The politics of paranoia can lead policymakers into some unfortunate directions. On everything from homeland security to education to guns, paranoid politicians invariably end up pushing some truly bizarre proposals for no good reason.
In the latest example, some far-right congressional Republicans have decided to wage a war on census data because they have paranoid ideas about “big government.”
A group of Republicans are cooking up legislation that could give President Barack Obama an unintentional assist with disagreeable unemployment numbers — by eliminating the key economic statistic altogether.
The bill, introduced last week by Rep. Jeff Duncan (R-S.C.), would bar the U.S. Census Bureau from conducting nearly all surveys except for a decennial population count. Such a step that would end the government’s ability to provide reliable estimates of the employment rate. Indeed, the government would not be able to produce any of the major economic indices that move markets every month, said multiple statistics experts, who were aghast at the proposal.
“They simply wouldn’t exist. We won’t have an unemployment rate,” said Ken Prewitt, the former director of the U.S. Census who is now a professor of public affairs at Columbia University.
The core issue is something called the American Community Survey, which the Census Bureau uses as a supplemental to the decennial reports, providing information on commuting, income, family structure, educational attainment, housing, and finance. The results are used extensively by businesses, researchers, academics, and government agencies, and have been an invaluable tool for decades.
Right-wing lawmakers, however, have come to believe nefarious government officials are collecting the information as part of a larger scheme — it’s never been entirely clear to me what they see as the point of the plot — that must be stopped. Sen. Rand Paul (K-Ky.), who revels in strange conspiracy theories, proposed legislation in March to make elements of the American Community Survey optional, apparently because he didn’t realize that they were already optional.
But it’s not just the American Community Survey that congressional Republicans are eager to crush.
Indeed, Rep. Jeff Duncan’s (R-S.C.) bizarre proposal, which has 10 co-sponsors, would also explicitly eliminate the agricultural census, economic census, government census, and mid-decade census.
As a consequence, Duncan’s bill would eliminate the existence of the unemployment rate and the measurement of the nation’s GDP, among other thing.
Maurine Haver, founder of business research firm Haver Analytics and a past president of the National Association for Business Economics, told the Huffington Post‘s Michael McAuliff, “Do they understand that these data that the Census Bureau collects are fundamental to everything else that’s done? They think the country doesn’t need to know how many people are unemployed, either?”
The answers to these questions are unclear — Duncan and other supporters of this proposal have not explained why they oppose the data, why they see the need to eliminate the data, or even if they understand what it is they’re doing.
Duncan, incidentally, is the same deeply confused congressman who spewed bizarre conspiracy theories about the Boston Marathon bombing, going so far that Homeland Security Secretary Janet Napolitano felt the need to say Duncan’s ignorant inquiries were “full of misstatements and misapprehensions,” and “not worthy of an answer.”
By: Steve Benen, The Maddow Blog, May 2, 2013
In his latest salvo in his back-and-forth with Paul Krugman over the significance of the national debt, Joe Scarborough, writing in POLITICO today, displayed such a foul misunderstanding about economics, Krugman must have choked on his oatmeal laughing as he read it.
In “Paul Krugman is wrong – but don’t take my word for it,” the MSNBC host made the following point:
Investors may be growing skittish about U.S. government debt levels and the disordered state of U.S. fiscal policymaking.
From the beginning of 2002, when U.S. government debt was at its most recent minimum as a share of GDP, to the end of 2012, the dollar lost 25 percent of its value, in price-adjusted terms, against a basket of the currencies of major trading partners. This may have been because investors fear that the only way out of the current debt problems will be future inflation.
It also may have been because space aliens raided the Treasury in the dead of night because Nicholas Cage and Chuck Norris were off duty, having been contracted by the Navy to fight a flotilla of krakens in the Caribbean the week before. Scarborough may as well have argued that, because it would have displayed a better understanding of how foreign exchange markets actually work. The value of the dollar is determined by foreign countries’ demand for it and our supply of foreign exchange. And while foreign investors in 2002 may have begun to fear widening debt that was eventually caused by a recession in 2008 — despite the fact that the housing bubble was far from inflated in 2002 and that these investors eventually failed to foresee the crash itself — it’s more likely that the value of the dollar fell because our current account deficit essentially doubled between 2002 and 2006 (but don’t take my word for it).
