Archive for the ‘Economics’ Category

Yes, Marco is the big winner of the night! By coming in third. Or maybe second. And he’s not talking participation trophy here. No, he’s a winner, yes he is! Sheesh. At least he’s getting a lot of practice delivering his victory speech for when he actually needs it. If he ever does.

The big news, of course, is that the Donald Trump felled another member of The Deep Bench, namely Jeb! Bush. The Deep Bench was so deep–remember?–that a complete novice of a politician has laid waste to most of them. I feel a little sad for Jeb!. I mean, he was always supposed to be the smart one, but in the end he was bested by his dumb brother. That’s gotta sting. You know it does. But I’m also a little sad for Jeb! because he was really just about the only one to pushback against Trump’s ugly bigotry. So now the Republicans get to own Trump. He is them and they are him.

And we might be better off with him than Rubio, anyway–that is, assuming either one of them can beat Hillary. Matt Yglesias had an interesting piece on Vox the other day, titled “Why I’m more worried about Marco Rubio than Donald Trump.”

Yglesias explains that Rubio’s budget math is “ridiculous.” Remember: Republicans are supposed to be the ones who know how to manage budgets. You’d never know it from their presidential candidates.

Rubio has proposed a tax cut that will reduce federal revenue by $6.8 trillion over 10 years. Numbers that large don’t mean anything to people, so for comparison’s sake let’s say that if we entirely eliminated American military spending over that period we still couldn’t quite pay for it.

But of course Rubio doesn’t want to eliminate military spending — he wants to spend more. He also promises to avoid any cuts to Social Security and Medicare for people currently at or near retirement. For good measure, he is also proposing a balanced-budget amendment to the Constitution. You could eliminate the entire non-defense discretionary budget and you’d still need $100 billion to $200 billion more per year in cuts to make this work.

This is, of course, totally unworkable. And the process that led Rubio to this point is telling and troubling.

Rubio entered the Senate at a time when an intellectual movement known as “reform” was hot in conservative circles, which argued that Republicans should concentrate less on supply-side tax cuts and more on tax policy focused on the working class. This originally took the form of a $2.4 trillion tax cut plan crafted by Utah Sen. Mike Lee that Rubio signed on to but then kept transforming into a larger and more regressive tax cut, as Rubio came under pressure from the supply-side wing of the party and it became clear that the constituency for “reform” conservatism was limited to a handful of media figures. Eager to prove that his dalliance with the reformocons was over, he actually ended up proposing to entirely eliminate taxes on investment income, meaning that billionaire captains of industry could end up paying nothing at all.

The upshot is a plan that is costly and regressive, yet paired with other commitments around entitlements, military spending, and constitutional amendments that make it completely impossible.

Trump’s tax plan is even costlier than Rubio’s by most measures. But in his defense, he barely ever talks about it and hasn’t compounded the cost problem with a balanced-budget amendment or a firm commitment to enormous quantities of new military spending.

Then there’s Rubio’s foreign policy:

Rubio’s approach to world affairs essentially repeats the “let’s have it all and who cares if it adds up” mentality of his fiscal policy. His solution to every problem is to confront some foreign country more aggressively, with no regard to the idea of trade-offs or tensions between goals or limits to how much the United States can bite off at any particular time.

There’s more in the article. I guess we shouldn’t worry too much until Rubio actually wins something.

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That Republican bench is awfully deep, so we’ve been told ad naseum. Today we bring you Ben Carson, currently second in the polls for the Republican presidential nomination. Once upon a time, Carson was a highly respected medical doctor. Now he seems to be trying to prove just how ill-informed a medical doctor can be in every other part of life.

His comments in the aftermath of the Oregon mass shooting are idiotic enough, but today he demonstrated that he does not understand what the debt ceiling is. That would seem to be kind of important for someone managing the federal government.

Ryssdal: As you know, Treasury Secretary Lew has come out in the last couple of days and said, “We’re gonna run out of money, we’re gonna run out of borrowing authority, on the fifth of November.” Should the Congress then and the president not raise the debt limit? Should we default on our debt?

Carson: Let me put it this way: if I were the president, I would not sign an increased budget. Absolutely would not do it. They would have to find a place to cut.

Ryssdal: To be clear, it’s increasing the debt limit, not the budget, but I want to make sure I understand you. You’d let the United States default rather than raise the debt limit.

Carson: No, I would provide the kind of leadership that says, “Get on the stick guys, and stop messing around, and cut where you need to cut, because we’re not raising any spending limits, period.”

Ryssdal: I’m gonna try one more time, sir. This is debt that’s already obligated. Would you not favor increasing the debt limit to pay the debts already incurred?

Carson: What I’m saying is what we have to do is restructure the way that we create debt. I mean if we continue along this, where does it stop? It never stops. You’re always gonna ask the same question every year. And we’re just gonna keep going down that pathway. That’s one of the things I think that the people are tired of.

