St. Peter’s Square, and it wouldn’t matter.

That’s the nub:  the real issue is that credentialed economists produced work that does not conform to reality — but does conform to what our friends in the Comfort the Comfortable lobby would wish to be true…and hence, it will never die.  Just to repeat:  it is not true that cutting demand in an economy with a demand gap in the gazillions will magically conjure up folks willing to spend.

Oh — and one more thing:  Portman knew, or should have, that the work he cited was, to say it most nicely, unproven. The IMF research, only the latest in a series of demonstrations of flaws in the Alesina-Ardagna conclusions, was released early in the summer, more than two months before the hearing this week.

If Portman did not pick up on work of direct relevance to their argument about the proper course for our country to steer, then he and his staff are incompetent, and should have no role in setting policy for a rowboat, much less for a society and economy on which the lives and happiness billions at home and abroad depend.  If he did know about it, then he’s a lying scum who has no business in any position of power.

You make the call.

So, just to get back to the underlying reality (and to belabor the obvious one more time): as the British Chancellor of the Exchequer George Osborne was reminded this week, starving an already famished economy of someone, anyone, the government willing to spend is the way to screw your economy, and especially those most vulnerable in it.

Which, of course, is exactly what the Republican deficit hallelujah chorus is trying (and mostly succeeding) in doing to us.

Images:  David Vinckboons, Distribution of Loaves to the Poorbefore 1650.

Viktor Oliva, The Absinthe Drinker, 1901

Sanity in Texas!

August 30, 2011

Dallas, even! Home of Mark Cuban

Now, Cuban’s politics are generally a bit bonkers, to put it excessively kindly — he is, (wait for it) a Randian, seemingly of the high-functioning sort, and endorsed Michael Bloomberg in the 2008 election (sic!)  This time around, he’s signed on to one of those centrist third party rich-guys’ playgrounds so beloved of Thomas Friedman.

At the same time, he isn’t frothing at the mouth about the current President.  He complains that the Obama administration has been insufficiently transparent, which may be true, but would be a low-on-my-list concern given what’s happening in, you know, reality.

But, even if Cuban were born at night, it wasn’t last night.  None of the GOPsters running impress him, he says, because “all of them are just spouting ‘doctrine'”….

That’s one word for it, but at least he noticed.

What caught my eye in that interview, though, wasn’t the horse-race stuff, nor his transparent (and justified) pleasure in his Dallas Mavericks’ defeat of “the Evil Empire,” Miami. (Pat Riley = Sauron — works for me.)

Rather, here’s the guy who became the supermodel-on-the-wall of every dot-com geek when in 1999, he sold his company, Broadcast.com, with all of its mighty $13.5 million in quarterly revenue sales, to Yahoo, in exchange for $6.5 billion in stock.  And then he took the necessary next step, turning a ton of that stock into cash fast.

So, lucky, good, and filthy rich.  And he wants to pay his share to the country in which his success could occur:

Cuban did say he agrees with Warren Buffett’s recent assertion that the wealthiest Americans should pay more taxes.

“He’s right,” Cuban said. “Not only should we pay more taxes . . . there should not be a differentiation between capital gains and regular income.”

Well yeah.  More of this please — backed by lobbying money to defend the principle.

Image:  Francisco de Goya, Las Gigantillas, 1791-1792

August 4, 2011

Barney Frank has written a clear, detailed and carefully reasoned explanation of why he voted against the debt ceiling bill.  It’s long enough to send most of it below the jump, but I want to highlight on the front page what my congressman had to say about our job now:

Dear Friend,

I appreciate you taking the time to let me know of your views on the debt limit.  As I will explain later, I think part of the reason that we wound up with a very unsatisfactory bill – one that I voted against – is that there was a disproportionate volume of communications from people who take a wholly negative view of virtually all government activity.  Fortunately, now that their efforts have called some fundamental values into question, a more broadly representative sector in the American public is speaking out and I think that will have a good result. [emphases added]

That is:  keep those cards and letters coming, now, through the summer, and all the way to Christmas.

