swimming freestyle

The 'starving the beast' fallacy

Steve Chapman's Washington Examiner piece has some surprises.  The first is to read a conservative writer in a conservative paper with some criticisms of Reaganomics and the simplemindedness of Sarah Palin.  The second is a concession that the GOP's "lower taxes" mantra just isn't going to cut it any longer.

"We can lecture our children about extravagance until we run out of voice and breath," (Ronald Reagan) said in 1981. "Or we can cure their extravagance by simply reducing their allowance." With that in mind, he pushed through cuts in federal income tax rates.

Under Reagan, spending rose 22 percent (adjusted for inflation) and the government debt tripled. But Republicans have stuck to the strategy ever since.

When they began, this approach seemed worth a try. But 30 years later, confirmation is hard to find. Like Reagan, George W. Bush reduced income tax rates. In spite of that, inflation-adjusted federal outlays this year are 60 percent higher than they were the year Bush became president. 

Chapman notes evidence that lowering nominal tax rates hasn't impacted government expenses; in the face of reduced revenues, the government has just gone out and financed the added expenses.  And in the face of mounting debt, poll after poll finds Americans demanding lower taxes and no federal budget cuts.

I wonder how this story ends.

Americans aren't as crazy for capitalism as you may think

I've seen similar polls, with similar results, but it's always a little surprising to see the loose hold Americans have on what are supposed to be two very firmly held tenets; an aversion to socialism and a hardy embrace of capitalism.

A new Pew poll asked Americans their reaction to a set of politically charged, frequently used words. like "militias", "states rights" and "family values".  Thankfully, there's not a bunch of favorable reaction to "militia" and, not unexpectedly, Americans respond very favorably to "family values".

There's an interesting breakdown for "socialism" and "capitalism".  The poll includes data for age, sex, education, political ideology/party affiliation, income level, and race.

The high level numbers are interesting (29% positive/59% negative for "socialism" and 52% positive/37% negative for "capitalism").  Just a wee bit over half of Americans have positive feelings about capitalism!  

The more detailed demographic numbers are even more interesting.  The young, less educated, lower income earners have a decidedly more unfavorable view of capitalism and a more favorable opinion of socialism.

Polls that have tracked this over time would be interesting.  Forty years of Reaganomics has transformed the country into two distinct classes, the rich and everyone else.  It doesn't seem at all surprising that those who've been handed the short end of the stick aren't all that enamored with the status quo.

It's richly ironic that the policies of those who boast loudest about their hate for socialism and love of capitalism are the very policies that may yet turn whole groups of Americans into anti-capitalist socialists.

Poll: Public views economy as improving

Public perception that the economy is improving is on the upswing, according to a new CBS News/NY Times poll. 

Americans are more optimistic about the future of the economy than they were last month, according to a new CBS News/ New York Times poll. Forty-one percent of Americans now say the economy is improving, up eight points from April and more than at any time during this recession. Just 15 percent think the economy is getting worse, according to the poll, conducted April 28 - May 2. (Link)

The polling also included a question about President Obama's handling of the economy.  The response was nearly entirely party dependent.

Most Democrats (77 percent) approve of the president's handling the economy, while most Republicans disapprove (86 percent). Independents are divided: 46 percent approve, while 45 percent disapprove. Last month, more independents disapproved than approved of how Mr. Obama was handling the economy.

If the economy stays on the current track, it's difficult to imagine that trend not continuing and it will become increasingly difficult for the GOP to, at the same time, concede the economy is improving and assert Mr. Obama is doing a lousy job at managing it. 

Retirement age in other developed countries

Solutions for fixing Social Security invariably include raising the retirement age.  Here's an interesting graph from the Economic Policy Institute on retirement ages (the age when full benefits kick in) for other countries in the Organization of Economic Cooperation and Development (OECD).  (Click to enlarge).

There are three countries with retirement ages higher than the U.S.  Ireland's retirement age is 66 and Iceland and Norway call 67 the age for full benefits.