Ryssdal: I’m really trying not to be circular here, Dr. Carson, but if you’re not gonna raise the debt limit and you’re not gonna give specifics on what you’re gonna cut, then how are we going to know what you are going to do as president of the United States?

So you’re at the gym and you run into the local former Naval intelligence analyst–you know, the guy who never fails to remind you that he was an intelligence analyst because it makes it him sound both intelligent and capable of thoughtful analysis. In the course of the conversation, you mention that you recently read an article explaining that since 1900 unemployment has been much worse, on average, during Republican administrations than Democratic ones; and that more recessions have started under Republicans than Democrats.

This causes the intelligence analyst to go silent for a few seconds, eyes blinking, until he utters his favorite one-word response when confronted with facts for which he has no counter. “Bullshit,” he says, expecting (hoping) that this will put an end to the conversation and you will go away.

Ah, but this time you pull out your iPad and point out the interesting passages from the article (highlighted in bold below), which is based on research conducted by Dr. James Gilligan in the course of writing his book, Why Some Politicians Are More Dangerous Than Others. His book shows that the rate of lethal violence rises under Republican presidents and falls just as consistently under Democrats. What might explain this correlation? “According to Gilligan, criminologists and public health experts have long been aware of another striking set of data that reliably parallels increases in murder and suicide when traced over the past hundred years: the rate of unemployment.”

Noting the apparent congruence between unemployment, economic inequality and recession across one dimension, and lethal violence across another, Gilligan put together his own statistical picture of economic conditions under American presidents since 1900, using data compiled by both the Bureau of Labor Statistics and the National Bureau of Economic Research. He saw what other academics and journalists have remarked upon from time to time (including me, in a 2003 book titled Big Lies) — namely that unemployment rates have gone up during every Republican administration and gone down during every Democratic administration, without exception. Every time a Republican president left the White House, unemployment was higher than when he came in, while the opposite was true whenever a Democratic president completed his term. Rates of unemployment stayed higher for longer periods under Republicans too.

Then he did some simple addition: “If we count up the net sum of all the increases that occurred during Republican administrations from 1900 through 2008, we find that the Republicans brought about a cumulative increase of 27.8 percent in the unemployment rate, and the Democrats an almost exactly equal decrease of 26.5 percent.” The net cumulative difference in the partisan effects was a staggering 53.8 percent. He also calculated the cumulative difference in duration of unemployment among the jobless during Republican and Democratic administrations, and again the numbers are enormous. From 1948 to 2003, Republicans oversaw a net cumulative increase of 24.6 weeks of unemployment, while Democrats oversaw a net decrease of 13.6 weeks — a difference of 38.2 weeks, or almost ten months.

Why is the unemployment record of the Republicans so awful? When Gilligan looked up the tabulations of expansion and recession tabulated by the National Bureau of Economic Research — an organization that was headed for many years, as he notes, by the conservative economist Martin Feldstein — he found a simple answer. The NBER numbers show that “from 1900 through October 2010, the country suffered approximately three times as many months of recession during the times Republicans were governing the country as during the times Democrats were: 246 months (more than 20 years) compared with 86 — a discrepancy that could not have happened by chance more than one time out of 10,000.” Moreover, recessions began 17 times during Republican presidencies and only six times during Democratic presidencies, and always lasted several months longer under Republicans as well.

Now, you explain to the intelligence analyst that you don’t actually subscribe to the notion that presidents have direct control over the economy, but the correlation, over the course of more than a century, seems greater than could be explained by chance. And besides, conservatives are always–always–yammering on about how Democrats are terrible for the economy and Republicans are great, so you found this information curious. The intelligence analyst blinks a few more times, mutters “Bullshit,” and walks away. Yup, the conversation is over.

Another conservative-led state underperforms:

Wisconsin ranked 40th in the nation in private-sector job growth during the one-year period between September 2013 and September 2014, according to the latest detailed job numbers from the federal Bureau of Labor Statistics.

The numbers come from the Bureau’s Quarterly Census of Employment and Wages, which economists say is the gold standard of job metrics. Because the QCEW is so thorough, the numbers take a long time to report.

They showed Wisconsin added private-sector jobs at a rate of about 1.16 percent from September 2013 to September 2014. By comparison, private-sector jobs grew by 2.3 percent nationwide.

All neighboring states fared better than Wisconsin, and when matched up against a broader region of 10 Midwest states, only Nebraska fared worse.

The Walker administration also released less-accurate monthly job estimates early Thursday morning, which were much more positive. They showed Wisconsin’s unemployment rate dropped to 4.8 percent in February of 2015.

Not only is the state faring poorly due to Governor Scott Walker’s policies, he also feels the need to lie about it. How typically conservative.