There’s a lot more, all worth reading, reminding us (me) that despite the relatively negligible damage done up front by this deal, the potential remains for much worse to come.  To get Frank’s take, keep reading. (more…)

For the Record

August 4, 2011

The White House’s version of the debt ceiling agreement.

Also, FWIW, someone I know in the moneyed world sent me this from a highly numerically literate type at another MRU on what the actual agreement entails in the here-and-now:

There are no cuts to this years federal budget. For the one that start Oct 2011 there will be a cut of $21 billion. The total budget this year is 3.4 trillion (that includes entitlements). So, if my arithmetic is correct the cut is about 0.6 of 1 percent! If one takes only discretionary spending of $1.3 trillion then the cut is 1.6%. And my guess is that this cut is not to be taken to the actual budget but to the “inflation adjusted budget” which will be up about 3%, so there is probably a net increase planned for the discretionary budget of over 2% and an increase of the entitlement budget of over 5%. So the whole thing is smoke and mirrors. All of the rest of the changes are back loaded to “later” or to “after there is a committee agreement’.. The theatre will continue.

I have not checked these numbers myself — I don’t have the arithmetic sheet from this source, only his conclusion.  But it tracks the CBO analysis (link to the CBO analysis (PDF) at the bottom of that page), and it is being incorporated into green eye shade-jaundiced  views of the economy.

 

I might go so far as to say as that Obama fellow may not be quite so dumb as he looks. Doesn’t alter the message problem, nor the inherent danger-and-tragedy of double digit unemployment (viewed from the wider perspective).  But given the hands to be dealt, it does not appear that Obama is quite the terrible poker player that some of us — myself on occasion certainly included — have believed him to be.

Image:  Edgar Degas, Arlequin danse, c. 1890

August 4, 2011

So, just to follow up last night’s post, here’s my first attempt to be heard on what might come of the Catfood Commission redux the new joint Congressional committee on debt reduction:

Dear Senator Reid,

I write to ask you to commit to appointing as members of the so-called “Super Congress” committee on debt reduction only Democrats committed to revenue raising and tax reform as an essential, non-negotiable part of the deal.

We’ve already heard from your counterparts in the GOP:  they will appoint only those who oppose any tax revenue in the final package.  That’s both bad (disastrous) policy and bad politics for any Democrat.  We need to counter with strength the other side’s scorched-earth approach to every political dispute.  Right now, that means a committee composed of people who will not give on what both our country and our party desperately needs:  powerful voices defending the idea that when our country needs help, everyone, including (especially) the richest and most fortunate among us must rise to the occasion.

Don’t treat this as business as it used to be usual, where you could sit down with your counterparts and cut a reasonably equitable deal.  If the events of the last few weeks have taught us anything, it’s that those days are gone.

Act accordingly, or the country and our political fortunes as Democrats in 2012 will suffer terribly.

I don’t say it’s great prose, but of course, anyone who wants to grab any of it is more than welcome.  Reid’s contact page is here.  The GOS’s piece on this, from which I got that contact, is here.

Volume counts, both in decibels and amount.  So in your copious spare time, write the notes — to your own senators (Democrats on this issue, of course), representatives, the leadership, the White House, your local newspapers and so on.

A last thought:  several commenters in the thread from last night expressed some variation on the “it-doesn’t-matter because either the two parties are functionally the same, or the Democrats must necessarily cave/lose” theme.

Maybe so, but if ever there was a self-fulfilling prediction, that is one.

Image:  Gerard von Honthorst, Solon and Croesus, 1624.

Megan McArdle: Is it her reading that’s the problem? Her comprehension? Her honesty? You Make The Call!

August 1, 2011

I know that this is all kind of moot in light of the events of the last few days, but someone passed word of this McArdle post to me yesterday, and it seemed to me to capture so much of what has gone wrong in the way the media engaged the debate over deficits and their discontents.

In this particular example of Village media retailing a false narrative, She Who Is Always Wrong™ took issue with a chart referenced by and a conclusion her actually, you know, accomplished colleague* James Fallows has been arguing for a while.