Scarborough continued to make arguments that could be debunked by a remedial high school economics teacher shortly after:
More troubling for the future is that private domestic investment—the fuel for future economic growth—shows a strong negative correlation with government debt levels over several business cycles dating back to the late 1950s. Continuing high debt does not bode well in this regard.
While it’s true that government borrowing can “crowd out” private investment by bidding up interest rates, it isn’t currently happening — interest rates remain low. Furthermore, investors seem to have more confidence in U.S. Treasuries than they do in the market (but don’t take my word for it, “investors continue to buy U.S. government debt as a refuge against a renewal of turmoil in global financial markets and concern the U.S. recovery may falter”). The real reason that private investment and government debt appear to have an inverse relationship, both now and during any recession, is that economic contraction causes both tax revenue and private investment to fall.
So whose word should we take?
If you believe that I am wrong and Paul Krugman is right…then take it up with the RAND Corporation whose senior economist wrote everything you have read here other than this concluding paragraph. The debt crisis is real and waiting another decade to fix it is not an option. Anyone who suggests it is operates well outside the mainstream of where serious economists reside.
If the recent financial crash has taught us anything, it’s that “the mainstream of where serious economists reside” is less credible than a bootleg DVD salesman convention. But what’s even more troubling about Scarborough’s column — and POLITICO’s decision to publish it — is that he doesn’t even say whose words we should take or what those words actually are. Scarborough names neither the “senior economist” nor the study or studies that he is citing. Nor does the RAND Corporation even have a single “senior economist” — a search for “senior economist” on RAND’s website indicates that the think tank has at least a dozen “senior economists” on staff. So we can’t even debunk the man inspiring Scarborough to spew such noxious filth. At least we can debunk him.
By: Samuel Knight, Washington Monthly Political Animal, February 16, 2013
By its very definition, war spending—indeed, any government spending—improves GDP, as anyone who has ever taken an economics 101 course knows. Spending on World War II is credited with helping the U.S. decisively climb out of its depression slump. Likewise, the Iraq War helped the economy in some ways. But to many experts, the costs will far outweigh and outlast the benefits.
As U.S. operations in Iraq end, tallying up the costs and benefits of a nine-year ordeal is a daunting task. Estimates on Iraq War spending vary. The Congressional Research Service has put the Operation Iraqi Freedom pricetag at $806 billion. President Obama said that the Iraq War would cost over $1 trillion, all told. Either way, compared to past U.S. conflicts, spending on the Iraq war has been relatively small—at its height, spending on WWII helped drive government spending to 42 percent of GDP, according to the Congressional Budget Office. At its height, operations in Iraq cost around 1 percent of GDP.
But the long-term costs will well exceed this total, and the budgetary consequences are far-reaching.
On the positive side, the Iraq War did bolster the economy in some ways.
“It reduced unemployment compared to what it otherwise would have been” both with military and contractor jobs, says Stan Collender, a senior partner at Qorvis Communications who has also worked on both the House and Senate Budget Committees.
According to figures from the Commerce Department, GDP has grown at an average quarterly rate of 4.1 percent since the start of 2003, when the Iraq War began. While the war’s contribution to that growth was likely small, Collender believes it is significant.
“[Troops] were getting hazardous duty pay, which means they were sending more money home. We weren’t really on a wartime economy, certainly not compared to Vietnam or WWII, but you can’t say that it wasn’t an insignificant part of economic or GDP, given where the economy has been.”
Coming to a hard figure on the costs versus benefits of the Iraq War may indeed be impossible—particularly because untangling those costs from those of the simultaneous war in Afghanistan is difficult. However, it is clear that the costs of the war will ultimately go far beyond those of the costs of combat and reconstruction.