As 2014 comes to an end, Republicans around the country should be rejoicing in the amazing track record of President Obama, who has accomplished the 2012 Republican presidential candidates’ agendas far faster than they themselves promised they would have!

From Steven Benen:

* The Romney Standard: Mitt Romney said during the 2012 campaign that if Americans elect him, he’d get the unemployment rate down to 6% by 2016. Obama won anyway and the unemployment rate dropped below 6% two years faster.

* The Gingrich Standard: Newt Gingrich said during the 2012 campaign that if Americans re-elected the president, gas prices would reach $10 per gallon, while Gingrich would push gas down to $2.50 a gallon. As of this morning, the national average at the pump is a little under $2.38.

* The Pawlenty Standard: Tim Pawlenty said trillions of dollars in tax breaks would boost economic growth to 5% GDP. Obama actually raised taxes on the wealthy and GDP growth reached 5% anyway.

Fantastic job, Mr. President!

Of course, sadly for Republicans, their own agenda was achieved via some, er, um, unorthodox methods (at least to them). I mean, President Obama and Congress allowed most of the Bush tax cuts to expire, and taxes even increased for the very richest among us.

Republican members of Congress spent much of the beginning of 1993 warning that raising taxes on the rich would destroy the economy.

“It will kill jobs, kill businesses, and yes, kill even the higher tax revenues that these suicidal tax increasers hope to gain,” Rep. Christopher Cox said.

And cut to the best job growth of the century — over 22 million jobs — and the first budget surplus in generations.

Of course, the nineties were an anomaly, with the end of the Cold War and the government’s decades-long investment in the internet suddenly paying off exponential returns. You can’t expect those kinds of returns again.

Cut to 2013, when President Obama’s re-election allowed most of the Bush tax breaks to expire with Republicans making similar warnings.

The result? Well, it wasn’t the best job creation of the century – yet. The 2,331,000 jobs created in 2013 was shy of 2005’s 2,506,000, which was fueled by the tens of billions of dollars the Bush Administrations flushed into defense and Homeland Security. I’d argue that 2013’s job growth could have beaten 2005 if not for Congress allowing a payroll tax to expire as the sequester went into effect. And don’t forget the how the GOP shut down the government for no discernible purpose.

In 2014, taxes again went up on those in the top percentiles to fund the Affordable Care Act. And with that money we were able to help 10 million Americans gain health insurance.

The result? According to the Labor Department, 2014 has already surpassed 2005 as the best year of job growth this century with 2,650,000 jobs projected to have been created through November.

Democratic policies that ask the rich to invest in our economy is the only way we ever created middle class jobs and it pays off for the rich.

“The U.S. economy not only grows faster, according to real GDP and other measures, during Democratic versus Republican presidencies, it also produces more jobs, lowers the unemployment rate, generates higher corporate profits and investment, and turns in higher stock market returns,” Princeton University professors Mark W. Watson and Alan Blinder have found. “Indeed, it outperforms under almost all standard macroeconomic metrics.”

Then there’s the terrible reality that the economy is growing despite the fact that millions of Americans are obtaining health care for the first time. In fact, I have conservative relatives who hate ObamaCare so much that they complain about the bureaucratic hoops they had to jump through to obtain the subsidies that allowed them to actually afford health care. The horror!

And let’s not even get started with all those “job killing” regulations that Americans are swimming in. Yes, we would all have been better off letting the Republican president slow things down in the name of ideology.

UPDATE

And let’s not forget the stock market. The Dow passed 18,000 a few days ago, which brings to mind the words of former George W. Bush adviser Michael Boskin, who on Mar. 6, 2009 penned an op-ed in the Wall Street Journal titled “Obama’s Radicalism Is Killing the Dow.” As Matt O’Brian writes in the Washington Post:

Boskin, though, didn’t think that this once-in-three-generations financial crisis was to blame for the market meltdown. Instead, he blamed it on Obama for … talking about raising taxes? “It’s hard not to see the continued sell-off on Wall Street and the growing fear on Main Street,” Boskin philosophized, “as a product, at least in part, of the realization that our new president’s policies are designed to radically re-engineer the market-based U.S. economy.” What followed was the usual conservative jeremiad against higher taxes on the rich, lower taxes on the poor, and deficit spending. Obama’s trying to turn us into Europe, and that’s why markets are pricing in the possibility of a Great Depression—not the dying economy he inherited.

Stocks bottomed on March 9, three days after the op-ed, as the Federal Reserve’s bond-buying and the Treasury’s stress tests restored confidence in the financial system. Then the stimulus started to kick in, putting enough of a floor under the economy that it began growing again that summer. It’s been a nasty, brutish, and long recovery, but unemployment is finally back under 6 percent and the economy is now growing at its fastest pace in over a decade.