And yes, I know, a cage match between Fallows and McArdle is kind of like watching Ali (in his prime) against the Weehauken Regional Golden Gloves champion, at least as far as intellect and journalistic chops are concerned.  McArdle would win, no doubt, were the judges scoring condescension and high-school in-group wit.  But when it comes to actually reporting an issue, understanding what one has been told, and reporting both facts and (clearly demarcated) analysis/opinion, Fallows v. McArdle wouldn’t be licensed even in Nevada.

But that doesn’t stop the divine Ms. MM, unsurprisingly.  Her role is not to be responsible, or accurate, or even coherent.  It is to advance the approved Central Committee line — which, McArdle, loyal and very effective apparatchik that she is, seems to know before the word from on high need ever get spoken out loud.

Hence her attempt to deflect the hideously liberally biased facts of the history of the deficit.

For, you see, the Fallows post she seeks to undermine focused on this chart:

http://cdn.theatlantic.com/static/mt/assets/jamesfallows/debt_chart_wh_0.jpg

Fallows made the point, also raised by such raving loony left organizations as the Pew Charitable Trusts and the ever-liberal New York Times that such recourses to history and actual data suggest both a problem and solutions that are different from those we’ve just gone through the wringer trying to debate. (Both references supplied by the White House.)

The broad point is both obvious and obviously too painful for McArdle to contemplate:  George Bush the Lesser inherited significant surpluses and a budget that promised to generate further surpluses through times of economic growth, and transformed that extraordinary fiscal idyll into a crater, a truly spectacular failure of financial prudence.

As the chart above accurately depicts, the largest driver of the deficit is the Bush tax cuts that coincided with the eight years of desperately unspectacular economic returns, culminating in the catastrophic failure of global financial capitalism.** The next largest creator of new debt was expanding domestic spending, followed closely by the wars in Afghanistan and Iraq, both wars of choice.  The prescription drug benefit (Medicare Part D) is a smaller item on this list — just 10% of the scale of the tax cuts — but it’s worth noting for the argument to come below.

All this, of course, shows what we already knew:  Bush policies, supported overwhelmingly by a GOP party that controlled the House for six of the eight years of the Lesser’s adminstration, and the Senate for more than four of those years, are what produced something approaching half of the total still-outstanding debt accumulated to date by all administrations since the birth of the Republic.  This, the Obama administration contrasts with its own record of a 1.4 trillion dollar addition to what we owe now, composed mostly of the stimulus, some particular policy choices, and a bit (and the significance of this will become obvious in a moment) of the extension of Bush tax policies.

So, given that none of these claims are controversial to anyone but McArdle, why is The Atlantic’s Business and Economics Editor so unhappy with her colleague?

Let’s give her the floor for a a moment:

I’m a little less enamored, considering that this graph attributes decisions made by Obama and an all-Democratic Congress–like doubling down in Afghanistan–to Bush, while taking responsibility for basically nothing except the stimulus.  When Obama extends the Bush tax cuts for the rich under pressure from Congressional Republicans, that disappears from his side of the ledger, because after all, he didn’t want to do it.  When Bush enacts Medicare Part D under pressure from Congressional Democrats, the full cost is charged against his presidency.  The list of such silliness goes on.  Our president seems set to coin another presidential motto: “The duck starts here.”

Ah, word salad.

I’ve been enjoying ignoring McArdle, as life is too short to waste time on the negligible.  But that means I’ve forgotten the peculiar pleasure of watching someone lie so badly.  It really is an art, to say something contradicted within fractions of a column inch without noticing — or more likely, without caring, for the purpose of this kind of communication is not to advance an argument but to establish a talking point.

So, to the fisking:

On attributing to Bush costs for the two wars:  well, (a) the $1.4 trillion laid to the Bush account underestimates the long term budgetary consequences, reasonably accurately totals up the budgetary authority extended to conduct the war through FY2009, including homeland security and foreign aid costs of the choice made to go to war.   More to the point, it correctly attributes the decision to the administration that made it.  We are still paying for Medicare Part D, for example, and will continue to do so, because unless repealed, future administrations continue to administer decisions made by prior ones.