One key way that the war’s costs will outlast its operations is in veterans’ health care. A recent paper from the Center for American Progress estimates that the projected total cost of veterans’ healthcare and disability will run between $422 billion and $717 billion.
Columbia University Economics Professor Joseph Stiglitz and Linda Bilmes, a lecturer at Harvard’s Kennedy School of Government, have also argued that fighting in Iraq diverted resources from Afghanistan, prolonging conflict in that country. All told, Stiglitz and Bilmes have put the cost at well over $3 trillion.
Whatever the cost, some experts say that it wasn’t what was financed in the Iraq War but how it was financed that is problematic.
“The problem is not the impact on the GDP. It basically was financed through debt, which is a completely different issue,” says Anthony Cordesman, the Arleigh A. Burke Chair in Strategy at the Center for Strategic and International Studies.
“It’s really the decision of how to pay for it that has had such a negative effect on the U.S. economy. Because unlike any previous war in U.S. history, this was paid for entirely by debt at the same time that we cut taxes,” says Bilmes. While entitlements and other mandatory spending make up a majority of annual federal budgets and contribute heavily to deficits and debt, the Iraq War also contributed significantly. The Center for Budget and Policy Priorities has estimated that the wars in Iraq and Afghanistan, together with the Bush tax cuts, will account for almost half of the projected $20 trillion debt in 2019.
Cordesman stresses that asking “what if” can be an exercise in futility. Calculating the opportunity cost of engaging in the Iraq War, as opposed to however else government might have spent (or not spent) the same amount of money, “borders on the absurd,” he says, as there are countless alternatives to any option. “The opportunity cost of every decision you take is almost inevitably suboptimal,” he says.
Aside from whatever opportunities the U.S. missed by engaging in Iraq, there are also unquantifiable costs. A recent memo from the Center for American Progress, a left-leaning think tank, argues that ending Saddam Hussein’s regime empowered Iran, “remov[ing] the most significant check on Iran’s hegemonic aspirations.” Many returning vets will also face personal economic difficulties, coming home to a difficult job market.
Of course, the human costs of the Iraq War are without a doubt its most lasting and tragic legacy. In addition to more than 32,000 U.S. soldiers wounded in Iraq, the war killed over 4400 U.S. soldiers, according to Icasualties.org, not to mention more than 104,000 Iraqi civilian casualties, according to Iraqbodycount.org.
By: Danielle Kurtleben, U. S. News and World Report, December 15, 2011
If you read the business and even the political press, you’ve doubtless encountered the claim that the economy is a mess because the threat to reregulate in the wake of a global-economy-wrecking financial crisis is creating “uncertainty.” That is touted as the reason why corporations are sitting on their hands and not doing much in the way of hiring and investing.
This is propaganda that needs to be laughed out of the room.
I approach this issue as as a business practitioner. I have spent decades advising major financial institutions, private equity and hedge funds, and very wealthy individuals (Forbes 400 level) on enterprises they own. I’ve run a profit center in a major financial firm and have have also operated a consulting business for over 20 years. So I’ve had extensive exposure to the dysfunction I am about to describe.
Commerce is all about making decisions and committing resources with the hope of earning profit when the managers cannot know the future. “Uncertainty” is used casually by the media, but when trying to confront the vagaries of what might happen, analysts distinguish risk from “uncertainty”, which for them has a very specific meaning. “Risk” is what Donald Rumsfeld characterized as a known unknown. You can still estimate the range of likely outcomes and make a good stab at estimating probabilities within that range. For instance, if you open an ice cream store in a resort area, you can make a very good estimate of what the fixed costs and the margins on sales will be. It is much harder to predict how much ice cream you will actually sell. That is turn depends largely on foot traffic which in turn is largely a function of the weather (and you can look at past weather patterns to get a rough idea) and how many people visit that town (which is likely a function of the economy and how that particular resort area does in a weak economy).
