“So Much For Economic Uncertainty”: Republicans Have Decided To Govern Through Series Of Self Imposed Crises
In 2009 and 2010, the single most common Republican talking point on economic policy included the word “uncertainty.” I did a search of House Speaker John Boehner’s (R-Ohio) site for the phrase “economic uncertainty” and found over 500 results, which shows, at a minimum, real message discipline.
The argument was never especially compelling from a substantive perspective. For Boehner and his party, President Obama was causing excessive “uncertainty” — through regulations, through the threat of tax increases, etc. — that held the recovery back. Investors were reluctant to invest, businesses were reluctant to hire, traders were reluctant to trade, all because the White House was creating conditions that made it hard for the private sector to plan ahead.
It was a dumb talking point borne of necessity — Republicans struggled to think of a way to blame Obama for a crisis that began long before the president took office — but the GOP stuck to it.
That is, Republican used to stick to it. Mysteriously, early in 2011, the “economic uncertainty” pitch slowly faded away without explanation. I have a hunch we know why: Republicans decided to govern through a series of self-imposed crises that have created more deliberate economic uncertainty than any conditions seen in the United States in recent memory.
E.J. Dionne Jr. had a great column on the larger pattern today.
Ever since they took control of the House of Representatives in 2011, Republicans have made journeys to the fiscal brink as commonplace as summertime visits to the beach or the ballpark. The country has been put through a series of destructive showdowns over budget issues we once resolved through the normal give-and-take of negotiations. […]
The nation is exhausted with fake crises that voters thought they ended with their verdict in the last election. Those responsible for the Washington horror show should be held accountable. And only one party is using shutdowns, cliffs and debt ceilings as routine political weapons.
Quite right. Looking back over the last two years — in fact, it’s closer to 22 months — Republicans have made three shutdown threats, forced two debt-ceiling standoffs, pushed the country towards a fiscal cliff, refused to compromise on a sequester, and have lined up even more related fiscal fights in the months ahead.
So, here’s the question for GOP leaders: where did your concern about “economic uncertainty” go? Here’s the follow-up: do you think a never-ending series of hostage standoffs inspire investors, reassure “job creators,” and improve consumer confidence?
Or is it more likely Republicans are doing the very thing they said they opposed in 2010?
By: Steve Benen, The Maddow Blog, February 28, 2013
“Still More BS”: The Bowles-Simpson Commission Is The Fiscal Zombie That Just Won’t Die
We all do things that we regret. President Obama must surely regret that he ever listened to the extreme deficit hawks back in early 2010, when he appointed the Bowles-Simpson Commission, the fiscal zombie that just won’t die.
The commission is long defunct. The recommendations of its majority report never became law (because that required a super-majority). But the dreams and schemes of B-S have become the gold standard of deflationists everywhere. The test of budgetary soundness is: does it meet the recommendations of Bowles and Simpson?
On Tuesday, the depressive duo were at it again, calling for additional deficit reductions of $2.4 trillion over a decade. This is almost a trillion dollars beyond what President Obama and Congress are considering.
This clarion call was issued under the aegis of the corporate group, “Fix the Debt,” a bunch of millionaires and billionaires urging regular people to tighten their belts for the greater good.
Quite apart from the impact of particular cuts (Social Security, Medicare, domestic discretionary spending), this is economic lunacy—because it sandbags an already depressed economy. The Congressional Budget Office has calculated that growth would be 3 percent this year, but will only be half that rate because of the effects of the sequester (or cuts of a similar magnitude)—and Bowles and Simpson are calling for annual cuts of twice the scale of the sequester, and over a whole decade.
President Obama has focused on heading off the sequester—$85 billion of mandatory cuts in the next ten months. But he has bought into the deeper mischief wrought by Bowles and Simpson, by embracing further cuts of $1.5 trillion over a decade.
As the latest pronouncement by the B-S boys shows, the cuts are never enough. If Obama accepts $1.5 trillion, they counter with $2.4 trillion.
They are more gentlemanly than Grover Norquist, but the ideological goal is the same—a government small enough to drown in a bathtub. Even worse, deflationary cuts slow growth, making the debt load larger in real terms, no matter how much we cut.
We’ve now had a real-time experiment, in countries as diverse as Greece, Spain, and Britain. Austerity only breeds more austerity.