In her 2009 paper Working the Graveyard Shift, EPI Economist Monique Morrissey notes that most of the increase in life expectancy in the U.S. in recent decades has been among higher income workers. Raising the retirement age would hurt many workers who have little choice but to retire early due to poor health and job prospects – often the low-income workers who rely on Social Security the most.     (Link)

At the end of the day, it's a question of priorities.  As a nation, we've decided lower taxes are better than services and benefits and we've opted to fund a gigantic defense infrastructure. 

Wall Street donations flowing to GOP

If I was a corporation with a bunch of cash to give to politicians and, hopefully, influence upcoming legislation, I wouldn't think twice about who to give it to; the politicians with the juice, the ones most likely to accomplish what's in my best interests. 

That could be the majority party.  But if they were adamantly opposed to my interests, I'd give to the minority party to curry favor and contribute to the minority party's efforts to become the majority party.  

So, strictly speaking, drawing any conclusions about which party is in the pocket of any given corporation or industry based on donations is a little risky without some analysis.

This last weekend, during a panel discussion on "This Week" about the financial reform legislation, host Jake Tapper said:

"Can I interject for one second on the campaign contributions, and I'll come to you in a second, Paul. But the Center for Responsive Politics did a study of campaign contributions, and in this cycle, the finance, insurance and real estate sectors are giving much more to Democrats than to Republicans. $65 million to $51 million. Paul (Krugman), do you think the Democratic Party is too close to Wall Street?

Paul Krugman replied that the difference in overall campaign contributions was more likely due to the Democrats being the majority party.  That was a nice save by Krugman - I suspect he may answer differently in different circumstances.  With the Obama Administration full of Larry Summers, Tim Geithner, and other Wall Street refugees, it's pretty hard to make an argument that Wall Street hasn't completely infiltrated the Democratic Party as well.

So, I was a little surprised to see this from the WSJ today:

For the first time since 2004, the biggest Wall Street firms are now giving most of their campaign donations to Republicans. A Wall Street Journal analysis of 12 large financial services companies, including J.P. Morgan Chase & Co., Goldman Sachs Group Inc. shows that they have collectively made $1.4 million in political donations, with 52% going to Republicans so far this year. That’s a reversal from last year, according to the most recent round of fund-raising reports covering January, February and March.

Best case, the big Wall Street firms consider this financial reform legislative effort to be a huge deal and are giving their biggest advocates the proper incentives to go to battle for them.  Worse case for Democrats, the big Wall Street firms believe the GOP now has all the juice.

Comparing economic performance during Clinton and Bush Administrations

There's quite a bit of heavy lifting now going on to paint the George W. Bush presidency as a success.  Last week, Texas Governor Rick Perry said Mr. Bush will go down in history as a "very, very good" president.  Mitt Romney, speaking at the recent CPAC conference praised the ex-president for his economic policies and handling of his "war on terror".  Minnesota Governor Tim Pawlenty said "history will be kind" to Bush. 

Who knows?  It might work.  Republicans have a remarkable talent for making Americans think white is black and wrong is right.  But it won't be easy for them as long as there's real data to refute. 

The Center for American Progress has just issued a report comparing the country's economic performance during the Clinton and George W. Bush presidencies.  From the report:

Progress

President Clinton took office at a time of large deficits and high unemployment. The country was headed in the wrong direction after more than a decade of supply-side economics. President Clinton turned the country around by adopting progressive economic policies that focused on reducing the budget deficit, halting the widening gap between rich and poor, and spurring innovation and investment. By the end of his term, these progressive policies had yielded the longest sustained period of economic growth in American history and more than 23 million new jobs.

Regress

Despite the clear success of progressive policies in the 1990s, President Bush returned the country to the failed economic strategy of focusing on the very wealthy under the theory that their success would “trickle down” to everyone else. It didn’t work out that way. President Bush cut taxes repeatedly for high-income earners and on capital gains, with the promise that those cuts would result in impressive growth for everyone. The rich were doing very well after eight years of supply-side policies, but everyone else was falling back. Median incomes and wages were down, poverty was up, job growth was anemic, and unemployment was beginning to soar.