It’s true that Obama and his administration have continued to fight the wars launched by his predecessors — but unless you want to advance the claim that all decisions by a President vanish from their legacy the moment they leave office, it still seems appropriate to lay the bulk of the cost of any given decision to the President who made it.  It is fair to state that Obama has chosen to pursue war in Afghanistan while dialling down our commitment (and cost) in Iraq — which is indeed a commitment for which the US taxpayer must pay.  That would suggest one could add a chunk to Obama’s ledger of deficit spending for war, while the chart above suggests other choices are responsible.

But again, if you think about what that chart is actually arguing —  that you should look to new choices on spending, president by president, to understand our current budget predicament — then you grasp its logic.  Bush sent us to war that we must somehow finish.  Obama demanded stimulus, which has not proved to be sufficient.  Both of these are real decisions taken at particular points in time by distinct administrations.  And both choices are accurately reflected above.  To which McArdle responds by conflating our president with water fowl. (Sic — ed.)

Meanwhile, consider McArdle’s next claim:

When Obama extends the Bush tax cuts for the rich under pressure from Congressional Republicans, that disappears from his side of the ledger, because after all, he didn’t want to do it.

Oh snap!  I wish I could proffer such incisive analysis with such — how to describe it? — insouciance.

Except (and this is where my jaw hit the floor, even considering the source), if you take one moment to look at the chart in question, you’ll find, nicely colored in blue, attributed to Obama, $250 billion accounted for as part of the December, 2010 deal that extended the Bush tax cuts for two years.

It really doesn’t seem too much to ask that the Business and Economic Editor of an institution as venerable as The Atlantic might actually read the chart she’s analyzing.  But sadly, that’s just a bridge too far for McArdle.

Update 8/2/31:  reader Atlas Fugged caught an error here:  Obama lays claim to $250 billion of the $800 billion cost of the December 2010 deal; that covers the unemployment extension and other aspects of that bargain; the tax cut extension does, as McArdle says, lie on Bush’s side of the ledger.  I apologize for the error — but note that the argument made on the cost of war still applies:  the decisions made by presidents do not die with the end of a given administration; legacies are, after all legacies.  To be strictly fair, I’d say Obama should own the middle class portion of the tax cuts; the extension of the tax cuts on earners over the $250,000 was clearly a Republican ambition first and last.

And now for the capper:

When Bush enacts Medicare Part D under pressure from Congressional Democrats, the full cost is charged against his presidency.

This is called doing the best (worst) you can when the hand you’ve been dealt has no cards at all.  Just to recall.  Medicare Part D, the prescription drug benefit, was debated and passed in 2003, a year in which the Republicans controlled both houses of Congress.  Republican leadership in the House of Representatives famously bent procedure to the point of breaking to ensure the measure’s passage there.  It’s not clear what pressure that the Democrats could have brought to bear on any of the key players, and certainly not Bush himself:  this was a period of unequivocal Republican control of the legislative process.

McArdle hopes no one remembers when and what happened here, I guess.  She’s playing to the established meme that Medicare is a Democrat’s program, so any spending for it must be due to some nefarious Democratic strategem.  But facts do have that well-known liberal bias, and this claim of hers is simply false.  Whether it is a conscious lie or merely a reflexive one is unclear and unimportant.  That McArdle publishes obviously wrong statements — this one, and the tax gaffe above, for two — is what actually matters.

Enough, mostly…except for a quick take on what this is all about.  One thing among many has been driven home by the ongoing debt-limit debacle:  however poorly you may rate Obama’s poker skills, the GOP has been revealed, again, as a party that cannot govern.

It can make use of power, of course — that’s the what they’re doing now, as they attempt to transfer yet more of the burden of living in American from the rich to the poor and middle class.  (Just to anticipate the usual trolls, how else to characterize an approach to deficits that bans tax increases on the rich and the richest but explicitly raises all kinds of costs borne by the rest of us.)