Uncertainty, by contrast, is unknown unknowns. It is the sort of risk you can’t estimate in advance. So businesses also have to be good at adapting when Shit Happens. Sometimes that Shit Happening can be favorable, but they still need to be able to exploit opportunities (like an exceptionally hot summer producing off the charts demand for ice cream) or disaster (like the Fukushima meltdown disrupting global supply chains). That implies having some slack or extra resources at your disposal, or being able to get ready access to them at not too catastrophic a cost.
So why aren’t businesses investing or hiring? “Uncertainty” as far as regulations are concerned is not a major driver. Surveys show that the “uncertainty” bandied about in the press really translates into “the economy stinks, I’m not in a business that benefits from a bad economy, and I’m not going to take a chance when I have no idea when things might turn around.”
The “certainty” they are looking for is concrete evidence that prevailing conditions have really turned. But with so many people unemployed, growth flagging in advanced economies, China and other emerging economies putting on the brake as their inflation rates become too high, and a very real risk of another financial crisis kicking off in the Eurozone, there isn’t any reason to hope for things to magically get better on their own any time soon. In fact, if you look at the discussion above, we actually have a very high degree of certainty, just of the wrong sort, namely that growth will low to negative for easily the next two years, and quite possibly for a Japan-style extended period.
So why this finger pointing at intrusive regulations, particularly since they are mysteriously absent? For instance, Dodd Frank is being water down in the process of detailed rulemaking, and the famed Obamacare actually enriches Big Pharma and the health insurers.
The problem with the “blame the government” canard is that it does not stand up to scrutiny. The pattern businesses are trying to blame on the authorities, that they aren’t hiring and investing due to intrusive interference, was in fact deeply entrenched before the crisis and was rampant during the corporate friendly Bush era. I wrote about it back in 2005 for the Conference Board’s magazine.
In simple form, this pattern resulted from the toxic combination of short-termism among investors and an irrational focus on unaudited corporate quarterly earnings announcements and stock-price-related executive pay, which became a fixture in the early 1990s. I called the pattern “corporate dysmorphia”, since like body builders preparing for contests, major corporations go to unnatural extremes to make themselves look good for their quarterly announcements.
An extract from the article:
Corporations deeply and sincerely embrace practices that, like the use of steroids, pump up their performance at the expense of their well-being…
Despite the cliché “employees are our most important asset,” many companies are doing everything in their power to live without them, and to pay the ones they have minimally. This practice may sound like prudent business, but in fact it is a reversal of the insight by Henry Ford that built the middle class and set the foundation for America’s prosperity in the twentieth century: that by paying workers well, companies created a virtuous circle, since better-paid staff would consume more goods, enabling companies to hire yet more worker/consumers.
Instead, the Wal-Mart logic increasingly prevails: Pay workers as little as they will accept, skimp on benefits, and wring as much production out of them as possible (sometimes illegally, such as having them clock out and work unpaid hours). The argument is that this pattern is good for the laboring classes, since Wal-Mart can sell goods at lower prices, providing savings to lower-income consumers like, for instance, its employees. The logic is specious: Wal-Mart’s workers spend most of their income on goods and services they can’t buy at Wal-Mart, such as housing, health care, transportation, and gas, so whatever gains they recoup from Wal-Mart’s low prices are more than offset by the rock-bottom pay.
Defenders may argue that in a global economy, Americans must accept competitive (read: lower) wages. But critics such as William Greider and Thomas Frank argue that America has become hostage to a free-trade ideology, while its trading partners have chosen to operate under systems of managed trade. There’s little question that other advanced economies do a better job of both protecting their labor markets and producing a better balance of trade—in most cases, a surplus.
The dangers of the U.S. approach are systemic. Real wages have been stagnant since the mid-1970s, but consumer spending keeps climbing. As of June, household savings were .02 percent of income (note the placement of the decimal point), and Americans are carrying historically high levels of debt. According to the Federal Reserve, consumer debt service is 13 percent of income. The Economist noted, “Household savings have dwindled to negligible levels as Americans have run down assets and taken on debt to keep the spending binge going.” As with their employers, consumers are keeping up the appearance of wealth while their personal financial health decays.