Check out the report.  As I've posted quite a bit on income inequality, this graphic really hit home:

That decrease in median income led to more and more Americans having to use home equity and credit hoping to maintain a 1990's type lifestyle which, in turn, led to the eventual economic collapse we're now trying to dig out from under.  

There are plenty of Republicans hoping to rehabilitate George W. Bush's legacy.  I'm hoping I develop a full head of hair and learn to sing and play guitar like Bruce Springsteen.  I really doubt either is going to happen.

GOP blocks financial reform debate

The Senate's vote today on allowing debate of financial reform will likely fail, 52-48.  It's expected the Republicans will successfully close ranks and be joined by Democratic Senator Ben Nelson of Nebraska.

Sen. Ben Nelson (D-Neb.) has voted no on the cloture motion to start debate on Sen. Chris Dodd’s (D-Conn.) financial regulatory reform bill — meaning the motion will likely fail, 58 to 42, short of the 60 votes needed. Republicans will tout this as an extraordinary victory demonstrating bipartisan opposition to moving forward on financial regulation until the bill is tried, tested and sorted. But my guess is that Nelson knew the motion would not pass, having failed to garner Sen. Olympia Snowe’s (R-Maine) vote earlier today, and decided not to vote for it at that point.(Link)

This comes on the heels of a new Washington Post/ABC News poll indicating overwhelming public support for the reform.  In the poll, nearly two thirds of the respondents support stricter federal regulations on Wall Street financial practices.

As Steve Benen notes, this seems particularly ironic given the Republican's position that they were doing the will of the people in opposing health care reform.

It's not at all clear what the Republicans are doing here.  First, there's overwhelming support for reform.  They've as much as said they'll fold like a cheap suit at some future point.  If their argument is the proposed legislation isn't stringent enough (I know- that's laughable), why in the world would they block debate and lose the opportunity to contribute amendments to the bill?

Hmmm....unless they're betting financial reform goes the way health care reform went.  Remember, health care reform started very popular, and as time (and accumulated lies) went by, public opinion turned against reform.  That long debate worked to the Republicans benefit, despite the ultimate loss. 

Those jeans come at a big price

Guangzhou, China is the blue jean capital of the world.  And the surrounding Pearl River Delta is taking a devastating hit as a result.

Keep in mind that's one factory among many that line the banks of the river. 

Details emerging on bill to counter Citizen's United decision

There's more detail emerging on the Democrats plans to stunt the effects of the recent Supreme Court Citizen's United ruling that allowed unlimited corporate contributions to political campaigns.

Provisions include:

  -  Requirement that CEO's names be attached to advertisements. 

  -  A mandate that major corporate donors for "campaign related activity" be identified.

  -  Tightening of political restrictions for foreign corporations, defined as any company with more than 20% foreign ownership, a majority of foreign directors, or a foreign national functioning as the Chief Executive Officer. 

  -  Requirement that public disclosure be made of all corporate political spending.

  -  Barring companies that receive federal contracts in excess of $50,000 from contributing to campaigns.

I know - it seems an awful lot like a bunch of bandaids.  Gives one some sense about how important Supreme Court justice nominations are, huh?

Bush still gets blame for the economy

The belief that Barack Obama inherited, rather than created, an economic disaster may have a shelf life, but a new Gallup poll suggests that Americans still believe the blame for the recession lands with the Bush Administration.

It's not a big surprise there's a marked difference in finger pointing when broken down by political party.   Over 75% of Republican respondents believe Barack Obama has either a "great deal" or a "moderate amount" of blame to shoulder for the downturn, while 90% of Democrats think George W. Bush has a most or a "moderate" amount of blame.   To their credit, 57% of polled Republicans found George Bush either greatly or somewhat to blame for the country's economic problems. 

(It seems fair to ask how 77% of Republicans found Barack Obama to blame and 57% found George W. Bush at fault.  I guess that's just the nature of polling).

Of course, the unrelenting effort to hand Obama all the blame goes on.  But every once in a while someone brings the discussion back down to earth (from Balloon Juice):