Every Saturday morning, President Obama releases a weekly address, issued over the air and on radio, followed by an official Republican response. Ordinarily, they’re intended to reinforce the parties’ message of the week, or push some new initiative, and they’re not especially newsworthy.
But this week’s GOP address, delivered by Kansas Gov. Sam Brownback (R), struck me as more interesting than most.
National party leaders selected Brownback so that he could tout Kansas’ new tax policies, which Republicans apparently now consider a model for the nation. The governor specifically called his tax agenda an example of “ideas that work.”
“They involve a more focused government that costs less. A taxing structure that encourages growth. An education system that produces measurable results. And a renewed focus on the incredible dignity of each and every person, no matter who they are.”
The next question, of course, is, “Ideas that work for whom?”
Brownback’s initial approach to tax reform was ludicrously regressive — sharply reducing tax rates for the wealthy, while punishing the poor. For his next phase of “tax reform,” the Kansas governor, with the help of a Kansas GOP legislature that’s been purged of moderates, intends to eliminate the state income tax altogether, while making matters even worse for families that are already struggling by raising sales taxes, eliminating the mortgage interest deduction, and scrapping tax credits for things like food and child care.
Remember to keep the larger context in mind: Brownback’s agenda is awful for Kansas, but Republican Party officials at the national level chose the governor to deliver their weekly address, not just because they heartily endorse his tax policies, but because they want to see them implemented elsewhere. Indeed, with a debate over tax reform on the horizon, GOP leaders in Washington are sending a not-so-subtle signal: Brownback’s regressive vision is the kind of plan they have in mind.
By: Steve Benen, The Maddow Blog, April 8, 2013
Ever since he first proposed it in the same year Thomas Jefferson declared all men to be created equal, people have been delighted and beguiled by the hidden workings of Adam Smith’s famous “invisible hand.”
For a millennia or more, humans who marveled at the orderly movements of the heavens sought to invent some system to explain and predict the comings and goings of the planets. And so, it was entirely inevitable that in the fullness of time people would seek to impose the cosmic reliability of celestial mechanics onto more terrestrial phenomenon as well, like economics.
“Let the market decide!” That has been the battle cry of free market aficionados from the day Adam Smith first suggested that private avarice might transubstantiate into public virtue right through to the unspoken suppositions buried deep within Congressman Paul Ryan’s god-awful budget that tax cuts pay for themselves and the whole point of national fiscal policy is to lift from the minds of America’s job-producing investor class the dark clouds of “uncertainty.”
But what if the laissez faire conception of the free market doesn’t hold up any better than did the Ptolemaic vision of an earth-centered solar system that very nearly got Galileo burned at the stake for contradicting?
What if private vice doesn’t produce public virtue at all, as Adam Smith surmised, but rather invites a heedless and reckless pursuit of private profit that leads inexorably to public catastrophe? That was the conclusion which the Chicago-school conservative Richard Posner reluctantly reached after sifting through the rubble following the collapse of capitalism in 2008.
In his 2009 diagnosis of the most recent financial crisis, The Failure of Capitalism, Posner concluded that the fundamental problem with free market capitalism is that behavior which is perfectly rational when pursued by individuals, and individual firms, is disastrous when that behavior is aggregated across the entire society.
The micro-economic laws of supply and demand that tell an economic participant how to use the price mechanism to maximize profits, in other words, are worse than worthless as a macro-economic guide for the national policymaker whose aim is, not profits, but the productivity and prosperity of the economy as a whole.
It makes perfect sense for the consumer to buy when the market is strong and save when it is weak, “but by doing this they make the downturn worse,” says Posner, since from the standpoint of the overall society “we want people to save when times are good and spend when times are bad.”
Likewise, it can be rational to ride one of the serial economic bubbles that have become all too commonplace since high finance replaced making things as America’s signature industry — even if you know it is a bubble — since the individual investor can never know when that bubble will burst. And until it does, says Posner, there are lots of profits to lose if one climbs off the bubble too soon.
As a former Citigroup CEO put it: “When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing you got to get up and dance. And we’re still dancing.”
Because risk and return are positively correlated, Posner says a firm that plays it safe is, paradoxically, “courting failure because investors will turn elsewhere.”
Likewise, while a “cascade” of bank failures could bring the economy to a halt, Posner says “no individual bank has an incentive to take measures to avoid such a consequence.”
That is why, he says, it may be risky to follow the herd, but it is not irrational.