Part of the problem is that companies have not recycled the fruits of their growth back to their workers as they did in the past. In all previous postwar economic recoveries, the lion’s share of the increase in national income went to labor compensation (meaning increases in hiring, wages, and benefits) rather than corporate profits, according to the National Bureau of Economic Analysis. In the current upturn, not only is the proportion going to workers far lower than ever before—it is the first time that the share of GDP growth going to corporate coffers has exceeded the labor share.
And businesses weren’t using their high profits to invest either:
Companies typically invest in times like these, when profits are high and interest rates low. Yet a recent JP Morgan report notes that, since 2002, American companies have incurred an average net financial surplus of 1.7 percent of GDP, which contrasts with an average deficit of 1.2 percent of GDP for the preceding forty years. While firms in aggregate have occasionally run a surplus, “. . . the recent level of saving by corporates is unprecedented. . . .It is important to stress that the present situation is in some sense unnatural. A more normal situation would be for the global corporate sector—in both the G6 and emerging economies—to be borrowing, and for households in the G6 economies to be saving more, ahead of the deterioration in demographics.”
The problem is that the “certainty” language reveals what the real game is, which is certainty in top executive pay at the expense of the health of the enterprise, and ultimately, the economy as a whole. Cutting costs is as easy way to produce profits, since the certainty of a good return on your “investment” is high. By contrast, doing what capitalists of legend are supposed to do, find ways to serve customer better by producing better or novel products, is much harder and involves taking real chances and dealing with very real odds of disappointing results. Even though we like to celebrate Apple, all too many companies have shunned that path of finding other easier ways to burnish their bottom lines. and it has become even more extreme. Companies have managed to achieve record profits in a verging-on-recession setting.
Indeed, the bigger problem they face is that they have played their cost-focused business paradigm out. You can’t grow an economy on cost cutting unless you have offsetting factors in play, such as an export led growth strategy, or an ever rising fiscal deficit, or a falling household saving rate that has not yet reached zero, or some basis for an investment spending boom. But if you go down the list, and check off each item for the US, you will see they have exhausted the possibilities. The only one that could in theory operate is having consumers go back on a borrowing spree. But with unemployment as high as it is and many families desperately trying to recover from losses in the biggest item on their personal balance sheet, their home, that seems highly unlikely. Game over for the cost cutting strategy.
And contrary to their assertions, just as they’ve managed to pursue self-limiting, risk avoidant corporate strategies on a large scale, so too have they sought to use government and regulation to shield themselves from risk.
Businesses have had at least 25 to 30 years near complete certainty — certainty that they will pay lower and lower taxes, that they’ will face less and less regulation, that they can outsource to their hearts’ content (which when it does produce savings, comes at a loss of control, increased business system rigidity, and loss of critical know how). They have also been certain that unions will be weak to powerless, that states and municipalities will give them huge subsidies to relocate, that boards of directors will put top executives on the up escalator for more and more compensation because director pay benefits from this cozy collusion, that the financial markets will always look to short term earnings no matter how dodgy the accounting, that the accounting firms will provide plenty of cover, that the SEC will never investigate anything more serious than insider trading (Enron being the exception that proved the rule).
So this haranguing about certainty simply reveals how warped big commerce has become in the US. Top management of supposedly capitalist enterprises want a high degree of certainty in their own profits and pay. Rather than earn their returns the old fashioned way, by serving customers well, by innovating, by expanding into new markets, their ‘certainty’ amounts to being paid handsomely for doing things that carry no risk. But since risk and uncertainty are inherent to the human condition, what they instead have engaged in is a massive scheme of risk transfer, of increasing rewards to themselves to the long term detriment of their enterprises and ultimately society as a whole.
By: Yves Smith, Salon, August 14, 2011
Ten years ago today, the wealthiest Americans caught a multi-billion dollar break from their benefactor, then-president George W. Bush. In the decade since, through two wars, natural disasters, a plummeting economy and a soaring debt, the wealthiest Americans have gotten to keep those Bush tax cuts. Happy birthday, everybody!