By: Robert Kuttner, The American Prospect, February 21, 2013
“The Big Fail”: Too Many Republicans Responsible For Economic Failure Retain Power And Refuse To Learn From Experience
It’s that time again: the annual meeting of the American Economic Association and affiliates, a sort of medieval fair that serves as a marketplace for bodies (newly minted Ph.D.’s in search of jobs), books and ideas. And this year, as in past meetings, there is one theme dominating discussion: the ongoing economic crisis.
This isn’t how things were supposed to be. If you had polled the economists attending this meeting three years ago, most of them would surely have predicted that by now we’d be talking about how the great slump ended, not why it still continues.
So what went wrong? The answer, mainly, is the triumph of bad ideas.
It’s tempting to argue that the economic failures of recent years prove that economists don’t have the answers. But the truth is actually worse: in reality, standard economics offered good answers, but political leaders — and all too many economists — chose to forget or ignore what they should have known.
The story, at this point, is fairly straightforward. The financial crisis led, through several channels, to a sharp fall in private spending: residential investment plunged as the housing bubble burst; consumers began saving more as the illusory wealth created by the bubble vanished, while the mortgage debt remained. And this fall in private spending led, inevitably, to a global recession.
For an economy is not like a household. A family can decide to spend less and try to earn more. But in the economy as a whole, spending and earning go together: my spending is your income; your spending is my income. If everyone tries to slash spending at the same time, incomes will fall — and unemployment will soar.
So what can be done? A smaller financial shock, like the dot-com bust at the end of the 1990s, can be met by cutting interest rates. But the crisis of 2008 was far bigger, and even cutting rates all the way to zero wasn’t nearly enough.
At that point governments needed to step in, spending to support their economies while the private sector regained its balance. And to some extent that did happen: revenue dropped sharply in the slump, but spending actually rose as programs like unemployment insurance expanded and temporary economic stimulus went into effect. Budget deficits rose, but this was actually a good thing, probably the most important reason we didn’t have a full replay of the Great Depression.
But it all went wrong in 2010. The crisis in Greece was taken, wrongly, as a sign that all governments had better slash spending and deficits right away. Austerity became the order of the day, and supposed experts who should have known better cheered the process on, while the warnings of some (but not enough) economists that austerity would derail recovery were ignored. For example, the president of the European Central Bank confidently asserted that “the idea that austerity measures could trigger stagnation is incorrect.”
Well, someone was incorrect, all right.
Of the papers presented at this meeting, probably the biggest flash came from one by Olivier Blanchard and Daniel Leigh of the International Monetary Fund. Formally, the paper represents the views only of the authors; but Mr. Blanchard, the I.M.F.’s chief economist, isn’t an ordinary researcher, and the paper has been widely taken as a sign that the fund has had a major rethinking of economic policy.
For what the paper concludes is not just that austerity has a depressing effect on weak economies, but that the adverse effect is much stronger than previously believed. The premature turn to austerity, it turns out, was a terrible mistake.
I’ve seen some reporting describing the paper as an admission from the I.M.F. that it doesn’t know what it’s doing. That misses the point; the fund was actually less enthusiastic about austerity than other major players. To the extent that it says it was wrong, it’s also saying that everyone else (except those skeptical economists) was even more wrong. And it deserves credit for being willing to rethink its position in the light of evidence.
The really bad news is how few other players are doing the same. European leaders, having created Depression-level suffering in debtor countries without restoring financial confidence, still insist that the answer is even more pain. The current British government, which killed a promising recovery by turning to austerity, completely refuses to consider the possibility that it made a mistake.
And here in America, Republicans insist that they’ll use a confrontation over the debt ceiling — a deeply illegitimate action in itself — to demand spending cuts that would drive us back into recession.
The truth is that we’ve just experienced a colossal failure of economic policy — and far too many of those responsible for that failure both retain power and refuse to learn from experience.