But it can’t actually do stuff that makes the country go.  The Bush the Lesser administration was an eight year demonstration of that incapacity to do even the basics — from the catastrophic mismanagement of the Coalition Political Authority to “heckava job Brownie” adventures in abandoning an American city, to the sustained and successful campaign of failure in economic and fiscal mismanagement.  Remember:  Bush policies left us with debt, a burst housing bubble, and the near-death experience of the US and world banking system.

It shouldn’t require reminding folks of this:  the GOP had its hands essentially unchallenged on the levers of governance and they failed.  Full stop.  A crater.  We’re currently flying with a partly crippled FAA because the GOP still can’t find their asses with two hands behind their backs.  And above all, as the chart that the White House published, others have corroborated, and James Fallows correctly pointed out accurately depicts, any Republican who claims to care about deficits who voted for Bush-era spending measures is a fraud.

Which gets back, at long last, to McArdle’s real aim in her post.  She writes:

The focus on the past makes it a very bad guide to the relative magnitude of the future choices we need to make.  Some of these items (tax cuts, entitlements) will grow, and some of them (military spending, some discretionary items) won’t….Settling whether “Bush policies” or “Obama policies” were the “cause” of the deficit wouldn’t tell us a damn thing about what we should do

This is an attempt to bely the obvious: knowing what policies, chosen by whom actually created the federal debt tells us a great deal about what we should do.  E.g.:  GOP tax cutting creates recurrent fiscal disasters, leading, inter alia to the need for Democratic choices to spend on stimulus to try to recover from the mess.  Pace McArdle, looking at what was done, administration by administration, and then examining both the context and the consequences of those decisions is precisely what you need do in order to frame choices here-and-now about what we should do.

That McArdle knows this at some level, I have little doubt.  But the consequences of becoming aware of such knowledge are insupportable: she’d have to come to grips with the realization that much of what she has written and supported in the past is turning to ashes in her mouth — not to mention the difficulties it would cause her with her patrons were consciousness to descend upon her.  So, again, she is a pretty straight forward illustration of the truism that it is very hard to grasp that which would cost you to understand.

That’s it, but for this last bit of snark:  McArdle near the bottom of her post contrasts the White House chart with one that she “just happen[s] to have handy.”  I invite you to enjoy it, for it is a peculiar masterpiece. It is both one of the worst examples of the graphic display of information I’ve seen since the great Tufte began to show us the way — and it is, as one would expect, a deeply dishonest depiction.

I’ll leave it to you to pick out the various ways in which the chart conceals relevant information, while just noting that I find it … interesting … that McArdle does not provide a source for this handy chart.  Would it’s provenance be that embarassing?

And with that, enough.

*I know that it must hurt Fallows, an actual journalist, to be thus labelled by McArdle. But, in fact, she’s right, with all the implications for both that follows from that harsh reality.

**I know that sounds like hyperbole — but as the Michael Lewis work at that link documents (as many others do), it ain’t.

Images:  Joachim Beuckelaer, Vegetable Seller2nd half of 16th century.

Gerard ter Borch, The Reading Lesson, 2nd half of the 17th century.

And Now, An Update From Reality

July 29, 2011

As we head towards either the completely unforced self-immolation of default, or the almost as self-defeating response of belt tightening amidst a recession, it’s worth taking yet one more swing at the piñata:  does the US have a debt/deficit crisis?

There are lots of ways to say “no.”

Here’s Kthug, debunking yet again the myth of out-of-control federal spending.  DeLong reminds us  (yet again)that the bond market thinks our debt is nothing to write home about.  Karl Smith reminds us that the US is borrowing money at a rate that amounts to a negative real return — which is to say that right now it is cheaper for the US to borrow than to pay cash for what it buys.