As the Republican Party now lines itself up behind Rep. Paul Ryan on his mission to cut the resulting deficit on the backs of working people and the elderly, I find myself surprisingly and strangely nostalgic for another GOP hero, whose legacy, at least when it comes to taxes, has become woefully misunderstood. Can it be that I find myself nostalgic for Ronald Reagan?!
Of course, I’m not alone in my nostalgia. I’m joined by the entire Republican leadership in this, but I think our reasons may be quite a bit different. In the spirit of unity, I’d like to suggest to Republicans in Congress that they look closely at the record of their favorite 20th century hero and adopt yet another policy named after the Gipper. I’m no fan of much of President Reagan’s legacy, but in a new spirit of bipartisanship, and historical accuracy, I’d like to present Republicans in Congress with an idea: the Ronald Reagan Tax Reform Act of 2011.
A key element of the Reagan lore believed by today’s GOP is that Reagan’s embrace of “trickle-down economics” is what caused any and all economic growth since the 1980s. In fact, after Reagan implemented his initial tax-slashing plan in 1981, the federal budget deficit started to rapidly balloon. Reagan and his economic advisers were forced to scramble and raised corporate taxes to calm the deficit expansion and stop the economy from spiraling downward. Between 1982 and 1984, Reagan implemented four tax hikes. In 1986, his Tax Reform Act imposed the largest corporate tax increase in U.S. history. The GDP growth and higher tax revenues enjoyed in the later years of the Reagan presidency were in part because of his willingness to compromise on his early supply-side idolatry.
The corporate tax increases that Reagan implemented — under the more palatable guise of “tax reform” — bear another lesson for Republicans. The vast majority of the current Republican Congress has signed on to a pledge peddled by anti-tax purist Grover Norquist, which beholds them to not raise any income taxes by any amount under any circumstances, or to bring in new revenue by closing loopholes. This pledge, which Rep. Ryan’s budget loyally adheres to, in effect freezes tax policy in time — preserving not only Bush’s massive and supposedly temporary tax cuts for the wealthiest Americans, but also a vast mishmash of tax breaks and loopholes for specific industries won by well-funded lobbyists.
The problem has become so great that many giant American corporations have become so adept at exploiting loopholes in the tax code that they paid no federal income taxes at all last year — if Republicans in Congress follow their pledge to Norquist, they won’t be able to close a single one of the loopholes that are allowing corporations to avoid paying their fair share.
Even Reagan recognized the difference between just plain raising taxes and simplifying the tax code to cut out loopholes that subsidize corporations. In 1984, he arranged to bring in $50 billion over three years, mainly by closing these loopholes. His 1986 reform act not only included $120 billion in tax hikes for corporations over five years, it also closed $300 billion worth of corporate loopholes.
These kinds of tax simplification solutions are available for Congress if they want them. As I wrote in April, nixing Bush’s tax cut’s for the wealthiest Americans would help the country cut roughly $65 billion off the deficit in this year alone. Closing loopholes that allow corporations to shelter their income in foreign banks would bring in $6.9 billion. Eliminating the massive tax breaks now enjoyed by oil and gas companies would yield $2.6 billion to help pay the nation’s bills.
But before Republicans in Congress change their math, they have to change their rhetoric — and embrace the reality of the economic situation they face and the one that they’d like to think they’re copying. In 1986, during the signing ceremony for the Tax Reform Act, Reagan explained that “vanishing loopholes and a minimum tax will mean that everybody and every corporation pay their fair share.”
It’s time for the GOP to take a page from their hero’s playbook. If they do so, they might be able to find some allies that they never thought possible. It’s time for “everybody and every corporation to pay their fair share.” We can all get along. Sign me up for “The Reagan Tax Reform Act of 2011.”
By: Michael B. Keegan, President: People For the American Way, Published in HuffPost, August 7, 2011