By: Paul Krugman, Op-Ed Columnist, The New York Times, January 6, 2013
“A Very Sketchy Deal”: Mitt Romney’s Grab Bag Of Right-Wing Disasterous Bush Policies
Mitt Romney’s entire presidential campaign is premised on the idea that—as a former businessman—he is best qualified to fix the economy. It went unnoticed, but while talking tax reform, President Obama pushed against that with an effective attack on the shaky numbers behind Romney’s tax plan:
Now, Governor Romney was a very successful investor. If somebody came to you, Governor, with a plan that said, here, I want to spend $7 or $8 trillion, and then we’re going to pay for it, but we can’t tell you until maybe after the election how we’re going to do it, you wouldn’t take such a sketchy deal and neither should you, the American people, because the math doesn’t add up.
Since then, “sketchy deal” has become something of a catchphrase for the president; to wit, in an Iowa speech yesterday, he used it to contrast Romney’s plan with “deals” of the past:
Romney still benefits from a presumption of competence, and Obama would be well-served by hammering on the essential vapidness of Romney’s economic plan. It’s not just that his tax promises don’t add up—even with a $25,000 limit on deductions, there’s not enough revenue raised to pay for an across-the-board cut and cuts to taxes on capital gains and investment income—but that his five point plan to create 12 million jobs does nothing of the sort.
The definitive debunking was done by The Washington Post’s Glenn Kessler, who found that Romney’s numbers just don’t add up. On his website, Romney’s economic advisors say that “History shows that a recovery rooted in policies contained in the Romney plan will create about 12 million jobs in the first term of a Romney presidency.” Team Romney even goes as far as to cite exact job-creation numbers for each plank of the plan: 3 million from Romney’s energy policies, 7 million from his tax policies, and 2 million from cracking down on China.
But as Kessler shows, the Romney campaign has little evidence for any of its claims. There’s no study showing that the Romney energy plan would create 3 million jobs—at most, there’s a Citigroup report that predicts that rate of job growth over the next eight years as a result of policies already adopted (and opposed by Romney). The 7 million jobs number? It comes from a ten-year estimate of what might happen with Romney’s policies. And the 2 million jobs claim comes from a 2011 International Trade Commission report which estimates gains if China stopped infringing on American intellectual property. The problem is that the study was highly contingent on last year’s job market, which was far worse than the current one.
Perhaps the most damning indictment of Romney’s claim is the simple fact that “12 million jobs” is the current projection for job growth over the next four years under the current policies. In essence, Romney’s promise is to take credit for the results of Obama’s policies if he’s elected president.
“Sketchy deal” is the right way to describe Romney’s offer to the American public. Rather than put forth a plan to deal with our short-term economic problems, he’s offered a grab bag of right-wing proposals that are indistinguishable from the disasterous policies of the Bush administration. He’s betting that better packaging is all it takes to sell the public the same bill of goods. And judging from the close polls, he might be right.
By: Jamelle Bouie, The American Prospect,October 18, 2012
“Deliberate Sabotage”: The Public Sector Is Bleeding By The Knife Of Republicans
Public-sector jobs continued to disappear last month; according to today’s report, government employment is down by 4,000. To Republicans, these aren’t “real” jobs. For the rest of us, however, the decline of the public sector over the last three years has been a tremendous drag on economic growth. Since June 2009, state and local governments have shed more than 600,000 jobs. At the Economic Policy Institute, Josh Bivens and Heather Shierholz crunch the numbers to find that the economy would have 2.3 million more jobs if not for those ongoing losses:
Putting our four components together—the jobs lost in the public sector, the jobs the public sector should have gained just to keep up with population growth, the jobs lost in the private sector due to direct public-sector job declines, and the jobs likely lost when state spending cutbacks on transfer programs were made—we find that if it weren’t for state and local austerity, the labor market would have 2.3 million more jobs today—and half of these jobs would be in the private sector.
This is more than a fifth of our 9.8 million “jobs gap”, the number of jobs needed to bring the economy back to full employment. If all of these 2.3 million jobs had been filled, it is likely that the unemployment rate would now be between 6.7% and 7.5% instead of 8.2%, and the labor force participation rate (which has dropped dramatically in recent years due to weak job opportunities) would be up to three-tenths of a percentage point higher than it is.
Remember: Thanks to Republicans on the state and local level, the United States has been going through austerity for the last two years. Our sluggish economic growth has less to do with the administration’s policies and everything to do with a Republican Party that sees mass immiseration as an opportunity to cut spending.
BY: Jamelle Bouie, The American Prospect, July 9, 2012
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