Since the 2008 collapse, the media has been on high alert (unlike the government) for the scoundrels and knaves who brought our economy to grief. But in apportioning blame, Posner says “there is no need to bring cognitive quirks, emotional forces, or character flaws into the causal analysis.”
The “rational maximization” of businessmen and consumers all legally pursuing their self-interest, together and intelligently, within a framework of property and contract rights, was all it took to “set the stage for economic catastrophe.”
It’s this “rational indifference” to the consequences of one’s own business and consumption behavior — an indifference baked into the very nature of the “free” market itself — that explains why government has a duty to do more than merely prevent fraud, theft and other infringements of property and contract rights, even though this “is the only duty that libertarians believe government has,” as Posner says.
Government also has an obligation to regulate financial behavior, says Posner, for without such regulation “the rational behavior of law abiding financiers and consumers can precipitate economic disaster.”
Given the structural deficiencies of the free market and the perverse, self-destructive incentives it creates, it was probably smart for conservatives to shift the focus of their cheerleading away from capitalism’s economic performance and towards laissez faire’s imagined moral underpinnings instead — freedom, liberty, individualism and all of that. That’s because, as an economic incentive that promises broad-based prosperity, greed, it turns out, has not been so good.
By: Ted Frier, Open Salon Blog, Salon, March 21, 2013
It has been a big week for budget documents. In fact, members of Congress have presented not one but two full-fledged, serious proposals for spending and taxes over the next decade.
Before I get to that, however, let me talk briefly about the third proposal presented this week — the one that isn’t serious, that’s essentially a cruel joke.
Way back in 2010, when everybody in Washington seemed determined to anoint Representative Paul Ryan as the ultimate Serious, Honest Conservative, I pronounced him a flimflam man. Even then, his proposals were obviously fraudulent: huge cuts in aid to the poor, but even bigger tax cuts for the rich, with all the assertions of fiscal responsibility resting on claims that he would raise trillions of dollars by closing tax loopholes (which he refused to specify) and cutting discretionary spending (in ways he refused to specify).
Since then, his budgets have gotten even flimflammier. For example, at this point, Mr. Ryan is claiming that he can slash the top tax rate from 39.6 percent to 25 percent, yet somehow raise 19.1 percent of G.D.P. in revenues — a number we haven’t come close to seeing since the dot-com bubble burst a dozen years ago.
The good news is that Mr. Ryan’s thoroughly unconvincing policy-wonk act seems, finally, to have worn out its welcome. In 2011, his budget was initially treated with worshipful respect, which faded only slightly as critics pointed out the document’s many absurdities. This time around, quite a few pundits and reporters have greeted his release with the derision it deserves.
And, with that, let’s turn to the serious proposals.
Unless you’re a very careful news reader, you’ve probably heard about only one of these proposals, the one released by Senate Democrats. And let’s be clear: By comparison with the Ryan plan, and for that matter with a lot of what passes for wisdom in our nation’s capital, this is a very reasonable plan indeed.
As many observers have pointed out, the Senate Democratic plan is conservative with a small “c”: It avoids any drastic policy changes. In particular, it steers away from draconian austerity, which is simply not needed given ultralow U.S. borrowing costs and relatively benign medium-term fiscal projections.
True, the Senate plan calls for further deficit reduction, through a mix of modest tax increases and spending cuts. (Incidentally, the tax increases still fall well short of those called for in the Bowles-Simpson plan, which Washington, for some reason, treats as something close to holy scripture.) But it avoids large short-run spending cuts, which would hobble our recovery at a time when unemployment is still disastrously high, and it even includes a modest amount of stimulus spending.
So we could definitely do worse than the Senate Democratic plan, and we probably will. It is, however, an extremely cautious proposal, one that doesn’t follow through on its own analysis. After all, if sharp spending cuts are a bad thing in a depressed economy — which they are — then the plan really should be calling for substantial though temporary spending increases. It doesn’t.
But there’s a plan that does: the proposal from the Congressional Progressive Caucus, titled “Back to Work,” which calls for substantial new spending now, temporarily widening the deficit, offset by major deficit reduction later in the next decade, largely though not entirely through higher taxes on the wealthy, corporations and pollution.
I’ve seen some people describe the caucus proposal as a “Ryan plan of the left,” but that’s unfair. There are no Ryan-style magic asterisks, trillion-dollar savings that are assumed to come from unspecified sources; this is an honest proposal. And “Back to Work” rests on solid macroeconomic analysis, not the fantasy “expansionary austerity” economics — the claim that slashing spending in a depressed economy somehow promotes job growth rather than deepening the depression — that Mr. Ryan continues to espouse despite the doctrine’s total failure in Europe.
