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…


…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,, 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.


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