Now, via Zachary Karabell writing at Time.com, we learn of a new way to parse the blunt truth:  we have real policy challenges facing us — mostly how to get sufficienthell, any — growth going in the economy that could lead to actually getting our fellow citizens back into paying jobs.  But what we don’t have is an unsustainable debt burden, as revealed by perhaps the most direct metric of all:  how much it costs us as a percentage of GDP to service the supposedly unprecedented, unsustainable flood of red ink in which the United States is (not) drowning:

…what matters about the debt isn’t the dollar amount per se, but how much it costs us to service it. And by that measure, the debt isn’t nearly as big a problem as it’s being made out to be.

Yes, the federal debt has grown by nearly $3 trillion dollars in the past three years. And yes, the dollar amount of that debt is quite large (in excess of $14 trillion and headed toward $15 trillion should the ceiling be raised). But large numbers are not the problem. The U.S. has a large economy (slightly larger than that debt number). And, crucially, we have very low interest rates.

Because of those low rates, the amount the U.S. government pays to service its debt is, relative to the size of the economy, less than it was paying throughout the boom years of the 1980s and 1990s and for most of the last decade. The Congressional Budget Office estimates that net interest on the debt (which is what the government pays to service it) would be $225 billion for fiscal year 2011. The latest figures put that a bit higher, so let’s call it $250 billion. That’s about 1.6% of American output, which is lower than at any point since the 1970s – except for 2003 through 2005, when it was closer to 1.4%.

Under Ronald Reagan, the first George Bush, and Bill Clinton, payments on federal debt often got above 3% of GDP. Under Bush the second, payments were about where they are now. Yet suddenly, we are in a near collective hysteria.

Yup…for a debt burden that in budgetary terms is about half of what Saint Ronnie dealt with, we are now contemplating dismantling the safety net and gutting the investment in education, research and infrastructure that are essential for any future economic security for our country and our kids.

The good news is that this comes from an unequivocally MSM source.  The bad news is that the Village, for the most part, has failed to convey to the American people that what we are seeing is simply the smokescreen the GOP is using to hide its pursuit of policies that it could never sustain in the full light of day.  Too much of our government has fallen into the hands of fools and knaves.  And the press — not enough of it, even now — has left it way too late to confront that fact.

And yes, as Karabell and the others have noted, the Democrats have either gone along with too much of this nonsense, or else mounted ineffective opposition to the folly, avarice and/or pure stupidity of their opponents.  But consider the alternative — and, it seems to me, we gotta work, however resentfully, as hard as it takes to hold what we have and to grab the House back fifteen months from now.  “Not that bad” may be cold comfort…but your modern GOP is terrifyingly worse.

Image:  Jacques de Gheyn (II), Vanitas Still Life, 1603.

Who’s Taxing Whom

July 19, 2011

Fair warning: what follows is a bit of a rant and contains nothing particularly new.  But the fiscal follies of our overlords are unhinging me, and as misery loves company, I hope to share my derangement.

———–

I’ve been a little obsessed with light bulbs lately, as regular readers know.  I  continue to be dumbfounded at the depth, passion, and naked-mole-rat-stupidity of the GOP drive to ensure Americans waste money on illumination.  Following a thought from one commenter, I’m bracing for the claim that bans on whaling are really an unconscionable assault on the liberty of the people to light their homes with oil lanterns.

But as I thought about the implications of the Republican House caucus’ relentless drive to undermine America’s energy security, I started to fixate on a penetrating glimpse of the obvious:  the entire GOP approach to the federal government’s fiscal policy is a vast tax hike on most Americans.

That the GOPsters approach to policy will raise the cost of living in America is, I think obvious by this point:  when you privatize public goods, by and large those goods cost more for the individual user to access.  (There is a lot of detail obscured by that blanket statement, and certainly some instances where it might be otherwise, but the health care system (about which more below) is a familiar example of the basic problem, and there are many more.)

Republicans would say, I think, that cost isn’t the issue.  Government shouldn’t pay for much that it does now and that individuals can make better choices about priorities and so on.  They’d add that government musn’t pay for that which it can’t; that, to use a cliche repeated over and over again, that the government must behave like any household would, and not spend money it doesn’t have.