No, the only thing the progressive caucus and Mr. Ryan share is audacity. And it’s refreshing to see someone break with the usual Washington notion that political “courage” means proposing that we hurt the poor while sparing the rich. No doubt the caucus plan is too audacious to have any chance of becoming law; but the same can be said of the Ryan plan.
So where is this all going? Realistically, we aren’t likely to get a Grand Bargain any time soon. Nonetheless, my sense is that there is some real movement here, and it’s in a direction conservatives won’t like.
As I said, Mr. Ryan’s efforts are finally starting to get the derision they deserve, while progressives seem, at long last, to be finding their voice. Little by little, Washington’s fog of fiscal flimflam seems to be lifting.
By: Paul Krugman, Op-Ed Columnist, The New York Times, March 14, 2013
Ten years ago, on March 20, 2003, the administration of George W. Bush launched its disastrous invasion of Iraq. It’s a war most Americans — including many Republicans who enthusiastically supported it — are working assiduously to forget.
Not so fast. An examination of the lies, the hypocrisy and the power-mongering that led us into that act of grand folly may help us to avoid similar impulses in the coming decades. Besides, there are lasting consequences that cannot be shoved into history’s dustbin.
Yes, Saddam Hussein is dead. So are an estimated 100,000 Iraqis and more than 4,400 Americans. Countless other Americans are forever maimed, some of them suffering mental traumas from which they will never fully recover.
That’s the human toll. It doesn’t include the billions of dollars that were wasted. While the official calculations of the cost to the Treasury are in the $800 billion range, Nobel laureate Joseph Stiglitz has put the cost to the U.S. economy at $3 trillion. That’s why it’s quite laughable now to listen to the Fox News crew blast President Obama over the budget deficit. They all cheered for Bush’s dumb war, which he prosecuted while cutting taxes.
But the most disastrous long-term consequence of the war may be its effect on Iran. The United States gave Saddam nominal support for years because he served as a check on Iran, his bitter enemy. Now Shiites run Iraq, as they do Iran, and Tehran has great influence in Baghdad.
So how is it that so many cheered the invasion? Why did so few voice any dissent? Why was it that those who did argue against the war were vilified as traitors?
I vividly recall the months leading to the war because I was among those who insisted at the outset that the drive to oust Saddam was foolish. (At first, I assumed Bush was merely posturing. Even he, I thought, wouldn’t do something that stupid.) For my trouble, I was denounced as a fifth columnist, an appeaser, a liberal bed-wetter, etc.
Among those attacking my anti-invasion stance were comfortable, affluent professionals whose sons and daughters would never have considered volunteering for military service. I was dumbfounded by the nonchalance — and hypocrisy — with which they endorsed a war that would be fought by young men and women largely from the working classes.
I was also deeply disappointed — taken aback, actually — by the complicity of the major news media, whose supposedly intrepid journalists, instead of ferreting out official dishonesty, caved before it. The nation’s best newspapers ran numerous front-page stories trumpeting the Bush administration’s lies about Saddam, his alleged WMDs and his supposed collusion with Osama bin Laden. There were no similarly placed stories about the Project for the New American Century, the group of neo-cons pushing for Saddam’s ouster years before 9/11.
Andrew Bacevich, a well-respected foreign policy scholar and early opponent of the war, lists a misplaced faith in the U.S. military as among several reasons for the lack of critical questioning from the media or political leaders.
“It was taken for granted that we would win and we would win easily,” Bacevich, a Boston University professor and retired military officer, told me. “For anyone to question the effectiveness of the U.S. military in those days was tantamount to failing to support the troops, and no politician or person who cared about their public reputation dared do anything that would suggest failure to support the troops.”
Bacevich also points out that, unlike the war in Vietnam, which was also fueled by official dishonesty, few public figures who led the nation into Iraq have paid any price. Not only was Lyndon Johnson’s career cut short and legacy diminished, but his leading foreign policy strategists were also forced into public contrition.
Not so with Bush’s minions. Vice President Darth – ah – Dick Cheney remains adamant that Saddam was in league with anti-U.S. terrorists, even though all credible intelligence officials have said otherwise. John McCain, for his part, bludgeoned Chuck Hagel recently because Hagel came to oppose the war.
It’s much too early to forget the folly of Iraq. Too few of us have learned any lessons from it.
By: Cynthia Tucker, The National Memo, March 18, 2013