Add it all up, and Obama’s radicalism has killed the Dow to the tune of a 171 percent return since Boskin’s op-ed.

A Tale Of Two States

Posted: July 21, 2014 by watsonthethird in Current Events, Economics
Tags: , , , ,

An interesting juxtaposition in recent articles describing the circumstances of red state Kansas and blue state California.

The article about Kansas is titled “Sam Brownback’s Kansas Catastrophe.” Yeah, it’s not good. A former supporter complains that Governor Brownback is using the state as “crash test dummies for his own fiscal experiments.”

The experiment that Winter referred to is a sweeping income tax cut plan that Brownback enacted in 2011, which eliminated income taxes for small businesses, cut the highest income tax rates by 25 percent, and made smaller cuts for people with lower rates. Brownback has also signed bills cutting state budgets, declared that life begins “at fertilization,” and created an “Office of the Repealer” to eliminate state laws, regulations and agencies. He’s also ended guaranteed teacher tenure, and narrowed eligibility for welfare and Medicaid.

The tax cuts have come at a particularly steep price. The Wall Street Journal reported that tax collections fell by $685 million in the first 11 months of the fiscal year, putting Kansas on track to blow through its $700 million reserve fund by the middle of next year.

Brownback has insisted that he’ll make up future shortfalls with economic growth, but with 40 percent of state revenue traditionally coming from those taxes and no specific plan to make up the shortfall, Moody’s Investor Service recently downgraded the state’s debt rating. In their decision, Moody’s cited both the tax cuts and a state Supreme Court decision that found that Brownback and the legislature had cut funding for schools unfairly and too deeply in 2011, and would have to find budget savings elsewhere.

Now Brownback faces a tight re-election race, whereas he should have been a shoe-in in conservative Kansas–until he wrecked the state’s economy. Meanwhile, one of conservatives’ favorite punching bags is California Governor Jerry Brown. In 2012, he backed voter proposals to raise various taxes in order to cope with California’s deficit. How are things going in California?

Dire predictions about jobs being destroyed spread across California in 2012 as voters debated whether to enact the sales and, for those near the top of the income ladder, stiff income tax increases in Proposition 30. Million-dollar-plus earners face a 3 percentage-point increase on each additional dollar.

“It hurts small business and kills jobs,” warned the Sacramento Taxpayers Association, the National Federation of Independent Business/California, and Joel Fox, president of the Small Business Action Committee.

So what happened after voters approved the tax increases, which took effect at the start of 2013?

Last year California added 410,418 jobs, an increase of 2.8 percent over 2012, significantly better than the 1.8 percent national increase in jobs.

California is home to 12 percent of Americans, but last year it accounted for 17.5 percent of new jobs, Bureau of Labor Statistics data shows.

Can we finally–FINALLY–put an end to the myth that reducing taxes magically puts the economy into overdrive and as a consequence, actually increases tax revenues? It’s just not true. The only reason conservatives cling to this theory, despite the complete lack of evidence that it works, is simply because they don’t want to pay taxes.

More evidence of the failure of trickle down economics, this time perpetrated by Kansas Governor Sam Brownback, who took only two years to bankrupt the State of Kansas.

From the Vox article:

The governor proposed to cut income taxes on the state’s highest earners from 6.45 percent to 4.9 percent, to simplify tax brackets, and to eliminate state income taxes on most small business income entirely. In a nod to fiscal responsibility, though, he proposed to end several tax deductions and exemptions, including the well-liked home mortgage interest deduction. This would help pay for the cuts.

Yet as the bill went through the state Senate, these deductions proved too popular, and legislators voted to keep them all. The bill’s estimated price tag rose from about $105 million to $800 million, but Brownback kept supporting it anyway. “I’m gonna sign this bill, I’m excited about the prospects for it, and I’m very thankful for how God has blessed our state,” he said.

After the cuts became law, it was undisputed that Kansas’s revenue collections would fall. But some supply-side analysts, like economist Arthur Laffer, argued that increased economic growth would deliver more revenue that would help cushion this impact.

Yet it’s now clear that the revenue shortfalls are much worse than expected. “State general fund revenue is down over $700 million from last year,” Duane Goossen, a former state budget director, told me. “That’s a bigger drop than the state had in the whole three years of the recession,” he said — and it’s a huge chunk of the state’s $6 billion budget. Goossen added that the Kansas’s surplus, which had been replenished since the recession, “is now being spent at an alarming, amazing rate.”

Of course, it’s all President Obama’s fault. “This is an undeniable result of President Obama’s failed economic policies of increasing taxes and overregulation,” Brownback’s revenue secretary Nick Jordan said.

These people are seriously deluded. And dishonest, too. Evidently, Brownback is in a tight re-election race in a deep red state. If he loses, of course that will be President Obama’s fault, too. I can hardly wait to hear his excuses.