That last is nonsense, of course.  I’m actually working on a next book that tells a grand story of fraud and deceit at the birth of the idea of government debt — and that tale turns on the ways that governments aren’t like households or small businesses.

For now, though, the point is that if you take the Republicans false metaphor at face value, then you see that despite the brave promises of “no new taxes,” the practical, household consequences of their actions add up to a huge stealth tax increase that differentially falls on to working people, the middle class, and the poor.

And yes, as noted above, I know I’m restating the obvious, but bear with me.  Let’s  take my lighting fixation for a spin.  Recall that the energy efficiency standards that so offend the current Republican caucus* are predicted to save each American household $50 a year.

Now back to that bill-paying session over the kitchen table Republicans are so wont to imagine.  Maybe liberty is beyond price.  Whatever it’s called though, this extra hit of four or five bucks a month would feel exactly the same as if the GOP had voted a $50/home surcharge on each of us to subsidize light bulb makers or power generators:   We wouldn’t have that money no more, and it’s by GOP choice that this increase in our burdens would such cash out of our pockets.

A latte a month may in fact be a worthy price to keep the dead hand of statism from our necks.  But what about cost of aging?  Remember the Paul Ryan plan that virtually the entire GOP congressional caucus has endorsed.  That scheme switches the cost of medical care for the elderly to those old, ill people and their families.  Now we’re not talking cups of coffee any more, mere Franklins a year; rather, we’re in the realm of beaucoup  Benjamins.

Again this is surely familiar to all here, but just as a reminder, the gap between the vouchers Ryan’s plan provides and the projected actual cost of senior’s health care is about $12,500,  according to a CBO analysis, $6,000 more than the out-of-pocket charges to be borne were Medicare left unchanged.

And is there any choice here, really, for any household that loves its grandparents (or just folks of an age that in my case is coming up rather sooner than seems plausible)?

No there is not.  We could enact the old Jewish mother light bulb joke,** but our only real options were the GOPsters to achieve their long-cherished goal of killing Medicare is to pay the freight or die faster.

Death and taxes — there’s a reason the two are such close kin, after all.

Old news, get over it — I get it.

But the point I want to make, the meme, to use a word I mistrust, or a shove to the Overton window, is that all this talk of the holding the line against taxes and so on is bullsh*t when we’re working at the level of that holy kitchen table.  There, the only thing that matters at the level of individual Americans’ bank accounts is that GOP policies raise the cost of being an American in ways that are indistinguishable from brutal, huge tax increases.

If politics is perception then it’s important to do what the Bush clan was brilliant at — take your opponents’ seeming strength and hang an anvil around its neck.  And here, as we see every day (and many posts here remind us), the GOPsters using the power of government to impose huge new costs on us all that we have in practical terms no way to avoid.  The resulting drain of our dollars is not a tax in law, of course, but the resulting holes in my wallet feel exactly the same as if it were.  And, of course, the bitter last jest is that under the Republican approach, we pay more to get less.

So I’d like to see every Democrat running, and the chattering classes as well, all raging about the GOP stealth tax on the American way of life.  I’d like to see the ads that make that connection with couples in their kitchens talking about this GOP tax assault, how cleverly it’s been disguised, how hard it bites.  I’d like to see sneering and rage and bitter remorse at the thought that any all-American family of voters was taken in by all that no-tax deceit.  I want to make it impossible for any GOP thug to hide behind Grover’s tissue of a pledge when next the polls open.

No new taxes?  Hell and death (and taxes)!  No GOPster should be allowed to say that unchallenged.

*Recall also that the standards were approved with bipartisan support in 2007 (including sponsorship by GOPster Fred Upton, currently  chairman of the  House Energy and Commerce Committee, who now fights the good fight against light bulb efficiency), and signed into law by that notorious state-socialist, George W. Bush.

**Q:  How many Jewish mothers does it take to change a light bulb?

A:  “None!  I’ll just sit here in the dark.”

Images:  Vincent van Gogh, The Potato Eaters, 1885

Rembrandt van Rijn, Portrait of an Old Jew, 1654

 


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